Exhibit 10.5

 

SYNERGY PHARMACEUTICALS INC.

 

NON-STATUTORY STOCK OPTION AGREEMENT

 

Option No.

 

Date of Grant: As of       , 2008

 

 

Shares:

 

To:

 

We are pleased to notify you that SYNERGY PHARMACEUTICALS INC. (the “Company”)
has granted to you a non- statutory stock option, to purchase all or any part of
an aggregate of            shares of the Common Stock of the Company (the
“Optioned Shares”) at a price of $       per share, subject to the terms and
conditions of this Agreement set forth hereinafter.

 

1.                                       VESTING, TERM AND EXERCISE OF OPTION. 
SUBJECT TO THE PROVISIONS OF THIS AGREEMENT, THIS OPTION MAY BE EXERCISED FOR UP
TO THE NUMBER OF VESTED OPTIONED SHARES BY YOU OR THE REPRESENTATIVE OF YOUR
ESTATE ON OR PRIOR TO 10 YEARS FROM THE DATE OF GRANT (“LAST EXERCISE DATE”). 
     OF THE OPTIONED SHARES WILL VEST ON EACH OF                           .

 

2.                                       ANY PORTION OF THE OPTIONED SHARES THAT
YOU DO NOT EXERCISE SHALL ACCUMULATE AND CAN BE EXERCISED BY YOU ANY TIME PRIOR
TO THE LAST EXERCISE DATE.   YOU MAY NOT EXERCISE YOUR OPTION TO PURCHASE A
FRACTIONAL SHARE, AND YOU MAY ONLY EXERCISE YOUR OPTION BY PURCHASING SHARES IN
INCREMENTS OF 100 SHARES UNLESS THE REMAINING SHARES PURCHASABLE ARE LESS THAN
100 SHARES.

 

This option may be exercised by delivering to the Secretary of the Company (i) a
written Notice of Intention to Exercise in the form attached hereto as Exhibit A
signed by you and specifying the number of Optioned Shares you desire to
purchase, (ii) payment in full of the exercise price for all such Optioned
Shares in cash, certified check or surrender of shares of Common Stock of the
Company having a value equal to the exercise price of the Optioned Shares as to
which you are exercising this option, provided that such surrendered shares, if
previously acquired by exercise of a Company stock option, have been held by you
at least six months prior to their surrender. As a holder of an option, you
shall have the rights of a shareholder with respect to the Optioned Shares only
after they shall have been issued to you upon the exercise of this option.
Subject to the terms and provisions of this Agreement, the Company shall use its
best efforts to cause the Optioned Shares to be issued as promptly as
practicable after receipt of your Notice of Intention to Exercise.

 

3.                                       DEATH OR TERMINATION OF EMPLOYMENT OR
SERVICES. IF THE EMPLOYMENT OR SERVICES OF THE OPTIONEE BY THE COMPANY OR A
SUBSIDIARY CORPORATION OF THE COMPANY SHALL BE TERMINATED VOLUNTARILY BY THE
OPTIONEE OR FOR CAUSE BY THE COMPANY, THIS OPTION SHALL EXPIRE FORTHWITH, BUT IF
SUCH EMPLOYMENT OR SERVICES SHALL BE TERMINATED FOR ANY OTHER REASON (EXCEPT
DEATH OR DISABILITY), THEN THIS OPTION MAY NOT BE EXERCISED AT ANY TIME LATER
THAN THREE (3) MONTHS AFTER SUCH TERMINATION OF THE OPTIONEE’S EMPLOYMENT AND
THEN ONLY TO PURCHASE THOSE NUMBER OPTIONED SHARES, SUBJECT TO THIS OPTION, THAT
THE OPTIONEE WAS ENTITLED TO PURCHASE, UPON

 

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EXERCISE OF THIS OPTION, PRIOR TO SUCH TERMINATION OF THE OPTIONEE’S EMPLOYMENT.
IF THE OPTIONEE DIES (I) WHILE EMPLOYED BY OR IN THE SERVICE OF THE COMPANY OR A
SUBSIDIARY CORPORATION OF THE COMPANY, OR (II) WITHIN THREE (3) MONTHS AFTER
TERMINATION OF THE OPTIONEE’S EMPLOYMENT OR SERVICES, THEN THIS OPTION MAY BE
EXERCISED BY THE ESTATE OF THE OPTIONEE, OR BY A PERSON WHO ACQUIRED THE RIGHT
TO EXERCISE THIS OPTION BY BEQUEST OR INHERITANCE OR BY REASON OF THE DEATH OF
THE OPTIONEE, AT ANY TIME WITHIN ONE (1) YEAR AFTER SUCH DEATH. IF THE
OPTIONEE’S EMPLOYMENT OR SERVICES WITH THE COMPANY OR SUCH SUBSIDIARY ARE
TERMINATED BECAUSE OF PERMANENT AND TOTAL DISABILITY WHILE EMPLOYED BY OR IN THE
SERVICE OF THE COMPANY OR SUCH SUBSIDIARY, THIS OPTION MAY BE EXERCISED AT ANY
TIME WITHIN ONE (1) YEAR AFTER TERMINATION OF THE OPTIONEE’S EMPLOYMENT OR
SERVICE DUE TO THE DISABILITY, PROVIDED, HOWEVER, THAT NOTHING IN THIS SECTION 3
SHALL EXTEND THE RIGHT TO PURCHASE OPTIONED SHARES WHICH COULD NOT BE PURCHASED
BY THE OPTIONEE PRIOR TO THE TERMINATION OF HIS EMPLOYMENT WITH THE COMPANY OR
SUCH SUBSIDIARY.

 

4.                                       CHANGE OF CONTROL. NOTWITHSTANDING THE
FOREGOING, IN THE EVENT THERE SHALL HAVE BEEN A CHANGE IN CONTROL OF THE
COMPANY), ALL UNVESTED OPTIONED SHARES SHALL IMMEDIATELY AND IRREVOCABLY VEST. 
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, (II) 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 EMPLOYEE BENEFIT PLAN SPONSORED
BY THE COMPANY, 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.                                       NON-TRANSFERABILITY OF OPTION.  THIS
OPTION SHALL NOT BE TRANSFERABLE AND MAY BE EXERCISED DURING YOUR LIFETIME ONLY
BY YOU. ANY PURPORTED TRANSFER OR ASSIGNMENT OF THIS OPTION SHALL BE VOID AND OF
NO EFFECT, AND SHALL GIVE THE COMPANY THE RIGHT TO TERMINATE THIS OPTION AS OF
THE DATE OF SUCH PURPORTED TRANSFER OR ASSIGNMENT. NO TRANSFER OF AN OPTION BY
YOU BY WILL OR BY THE LAWS OF DESCENT AND DISTRIBUTION SHALL BE EFFECTIVE UNLESS
THE COMPANY HAVE BEEN FURNISHED WITH WRITTEN NOTICE THEREOF, AND SUCH OTHER
EVIDENCE AS THE BOARD OF DIRECTORS MAY DEEM NECESSARY TO ESTABLISH THE VALIDITY
OF THE TRANSFER AND CONDITIONS OF THE OPTION, AND TO ESTABLISH COMPLIANCE WITH
ANY LAWS OR REGULATIONS PERTAINING THERETO.

 

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6.                                       CERTAIN RIGHTS AND RESTRICTIONS WITH
RESPECT TO COMMON STOCK.  THE OPTIONED SHARES WHICH YOU MAY ACQUIRE UPON THE
EXERCISE OF THIS OPTION WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR UNDER STATE SECURITIES LAWS AND THE RESALE BY YOU OF SUCH
OPTIONED SHARES WILL, THEREFORE, BE RESTRICTED. YOU WILL BE UNABLE TO TRANSFER
SUCH OPTIONED SHARES WITHOUT EITHER REGISTRATION UNDER SUCH ACT AND COMPLIANCE
WITH APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN EXEMPTION
THEREFROM. ACCORDINGLY, YOU REPRESENT AND WARRANT TO THE COMPANY THAT ALL SHARES
OF COMMON STOCK YOU MAY ACQUIRE UPON THE EXERCISE OF THIS OPTION WILL BE
ACQUIRED BY YOU OR YOUR ESTATE IN THE EVENT OF YOUR DEATH FOR YOUR OWN ACCOUNT
FOR INVESTMENT AND THAT YOU WILL NOT SELL OR OTHERWISE DISPOSE OF ANY SUCH
SHARES EXCEPT IN COMPLIANCE WITH ALL APPLICABLE FEDERAL AND STATE SECURITIES
LAWS. THE COMPANY MAY PLACE A LEGEND TO SUCH EFFECT UPON EACH CERTIFICATE
REPRESENTING OPTIONED SHARES ACQUIRED BY YOU UPON THE EXERCISE OF THIS OPTION.

 

7.                                       DISPUTES.  ANY DISPUTE WHICH MAY ARISE
UNDER OR AS A RESULT OF OR PURSUANT TO THIS AGREEMENT SHALL BE FINALLY AND
CONCLUSIVELY DETERMINED IN GOOD FAITH BY THE BOARD OF DIRECTORS OF THE COMPANY
IN ITS SOLE DISCRETION, AND SUCH DETERMINATION SHALL BE BINDING UPON ALL
PARTIES.

 

8.                                       GOVERNING LAW.  THIS AGREEMENT SHALL BE
INTERPRETED, CONSTRUED AND ADMINISTERED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK AS THEY APPLY TO CONTRACTS MADE, DELIVERED AND PERFORMED IN THE
STATE OF NEW YORK.

 

 

SYNERGY PHARMACEUTICALS INC.

 

 

 

 

 

By:

 

 

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Exhibit A

 

NOTICE OF INTENTION TO EXERCISE STOCK OPTIONS

 

The undersigned grantee of a Synergy Pharmaceuticals Inc. Stock Option Agreement
dated as of           , 2008 to purchase      shares of Synergy Pharmaceuticals
Inc. common stock hereby gives notice of his or her intention to exercise the
Stock Option (or a portion thereof) and elects to purchase                     
shares of Synergy Pharmaceuticals Inc. common stock.

 

Shares should be issued in the name of the undersigned and should be sent to the
undersigned at:

 

 

(Address where you want stock certificates mailed to)

 

Date:

 

Social Security Number

 

 

 

 

Signature

 

 

INSTRUCTIONS:  The exercise of these Stock Options is effective on the date the
Company has received all of (1) this Notice of Intention to Exercise Stock
Options, and (2) payment in full in cash of the exercise price for all shares
being purchased pursuant to this Notice.

 

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