Exhibit
10.2


 


AMENDED
AND RESTATED CONSULTING AGREEMENT


 


This AMENDED AND RESTATED
CONSULTING AGREEMENT (the “Agreement”) is made and entered into as of the 1st
day of February 2010 by and between Gabriele M. Cerrone (“Consultant”) and
Synergy Pharmaceuticals, Inc., a Florida corporation (the “Company”).


 


WHEREAS, the Consultant
guided the Company’s simultaneous acquisition of Synergy Pharmaceuticals, Inc.
a Delaware corporation (“Synergy”) from Callisto Pharmaceuticals, Inc., a
Delaware corporation (“Callisto”), its recapitalization and financing in July 2008,


 


WHEREAS, the Consultant
has and will continue to serve as a consultant and Chairman of the Board of
Callisto, which owns more than a majority of the Company’s common stock; and


 


WHEREAS, the Company desires
to engage Consultant to provide certain consulting services, and Consultant is
willing to be engaged by the Company to provide such services, on the terms and
conditions set forth below;


 


WHEREAS, the Company and
Callisto desire to allocate the cost of the Consultant’s services between them
consistent with the cost of such services and relative benefits derived
therefrom;


 


WHEREAS,
the Consultant has previously entered into a consulting agreement with the
Company as of March 11, 2009 (the “Consulting Agreement”); and


 


WHEREAS,
the parties wish to amend and restate the Consulting Agreement between the
Consultant and the Company in its entirety, on the terms and conditions
contained in this Agreement.


 


NOW, THEREFORE, in
consideration of the mutual covenants and agreements contained herein, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:


 


1.                                       Purpose: The Company hereby engages Consultant
for the term specified in Paragraph 2 hereof to render consulting advice to the
Company relating to business development, corporate finance and capital markets
matters upon the terms and conditions set forth herein.


 


2.                                       Effective Date and Term:


 


2.1                                 Effective Date.  This Agreement shall become effective as of August 1,
2008 (the “Effective Date”)


 

















 


2.2                                 Term.  Unless earlier terminated pursuant to Section 10
hereof, the term of this Agreement shall commence on the Effective Date and
shall continue from the Effective Date to December 31, 2012 (the “Initial
Term”).  This Agreement shall thereafter
be automatically renewed for successive one year periods unless either party
shall notify the other in writing of its intention not to renew this Agreement
(a “Non-renewal Notice”), which notice shall be given at least 90 days prior to
the end of the then current term (the “Expiration Date”).  The period from the Effective Date to the
Expiration Date, including the Renewal Term, if any, is referred to herein as
the “Term.”


 


3.     Duties of Consultant:  During the term of this Agreement,
the Consultant shall devote such portion of his business time and attention to
affairs of the Company reasonably necessary to provide the Company with such
regular and customary business development, strategic planning, capital markets
and corporate finance consulting advice as is reasonably requested by the
Company’s management and Board of Directors, provided that Consultant shall not
be required to undertake duties not reasonably within the scope of this
Agreement.   So long as the Consultant
serves as a member of the Company’s Board of Directors,  Consultant shall serve as Chairman of the
Board; provided, at the request of all of the members of the Board of
Directors (not counting the Consultant), the Consultant will relinquish his
title as Chairman to the Company’s duly appointed chief executive officer, and
accept the title of Vice Chairman.


 


3.1.  Permissible Services.         The Consultant’s services will include advising the
Company’s Board of Directors and senior management on the following matters:


 


	
  (i)

  	
  in-licensing and
  out-licensing technologies and compounds;

  
	
  (ii)

  	
  capitalization and
  corporate organization of the Company;

  
	
  (iii)

  	
  structure and pricing
  of offerings of the Company’s securities in public and private transactions;

  
	
  (iv)

  	
  alternative uses of
  corporate assets;

  
	
  (v)

  	
  structure and use of
  debt;

  
	
  (vi)

  	
  application and
  maintenance of listing of the Company’s stock in securities exchanges and
  other appropriate markets;

  
	
  (vii)

  	
  strategic planning

  
	
  (viii)

  	
  management recruitment
  and compensation; and

  
	
  (ix)

  	
  presentations to
  institutional and professional individual investors in the U.S. and Europe.

  



 

















 


3.2                                 Prohibited Services. 
The services to be rendered by the Consultant to the Corporation shall
not (unless the Consultant is appropriately licensed, registered or there is an
exemption available from such licensing or registration) include, directly or
indirectly: any activities which require the Consultant to register as a
broker-dealer under the Securities Exchange Act of 1934.


 


4.                                       Compensation:  :


 


4.1.                                                      Base Compensation.


 


(a)                                  In consideration for the services
rendered by Consultant to the Company pursuant to this Agreement, the Company
agrees to pay Consultant the annual sum of $295,000 at the rate of $24,583.33
per month commencing on the Effective Date (“Base Compensation”). The
Consultant’s Base Compensation may be increased, but not decreased by the
Compensation Panel.  Once increased, such
increased amount shall constitute the Consultant’s Base Compensation and shall
not be decreased. The Company will include the shares of equity securities of
the Company which may be issued upon the exercise of the options held by
Consultant in any registration statement under the Securities Act of 1933 which
includes securities issuable to any other executive officer of the Company.


 


(b)                                 It is expressly acknowledged that
Consultant’s Base Compensation shall be allocated between the Company and
Callisto, so that the aggregate Base Compensation payable to the Consultant
during the Employment Term from the Company and Callisto will not exceed
$295,000 (or such higher amount as is determined by the committee of Callisto’s
and/or the Company’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 Consultant’s Base Compensation shall be payable by the Company
and 25% of such Base Compensation shall be paid 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 Consultant’s Base Compensation, the
Company shall pay Consultant’s Base Compensation in full, irrespective of any
accounting allocation.   The overall cap
of $295,000 shall not be diminished by any bonus or accelerated payment benefit
given to Consultant by Callisto.


 


(c)                                  In the event Callisto is obligated to pay
any item of compensation or reimburse expenses to Consultant under this
Agreement, Callisto fails to do so and the Company makes payment to the
Consultant


 

















 


pursuant to Section 4.1(b) of
this Agreement, the Company shall be subrogated to all claims of the Consultant
against Callisto arising from Callisto’s failure to make payment to the extent
of such payments made to the Consultant.


 


4.2.                                                      Incentive Compensation.


 


(a)                                  Annual Bonus.               Consultant shall be eligible to earn a cash bonus of
up to 50% of his Base Compensation per full calendar year during the 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 Consultant and the Compensation Panel.  Bonuses, if any, shall be subject to all
applicable tax and payroll withholdings.


 


(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 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 $150 million, $200 million and $250 million in the
first, second, third years of the Term or any years beyond the third year of
the Term, respectively, and, in the case of a financing transaction, the
Company receives not less than $20 million of gross proceeds; or the license
fees the Company contracts to receive (disregarding any contingencies to such
payment) equal or exceeds $50 million, the Consultant shall accrue a bonus in
an amount determined by multiplying the Enterprise Value (defined below) in the
case of a joint venture or financing 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 engages in a merger transaction or 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 Consultant shall accrue
a bonus in an amount determined by multiplying the Enterprise Value by 2.5% (a “Sale
Transaction”).


 


(iii)                               The accrued bonuses shall be payable to
Consultant: (a) in cash in full 5 business days after the closing of any
Sale Transaction or joint venture, notwithstanding that the consideration for
such merger or sale or joint venture consists in whole or in part of securities
of the acquiring company or joint venture company, as the case may be; (b) in
cash 5 full business days after the Company’s receipt of


 

















 


license fees at the rate
of 0.5% of license fees actually received; or, in connection with one or more
bonuses with respect to financing transactions, at the time set forth in Section 4.2(b)(v) below.  The expiration or termination of this
Agreement shall not terminate or diminish the Consultant’s right to receive
bonus payments with respect to out licenses fees collected after the
termination or expiration of this Agreement


 


(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 Board of Directors of the
Company prior to the Change in Control in good faith. 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 $400 million 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 4.2(b)(i),
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.


 


(v)                                 The Enterprise Value in a financing
transaction shall be determined on the basis of the pre-money valuation of the
Company for financing purposes, provided the bonus shall accrue in full but
only be payable: (1) concurrently with the closing of the financing, to
the extent of 3% of the gross proceeds received by the Company in the
financing; and (2) the balance of such accrued bonus, the earlier of the
end of the calendar year in which such bonus is accrued or on the tenth
business day after termination of this Agreement without Cause or for Good
Reason.


 

















 


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


 


5.                                       Expenses and Services:


 


5.1                                 Consultant is authorized to incur
reasonable expenses in carrying out his duties and responsibilities under this
Agreement, including, without limitation, expenses for travel (at the fare
class no less favorable than that of other executive officers of the Company),
cellular telephone (including access charges and business calls), electronic
market data services consisting of a full office-based and
portable Bloomberg information services, the cost associated with accessing office facilities and
administrative assistance outside of the Company’s principal executive offices
at such times that the Consultant is attending to matters within the scope of
this Agreement and business entertainment. 
Additionally, the Consultant is authorized to incur reasonable expenses
for the attendance of conferences in fields relate to technology of interest to
the Company, finance of biotechnology ventures, and similar events related to
Consultant’s duties and responsibilities as Consultant deems necessary.  Company will reimburse Consultant for all
such expenses upon presentation by Consultant of appropriately itemized
accounts of such expenditures or the Company will pay such expenses directly.


 


5.2                                 During the Term, the Company will at its
sole expense provide the Consultant with computing hardware and software tools,
office facilities and qualified, access to Company information and financial
records and an experienced administrative assistant and such legal and
accounting support services as is deemed appropriate by the Consultant. 
Such services and facilities will not be diminished without the
Consultant’s prior consent.


 


5.3                                 In the event this Agreement is terminated
other than for Cause or voluntarily by the Consultant, the Company, in addition
to any other termination benefit, will make a lump sum payment to Consultant
equal to the amount of reimbursable expenses accrued for the services and
accommodations set forth in Sections 5.1 and 5.2 during the 12 full calendar
months preceding the date of termination. 
In the event 12 full calendar months of the Term shall not have elapsed
as of the date of termination, the lump sum payment shall equal the average
monthly expenses accrued for the full calendar months of the Term completed as
of the date of termination times 12. 
Such lump sum payments shall be made no later than 30 days after
termination. In the event of a disagreement between the Company as to the
amount of such lump sum 


 

















 


payment, the
Company shall pay the amount as to which there is no dispute, pending the
settlement of any amounts as to which there is a dispute.


 


6.                                       Liability of Consultant: 
The Company acknowledges that all opinions and advice (written or oral)
given by Consultant to the Company in connection with Consultant’s engagement
are intended solely for the benefit and use of the Company in considering the
transaction to which they relate, and the Company agrees that no person or
entity other than the Company shall be entitled to make use of or rely upon the
advice of Consultant to be given hereunder, and no such opinion or advice shall
be used for any other purpose or reproduced, disseminated, quoted or referred
to at any time, in any manner or for any purpose, nor may the Company make any
public references to Consultant, or use Consultant’s name in any annual reports
or any other reports or releases of the Company without Consultant’s prior
written consent.  Consultant’s maximum
liability shall not exceed the cash compensation received from the Company.


 


7.                                       Consultant’s Services to
Others:  The Company acknowledges that Consultant and
its affiliates are in the business of investing and providing financial
services and consulting advice to others. 
Nothing herein contained shall be construed to limit or restrict
Consultant in conducting such business with respect to others, or in rendering
such advice to others.


 


8.                                       Company Information:


 


a.                                       The Company recognizes and confirms that,
in advising the Company and in fulfilling his engagement hereunder, Consultant
will use and rely on data, material and other information furnished to
Consultant by the Company.  The Company
acknowledges and agrees that in performing his services under this engagement,
Consultant may rely upon the data, material and other information supplied by
the Company without independently verifying the accuracy, completeness or
veracity of same.  The Company agrees to
notify Consultant in writing via overnight courier, facsimile or e-mail of any
material event and/or change with in twenty-four hours of its occurrence.


 


b.                                      Consultant recognizes and acknowledges
that by reason of Consultant’s retention by and service to the Company before,
during and, if applicable, after the Term, Consultant 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
relating to the field of in which the Company is actually engaged in
research, development, collaboration or sales at the time of such disclosure (collectively referred to as “Confidential
Information”).  Consultant acknowledges
that such


 

















 


Confidential Information
is a valuable and unique asset of the Company and Consultant covenants that it
will not, unless expressly authorized in writing by the Company, at any time
during the Consulting Term use any Confidential Information or divulge or
disclose any Confidential Information to any person, firm or corporation except
in connection with the performance of Consultant’s duties for the Company and
in a manner consistent with the Company’s policies regarding Confidential
Information.  Consultant also covenants
that at any time after the termination of this Agreement, directly or
indirectly, it 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 Consultant 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 Consultant 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 Consultant’s possession during the Consulting Term
shall remain the property of the Company. 
Except as required in the performance of Consultant’s duties for the Company,
or unless expressly authorized in writing by the Company, Consultant shall not
remove any written Confidential Information from the Company’s premises, except
in connection with the performance of Consultant’s duties for the Company and
in a manner consistent with the Company’s policies regarding Confidential
Information.  Upon termination of this
Agreement, the Consultant agrees to return immediately to the Company all
written Confidential Information (including, without limitation, in any
computer or other electronic format) in Consultant’s possession.  .


 


9.                                       Consultant an Independent
Contractor:  Consultant shall perform its services
hereunder as an independent contractor and not as an employee of the Company or
an affiliate thereof.  It is expressly
understood and agreed to by the parties hereto that Consultant shall have no
authority to act for, represent or bind the Company or any affiliate thereof in
any manner, except as may be agreed to expressly by the Company in writing from
time to time.


 


10.                                 Termination:


 


10.1                           Termination
Without Cause or for Good Reason.


 


(a)                                  If this Agreement is terminated by the
Company other than for Cause (as defined in Section 10.4 hereof) or as a
result of Consultant’s death or Permanent Disability (as defined in Section 10.2
hereof), or if Consultant terminates his employment for Good Reason (as defined
in Section 10.1 (b) hereof) prior to the Expiration Date, Consultant
shall receive or commence receiving as soon as practicable in accordance with
the terms of this Agreement:


 
















 


(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 Consultant’s Base Compensation for the then remaining term of
this Agreement or twelve times the average monthly Base Compensation paid or
accrued during the three full 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 monthly cost during the
three full months immediately preceding such termination of providing the
services to Consultant set forth in Section 5.1 and Consultant’s reimbursed
expenses set forth in Section 5.2;


 


(ii)                                  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;


 


(iii)                               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


 


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


 


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


 


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


 


(ii)                                  A reduction by the Company in Consultant’s
Base Compensation or any failure of the Company to reimburse Consultant for
material expenses described in Section 5.1 or provide the services
described in Section 5.2 of this Agreement;


 

















 


(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 11 hereof;


 


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


 


(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 10.1 (a) becomes payable
to the Consultant:


 


(i)                                     In the event the severance compensation
provided for in subsection 10.1(a)  above cannot be finally determined on
or before the tenth day following such termination, the Company shall pay to
the Consultant 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 Consultant 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 Consultant 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 Consultant, 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 Consultant in connection
with a Change in Control of the Company or the Consultant’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 acceptable to the
Consultant, 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 Consultant 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 Consultant’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
Consultant’s employment, the Consultant 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 Consultant remains whole
on an after-tax basis following such repayment (taking into account any reduction
in income or excise taxes to the 


 

















 


Consultant 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 Consultant’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.


 


10.2                           Permanent
Disability. If Consultant 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 Consultant may terminate this Agreement on written
notice thereof, and Consultant shall receive or commence receiving, as soon as
practicable:


 


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


 


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


 


(iii)                               immediate vesting of all unvested stock
options.


 


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


 


(i)                                     compensation equal to one year’s Base
Compensation which shall be paid within 30 days of such termination;


 


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


 


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


 

















 


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


 


10.4                           Voluntary Termination
by Consultant: Discharge for Cause.  The Company
shall have the right to terminate this Agreement for Cause (as hereinafter
defined). In the event that Consultant’s employment is terminated by Company
for Cause, as hereinafter defined, or by Consultant other than for Good Reason
or other than as a result of the Consultant’s Permanent Disability or death,
prior to the Termination Date, Consultant 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 (i) willful malfeasance or willful misconduct by
Consultant 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 (ii) the
conviction of Consultant for commission of a felony.  For purposes of this subsection, no act or
failure to act on the Consultant’s part shall be considered “willful” unless
done, or omitted to be done, by the Consultant 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
pursuant to this Section 10.4 shall be made by delivery to Consultant 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 days prior
written notice to Consultant and reasonable opportunity for Consultant 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, Consultant was guilty
of conduct set forth in any of clauses (i) through (ii) above and
specifying the particulars thereof.


 


11.                               Assignment:


 


This
Agreement shall be binding upon and inure to the benefit of the heirs and
representatives of Consultant 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 Consultant (except by will
or by operation of the laws of intestate succession or by Consultant notifying
the Company that cash payment be made to an affiliated investment partnership
in which Consultant 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.


 


12.                               Change
In Control:


 


12.1                           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
Consultant 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.


 


12.2                           Rights and
Obligations.                  If a Change in
Control of the Company shall have occurred while the Consultant is director of
the Company, the Consultant shall be entitled to the compensation provided in Section 10.1
of this Agreement upon the subsequent termination of this Agreement by either
the Company, or the Consultant within two years of the date upon which the
Change in Control shall have occurred, unless such termination is a result of (i) the
Consultant’s death; (ii) the Consultant’s Disability; (iii) the
Consultant’s Retirement; or (iv) the Consultant’s termination for Cause.


 


7.                                      Indemnification:


 


Consultant,
as such and as a Director of the Company, shall be indemnified by the Company
against all liability incurred by the Consultant in connection with any
proceeding, including, but not necessarily limited to, the amount of any
judgment obtained against Consultant, the amount of any settlement entered into
by the Consultant 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 Consultant may be entitled under Company’s Certificate of
Incorporation or By-laws, as in effect from time to time, any agreement or
otherwise.


 


14.                                 Miscellaneous:


 


(a)                                  This Agreement between the Company and
Consultant constitutes the entire agreement and understanding of the parties hereto,
and supersedes any and all previous agreements and understandings, whether oral
or written, between the parties with respect to the matters set forth herein.


 


(b)                                 Any notice or communication permitted or
required hereunder shall be in writing and shall be deemed sufficiently given
if hand-delivered or sent (i) postage prepaid by registered mail, return
receipt requested, or (ii) by facsimile, to the respective parties as set
forth below, or to such other address as either party may notify the other in
writing.


 


If to the Company,
to:                                                                            Synergy Pharmaceuticals, Inc.


420 Lexington Avenue, Suite 1609


New York, New York 10170


Attention:  Gary S. Jacob, CEO


 


If to Consultant,
to:                                                                                        Gabriel M. Cerrone


c/o Panetta Partners Ltd.


1275
First Avenue, Suite 296


New York, New York 10021


Attention:  Gabriele M. Cerrone, Managing Partner


 


With a required copy to:


 


Sommer &
Schneider LLP


595 Stewart Avenue, Suite 710


Garden City, NY 11530


Attention: Herb Sommer,
Partner


 


(c)                                  This Agreement may be executed in any
number of counterparts, each of whom together shall constitute one and the same
original document.


 


(d)                                 This Agreement may not be changed orally,
but only by an agreement in writing signed by the party against whom any
waiver, change, amendment, modification or discharge is sought.


 

















 


(e)                                  The invalidity of all or any part of any
provision of this Agreement shall not render invalid the remainder of this
Agreement or the remainder of such provision. 
If any provision of this Agreement is so broad as to be unenforceable,
such provision shall be interpreted to be only so broad as is enforceable.


 


(f)                                    This Agreement shall be governed by and
construed in accordance with the law of the State of New York without giving
effect to the principles of conflicts of law thereof.  The parties hereto each hereby submits herself
or itself for the sole purpose of this Agreement and any controversy arising
hereunder to the exclusive jurisdiction of the state courts in the State of New
York.


 


(d)                                 Any amounts due hereunder to Consultant which
remain unpaid after their due date, shall bear interest from the due date until
paid at a rate of the prime rate (in effect on the date thereof for Citibank).


 


(e)                                  The Company’s obligations to make
payments under Section 10 and 12 shall survive termination or expiration
of this Agreement.


 


(f)                                    Consultant shall not be required to
mitigate damages or the amount of any payment provided for under this Agreement
by seeking other employment or otherwise after the termination of this
Agreement.


 


IN
WITNESS WHEREOF,
the parties hereto have caused this Agreement to be duly executed, as of the
date first above written.


 


 


	
   

  	
  CONSULTANT

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Gabriele M. Cerrone

  
	
   

  	
  Gabriele M. Cerrone

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SYNERGY PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary S. Jacob

  
	
   

  	
   

  	
  Name:

  	
  Gary S. Jacob

  
	
   

  	
   

  	
  Title:

  	
  President and CEO