Document:

Exhibit 10.1

 

AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT

 

This
AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”) dated February 1,
2010 by and between Synergy Pharmaceuticals,, Inc., a company incorporated
under the laws of Florida (the “Company”), and Gary S. Jacob, Ph.D., an
individual (the “Executive”) with reference to the following facts:

 

Callisto
Pharmaceuticals, Inc., a Delaware corporation (“Callisto”) owns
approximately 50% of the outstanding common stock of the Company;

 

Executive
serves as the CEO of Callisto and has been appointed President and Chief
Executive Officer of the Company;

 

Both
Callisto Research and Synergy are engaged in the business of developing and
marketing drug products;

 

The
Executive has previously entered into an employment agreement with the Company
as of March 11, 2009 (the “Employment Agreement”); and

 

The
parties wish to amend and restate the Employment Agreement between the
Executive and the Company in its entirety, on the terms and conditions
contained in this Agreement.

 

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

 

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

 

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

 

1.2                                 Employment Term.  The term of Executive’s employment under this
Agreement shall commence as of August 1, 2008 (the “Effective Date”) and
shall continue until December 31, 2012, unless earlier terminated in
accordance with Section 4 hereof. The term of Executive’s employment shall
be automatically renewed for 

 

 

successive one (1) year periods until the Executive or the Company
delivers to the other party a written notice of their intent not to renew the “Employment
Term,” such written notice to be delivered at least sixty (60) days prior to
the expiration of the then-effective “Employment Term” as that term is defined
below. The period commencing as of the Effective Date and ending December 31,
2011 or such later date to which the term of Executive’s employment under the
Agreement shall have been extended Agreement is referred to herein as the “Employment
Term” and the end of the Employment Term is referred to herein as the “Expiration
Date.”

 

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

 

1.4                                 Base Salary.

 

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

 

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

 

 

accounting allocation.  The
overall cap of $300,000 shall not be diminished by any bonus or accelerated
payment benefit given to Executive by Callisto.

 

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

 

1.5                                 Incentive
Compensation.

 

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

 

(b)                                 Realization
Bonus.

 

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

 

(ii)                                  In the event during the Term
of this Agreement the Company 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 Executive 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 Executive (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; or (b) in cash 5 business days after the Company’s
receipt of license fees at the rate of 0.5% of license fees actually
received.  The expiration or termination
of this Agreement shall not terminate or diminish the Executive’s right to
receive bonus payments with respect to out license fees collected 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.

 

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

 

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

 

 

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

 

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

 

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

 

2.                                       Confidential
Information.  Executive
recognizes and acknowledges that by reason of Executive’s employment by and
service to the Company before, during and, if applicable, after the Employment
Term, Executive will have access to certain confidential and proprietary
information relating to the Company’s business, which may include, but is not
limited to, trade secrets, trade “know-how,” product development techniques and
plans, formulas, customer lists and addresses, financing services, funding
programs, cost and pricing information, marketing and sales techniques,
strategy and programs, computer programs and software and financial information
(collectively referred to as “Confidential Information”). Executive
acknowledges that such Confidential Information is a valuable and unique asset
of the Company and Executive covenants that he will not, unless expressly
authorized in writing by the Company, at any time during the course of
Executive’s employment use any Confidential Information or divulge or disclose
any Confidential Information to any person, firm or corporation except in
connection with the performance of Executive’s duties for the Company and in a
manner consistent with the Company’s policies regarding Confidential
Information. Executive also covenants that at any time after the termination of
such employment, directly or indirectly, he will not use any Confidential
Information or divulge or disclose any Confidential Information to any person,
firm or corporation, unless such information is in the public domain through no
fault of Executive or except when required to do so by a court of law, by any
governmental agency having supervisory authority over the business of the
Company or by any administrative or legislative body (including a committee
thereof) with apparent jurisdiction to order Executive to divulge, disclose or
make accessible such information. All written Confidential Information
(including, without 

 

 

limitation,
in any computer or other electronic format) which comes into Executive’s
possession during the course of Executive’s employment shall remain the
property of the Company. Except as required in the performance of Executive’s
duties for the Company, or unless expressly authorized in writing by the
Company, Executive shall not remove any written Confidential Information from
the Company’s premises, except in connection with the performance of Executive’s
duties for the Company and in a manner consistent with the Company’s policies
regarding Confidential Information. Upon termination of Executive’s employment,
the Executive agrees to return immediately to the Company all written
Confidential Information (including, without limitation, in any computer or
other electronic format) in Executive’s possession. As a condition of Executive’s
continued employment with the Company and in order to protect the Company’s
interest in such proprietary information, the Company shall require Executive’s
execution of a Confidentiality Agreement and Inventions Agreement in the form
attached hereto as Exhibit “B”, and incorporated herein by this reference.

 

3.                                       Non-Competition;
Non-Solicitation.

 

3.5                                 Non-Compete.  The Executive hereby covenants and agrees
that during the term of this Agreement and for a period of one year following
the end of the Employment Term, the Executive will not, without the prior
written consent of the Company, directly or indirectly, on his own behalf or in
the service or on behalf of others, whether or not for compensation, engage in
any business activity, or have any interest in any person, firm, corporation or
business, through a subsidiary or parent entity or other entity (whether as a
shareholder, agent, joint venturer, security holder, trustee, partner,
Executive, creditor lending credit or money for the purpose of establishing or
operating any such business, partner or otherwise) with any Competing Business
in the Covered Area. For the purpose of this Section 3.1, (i) “Competing
Business” means any biotechnology or pharmaceutical company, any contract
manufacturer, any research laboratory or other company or entity (whether or
not organized for profit) that has, or is seeking to develop, one or more
products or therapies that is related to azaspiranes and guanylyl cyclase
receptor agonists and (ii) “Covered Area” means all geographical areas of
the United States and  foreign
jurisdictions where the Company then has offices and/or sells its products
directly or indirectly through distributors and/or other sales agents.
Notwithstanding the foregoing, the Executive may own shares of companies whose
securities are publicly trades, so long as such securities do not constitute
more than one percent (1%) of the outstanding securities of any such company.

 

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

 

 

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

 

4.                                       Termination.

 

4.5                                 Termination
Without Cause or for Good Reason.

 

(c)                                  If this
Agreement is terminated by the Company other than for Cause (as defined in Section 10.4
hereof) or as a result of Executive’s death or Permanent Disability (as defined
in Section 4.2 hereof), or if Executive terminates his employment for Good
Reason (as defined in Section 4.1(b) hereof) prior to the Expiration Date,
Executive 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 Executive’s Base Salary for the then
remaining term of this Agreement or twelve times the average monthly Base
Salary paid or accrued during the three full calendar months immediately
preceding such termination;

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

(e)                                  The following
provisions shall apply in the event compensation provided in Section 4.1(a)
becomes payable to the Executive:

 

(i)                                     if the
severance compensation provided for in subsection 4.1(a) above cannot be
finally determined on or before the tenth day following such termination, the
Company shall pay to the Executive on such day an estimate, as determined in
good faith by the Company of the minimum amount of such compensation and shall
pay the remainder of such compensation (together with interest at the Federal
short-term rate provided in Section 1274(d)(7)(C)(1) of the Code) as
soon as the amount thereof can be determined but in no event later than the
thirtieth day after the Date of Termination. In the event the amount of the
estimated payment exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive payable on
the fifth day after demand by the

 

 

Company (together with interest at the Federal short-term rate provided
in Section 1274(d)(7)(C)(1) of the Code).

 

(ii)                                  If the payment
of the Total Payments (as defined below) will be subject to the tax (the “Excise
Tax”) imposed by Section 4999 of the Code, the Company shall pay the
Executive on or before the tenth day following the Date of Termination, an
additional amount (the “Gross-Up Payment”) such that the net amount retained by
the Executive, after deduction of any Excise Tax on Total Payments and any
federal and state and local income tax and Excise Tax upon the payment provided
for by this paragraph, shall be equal to the Total Payments. For purposes of
determining whether any of the payments will be subject to the Excise Tax and
the amount of such Excise Tax, (A) any payments or benefits received or to
be received by the Executive in connection with a Change in Control of the
Company or the Executive’s termination of employment, whether payable pursuant
to the terms of Section 10 of this Agreement or any other plan,
arrangement or agreement with the Company, its successors, any person whose
actions result in a Change in Control of the Company or any corporation
affiliated (or which, as a result of the completion of transaction causing such
a Change in control, will become affiliated) with the Company within the
meaning of Section 1504 of Code (the “Total Payments”) shall be treated as
“parachute payments” within the meaning of Section 28OG(b)(2) of the
Code, and all “excess parachute payments” within the meaning of Section 28OG(b)(1) shall
be treated as subject to the Excise Tax, unless, in the opinion of tax counsel
selected by the Company’s independent auditors and acceptable to the Executive,
the Total Payments (in whole or in part) do not constitute parachute payments,
or such excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section 28OG(b)(4) of
the Code either in their entirety or in excess of the base amount within the
meaning of Section 28OG(b)(3) of the Code, or are otherwise not
subject to the Excise Tax, (B) the amount of the Total Payments that shall
be treated as subject to the Excise Tax shall be equal to the lesser of (I) the
total amount of the Total Payments or (II) the amount of excess parachute
payments or benefit shall be determined by the Company’s independent auditors
in accordance with the principles of Section 28OG(d)(3) and (4) of
the Code. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive’s residence an the
Date of Termination, net of the maximum

 

 

reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. In the event the Excise Tax is
subsequently determined to be less than the amount taken into account hereunder
at the time of termination of the Executive’s employment, the Executive shall
repay to the Company at the time the amount of such reduction in Excise Tax is
finally determined the portion of the Gross-Up Payment that can be repaid such
that the Executive remains whole on an after-tax basis following such repayment
(taking into account any reduction in income or excise taxes to the Executive
from such repayment) plus interest on the amount of such repayment at the
Federal short-term rate provided in Section 1274(d)(1)(C)(i) of the
Code. In the event the Excise Tax is determined to exceed the amount taken into
account hereunder at the time of the termination of the Executive’s employment
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall make an
additional gross-up payment in respect of such excess (plus any interest
payable with respect to such excess) at the time that the amount of such excess
is finally determined.

 

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

 

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

 

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

 

(e)                                  immediate
vesting of all unvested stock options.

 

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

 

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

 

 

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

 

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

 

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

 

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

 

5.                                       Change In
Control.

 

5.5                                 Definition.    For
purposes of this Agreement, a “Change in Control” shall be deemed to have
occurred if (i) there shall be consummated (A) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company’s Common Stock would be
converted into cash, securities or other property, other than a merger of the
Company in which the holders of the Company’s Common Stock immediately prior to
the merger have substantially the same proportionate ownership of common stock
of the surviving corporation immediately after the merger, or (B) any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all the assets of the Company,

 

 

or (ii) the stockholders of the Company shall approve any plan or
proposal for the liquidation or dissolution of the Company, or (iii) any
person (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934 (the “Exchange Act”)), other than the Company
or any executive benefit plan sponsored by the Company, or such person on the
Effective Date hereof is a 20% or more beneficial owner, shall become the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act)
of securities of the Company representing 20% or more of the combined voting
power of the Company’s then outstanding securities ordinarily (and apart from
rights accruing in special circumstances) having the right to vote in the
election of directors, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, or (iv) at any
time during a period of two consecutive years, individuals who at the beginning
of such period, constituted the Board of Directors of the Company shall cease
for any reason to constitute at least a majority thereof, unless the election
or the nomination for election by the Company’s stockholders of each new
director during such two-year period was approved by a vote of at least
two-thirds of the directors then still in office, who were directors at the
beginning of such two-year period.

 

5.6                                 Rights and
Obligations.     If a Change in
Control of the Company shall have occurred while the Executive is director of
the Company, the Executive shall be entitled to the compensation provided in Section 4.1
of this Agreement upon the subsequent termination of this Agreement by either
the Company, or the Executive within two years of the date upon which the
Change in Control shall have occurred, unless such termination is a result of (i) the
Executive’s death; (ii) the Executive’s Disability; (iii) the Executive’s
Retirement; or (iv) the Executive’s termination for Cause.

 

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

 

7.                                       Indemnification.

 

Executive,
as such and as a Director of the Company, shall be indemnified by the Company
against all liability incurred by the Executive in connection with any
proceeding, including, but not necessarily limited to, the amount of any
judgment obtained against Executive, the amount of any settlement entered into
by the Executive and any claimant with the approval of the Company, attorneys’
fees, actually and necessarily incurred by him in connection with the defense
of any action, suit, investigation or proceeding or similar legal activity,
regardless of whether criminal, civil, administrative or investigative in
nature (“Claim”), to which he is made a

 

 

party
or is otherwise subject to, by reason of his being or having been a director,
officer, agent or employee of the Company, to the full extent permitted by
applicable law and the Certificate of Incorporation of the Company..  Such right of indemnification will not be
deemed exclusive of any other rights to which Executive may be entitled under
Company’s Certificate of Incorporation or By-laws, as in effect from time to
time, any agreement or otherwise.

 

8.                                       General
Provisions.

 

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

 

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

 

If
to the Company, to:

 

Synergy Pharmaceuticals, Inc.

420 Lexington Avenue, Suite 60

New
York, NY 10070

 

If
to Executive, to:

Gary
S. Jacob, Ph.D.

 

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

 

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

 

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

 

8.9                                 Severability.  Should any one or more of the provisions of
this Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, then such illegal or unenforceable
provision shall be modified 

 

 

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

 

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

 

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

 

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

 

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

 

	
  EXECUTIVE:

  	
   

  	
  SYNERGY
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Gary S. Jacob

  	
   

  	
  /s/ Bernard
  Denoyer

  
	
  Gary S. Jacob, Ph.D.

  	
   

  	
  Bernard
  Denoyer, Senior Vice President, FinanceExhibit
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

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