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 26,000,000
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 November 15, 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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