Exhibit 10.2


 


Confidential treatment has been
requested for portions of this exhibit. 
The copy filed herewith omits the information subject to the
confidentiality request.  Omissions are
designated as *.  A complete version of
this exhibit has been filed separately with the Securities and Exchange
Commission.


 


MASTER SERVICES AGREEMENT


 


This
Master Services Agreement (this “Agreement”) is made as of August 5,
2010 by and between Synergy Pharmaceuticals, Inc., a Florida corporation
with an address of 420 Lexington Avenue, New York, NY 10170 (“Synergy”),
and *, a corporation with offices at * (“Contractor”).


 


A.            Synergy is
in the business of discovering, developing and commercializing pharmaceutical
products.


 


B.            Contractor
is in the business of providing pharmaceutical development and manufacturing
services.


 


C.            Synergy
wishes to retain Contractor to provide certain services associated with the
development, manufacturing and/or supply of certain quantities of specific
products for use in IND-enabling studies and/or clinical trials,  and Contractor is willing to perform such
services, all as more fully set forth below.


 


NOW, THEREFORE, in consideration of the
premises and of the mutual covenants and agreements contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties intending to be legally bound agree as
follows:


 


1.     DEFINITIONS


 


1.1.          “Affiliate”
means any person or entity that controls, is controlled by or is under common
control with a party to this Agreement, where “control” means (a) in the
case of corporate entities, direct or indirect ownership of more than fifty
percent (50%) of the stock or shares entitled to vote for the election of
directors; and (b) in the case of non-corporate entities, direct or
indirect ownership of more than fifty percent (50%) of the equity interest with
the power to direct the management and policies of such non-corporate entities.


 


1.2.          “API” means bulk quantities of
active pharmaceutical ingredients.


 


1.3.          “Applicable
Laws” means all laws, statutes, ordinances, codes, rules and
regulations which have been enacted by a government authority and are in force
as of the Effective Date or come into force during the term of this Agreement
(including but not limited to the FDA Act and other applicable rules and
regulations of the FDA, and federal, state and local environmental and
occupational safety and health requirements, and the United States Export
Administration Act of 1979 as amended, the Trading With the Enemy Act, and the
regulations of the U.S. Departments of Commerce, Defense, State, Energy and
Treasury pursuant thereto.), in each case to the extent the same are applicable
to the performance by the parties of their respective obligations under this
Agreement.


 


1.4.          “CMC”
means chemistry manufacturing and control information required by the FDA for
filing of an IND or NDA.


 


1.5.          “Confidential
Information” means all information and materials, whether in tangible,
electronic, oral or visual form, (a) provided by either party and/or its
Affiliates hereunder to the other party, (b) generated by Contractor in
the performance of any Project (including but not limited to any information
about manufacturing, testing/analysis methods or processes, Products or
products (whether investigational or not), Synergy Materials, samples,
specimens, and other materials or compounds, sub-samples, and retention
samples; analyses and the results of such analyses, information on research and
development compounds, technical know-how; formulas; studies; regulatory
submissions and records; research data and information; financial information;
sales and marketing information (including, without limitation, service
proposals, price quotations and customer lists); inventions; patent
applications and other trade secrets, (c) information relating to
potential new transactions and business between the parties; and (d) all
information developed or prepared by either party pursuant to the terms and
conditions of this Agreement.


 


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1.6.          “Contractor
Intellectual Property” means all Intellectual Property owned by or licensed
to (other than by Synergy) Contractor as of the Effective Date, including
methods and processes developed and owned by Contractor as of the Effective
Date.  Contractor Intellectual Property
constitutes Contractor Confidential Information.


 


1.7.          “Debarment
Act” means the Generic Drug Enforcement Act of 1992, as amended, 21 U.S.C.
§§ 306.


 


1.8.          “FDA”
means the United States Food and Drug Administration (or its successor agency)
and/or the corresponding governmental or other authority in another country, as
applicable, such as the European Agency for the Evaluation of Medicinal
Products (or “EMEA”) in Europe.


 


1.9.          “FDA Act”
means the United States Federal Food, Drug and Cosmetic Act (21 U.S.C. 301, et. seq.), and the regulations promulgated thereunder, as
amended from time to time, and any successor statute(s).


 


1.10.        “cGMP” means current Good
Manufacturing Practices as promulgated under each of the following as in effect
upon the Effective Date and as amended or revised thereafter: (a) the FDA
Act, including 21 CFR (parts 11, 210 and 211) and other FDA regulations,
policies and guidelines in effect from time to time governing the manufacture,
testing and quality control of investigational drugs; and (b) all
International Conference on Harmonisation (ICH) guidance documents as
appropriate, including ICH guidance Q7a, “ICH Good Manufacturing Practice
Guidance for Active Pharmaceutical Ingredients,” as applied to investigational
drugs (Section 19) specifically for manufacturing activities of API.


 


1.11.        “IND” means an
Investigational New Drug Application filed with the FDA to begin clinical
studies of a new drug in humans (pursuant to 21 CFR 312, et. seq., as amended),


 


1.12.        “Intellectual Property” means
all intellectual property, including (without limitation) patents,
supplementary protection certificates, petty patents, utility models,
trademarks, database rights, rights in designs, copyrights and topography
rights (whether or not any of these rights are registered, and including
applications and the right to apply for registration of any such rights) and
all inventions, know-how, trade secrets, techniques and confidential information
and other proprietary knowledge and information, and all rights and forms of
protection of a similar nature or having equivalent or similar effect to any of
these which may subsist anywhere in the world, in each case for their full
term, and together with any renewals or extensions.


 


1.13.        “Manufacture and Release
Requirements” means those methodologies, analytical tests, process
parameters and cGMP requirements necessary to manufacture and release Product
to Synergy in conformity with the Specifications and as set forth in the Work
Order.


 


1.14.        “Product” means the product
resulting from the Services to be rendered by Contractor hereunder, as defined
in the Work Order, including the product of such Services that does not meet
the Specifications but is delivered to Synergy.


 


1.15.        “Project” means the separate,
defined project described in a Work Order.


 


1.16.        “Services” means those
formulation development, intermediary and product manufacture, consulting,
chemical synthesis, chemical process research, analytical methods development,
medicinal chemical synthesis, computational chemistry services, validation or
release testing and other related services, in each case that are to be
provided by Contractor as set forth in a Work Order.


 


1.17.        “Specifications” means the
composition, quality, purity, identity and strength of a Product and any
chemistry, manufacturing and controls requirements for the manufacture of
Product as set forth in the applicable Work Order or as agreed by the parties
in writing pursuant to a Work Order.


 


1.18.        “Synergy Intellectual Property”
means all Intellectual Property owned by or licensed to Synergy, and all
Intellectual Property that relates to methods, procedures and processes for the
synthesis and production of Products (including without limitation all hybrid
solution solid-phase processes developed and/or performed by Contractor), and
all Intellectual Property relating to Synergy Materials.  Synergy Intellectual Property constitutes
Synergy Confidential Information, and does not include Contractor Intellectual
Property.


 


2

















 


1.19.        “Synergy Materials” means all
materials, including the API, provided by or on behalf of Synergy to Contractor
under a Work Order.


 


1.20.        “Work Order” means a
written statement of work signed by both parties that specifies the Services to
be provided by Contractor for Synergy, including, as may be applicable, a
description of the Product, Specifications, quantity of Product, Manufacture
and Release Requirements, estimated duration of the Project(s), milestones and
all other matters as the parties may agree.


 


1.21.        “Work Product” means all
results of Services, including but not limited to the Product, Specifications,
and compounds, data, information, documentation (including, but not limited to,
lab notebooks as applicable), reports and any other deliverables listed in the
Work Order and/or developed by Contractor in its performance of a Work Order.


 


2.     Scope of
Services.


 


2.1.          Work Order. 
Services provided by Contractor shall be subject to the terms and
conditions of this Agreement and each Work Order.  Each Work Order shall a part of this
Agreement.  If Synergy wishes to amend any Work
Order, the parties shall negotiate a change in good faith and, upon their
agreement, shall execute a written change order amending such Work Order (“Change
Order”).  The Change Order
constitutes an amendment to the applicable Work Order and the services set
forth therein shall be deemed to be Services part of such Work Order.


 


2.2.          Subcontracting. 
Contractor may not subcontract the performance of any Services without
Synergy’s prior written consent.  Any
permitted subcontractor shall be under a written obligation to comply with
terms of this Agreement governing Contractor’s performance of Services and
protection of Synergy’s Confidential Information, and Contractor shall remain
liable to Synergy for the performance of any such subcontractor.


 


2.3.          Contractor Employees and Agents.  Contractor shall be solely responsible for
any and all salaries, fees, state and federal taxes, withholding, FICA, worker’s
compensation or other payments due with respect to the compensation paid to
Contractor by Synergy or by Contractor to any employee or agent of
Contractor.  Contractor’s employees and
other agents shall have no right to receive from Synergy any employee benefits
(including by not limited to health and accident insurance, sick leave or
vacation) that Synergy provides to its own employees, and shall indemnify and
hold harmless any claims brought against Synergy demanding the same.


 


2.4.          Standards.  Contractor will perform Services in
accordance with the terms of this Agreement and the relevant Work Order, with
Applicable Laws, and with its standard operating procedures (and shall, upon request,
deliver copies of all Contractor’s standard operating procedures relevant to
the Services).


 


2.5.          Supply of
Synergy Materials.  To the extent required by a Work Order, Synergy
shall provide Contractor with sufficient amounts of any Synergy Materials
(either directly or indirectly, and including API).  Synergy shall provide Contractor with data
regarding the stability, proper storage and safety and other characteristics
and requirements of such Synergy Materials. 
Contractor shall use Synergy Materials solely for rendering the Services
under the applicable Work Order, and shall not transfer any Synergy Materials
to a third party (except as may be permitted under Section 2.2).  Any Synergy Materials remaining upon
completion of the Services under a Work Order shall be, at Synergy’s direction,
either returned to Synergy or destroyed. 
If Synergy does not notify Contractor within sixty (60) days after
completion of a Project of its intention hereunder, then Contract shall return
the Synergy Materials to Synergy at Synergy’s expense.


 


2.6.          Project Manager. 
Contractor will assign a project manager (the “Project Manager”)
and other members of the core Project team (including, as relevant, a project
director) (the “Core Team”) for the duration of each Project.  Contractor shall provide thirty (30) days
prior written notice to Synergy, whenever practicable, of any changes to the
Core Team, except as specified below. 
During any Project, Contractor will employ its commercially reasonable
efforts to promote members of the Core Team within the Project.  Contractor will provide Project-specific
training to replacement Core Team members at its own expense.  The Project Manager, or such other Core Team
Member agreed by the parties, shall be the primary contact for Synergy and
shall timely address all issues and concerns raised by Synergy, as well as
provide to Synergy all information requested by Synergy concerning this
Agreement or the Services.


 


3

















 


2.7.          Preferred
Vendor.  For so long as Contractor
complies with the terms of this Agreement and for so long as its price for
Product is competitive, Synergy shall appoint Contractor as Synergy’s preferred
and primary supplier of the Product, meaning that Synergy will provide Contractor
the first opportunity (taking into account factors regarding Contractor’s
quality, timing and capacity) to supply up to at least seventy five percent
(75%) of Synergy’s commercial supply of Products.


 


2.8.          Exclusivity.  Contractor shall not, directly or indirectly,
develop, manufacture and/or supply any GC-C agonist peptide for or to any third
party, where “GC-C agonist peptide” means a peptide that (i) binds and
activates a GC-C receptor and (ii) activates the receptor-mediated
downstream signalling (including without limitation uroguanylin and
structurally similar peptides, and E. coli ST
peptides and structurally similar peptides.


 


2.9.          Fees.  All fees payable by Synergy shall be made in
accordance with the Work Order in U.S. dollars. 
All undisputed payments are due within thirty (30) days from the date of
Contractor’s invoice.


 


3.     Products and Services.


 


3.1.          Supply.  Contractor shall manufacture, store and
deliver Products in accordance with cGMP, the Specifications and all Applicable
Laws.


 


3.2.          Purchase
Orders.  When Synergy wishes to purchase
the Product, it shall submit a purchase order to Contractor identifying the
amount of Product requested, the purchase price, the address for delivery, and
the delivery date.  If any Product is
ordered to be stored for thirty (30) days after Contractor’s quality control
release, then Synergy may either (a) request Contractor to bill and hold
at $25/day for insurance and storage or (b) acquire its own insurance
and pay $10/day for storage.


 


3.3.          Shipping.  All Product shipped hereunder shall comply in
all material respects with the applicable Manufacture and Release Requirements
and shall be accompanied by (i) a certificate of analysis; (ii) a
cGMP certificate of conformance; and (iii) BSE/TSE certification
indicating that no BSE/TSE risk exists from materials-used in production of the
batch or came into contact with the batch; each in a form to be agreed upon by
the parties.  Contractor shall deliver
and transfer the Product to such locations and in such manner as directed by
Synergy.  All Product generated hereunder
shall be packaged and shipped to Synergy’s designated destination and in
accordance with Synergy’s written instructions and in compliance with all
applicable shipping regulations. 
Delivery shall be FCA Synergy’s facility (Incoterms 2000).


 


3.4.          Pre-Shipment
Samples.  Contractor shall deliver to
Synergy a preshipment sample from
each batch of Product prior to full delivery and prior to issuance of the
relevant certificate of analysis. 
Synergy shall test key attributes of the preshipment sample, either
itself or through an independent analytical lab, and will inform Contractor
whether or not such testing confirms that the sample conforms to the
Specifications.  If Synergy confirms that
the sample conforms to the Specifications, then Contractor will ship the full
delivery to Synergy.  This process does
not relieve Contractor of its obligations to deliver Product that meets the
Specifications and that conforms to the relevant certificate of analysis and
does not limit Synergy’s right to reject product as provided in Section 3.6.


 


3.5.          Evaluation.  Synergy shall have three (3) months from
the date of its receipt of Product to evaluate the Product (using reasonable
analytics) and determine whether or not the Product meets the
Specifications.  If Synergy fails to
notify Contractor of its rejection within such three (3) month period,
Synergy shall be deemed to have accepted such Product.


 


3.6.          Rejection of
Product.  If Synergy rejects any of the
Product pursuant to Section 3.5, Synergy shall (i)  provide to
Contractor written notice of rejection that includes the basis for such
rejection and (ii) provide Contractor with the opportunity to conduct its
own tests to confirm such basis of rejection, which shall be conducted
promptly.  Synergy shall return all
remaining unused Product to Contractor; provided
that Synergy may retain a sample of such reject Product that is being used for
laboratory testing and to confirm its rights hereunder.  Contractor shall replace such rejected
Product with conforming Product as soon as commercially reasonable, but in no
event after a period longer than the original lead time required for shipment
of Product as set forth in the applicable Work Order for such Product.


 


3.7.          Recalls.  Contractor shall maintain such traceability records as
are sufficient and as may be necessary to permit a recall or field correction
of any Product.  In the event (a) any
applicable regulatory authority should issue 


 


4

















 


a
request, directive or order that a Product be recalled, or (b) a court of
competent jurisdiction orders such a recall, or (c) Synergy determines
that any Product presents a risk of injury or gross deception or is otherwise
defective and that recall of such Product is appropriate (“Recall”), it
shall notify Contractor and Contractor shall cooperate with Synergy in
implementing any Recall.  Synergy shall
have sole responsibility for determining all corrective action to be taken and
for carrying out a Recall.  Synergy shall
be responsible for the cost of any Recall (including any direct out-of-pocket
expenses incurred by Contractor incurred in implementing Synergy’s
instructions) except to the extent such Recall is attributable to any negligence
on the part of Contractor or any breach by Contractor of its obligations under
this Agreement, in which case Contractor will be responsible for the cost of
the Recall and shall reimburse Synergy for its related expenses.


 


3.8.          Product
Support.


 


3.8.1.       Contractor shall ensure that
Projects intended to support INDs or NDAs shall comply with all appropriate
regulatory requirements applicable to such applications; provided
that, Synergy or its Affiliate, as applicable, is the Sponsor (as such term is
defined in 21 CFR Part 312.3) of any such IND or NDA, and Synergy shall
remain responsible for all legal requirements applicable to Synergy of INDs or
NDAs except to the extent that such obligations are transferred to Contractor
herein.  Contractor shall provide to
Synergy directly all information as Synergy may reasonably require for purposes
of applying for and maintaining application for regulatory approval of the
Product, including, without limitation, providing Synergy with all reports,
authorizations, certificates, methodologies, and other documentation in the
possession or under the control of Contractor relating to the synthesis or
manufacture of the Product (or any component thereof).  Such information shall be deemed the
Confidential Information of Contractor, and Contractor hereby allows Synergy to
provide such information to a regulatory authority as necessary to support any
application for authorization to conduct clinical trials or regulatory approval
of a Product or in response to the requests or requirements of such regulatory
authority. Contractor will provide to Synergy a copy of any correspondence with
any regulatory authority related to the Project, a Product or the Services
within a reasonable time, not to exceed three (3) days from receipt or
transmission of such correspondence.


 


3.8.2.       As between the parties, Synergy
shall be solely responsible for all contacts and communications with any
regulatory authority regarding Products. 
Unless required by applicable law, Contractor shall have no contact or
communication with any regulatory authority regarding the provision of the
Services hereunder without the prior written consent of Synergy, which shall
not be unreasonably withheld.  Synergy
shall have all decision-making authority in every case on whether and how to
supplement, amend or otherwise alter the NDAs and any other issues in
connection with the NDAs (including, but not limited to, decisions to recall
the Products) and on whether and how to communicate with the FDA in connection
therewith.


 


3.8.3.       Contractor shall: (a) promptly
notify Synergy in writing of any FDA or other governmental inspection or
inquiry concerning any Project or Work Order, including, but not limited to,
inspections of investigational sites or laboratories (“Regulatory Audit”);
(b) promptly forward to Synergy copies of correspondence from any
regulatory or governmental agency relating to such Regulatory Audit, including,
but not limited to, FDA Form 483 notices and FDA refusal to file,
rejection or warning letters; and (c) obtain the written consent of
Synergy, which will not unreasonably be withheld, before referring to Synergy
or any of its affiliates in any Regulatory Audit correspondence.  Contractor shall allow a Synergy representative
present during a Regulatory Audit inspection.


 


3.8.4.       Should any Regulatory Audit or other
inspection or audit by a regulatory authority require any process changes,
Contractor shall notify Synergy immediately and the parties shall discuss the
means for implementing such changes.  For
the avoidance of doubt, Contractor may not implement any such change to a
Product-related Process without Synergy’s prior, written consent (including
pursuant to a Change Order).


 


3.8.5.       Contractor shall not, during a
Regulatory Audit, disclose information or materials that are not legally
required to be disclosed to such agency without the prior consent of Synergy,
which shall not unreasonably be withheld. 
For example, such information and materials that a party conventionally
would not be required to disclose include, but are not limited to,
(a) financial and pricing data (including, but not limited to, the budget
and payment sections of a Work Order), (b) sales data (other than shipment
data), and (c) personnel data (other than data as to qualification of
technical and professional persons performing functions subject to regulatory
requirements).


 


5

















 


3.8.6.       All information disclosed, revealed
to or ascertained by Synergy or Contractor, as the case may be, in connection
with any Regulatory Audit or in connection with any correspondence between
Contractor and any regulatory authorities (including the redacted portions of
any FDA Form 483 notices) shall be deemed Confidential Information for
purposes of this Agreement.


 


3.9.          Audits; Progress Review; Records.  Contractor shall provide Synergy such periodic and
final written reports (either in electronic or paper format), as outlined in
the Work Order or as reasonably requested by Synergy from time to time.  Synergy may visit and inspect Contractor’s
facilities and review and audit Contractor’s records during normal business
hours and upon reasonable notice (a) to confirm Contractor’s performance
of this Agreement in accordance with its terms, and/or (b) in the event
circumstances arise that may adversely affect the quality of Product.  If the event of subsection (b), Contractor
shall immediately notify Synergy of such circumstances and shall allow Synergy
prompt access to relevant Contractor areas and records.  Contractor shall record and maintain all
records and data relating to the manufacture, processing, testing, packaging,
storage and transportation of Products, including all batch manufacturing
records, and Synergy may (either itself or through an agent) during normal
business hours and upon reasonable prior notice, audit and inspect such records
and observe the manufacture, processing, testing, packaging, storage and
transportation of materials related to or used in the manufacture of Products.  Contractor shall retain experimental records
and laboratory notebooks relating to each Project, and shall maintain suitable
CMC support documentation to allow Synergy or its Affiliates to file an IND, IND
amendment, NDA or ANDA with the FDA.  All
such documentation and Work Product in Contractor’s possession (not otherwise
returned to Synergy) shall be archived in a secure area reasonably protected
from fire, theft or destruction by Contractor for a period of ten (10) years
following expiration or termination of this Agreement.  Synergy may elect to have the materials
retained in Contractor’s archives for an additional period of time for a
reasonable storage fee.


 


4.     Confidential
Information.


 


4.1.          Nondisclosure
and Limited Use.  Each party
shall (a) hold the Confidential Information of the other party in strict
confidence and take reasonable precautions to protect such Confidential
Information (including, without limitation, all precautions the receiving party
normally employs with respect to its own confidential information),
(b) not divulge any such Confidential Information to any third party
(other than those parties specifically permitted to receive such Confidential
Information pursuant to the terms of this Agreement), (c) not make any use
whatsoever at any time of such Confidential Information except to carry out its
obligations under this Agreement and the Projects and Work Orders hereunder and
to exploit the rights granted to such party hereunder, (d) not derive any
commercial benefit (whether direct or indirect) from such Confidential
Information (other than pursuant to Services rendered under this Agreement),
and (e) not copy (except as may be necessary to accomplish the purposes of
this Agreement) or reverse engineer any such Confidential Information.


 


4.2.          Exclusions.  Without granting any right or license, a
party’s obligations under Section 4.1 shall not apply to Confidential
Information of a disclosing party that: (a) was in the receiving party’s
possession prior to receipt from the disclosing party; (b) was in the
public domain at the time of receipt from the disclosing party; (c) becomes
part of the public domain without wrongful act by the receiving party; or (d) the
receiving party can demonstrate by written or electronic evidence kept in the
ordinary course is lawfully received by the receiving party from a third party,
where the third party is wholly independent of the receiving party and has no
obligation of confidentiality to disclosing party with respect to such
information disclosed.  Notwithstanding
the foregoing, (i) Confidential Information shall not fall within an
exception set forth in this Section merely because such Information is
embraced by more general information in the public domain or in the possession
of the receiving party, and (ii) the fact that any Work Product may fall
within one or more of the exceptions set forth in this Section shall not
relieve Contractor or Synergy of its obligations under Section 4.1.


 


4.3.          Permitted
Disclosures.  If a party is
required to disclose Confidential Information of the other party pursuant to an
order of a court or administrative agency or other governmental body with valid
jurisdiction, the receiving party may disclose Confidential Information only
after providing the disclosing party with reasonable advance notice thereof to
enable the disclosing party to seek a protective order or otherwise prevent
such disclosure, but nothing herein shall require a party to take or refrain
from taking any action in violation of any such legal process.  Each party shall limit the disclosure of the
other party’s Confidential Information to its directors, employees and agents,
in each case with a legitimate “need to know” and who are bound in writing to
observe the obligations of nondisclosure and non-use under this Agreement.  Information exchanged by and between the
parties 


 


6

















 


and
any such directors, employees and/or agents shall be deemed the Confidential
Information of the party on whose behalf such information was disclosed, and
shall be governed by the provisions of this Section 4.


 


4.4.          Return of
Information.  Each party
shall, upon the request of the other party, return to the other party all of
the other party’s Confidential Information in the receiving party’s possession
or control (including any copies or extracts thereof) or destroy such records
and certify the destruction thereof, except for any copy legally required to be
retained for archive purposes.


 


4.5.          Injunctive
Relief.  Each party acknowledges and
agrees that due to the unique nature of the disclosing party’s Confidential
Information, there can be no adequate remedy at law for any breach of its
obligations hereunder, that any such breach may allow the receiving party or
third parties to unfairly compete with the disclosing party, and therefore,
that upon any such breach or any threat thereof, the disclosing party shall be
entitled to appropriate equitable relief in addition to whatever remedies it
might have at law.  The receiving party
shall notify the disclosing party in writing immediately upon the occurrence of
any such unauthorized release or other breach of which it becomes aware.


 


4.6.          Survival.  The obligations of each party with respect to
the other party’s Confidential Information shall continue in effect for
ten (10) years after the expiration or termination of this Agreement.


 


5.     Intellectual Property Rights


 


5.1.          Synergy IP.  As between the parties, all Synergy
Intellectual Property is and shall remain the exclusive property of
Synergy.  Synergy hereby grants to
Contractor, on a Project by Project basis and solely for the duration of such
Project, a limited, non-exclusive license (with no right to sublicense) to use
such Synergy Intellectual Property actually disclosed (or transferred, as
applicable) to Contractor solely for the purpose of, and only to the extent
strictly necessary for, Contractor’s performance of the applicable
Services.  Contractor hereby irrevocably,
expressly and automatically assigns, in perpetuity, all right, title and
interest in and to Work Product and Synergy Intellectual Property to
Synergy.  If Contractor has any rights to
Work Product and/or Synergy Intellectual Property that cannot (as a matter of
law) be assigned to Synergy in accordance with the foregoing, Contractor unconditionally
and irrevocably:  (i) waives the
enforcement of such rights against Synergy or its assignees and licensees; and
(ii) grants to Synergy an exclusive, irrevocable, perpetual, worldwide,
royalty-free license (a) to reproduce, create derivative works of,
distribute, publicly perform, publicly display, digitally perform, and
otherwise use and exploit such Work Product and/or Synergy Intellectual
Property, (b) to use, make, have made, sell, offer to sell, import, and
otherwise exploit any product or service based on, embodying, incorporating, or
derived from Work Product and/or Synergy Intellectual Property, and (c) to
exercise any and all other present or future rights not yet known in Work
Product and/or Synergy Intellectual Property. 
Contractor agrees to render all reasonably required assistance to
Synergy to protect Synergy’s rights under this Section.  If Synergy is unable to secure Contractor’s
signature on any documents deemed necessary by Synergy to carry out the
purposes of this Section, Contractor hereby irrevocably designates and appoints
Synergy or its designee(s) as Contractor’s agent and attorney, which
appointment is coupled with an interest, to act for and in Contractor’s behalf
to execute, verify and file any such documents.


 


5.2.          Contractor
IP.  As between the parties, all
Contractor Intellectual Property is and shall remain the exclusive property of
Contractor.  Contractor hereby grants to
Synergy, on a Project by Project basis, a fully paid-up, royalty free,
irrevocable, worldwide, non-exclusive license to use such Contractor
Intellectual Property solely for the purpose of, and only to the extent
strictly necessary for, Synergy’s full use and enjoyment (including the
commercialization of Products) of Work Product.


 


5.3.          Reservation of
Rights.  Except as otherwise expressly
agreed to by the parties in this Agreement or any Work Order, nothing contained
herein, nor the delivery of any Confidential Information of one party to the
other, shall be deemed to grant any right or license under any patent or patent
applications or to any intellectual property of the first party to the other.  Each
party reserves all rights not expressly granted herein, and no right or license
is granted hereunder, express or implied or by way of estoppel, to any
intellectual property rights or materials other than as expressly set forth
herein.


 


6.     Representations, Warranties and
Covenants.


 


6.1.          Contractor
Representations, Warranties and Covenants. 
Contractor hereby represents, warrants and covenants to Synergy that:


 


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6.1.1.       Contractor has and shall engage
competent employees and consultants with the proper skill, training and
background to support its obligation to render the Services hereunder, and
shall provide the facilities, supplies and staff necessary to complete each
Project as specified in the Work Order for such Project, and in accordance with
the other terms of this Agreement.


 


6.1.2.       Each Project shall be performed in
all material respects in accordance with the terms of this Agreement and the
applicable Work Order and all Product will conform in all respects to the
Specifications and Manufacture and Release Requirements set forth in the
applicable Work Order at the time of delivery to Synergy’s carrier if Synergy
arranges for shipment, or time of delivery to Synergy if Contractor arranges
shipment.


 


6.1.3.       Contractor is under no contractual
or other obligation or restriction that is inconsistent with performance of its
obligations under this Agreement, and Contractor will not enter into any
agreement, either written or oral, in conflict with its obligations
hereunder.  Contractor shall provide the
Services in a manner that the provision thereof will not conflict with its
responsibilities under any other agreement, arrangement or understanding,
including any employment relationship.


 


6.1.4.       Contractor’s performance of Services
shall not infringe, violate or misappropriate any third party intellectual
property rights except to the extent such performance is based upon Synergy’s
written instructions or use of Synergy Materials.


 


6.1.5.       Contractor has not been debarred,
and has not been convicted of a crime which could lead to debarment, under the
Debarment Act.  In the event that
Contractor or any of its officers, directors, or employees becomes debarred or
receives notice of action or threat of action with respect to its debarment,
Contractor shall notify Synergy immediately in writing.


 


6.1.6.       Contractor has not utilized and
shall not utilize the services of any individual or entity in the performance
of Services who has been debarred or who has been convicted of a crime which
could lead to debarment under the Debarment Act.  In the event that Contractor receives notice
of the debarment or threatened debarment of any such individual or entity,
Contractor shall notify Synergy immediately.


 


6.2.          Mutual
Representation and Warranties.  Each of
Synergy and Contractor hereby represents, warrants and covenants to the other
that:


 


6.2.1.       Such party is, and at all times
during the term of the Agreement shall remain, a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization.


 


6.2.2.       The execution and delivery of this
Agreement has been duly authorized by all requisite corporate action.


 


6.2.3.       This Agreement is, and shall remain,
a valid and binding obligation of such party, enforceable pursuant to its
terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors.


 


6.3.          Disclaimer.  Contractor makes no warrantees direct or implied
about the suitability of the Products for any use by Synergy.


 


7.     Indemnification.


 


7.1.          By Synergy. Synergy,
at its own expense, shall: (i) defend,
or at its option settle, any claim, suit or proceeding brought by a third party
against Contractor and its officers, directors, employees and agents to the extent arising out of:
(a) Contractor’s use of Synergy Materials to the extent such use is in
accordance with this Agreement; (b) Synergy’s commercialization of a Product; or
(c) Synergy’s breach of any representations, warranties or covenants set
forth in Section 6.2; and (ii) pay any judgment entered or settlement against Contractor thereon; except
in each case to the extent such third party claim is caused by Contractor’s or
its employee’s or agent’s breach of this Agreement, negligence or willful
misconduct.


 


7.2.          By
Contractor. Contractor, at its own expense, shall: (i) defend, or at its option settle, any
claim, suit or proceeding brought by a third party against Synergy and
its officers, directors, employees and agents to the 


 


8

















 


extent arising out of (a) Contractor’s use of
Synergy Materials other than as expressly permitted by this Agreement; or (B) Contractor’s
breach of any representations, warranties or covenants set forth in Section 6;
and (ii) pay any judgment entered
or settlement against Synergy thereon; except in each case to the extent
such third party claim is caused by Synergy’s or its employee’s or agent’s
breach of this Agreement, negligence or willful misconduct.


 


7.3.          Process.  The
party indemnifying the other party under this Section 7 shall have no
obligation to indemnify the relevant claim unless the indemnified party: (a) gives
it prompt written notice of the claim; (b) gives it the right to control
and direct the investigation, preparation, defense and settlement of the claim;
and (c) fully cooperates with it, at the indemnifying party’s expense, in
such defense and settlement.  The
indemnified party may, at its cost, to employ counsel of its choice to
participate in the defense of such claim.


 


8.     Insurance.


 


Contractor shall, during the term of this Agreement
and for five (5) years thereafter, maintain comprehensive general
liability insurance, with endorsements for contractual liability and product
liability with coverage limits of not less than Two Million Dollars
($2,000,000).  The minimum level of
insurance set forth herein shall not be construed to create a limit on
Contractor’s liabilities hereunder. 
Prior to the Effective Date (and each anniversary thereof thereafter),
Contractor shall furnish to Synergy a certificate of insurance evidencing such
coverage as of the Effective Date (and each anniversary thereof) and upon
request by Synergy at any time hereafter. 
Each such certificate of insurance shall include a provision whereby
sixty (60) days’ written notice must be received by Synergy prior to coverage
modification or cancellation by either Contractor or the insurer.


 


9.             Term and Termination.


 


9.1.            Term. Unless terminated
by either party as expressly permitted herein, this Agreement shall be in
effect from the Effective Date and for a period of five (5) years, and
shall thereafter automatically renew for additional one (1) year terms
unless either party notifies the other party of its intent not to renew no
later than ninety (90) days prior to expiration of the then-current term, in
which case this Agreement shall expire upon expiration of the then-current
term.


 


9.2.            Termination.


 


9.2.1.       Each party may terminate this Agreement or
any Work Order if the other party materially breaches this Agreement or such
Work Order, respectively, and if such breach remains uncured for thirty (30)
days from receipt of notice from the other party describing such breach, or in
the case of a breach that cannot reasonably by cured within such time period.


 


9.2.2.       Synergy may terminate any Project or
Work Order (or a portion thereof) at any time prior to completion by giving
written notice to Contractor. Synergy may, on termination of all Projects and
Work Orders, terminate this Agreement. Contractor shall promptly comply with
the terms of such notice(s) to terminate work on the Project(s) or
Work Order(s) (as applicable) and use its best efforts to limit any
further cost to Synergy.  Synergy shall
pay Contractor all fees due in respect of Services property performed as of the
date of termination.


 


9.3.            Effect of
Termination or Expiration.  Upon
termination of this Agreement and/or any Work Order by either party, Contractor
shall promptly deliver to Synergy all Work Product, reports, data, records and
other information and materials generated by Contractor for the Project(s) and
Work Orders and return all remaining Synergy Materials to Synergy, in each case
as applicable.  Termination
or expiration of this Agreement for any reason shall not relieve the parties of
any obligation accruing prior to such termination.  In no way limiting the generality of the
foregoing, Sections 3.7, 3.8, 3.9, 4, 5, 6, 7, 8, 9.3 and 10 shall survive
termination or expiration of this Agreement.


 


10.           Miscellaneous.


 


10.1.        Independent Contractor. 
Contractor shall at all times operate as independent contractor of
Synergy, and the relationship between Synergy and Contractor shall not
constitute a partnership, joint venture or agency.  Neither Synergy nor Contractor shall have the
authority to make any statements, representations or commitments of any kind,
or to take any action, which shall be binding on the other, without the prior
consent of the other party to do so.


 


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10.2.        Limitation
on Damages.  NEITHER PARTY
SHALL BE LIABLE TO THE OTHER PARTY UNDER OR IN CONNECTION WITH THIS AGREEMENT
FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL, INCIDENTAL, EXEMPLARY OR
PUNITIVE DAMAGES, EVEN IF SUCH PARTY HAS BEEN ADVISED OF OR IS AWARE OF THE
LIKELIHOOD OF SUCH DAMAGES, PROVIDED THAT THE FOREGOING SHALL NOT APPLY TO
CLAIMS ARISING UNDER SECTION 4 AND/OR SECTION 5, OR TO AMOUNTS OWING
TO A THIRD PARTY PURSUANT TO A PARTY’S INDEMNIFICATION OBLIGATIONS IN SECTION 7.


 


10.3.        Governing Law. 
This Agreement shall be governed by the laws of the State of New York,
U.S.A. without regard to any conflict of law provisions or principles.


 


10.4.        Publicity; Use of Names. Neither
party may publish any articles or make any presentations relating to the
Services provided hereunder or referring to data, information or materials
generated as part of such Services, in whole or in part, without the prior
written consent of the other.  Neither
party shall use the name of the other party or the names of the employees of
the other party in any advertising or sales promotional material or in any
publication without prior written permission of such party.


 


10.5.        Assignment. 
Neither party may assign any of its rights or obligations under this
Agreement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed, provided that Synergy may this
Agreement in its entirety in connection with a merger, consolidation or the sale
of substantially all of the assets to which this Agreement relates. Any
permitted assignee shall assume all obligations of its assignor under this
Agreement.


 


10.6.        Severability. 
If any provision of this
Agreement is held to be illegal, invalid, or unenforceable under present or
future state or federal laws or rules and regulations promulgated
thereunder effective during the term hereof, such provision shall be fully
severable, and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and the remaining provisions hereof shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance.


 


10.7.        Cumulative
Rights.  Except as herein expressly
provided, the rights, powers and remedies hereunder shall be in addition to,
and not in limitation of, all rights, powers and remedies provided at law or in
equity, or under any other agreement between the Parties, and all of such
rights, powers and remedies shall be cumulative, and may be exercised
successively or cumulatively.


 


10.8.        Notices.   Other than standard communications, any notice to
be given to a party under or in connection with this Agreement shall be in
writing and shall be delivered (a) personally, (b) by a nationally
recognized overnight courier or by certified mail, postage prepaid, return
receipt requested, (c) via facsimile, with receipt confirmed, or (d) if
actually received, by U.S. mail, addressed to such party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor and shall be effective upon receipt by
the addressee:


 


	
  If
  to Contractor:

  	
   

  	
  If
  to Synergy:

  
	
   

  	
   

  	
   

  
	
  *

  	
   

  	
  Synergy
  Pharmaceuticals Inc.

  
	
  Phone:
  *

  	
   

  	
  420
  Lexington Avenue, Suite 1609

  
	
  Fax:
  *

  	
   

  	
  New
  York, NY 10170

  
	
   

  	
   

  	
  Attention:
  Kunwar Shailubhai

  
	
   

  	
   

  	
  Telephone:
  212-297-0010

  
	
   

  	
   

  	
  FAX:
  212-297-0020

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With
  a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Mintz,
  Levin, Cohn, Ferris, Glovsky and Popeo, PC

  
	
   

  	
   

  	
  One
  Financial Center

  
	
   

  	
   

  	
  Boston,
  MA 02111

  
	
   

  	
   

  	
  Attention:
  John A. Dellapa

  
	
   

  	
   

  	
  Telephone:
  (617) 348-1797

  



 


10

















 


	
   

  	
   

  	
  Fax:
  (617) 522-2241

  
	
   

  	
   

  	
  Email:
  jadellapa@mintz.com

  



 


10.9.        Waiver.  No waiver of any provision of this Agreement,
whether by conduct or otherwise, in any one or more instances shall be deemed
to be or be construed as a further or continuing waiver of any such provision
in any other instance, or of any other provision or condition of this
Agreement.


 


10.10.      Entire Agreement; Modification.  This Agreement (including Work Orders)
supersedes all prior discussions and writings and constitutes the entire
agreement between the parties with respect to the subject matter hereof.  No waiver or modification of this Agreement
shall be binding upon either party unless made in writing and signed by a duly
authorized representative of such party and no failure or delay in enforcing
any right shall be deemed a waiver.  In
the event of any conflict between this Agreement and any Work Order, the terms
of this Agreement shall control.


 


IN
WITNESS WHEREOF, the parties have caused their duly authorized officers to
execute and deliver this Master Services Agreement effective as of the
Effective Date.


 


 


	
   Synergy:

  	
  SYNERGY PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Kunwar Shailubhai

  
	
   

  	
   

  
	
   

  	
  Name:
  

  	
  Kunwar
  Shailubhai, Ph.D. & M.B.A.

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:
  

  	
  Chief
  Scientific Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  Contractor:

  	
  *

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  *

  
	
   

  	
   

  
	
   

  	
  Name:
  *

  
	
   

  	
   

  
	
   

  	
  Title:

  	
  Executive
  Vice President, Business Development

  



 


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