Exhibit 10.1

 

SYNERGY PHARMACEUTICALS, INC.

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this “Agreement “) is dated as of
          , 2009 among Synergy Pharmaceuticals, Inc., a Florida corporation (the
“Company”), and each purchaser identified on the signature pages hereto (each,
including its successors and assigns, a “ Investor “ and collectively the “
Investors”).

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”) and Rule 506 promulgated thereunder, the Company desires to
issue and sell to each Investor (the “Offering”), and each Investor, severally
and not jointly, desires to purchase from the Company, securities of the Company
as more fully described in this Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Investor agree
as follows:

 

SECTION 1.

 

1.1                                 Subscription.  The Company is offering a
maximum of 20,000,000 shares of common stock, $.0001 par value, of the Company
(the “Common Stock”).  The Investor, intending to be legally bound, hereby
irrevocably subscribes for and agrees to purchase the number of shares (the
“Shares”) of the Common Stock, indicated on the signature page hereof, on the
terms and conditions described herein.  All fractional shares will be rounded up
or down to the nearest whole number.

 

1.2                                 Purchase of Shares.  The Investor
understands and acknowledges that the purchase price per Share to be remitted to
the Company in exchange for the Shares is $0.70.  The Investor or the Investor’s
agent has deposited the Subscription Amount (defined below) in an interest
bearing escrow account. There is a minimum investment of $50,000 or such smaller
amount in the sole discretion of the Company.

 

SECTION 2.

 

2.1                                 Acceptance or Rejection.

 

(a)                                  The Investor understands and agrees that
the Company reserves the right to reject this subscription for the Shares in
whole or part in any order, if, in its reasonable judgment, it deems such action
in the best interest of the Company, at any time prior to the Closing,
notwithstanding prior receipt by the Investor of notice of acceptance of the
Investor’s subscription.

 

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(b)                                 The Investor understands and agrees that
subscriptions may be revoked provided that written notice of revocation is sent
by certified or registered mail, return receipt requested, and is received by
the Company at least two business days prior to the Closing.

 

(c)                                  In the event (i) of rejection of this
subscription, or (ii) the sale of the Shares subscribed for by the Investor is
not consummated by the Company for any reason by March 31, 2009, which date may
be extended by the Company, this Subscription Agreement and any other agreement
entered into between the Investor and the Company relating to this subscription
shall thereafter have no force or effect and the Company shall promptly return
or cause to be returned to the Investor the purchase price remitted in
accordance with clause 1.2 by the Investor, without interest thereon or
deduction therefrom, in exchange for the Shares.

 

2.2                                 Closing.  The closing (the “Closing”) of the
purchase and sale of any of the Shares, following the acceptance by the Company
of the Investors’ subscriptions for not less than the Minimum Offering has, as
evidenced by the Company’s execution of this Subscription Agreement, shall take
place at the principal offices of Sichenzia Ross Friedman Ference LLP, counsel
to the Company, at 61 Broadway, 32nd Floor, New York, New York 10006, or such
other place as determined by the Company, on such date (the “Closing Date”) as
is determined by the Company. At the Closing of the purchase and sale of the
Shares subscribed to by the Investors, the Company shall prepare for delivery to
the Investors the certificates for the securities to be issued and sold to the
Investors, duly registered in the Investor’s name against payment in full by the
Investor in accordance with clause 1.2.  Additional Closings will be held until
the Maximum Offering has been achieved or the Offering has terminated.

 

SECTION 3.

 

3.1                                 Investor Representations and Warranties.

 

The Investor hereby acknowledges, represents and warrants to, and agrees with,
the Company and its affiliates as follows:

 

(a)                                  The Investor is acquiring the Shares for
his or its own account as principal, not as a nominee or agent, for investment
purposes only, and not with a view to, or for, resale, distribution or
fractionalization thereof in whole or in part and no other person has a direct
or indirect beneficial interest in such Shares or any of the components of the
Shares.  Further, the Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Shares for which the Investor is subscribing.

 

(b)                                 The Investor has full power and authority to
enter into this Agreement, the execution and delivery of this Agreement has been
duly authorized, if applicable, and this Agreement constitutes a valid and
legally binding obligation of the Investor.

 

(c)                                  The Investor acknowledges its understanding
that the offering and sale of the Shares is intended to be exempt from
registration under the Securities Act of 1933, as amended (the “Securities Act”)
by virtue of Section 4(2) of the Securities Act and the provisions of Regulation
D promulgated thereunder (“Regulation D”).  In furtherance thereof, the Investor
represents and warrants to and agrees with the Company and its affiliates as
follows:

 

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(i)                                     The Investor realizes that the basis for
the exemption may not be present if, notwithstanding such representations, the
Investor has in mind merely acquiring Shares for a fixed or determinable period
in the future, or for a market rise, or for sale if the market does not rise. 
The Investor does not have any such intention.

 

(ii)                                  The Investor has the financial ability to
bear the economic risk of his investment, has adequate means for providing for
his current needs and personal contingencies and has no need for liquidity with
respect to his investment in the Company;

 

(iii)                              
                                                       (insert name of Investor
Representative: if none, so state) has acted as the Investor’s Investor
Representative for purposes of the private placement exemption under the
Securities Act.  If the Investor has appointed a Investor Representative (which
term is used herein with the same meaning as given in Rule 501(h) of Regulation
D), the Investor has been advised by his Investor Representative as to the
merits and risks of an investment in the Company in general and the suitability
of an investment in the Shares for the Investor in particular; and

 

(iv)                              The Investor (together with his Investor
Representative(s), if any) has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of the
prospective investment in the Shares.  If other than an individual, the Investor
also represents it has not been organized for the purpose of acquiring the
Shares.

 

(d)                                 The information in the Accredited Investor
Questionnaire completed and executed by the Investor is substantially in the
form of the Accredited Investor Questionnaire (the “Accredited Investor
Questionnaire”) and is accurate and true in all respects and the Investor is an
“accredited investor,” as that term is defined in Rule 501 of Regulation D.

 

(e)                                  The Investor and his Investor
Representative, if any, have:

 

(i)                                     had access to and carefully reviewed the
Company’s SEC Documents and other public filings, the Schedules and Exhibits to
this Agreement and has had on opportunity for a reasonable period of time prior
to the date hereof to obtain additional information concerning the offering of
the Shares, the Company, and all other information to the extent the Company
possesses such information or can acquire it without unreasonable effort or
expense;

 

(iii)                               been given the opportunity for a reasonable
period of time prior to the date hereof to ask questions of, and receive answers
from, the Company or its representatives concerning the terms and conditions of
the offering of the Shares and other matters pertaining to this investment, and
have been given the opportunity for a reasonable period of time prior to the
date hereof to obtain such additional information necessary to verify the
accuracy of the information provided in order for him to evaluate the merits and
risks of purchase of the

 

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Shares to the extent the Company possesses such information or can acquire it
without unreasonable effort or expense;

 

(iv)                              not been furnished with any oral
representation or oral information in connection with the offering of the Shares
which is not contained herein; and

 

(v)                                 determined that the Shares are a suitable
investment for the Investor and that at this time the Investor could bear a
complete loss of such investment.

 

(f)                                    The Investor is not relying on the
Company, or its affiliates with respect to economic considerations involved in
this investment.  The Investor has relied on the advice of, or has consulted
with only those persons, if any, named as Investor Representative(s) herein and
in the Accredited Investor Questionnaire.  Each Investor Representative is
capable of evaluating the merits and risks of an investment in the Shares on the
terms and conditions set forth herein and each Investor Representative has
disclosed to the Investor in writing (a copy of which is annexed to this
Agreement) the specific details of any and all past, present or future
relationships, actual or contemplated, between himself and the Company or any
affiliate or subsidiary thereof.

 

(g)                                 The Investor represents, warrants and agrees
that he will not sell or otherwise transfer the Shares without registration
under the Securities Act or an exemption therefrom and fully understands and
agrees that he must bear the economic risk of his purchase because, among other
reasons, the Shares have not been registered under the Securities Act or under
the securities laws of any state and, therefore, cannot be resold, pledged,
assigned or otherwise disposed of unless they are subsequently registered under
the Securities Act and under the applicable securities laws of such states or an
exemption from such registration is available.  In particular, the Investor is
aware that the Shares are “restricted securities,” as such term is defined in
Rule 144 promulgated under the Securities Act (“Rule 144”), and they may not be
sold pursuant to Rule 144 unless all of the conditions of Rule 144 are met.  The
Investor also understands that, except as otherwise provided herein and in the
certificates for the Shares, the Company is under no obligation to register the
Shares on his behalf or to assist him in complying with any exemption from
registration under the Securities Act or applicable state securities laws.  The
Investor further understands that sales or transfers of the Shares are further
restricted by state securities laws and the provisions of this Agreement.

 

(h)                                 No representations or warranties have been
made to the Investor by the Company, or any officer, employee, agent, affiliate
or subsidiary of the Company, other than the representations of the Company
contained herein, and in subscribing for Shares the Investor is not relying upon
any representations other than those contained herein.  Investor has carefully
reviewed filings made by the Company with the U.S. Securities and Exchange
Commission and the Company’s Confidential Private Placement Memorandum dated
February 2, 2009.

 

(i)                                     Any information which the Investor has
heretofore furnished to the Company with respect to his financial position and
business experience is correct and complete as of the date of this Agreement and
if there should be any material change in such information he will immediately
furnish such revised or corrected information to the Company.

 

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(j)                                     The Investor understands and agrees that
the certificates for the Shares shall bear the following legend until (i) such
securities shall have been registered under the Securities Act and effectively
been disposed of in accordance with a registration statement that has been
declared effective; or (ii) in the opinion of counsel for the Company such
securities may be sold without registration under the Securities Act as well as
any applicable “Blue Sky” or state securities laws.  Accordingly the Investor
understands and consents that the certificates representing the Shares, in
addition to any notation required by law or by this Agreement, shall have the
following legend:

 

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE OFFERED, SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT
WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO A SPECIFIC EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT BUT ONLY UPON A HOLDER HEREOF FIRST HAVING
OBTAINED THE WRITTEN OPINION OF COUNSEL TO THE CORPORATION, OR OTHER COUNSEL
REASONABLY ACCEPTABLE TO THE CORPORATION, THAT THE PROPOSED DISPOSITION IS
CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE SECURITIES ACT AS WELL AS ANY
APPLICABLE “BLUE SKY” OR SIMILAR SECURITIES LAW.”

 

(k)                                  The Investor understands that an investment
in the Shares is a speculative investment which involves a high degree of risk
and the potential loss of his entire investment.

 

(l)                                     The Investor’s overall commitment to
investments which are not readily marketable is not disproportionate to the
Investor’s net worth, and an investment in the Shares will not cause such
overall commitment to become excessive.

 

(m)                               Investor is not purchasing the Shares as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.

 

(n)                                 Other than the transaction contemplated
hereunder, such Investor has not directly or indirectly, nor has any person
acting on behalf of or pursuant to any understanding with such Investor,
executed any disposition, including Short Sales (defined below), in the
securities of the Company during the period commencing from the time that such
Investor first received a term sheet from the Company or any other person
setting forth the material terms of the transactions contemplated hereunder
until the date hereof (“Discussion Time”).  Notwithstanding the foregoing, in
the case of a Investor that is a multi-managed investment vehicle whereby
separate portfolio managers manage separate portions of such Purchaser’s assets
and the portfolio managers have no direct knowledge of the investment decisions
made by the portfolio managers managing other portions of such Investor’s
assets, the representation set forth above shall only apply with respect to the
portion of assets managed by the portfolio manager

 

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that made the investment decision to purchase the Shares covered by this
Agreement.  Other than to other persons party to this Agreement, such Investor
has maintained the confidentiality of all disclosures made to it in connection
with this transaction (including the existence and terms of this transaction).
For the purpose of this Agreement, “Short Sales” shall include all “short sales”
as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not
be deemed to include the location and/or reservation of borrowable shares of
Common Stock).

 

(m)                               Investor hereby acknowledges that the Company
seeks to comply with all applicable laws concerning money laundering and related
activities. In furtherance of those efforts, Investor hereby represents,
warrants and agrees that, to the best of Investor’s knowledge based upon
appropriate diligence and investigation:

 

(i)                                          none of the cash or property that
Investor has paid, will pay or will contribute to the Company has been or shall
be derived from, or related to, an activity that is deemed criminal under United
States law;

 

(ii)                                       no contribution or payment by
Investor to the Company shall cause the Company to be in violation of the United
States Bank Secrecy Act, the United States Money Laundering Control Act of 1986
or the United States International Money Laundering Abatement and Anti-Terrorist
Financing Act of 2001;

 

(iii)                                    Investor agrees to promptly notify the
Company if any of these representations cease to be true and accurate regarding
Investor, and to provide to the Company any additional information regarding
Investor that the Company deems necessary or appropriate to ensure compliance
with all applicable laws concerning money laundering and similar activities;

 

(iv)                                   Investor agrees that if at any time the
Company determines that any of the foregoing representations are incorrect with
respect to Investor, or if otherwise required by applicable law or regulation
related to money laundering and similar activities, the Company may undertake
whatever actions it considers appropriate to ensure compliance with applicable
law or regulation, including causing the withdrawal of Investor from the Company
in accordance with such terms as the Company shall determine in its discretion
are required to comply with applicable laws and regulations; and

 

(v)                                      Investor further agrees that the
Company may release confidential information about such Investor to proper
authorities if the Company, in its sole discretion, determines that it is in the
best interests of the Company in light of relevant rules and regulations under
the laws described herein.

 

(n)                                 The foregoing representations, warranties
and agreements shall survive the Closing.

 

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3.2                                 Company Representations And Warranties.

 

The Company hereby acknowledges, represents and warrants to, and agrees with
each Investor (which representations and will be true and correct as of the date
of the Closing as if the Agreement were made on the date of Closing) as follows:

 

(a)                                  The Company has been duly organized, is
validly existing and is in good standing under the laws of the State of
Florida.  The Company has full corporate power and authority to enter into this
Agreement and this Agreement, has been duly and validly authorized, executed and
delivered by the Company and are valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as such
enforcement may be limited by the United States Bankruptcy Code and laws
effecting creditors rights, generally.

 

(b)                                 Subject to the performance by the Investors
of their respective obligations under this Agreement and the accuracy of the
representations and warranties of the Investor, the offering and sale of the
Securities will be exempt from the registration requirements of the Act.

 

(c)                                  The execution and delivery by the Company
of, and the performance by the Company of its obligations hereunder in
accordance with its terms will not contravene any provision of applicable law or
the charter documents of the Company or any agreement or other instrument
binding upon the Company, or any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company, and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its obligations
under this Agreement in accordance with its terms.

 

(d)                                 All of the outstanding shares of capital
stock of the Company have been duly authorized and validly issued and are fully
paid, non-assessable and free of preemptive or similar rights.  The Shares have
been duly authorized and, when issued and delivered as provided by this
Agreement, will be validly issued and fully paid and non-assessable, and the
Shares are not subject to any preemptive or similar rights.  In addition, the
shares of Common Stock issuable pursuable to Section 4.3 of this Agreement, when
issued as provided in Section 4.3, will be validly issued and fully paid and
non-assessable, and such shares are not subject to any preemptive or similar
rights.  No further corporate action is required on the Company’s part to issue,
if required to do so after the Closing, additional shares of Common Stock
pursuant to Section 4.3 of this Agreement.

 

(e)                                  The Company is not in violation of its
charter or bylaws and is not in default in the performance of any bond,
debenture, note or any other evidence of indebtedness or any indenture,
mortgage, deed of trust, license, contract, lease or other instrument to which
the Company is a party or by which it is bound, or to which any of the property
or assets of the Company is subject, except such as have been waived or which
would not have, singly or in the aggregate, a material adverse effect on the
Company, taken as a whole.

 

(f)                                    The execution and delivery by the Company
of, and the performance by the Company of its obligations under this Agreement
will not contravene any provision of law

 

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known by the Company to be applicable to it, or the charter documents of, the
Company or any subsidiary of the Company, or any judgment, order or decree of
any governmental body, agency or court having jurisdiction over the Company or
any subsidiary of the Company and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement in accordance
with its terms.

 

(g)                                 There is no material litigation or
governmental proceeding pending, or to the knowledge of the Company, threatened
against, or involving the property or the business of the Company, or, to the
best knowledge of the Company which would adversely affect the condition
(financial or otherwise), business, prospects or results of operations of the
Company, taken as a whole.

 

(h)                                 The audited and unaudited consolidated
financial statements set forth in the SEC Documents fairly present the financial
position and the results of operations of the Company, at the dates and periods
therein specified.  Such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the respective periods involved and are complete and accurate and are
in accordance with the books and records of the Company.  Since September 30,
2008, the Company;

 

(i)                                     has not entered into any transaction
outside of the ordinary course of business except pursuant to this and similar
subscription agreements; or

 

(ii)                                  suffered any material adverse change in
its financial condition or results of operations except as disclosed or
contemplated in the SEC Documents.

 

(i)                                     The foregoing representations,
warranties and agreements shall survive the Closing.

 

SECTION 4.

 

4.1                                 Lock-Up.

 

(a)                                  The Investor hereby agrees to be subject to
a lock-up until August 15, 2010.  During such period, the Investor agrees not to
directly or indirectly sell, offer to sell, contract to sell, including, without
limitation, “short” or “short against the box” (as those terms are generally
understood), grant any option to purchase or otherwise transfer or dispose of
(other than upon a distribution to the partners members of the Investor who
agree to be similarly bound) the Shares of the Company held by it at any time
during such period.

 

(b)                                 The Company may terminate or diminish the
restrictions set forth in this Section as to all or any portion of the Shares at
its sole discretion, provided that such termination or diminution shall apply to
all Investors, pro rata according to their respective Subscription Amounts.  In
such event, the Company will notify all the Investors of the nature and extent
of such termination or diminution.

 

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4.2                                 Stop Transfer and Legend.  In order to
enforce the foregoing covenant, the Company may impose stock-transfer
instructions with respect to the Shares of each Holder (and the Shares or
securities of every other person subject to the foregoing restriction) until the
end of such period and the Investor consents to the imprinting of a legend given
notices of these restriction on certificates representing the Shares,
substantially in the following form:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
ON TRANSFER, AS SET FORTH IN THE SECURITIES PURCHASE AGREEMENT DATED
                      , 2009 BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE
SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.
SUCH TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES.”

 

4.3                                 Per Share Purchase Price Protection.  From
the date hereof until February 15, 2011, if the Company or any Subsidiary shall
issue any Common Stock or Common Stock Equivalents, in transaction other than in
an Exempt Transaction, (a “Subsequent Financing”) entitling any person or entity
to acquire shares of Common Stock at an effective price per share less than the
Per Share Purchase Price (subject to prior adjustment for reverse and forward
stock splits and the like) (the “Discounted Purchase Price,” as further defined
below), the Company shall issue to such Investor that number of additional
shares of Common Stock equal to (a) the Subscription Amount paid by such
Investor at the Closing divided by the Discounted Purchase Price, less (b) the
Shares issued to such Investor at the Closing pursuant to this Agreement and
pursuant to this Section 4.3. The term “Discounted Purchase Price” shall mean
the amount actually paid in new cash consideration by third parties for each
share of Common Stock. The sale of Common Stock Equivalents shall be deemed to
have occurred at the time of the issuance of the Common Stock Equivalents and
the Discounted Purchase Price covered thereby shall also include the actual
exercise or conversion price thereof at the time of the conversion or exercise
(in addition to the consideration per share of Common Stock underlying the
Common Stock Equivalents received by the Company upon such sale or issuance of
the Common Stock Equivalents). In the case of any Subsequent Financing involving
an “MFN Transaction” (as defined below), the Discounted Purchase Price shall be
deemed to be the lowest actual conversion or exercise price at which such
securities are converted or exercised in the case of a Variable Rate
Transaction, or the lowest adjustment price in the case of an MFN Transaction.
If shares are issued for a consideration other than cash, the per share selling
price shall be the fair value of such consideration as determined in good faith
by the Board of Directors of the Company. The term “MFN Transaction” shall mean
a transaction in which the Company issues or sells any securities in a capital
raising transaction or series of related transactions which grants to an
investor the right to receive additional shares based upon future transactions
of the Company on terms more favorable than those granted to the such investor
in such offering. The Company shall not refuse to issue an Investor additional
Shares hereunder based on any claim that such Investor or any one associated or
affiliated with such Investor has been engaged in any violation of law,
agreement or for any other reason, unless an injunction from a court, on notice,
restraining and or enjoining an issuance hereunder shall have been sought and
obtained. Nothing herein shall limit a Investor’s right to pursue actual damages
for the Company’s failure to deliver Shares hereunder and such Investor shall
have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive

 

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relief. Notwithstanding anything to the contrary herein, this Section 4.3 not
apply in respect of an Exempt Issuance. Additionally, prior to any issuance to
an Investor pursuant to this Section 4.3, such Investor shall have the right to
irrevocably defer such issuances to such Investor under this Section 4.3, in
whole or in part, for continuous periods of not less than 75 days.

 

SECTION 5.

 

Definitions.  In addition to the terms defined elsewhere in this Agreement, for
all purposes of this Agreement, the following terms have the meanings indicated
in this Section 5:

 

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a
Person as such terms are used in and construed under Rule 144 under the
Securities Act. With respect to a Investor, any investment fund or managed
account that is managed on a discretionary basis by the same investment manager
as such Investor will be deemed to be an Affiliate of such Investor.

 

“Business Day” means any day except Saturday, Sunday, any day which shall be a
federal legal holiday in the United States or any day on which banking
institutions in the State of New York are authorized or required by law or other
governmental action to close.

 

“Closing” means the closing of the purchase and sale of the Shares pursuant to
Section 2.2.

 

“Closing Date” means the Trading Day when all of the Transaction Documents have
been executed and delivered by the applicable parties thereto, and all
conditions precedent to (i) the Investors’ obligations to pay the Subscription
Amount and (ii) the Company’s obligations to deliver the Securities have been
satisfied or waived.

 

“Closing Price” means on any particular date (a) the last reported closing bid
price per share of Common Stock on such date on the Trading Market (as reported
by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (b) if there is no such
price on such date, then the closing bid price on the Trading Market on the date
nearest preceding such date (as reported by Bloomberg L.P. at 4:15 p.m. (New
York City time)), or (c) if the Common Stock is not then listed or quoted on the
Trading Market and if prices for the Common Stock are then reported in the “pink
sheets” published by Pink Sheets LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported, or (d) if the shares of Common Stock are
not then publicly traded the fair market value of a share of Common Stock as
determined by an appraiser selected in good faith by the Investors of a majority
in interest of the Shares then outstanding.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” means the common stock of the Company, par value $0.0001 per
share and any other class of securities into which such securities may hereafter
be reclassified or changed into.

 

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“Common Stock Equivalents” means any securities of the Company or the
Subsidiaries which would entitle the holder thereof to acquire at any time
Common Stock, including, without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive, Common Stock.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

 

“Exempt Issuance” means the issuance of (a) shares of Common Stock or options to
employees, officers, consultants or directors of the Company or any Subsidiary
pursuant to any stock or option plan duly adopted or ratified by a majority of
the non-employee members of the Board of Directors of the Company present or
former corporate parent or a majority of the members of a committee of
non-employee directors established for such purpose, (b) securities upon the
exercise or exchange of or conversion of any Securities issued hereunder and/or
other securities exercisable or exchangeable for or convertible into shares of
Common Stock issued and outstanding on the date of this Agreement, provided that
such securities have not been amended since the date of this Agreement to
increase the number of such securities or to decrease the exercise, exchange or
conversion price of any such securities, and (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors, provided that any such issuance shall only be to a
Person which is, itself or through its subsidiaries, an operating company in a
business synergistic with the business of the Company and in which the Company
receives benefits in addition to the investment of funds, but shall not include
a transaction in which the Company is issuing securities primarily for the
purpose of raising capital or to an entity whose primary business is investing
in securities.

 

“Per Share Purchase Price” equals $0.70, subject to adjustment for stock splits,
stock dividends, stock combinations and other similar transactions of the Common
Stock that occur after the date of this Agreement.

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

 

“SEC Documents” means the filings made by the Company with the Commission under
the Securities Act and Exchange Act, including those made not more than 48 hours
prior to Closing.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

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“Shares” means the shares of Common Stock issued or issuable to each Investor
pursuant to this Agreement.

 

“Subscription Amount” means, as to each Investor, the aggregate amount to be
paid for Shares purchased hereunder as specified below such Investor’s name on
the signature page of this Agreement and next to the heading “Subscription
Amount,” in United States dollars and in immediately available funds.

 

“Subsequent Financing” shall have the meaning ascribed to such term in
Section 4.3.

 

“Subsidiary” means any subsidiary of the Company.

 

“Trading Day” means a day on which the Common Stock is traded on a Trading
Market.

 

“Trading Market” means the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the Nasdaq
Capital Market, the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or the OTC Bulletin Board.

 

SECTION 5

 

5.1                                 Indemnity.  The Investor agrees to indemnify
and hold harmless the Company, its officers and directors, employees and its
affiliates and each other person, if any, who controls any thereof, against any
loss, liability, claim, damage and expense whatsoever (including, but not
limited to, any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any litigation commenced or
threatened or any claim whatsoever) arising out of or based upon any false
representation or warranty or breach or failure by the Investor to comply with
any covenant or agreement made by the Investor herein or in any other document
furnished by the Investor to any of the foregoing in connection with this
transaction.

 

5.2                                 Modification.  Neither this Agreement nor
any provisions hereof shall be modified, discharged or terminated except by an
instrument in writing signed by the party against whom any waiver, change,
discharge or termination is sought.

 

5.3                                 Notices.  Any notice, demand or other
communication which any party hereto may be required, or may elect, to give to
anyone interested hereunder shall be sufficiently given if (a) deposited,
postage prepaid, in a United States mail letter box, registered or certified
mail, return receipt requested, addressed to such address as may be given
herein, or (b) delivered personally at such address.

 

5.4                                 Counterparts.  This Agreement may be
executed through the use of separate signature pages or in any number of
counterparts, and each of such counterparts shall, for all purposes, constitute
one agreement binding on all parties, notwithstanding that all parties are not
signatories to the same counterpart.

 

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5.5                                 Binding Effect.  Except as otherwise
provided herein, this Agreement shall be binding upon and inure to the benefit
of the parties and their heirs, executors, administrators, successors, legal
representatives and assigns.  If the Investor is more than one person, the
obligation of the Investor shall be joint and several and the agreements,
representations, warranties and acknowledgments herein contained shall be deemed
to be made by and be binding upon each such person and his heirs, executors,
administrators and successors.

 

5.6                                 Entire Agreement.  This Agreement and the
documents referenced herein contain the entire agreement of the parties and
there are no representations, covenants or other agreements except as stated or
referred to herein and therein.

 

5.7                                 Assignability.  This Agreement is not
transferable or assignable by the Investor.

 

5.8                                 Applicable Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to conflicts of law principles.

 

5.9                                 Pronouns.  The use herein of the masculine
pronouns “him” or “his” or similar terms shall be deemed to include the feminine
and neuter genders as well and the use herein of the singular pronoun shall be
deemed to include the plural as well.

 

[SIGNATURE PAGES FOLLOW]

 

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ALL INVESTORS MUST COMPLETE THIS PAGE

 

IN WITNESS WHEREOF, the Investor has executed this Agreement on the      day of
                , 2009.

 

 

 

X $0.70 Per Share

 

   =         $

Shares Subscribed for

 

 

 

Purchase Price

 

 

Name of Entity (Please Print)

 

Address for Registration of Ownership:

 

 

 

US Taxpayer ID # (or attach W8-BEN):

 

 

 

 

 

 

 

 

Name:

 

ACCEPTED this     st day of             , 2009 on behalf of the Company.

 

 

 

SYNERGY PHARMACEUTICALS, INC.

 

 

 

 

 

 

 

By:

 

 

 

Name:

Gary S. Jacob, Ph.D.

 

 

Title:

President and Acting CEO

 

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