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.


 

















 


(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:


 

















 


(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 


 

















 


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.


 

















 


(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 


 

















 


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.


 

















 


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


 

















 


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.


 

















 


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 


 

















 


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.


 

















 


“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.


 

















 


“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.


 

















 


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]


 

















 


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