Exhibit 10.1


 


SECURITIES PURCHASE AGREEMENT


 


This Securities Purchase Agreement (this “Agreement”)
is dated as of October    , 2010, between Synergy
Pharmaceuticals, Inc., a Florida corporation (the “Company”), and each
purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser” and collectively the “Purchasers”).


 


WHEREAS, subject to the terms and conditions set forth
in this Agreement and pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the “Securities Act”), the Company
desires to issue and sell to each Purchaser, and each Purchaser, 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
Purchaser agree as follows:


 


ARTICLE I.

DEFINITIONS


 


1.1           
Definitions.  In addition to the terms defined elsewhere in
this Agreement, for all purposes of this Agreement, the following terms have
the meanings set forth in this Section 1.1:


 


“Acquiring Person”
shall have the meaning ascribed to such term in Section 4.4.


 


“Action” shall
have the meaning ascribed to such term in Section 3.1(j).


 


“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 405 under the
Securities Act.


 


“Board of Directors”
means the board of directors of the Company.


 


“Business Day”
means any day except any Saturday, any Sunday, any day which is 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 Securities pursuant to Section 2.1.


 


“Closing Date”
means the Trading Day on which all of the Transaction Documents have been
executed and delivered by the applicable parties thereto, and all conditions
precedent to (i) the Purchasers’ obligations to pay the Subscription Amount and
(ii) the Company’s obligations to deliver the Securities, in each case, have
been satisfied or waived, but in no event later than the third Trading Day
following the date hereof.


 


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 “Commission” means the United States
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.


 


“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.


 


“Company
Counsel” means Sichenzia Ross Friedman Ference LLP, with offices located at
61 Broadway, 32nd Floor, New York, NY 10006.


 


“Disclosure
Schedules” means the Disclosure Schedules of the Company delivered
concurrently herewith.


 


“Escrow Agent” means Sichenzia Ross
Friedman Ference LLP, with offices located at 61 Broadway, New York, New York
10006.


 


“Escrow Agreement” means the escrow
agreement entered into prior to the date hereof, by and among the Company and
the Escrow Agent in substantially the form of Exhibit B attached hereto
pursuant to which the Purchasers, shall deposit Subscription Amounts with the
Escrow Agent to be applied to the transactions contemplated hereunder.


 


 “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 or directors of
the Company pursuant to any stock or option plan duly adopted for such purpose,
by a majority of the non-employee members of the Board of Directors or a
majority of the members of a committee of non-employee directors established
for such purpose and (b) securities issued pursuant to acquisitions or
strategic transactions approved by a majority of the disinterested directors of
the Company, provided that any such issuance shall only be to a Person (or to
the equityholders of a Person) which is, itself or through its subsidiaries, an
operating company or an owner of an asset in a business synergistic with the
business of the Company and shall provide to the Company additional 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.


 


“GAAP” shall
have the meaning ascribed to such term in Section 3.1(h).


 


 “Intellectual Property Rights” shall
have the meaning ascribed to such term in Section 3.1(o).


 


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“Liens” means a
lien, charge, security interest, encumbrance, right of first refusal,
preemptive right or other restriction.


 


“Material Adverse
Effect” shall have the meaning assigned to such term in Section 3.1(b).


 


“Material Permits”
shall have the meaning ascribed to such term in Section 3.1(m).


 


“Per Unit Purchase
Price” equals $2.50, subject to adjustment for reverse and forward 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.


 


“Prior Investors” shall
have the meaning set forth in the Disclosure Schedules.


 


 “Proceeding” means an action, claim,
suit, investigation or proceeding (including, without limitation, an informal
investigation or partial proceeding, such as a deposition), whether commenced
or threatened.


 


“Prospectus”
means the final prospectus filed for the Registration Statement.


 


“Prospectus
Supplement” means the supplement to the Prospectus complying with Rule
424(b) of the Securities Act that is filed with the Commission and delivered by
the Company to each Purchaser at the Closing.


 


“Purchaser Party”
shall have the meaning ascribed to such term in Section 4.7.


 


“Registration
Statement” means the effective registration statement with Commission file
No. 333-163316 which registers the sale of the Shares, the Warrants and the
Warrant Share to the Purchasers.


 


“Required Approvals”
shall have the meaning ascribed to such term in Section 3.1(e).


 


“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.


 


“Rule 424” means
Rule 424 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended or interpreted from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.


 


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 “SEC Reports” shall have the meaning
ascribed to such term in Section 3.1(h).


 


“Securities”
means the Units, the Shares, the Warrants and the Warrant Shares.


 


“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 Purchaser pursuant to
this Agreement.


 


“Short Sales”
means 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).


 


 “Subscription Amount” means, as to each
Purchaser, the aggregate amount to be paid for Units purchased hereunder as
specified below such Purchaser’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.


 


“Subsidiary”
means any subsidiary of the Company as set forth in the SEC Reports, and shall,
where applicable, also include any direct or indirect subsidiary of the Company
formed or acquired after the date hereof.


 


“Termination Date”
shall have the meaning ascribed to such term in Section 5.1.


 


“Trading Day”
means a day on which the principal Trading Market is open for trading.


 


“Trading Market”
means any of the following markets or exchanges on which the Common Stock is
listed or quoted for trading on the date in question: the NYSE AMEX, the Nasdaq
Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board (or any successors to any of
the foregoing).


 


“Transaction
Documents” means this Agreement, the Warrants, the Escrow Agreement and any
other documents or agreements executed in connection with the transactions
contemplated hereunder.


 


“Transfer Agent”
means StockTrans, Inc., the current transfer agent of the Company, with a
mailing address of 44 W. Lancaster Avenue, Ardmore, PA 19003, and any successor
transfer agent of the Company.


 


“Unit” means one
share of Common Stock and one Warrant to purchase 2/5 of a share of Common
Stock.


 


 “Warrants” means the Common Stock
purchase warrants delivered to the Purchasers at the Closing in accordance with
Section 2.2(a) hereof, which Warrants shall


 


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be exercisable immediately and have a term equal to
5 years, in the form attached hereto as Exhibit A.


 


“Warrant Shares”
means the shares of Common Stock issuable upon exercise of the Warrants.


 


ARTICLE II.

PURCHASE AND SALE


 


2.1           Closing.  On the Closing Date, upon the
terms and subject to the conditions set forth herein, substantially concurrent
with the execution and delivery of this Agreement by the parties hereto, the
Company agrees to sell, and the Purchasers, severally and not jointly,  agree to purchase, up to an aggregate of             
Units.  Each Purchaser shall deliver to
the Escrow Agent via wire transfer, immediately available funds equal to such
Purchaser’s Subscription Amount as set forth on the signature page hereto
executed by such Purchaser and the Company shall deliver to each Purchaser its
respective Shares and Warrants as determined by Section 2.2(a), and the Company
and each Purchaser shall deliver the other items set forth in Section 2.2
deliverable at the Closing.  Upon
satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3,
the Closing shall occur at the offices of Company Counsel or such other
location as the parties shall mutually agree.


 


2.2           Deliveries.


 


(a)           On or
prior to the Closing Date, the Company shall deliver or cause to be delivered
to each Purchaser the following:


 


(i)            this
Agreement duly executed by the Company;


 


(ii)           a copy
of the irrevocable instructions to the Company’s transfer agent instructing the
transfer agent to deliver via the Depository Trust Company Deposit Withdrawal
Agent Commission System (“DWAC”) Shares equal to such Purchaser’s
Subscription Amount divided by the Per Unit Purchase Price, registered in the
name of such Purchaser;


 


(iii)          a
Warrant registered in the name of such Purchaser to purchase up to a number of
shares of Common Stock equal to 40% of such Purchaser’s Shares, with an
exercise price equal to $2.75, subject to adjustment therein (such Warrant
certificate may be delivered within three Trading Days of the Closing Date);


 


(iv)          the
Escrow Agreement duly executed by the Company; and


 


(v)           the
Prospectus and Prospectus Supplement (which may be delivered in accordance with
Rule 172 under the Securities Act).


 


(b)           On or
prior to the Closing Date, each Purchaser shall deliver or cause to be
delivered to the Company the following:


 


(i)            this
Agreement duly executed by such Purchaser;


 


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(ii)           the
Escrow Agreement duly executed by such Purchaser; and


 


(iii)          such
Purchaser’s Subscription Amount by wire transfer to the account as specified in
writing by the Company.


 


2.3           Closing
Conditions.


 


(a)           The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:


 


(i)            the
accuracy in all material respects on the Closing Date of the representations
and warranties of the Purchasers contained herein (unless as of a specific date
therein);


 


(ii)           all
obligations, covenants and agreements of each Purchaser required to be
performed at or prior to the Closing Date shall have been performed; and


 


(iii)          the
delivery by each Purchaser of the items set forth in Section 2.2(b) of this
Agreement.


 


(b)           The
respective obligations of the Purchasers hereunder in connection with the
Closing are subject to the following conditions being met:


 


(i)            the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Company contained herein (unless as of a
specific date therein);


 


(ii)           all
obligations, covenants and agreements of the Company required to be performed
at or prior to the Closing Date shall have been performed;


 


(iii)          the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;


 


(iv)          there
shall have been no Material Adverse Effect with respect to the Company since
the date hereof; and


 


(v)           from
the date hereof to the Closing Date, trading in the Common Stock shall not have
been suspended by the Commission or the Company’s principal Trading Market
(except for any suspension of trading of limited duration agreed to by the Company,
which suspension shall be terminated prior to the Closing), and, at any time
prior to the Closing Date, trading in securities generally as reported by
Bloomberg L.P. shall not have been suspended or limited, or minimum prices
shall not have been established on securities whose trades are reported by such
service, or on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities nor shall
there have occurred any national or international calamity of such magnitude in
its effect on, or any material adverse change in, any financial


 


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market
which, in each case, in the reasonable judgment of each Purchaser, makes it
impracticable or inadvisable to purchase the Securities at the Closing.


 


ARTICLE
III.

REPRESENTATIONS AND WARRANTIES


 


3.1           Representations
and Warranties of the Company.  Except as set forth in the Disclosure
Schedules, which Disclosure Schedules shall be deemed a part hereof and shall
qualify any representation made herein to the extent of the disclosure
contained in the corresponding section of the Disclosure Schedules, the Company
hereby makes the following representations and warranties to each Purchaser:


 


(a)           Subsidiaries.  All of the direct and indirect
subsidiaries of the Company are as set forth in the SEC Reports.  The Company owns equity interests of each
Subsidiary as set forth in the Prospectus, free and clear of any Liens, and all
of the issued and outstanding shares of capital stock of each Subsidiary are
validly issued and are fully paid, non-assessable and free of preemptive and
similar rights of others to subscribe for or purchase securities.


 


(b)           Organization
and Qualification.  The Company and each of the Subsidiaries is
an entity duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.  Each of the Company and the Subsidiaries is
duly qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case
may be, could not have or reasonably be expected to result in: (i) a material
adverse effect on the legality, validity or enforceability of any Transaction
Document, (ii) a material adverse effect on the results of operations, assets,
business, prospects or condition (financial or otherwise) of the Company and
the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material
Adverse Effect”) and no Proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.


 


(c)           Authorization;
Enforcement.  The Company has the requisite corporate power
and authority to enter into and to consummate the transactions contemplated by
each of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder.  The execution
and delivery of each of the Transaction Documents by the Company and the consummation
by it of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of the Company and no further
action is required by the Company, the Board of Directors or the Company’s
stockholders in connection therewith other than in connection with the Required
Approvals.  Each Transaction Document to
which it is a party has been (or upon delivery will have been) duly executed by
the Company and, when delivered in


 


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accordance
with the terms hereof and thereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with
its terms, except (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable law.


 


(d)           No
Conflicts.  The execution, delivery and performance by
the Company of the Transaction Documents, the issuance and sale of the
Securities and the consummation by it of the transactions contemplated hereby
and thereby to which it is a party do not and will not (i) conflict with or
violate any provision of the Company’s or any Subsidiary’s certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the creation of
any Lien upon any of the properties or assets of the Company or any Subsidiary,
or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any
Subsidiary is a party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) subject to the Required Approvals,
conflict with or result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not have or reasonably be expected to
result in a Material Adverse Effect.


 


(e)           Filings,
Consents and Approvals.  The Company is not required to obtain any
consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) the filings required pursuant to Section 4.3 of this Agreement, (ii)
the filing with the Commission of the Prospectus Supplement, (iii)
application(s) to each applicable Trading Market for the listing of the Shares
for trading thereon in the time and manner required thereby and (iv) such
filings as are required to be made under applicable state securities laws
(collectively, the “Required Approvals”).


 


(f)            Issuance
of the Securities; Registration.  The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear
of all Liens imposed by the Company.  The
Company has prepared and filed the Registration Statement in conformity with
the requirements of the Securities Act, which became effective on December
10, 2009 (the “Effective Date”),
including the Prospectus, and such amendments and supplements thereto as may
have been required to the date of 


 


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this
Agreement.  The Registration Statement is
effective under the Securities Act and no stop order preventing or suspending
the effectiveness of the Registration Statement or suspending or preventing the
use of the Prospectus has been issued by the Commission and no proceedings for
that purpose have been instituted or, to the knowledge of the Company, are
threatened by the Commission.  The Company,
if required by the rules and regulations of the Commission, proposes to file
the Prospectus Supplement, with the Commission pursuant to Rule 424(b).  At the time the Registration Statement and
any amendments thereto became effective, at the date of this Agreement and at
the Closing Date, the Registration Statement and any amendments thereto
conformed and will conform in all material respects to the requirements of the
Securities Act and did not and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; and the Prospectus
and any amendments or supplements thereto, at time the Prospectus or any
amendment or supplement thereto was issued and at the Closing Date, conformed and
will conform in all material respects to the requirements of the Securities Act
and did not and will not contain an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.


 


(g)           Capitalization.  The capitalization of the
Company is as set forth on Schedule 3.1(g).  The Company has not issued any capital stock
since its most recently filed periodic report under the Exchange Act, other
than pursuant to the exercise of employee stock options under the Company’s
stock option plans, the issuance of shares of Common Stock to employees
pursuant to the Company’s employee stock purchase plans and pursuant to the
conversion and/or exercise of Common Stock Equivalents outstanding as of the
date of the most recently filed periodic report under the Exchange Act.  No Person has any right of first refusal,
preemptive right, right of participation, or any similar right to participate
in the transactions contemplated by the Transaction Documents.  Except as a result of the purchase and sale
of the Securities and as disclosed in the SEC Reports, there are no outstanding
options, warrants, scrip rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock or
Common Stock Equivalents.  The issuance
and sale of the Securities will not obligate the Company to issue shares of
Common Stock or other securities to any Person (other than the Purchasers). All
of the outstanding shares of capital stock of the Company are validly issued,
fully paid and nonassessable, have been issued in compliance with all federal
and state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities.  No further approval
or authorization of any stockholder, the Board of Directors or others is
required for the issuance and sale of the Securities.  Except as disclosed in the SEC Reports, there
are no stockholders agreements, voting agreements or other similar agreements
with respect to the Company’s capital stock to which the Company is a party or,
to the knowledge of the Company, between or among any of the Company’s
stockholders.


 


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(h)           SEC
Reports; Financial Statements.  The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date hereof (or such shorter
period as the Company was required by law or regulation to file such material)
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, together with the Prospectus and the
Prospectus Supplement, being collectively referred to herein as the “SEC
Reports”) on a timely basis or has received a valid extension of such time
of filing and has filed any such SEC Reports prior to the expiration of any
such extension.  As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act, as applicable, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing.  Such financial statements have been prepared
in accordance with United States generally accepted accounting principles
applied on a consistent basis during the periods involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated Subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.


 


(i)            Material
Changes; Undisclosed Events, Liabilities or Developments.  Since the date of the latest
audited financial statements included within the SEC Reports, except as
specifically disclosed in a subsequent SEC Report filed prior to the date
hereof, (i) there has been no event, occurrence or development that has had or
that could reasonably be expected to result in a Material Adverse Effect, (ii)
the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be
reflected in the Company’s financial statements pursuant to GAAP or disclosed
in filings made with the Commission, (iii) the Company has not altered its
method of accounting, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock and (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option
plans.  The Company does not have pending
before the Commission any request for confidential treatment of
information.  Except for the issuance of
the Securities contemplated by this Agreement, no event, liability, fact,
circumstance, occurrence or development has occurred or exists or is reasonably
expected to occur or exist with respect to the Company or its Subsidiaries or
their respective business, prospects, properties, operations, assets or
financial condition that would be required to be disclosed by the Company under
applicable securities laws at the time this representation is made or deemed
made that has


 


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not
been publicly disclosed at least 1 Trading Day prior to the date that this
representation is made.


 


(j)            Litigation.  There is no action, suit,
inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company, any
Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”)
which adversely affects or challenges the legality, validity or enforceability
of any of the Transaction Documents or the Securities.  Neither the Company nor any Subsidiary, nor
any director or officer thereof, is or has been the subject of any Action
involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty.  There has not been, and to the knowledge of
the Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or officer
of the Company.  The Commission has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company or any Subsidiary under the
Exchange Act or the Securities Act.


 


(k)           Labor
Relations.  No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company, which could reasonably be expected to result in a Material Adverse
Effect.


 


(l)            Compliance.  Neither the Company nor any
Subsidiary: (i) is in default under or in violation of (and no event has
occurred that has not been waived that, with notice or lapse of time or both,
would result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default
under or that it is in violation of, any indenture, loan or credit agreement or
any other agreement or instrument to which it is a party or by which it or any
of its properties is bound (whether or not such default or violation has been
waived), (ii) is in violation of any judgment, decree or order of any court,
arbitrator or governmental body or (iii) is or has been in violation of any
statute, rule, ordinance or regulation of any governmental authority, including
without limitation all foreign, federal, state and local laws relating to
taxes, environmental protection, occupational health and safety, product
quality and safety and employment and labor matters, except in each case as
could not have or reasonably be expected to result in a Material Adverse
Effect.


 


(m)          Regulatory
Permits.  The
Company and the Subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state, local or foreign regulatory
authorities necessary to conduct their respective businesses as described in
the SEC Reports, except where the failure to possess such permits could not
reasonably be expected to result in a Material Adverse Effect (“Material
Permits”), and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any
Material Permit.


 


(n)           Title
to Assets.  The Company and the Subsidiaries have good
and marketable title in all personal property owned by them that is material to
the business of the Company and the Subsidiaries, in each case free and clear
of all Liens, except for


 


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Liens
as do not materially affect the value of such property, do not materially
interfere with the use made and proposed to be made of such property by the
Company and the Subsidiaries, and Liens for the payment of federal, state or
other taxes, the payment of which is neither delinquent nor subject to
penalties.  Any real property and
facilities held under lease by the Company and the Subsidiaries which is
material to the business of the Company and Subsidiaries are held by them under
valid, subsisting and enforceable leases with which the Company and the
Subsidiaries are in compliance.


 


(o)           Patents
and Trademarks.  The Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions,
copyrights, licenses and other intellectual property rights and similar rights
necessary or material for use in connection with their respective businesses as
described in the SEC Reports and which the failure to so have could have a
Material Adverse Effect (collectively, the “Intellectual Property Rights”).  None of, and neither the Company nor any
Subsidiary has received a notice (written or otherwise) that any of, the
Intellectual Property Rights has expired, terminated or been abandoned, or is
expected to expire or terminate or be abandoned, within two (2) years from the
date of this Agreement.  Neither the
Company nor any Subsidiary has received, since the date of the latest audited
financial statements included within the SEC Reports, a written notice of a
claim or otherwise has any knowledge that the Intellectual Property Rights
violate or infringe upon the rights of any Person, except as would not have a
Material Adverse Effect.  To the
knowledge of the Company, all such Intellectual Property Rights are enforceable
and there is no existing infringement by another Person of any of the
Intellectual Property Rights.  The
Company and its Subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their intellectual properties,
except where failure to do so could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.


 


(p)           Insurance.  The Company and the Subsidiaries
are insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as are prudent and customary in the
businesses in which the Company and the Subsidiaries are engaged.  Neither the Company nor any Subsidiary has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.


 


(q)           Transactions
With Affiliates and Employees.  Except as set forth in the SEC Reports, none
of the officers or directors of the Company and, to the knowledge of the
Company, none of the employees of the Company is presently a party to any
transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director or such employee or, to the knowledge of the
Company, any entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner, in each
case in excess of $120,000 other than for (i) payment of salary or consulting
fees for services rendered, (ii) reimbursement for expenses incurred on behalf


 


12

















 


of the
Company and (iii) other employee benefits, including stock option agreements
under any stock option plan of the Company.


 


(r)            Sarbanes-Oxley.  The Company is in compliance
with any and all applicable requirements of the Sarbanes-Oxley Act of 2002 that
are effective as of the date hereof, and any and all applicable rules and
regulations promulgated by the Commission thereunder that are effective as of
the date hereof and as of the Closing Date.


 


(s)            Certain
Fees.  Except
as set forth in the Prospectus Supplement, no brokerage or finder’s fees or
commissions are or will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or
other Person with respect to the transactions contemplated by the Transaction
Documents.  The Purchasers shall have no
obligation with respect to any fees or with respect to any claims made by or on
behalf of other Persons for fees of a type contemplated in this Section that
may be due in connection with the transactions contemplated by the Transaction
Documents.


 


(t)            Investment
Company. The Company is not, and is not an Affiliate of,
and immediately after receipt of payment for the Securities, will not be or be
an Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.  The
Company shall conduct its business in a manner so that it will not become an “investment
company” subject to registration under the Investment Company Act of 1940, as
amended.


 


(u)           Registration
Rights.  Except
as disclosed in the SEC Reports and Schedule 3.1(u), no Person has any right to
cause the Company to effect the registration under the Securities Act of any
securities of the Company.


 


(v)           Listing
and Maintenance Requirements.  The Company has not, in the 12 months
preceding the date hereof, received notice from any Trading Market on which the
Common Stock is or has been listed or quoted to the effect that the Company is
not in compliance with the listing or maintenance requirements of such Trading
Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.


 


(w)          Disclosure.  Except with respect to the
material terms and conditions of the transactions contemplated by the
Transaction Documents, the Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or their agents
or counsel with any information that it believes constitutes or might
constitute material, non-public information which is not otherwise disclosed in
the Prospectus Supplement.   The Company
understands and confirms that the Purchasers will rely on the foregoing
representation in effecting transactions in securities of the Company.  All of the disclosure furnished by or on
behalf of the Company to the Purchasers regarding the Company, its business and
the transactions contemplated hereby, including the Disclosure Schedules to
this Agreement, is true and correct and does not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements made therein, in light of the circumstances


 


13

















 


under
which they were made, not misleading. The press releases disseminated by the
Company during the twelve months preceding the date of this Agreement taken as
a whole do not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made
and when made, not misleading.  The
Company acknowledges and agrees that no Purchaser makes or has made any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in Section 3.2 hereof.


 


(x)           No
Integrated Offering. Assuming the accuracy of the
Purchasers’ representations and warranties set forth in Section 3.2, neither
the Company, nor any of its Affiliates, nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of any applicable shareholder approval provisions of any Trading
Market on which any of the securities of the Company are listed or designated.


 


(y)           Tax
Status.  Except
for matters that would not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect, the Company and
each Subsidiary (i) has made or filed all United States federal and state
income and all foreign income and franchise tax returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations
and (iii) has set aside on its books provision reasonably adequate for the
payment of all material taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. 
There are no unpaid taxes in any material amount claimed to be due by
the taxing authority of any jurisdiction, and the officers of the Company or of
any Subsidiary know of no basis for any such claim.


 


(z)           Foreign
Corrupt Practices.  Neither the Company, nor to the knowledge of
the Company, any agent or other person acting on behalf of the Company, has (i)
directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf of
which the Company is aware) which is in violation of law, or (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of
1977, as amended.


 


(aa)           Acknowledgment
Regarding Purchasers’ Purchase of Securities.  The Company acknowledges and agrees that each
of the Purchasers is acting solely in the capacity of an arm’s length purchaser
with respect to the Transaction Documents and the transactions contemplated
thereby.  The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated thereby and any advice given by any
Purchaser or any of their respective representatives


 


14

















 


or
agents in connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to the Purchasers’ purchase of the
Securities.  The Company further
represents to each Purchaser that the Company’s decision to enter into this
Agreement and the other Transaction Documents has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.


 


(bb)         Acknowledgement
Regarding Purchaser’s Trading Activity.  Anything in this Agreement or elsewhere
herein to the contrary notwithstanding (except for Sections 3.2(d) and 4.11
hereof), it is understood and acknowledged by the Company that: (i) none of the
Purchasers have been asked by the Company to agree, nor has any Purchaser
agreed, to desist from purchasing or selling, long and/or short, securities of
the Company, or “derivative” securities based on securities issued by the
Company or to hold the Securities for any specified term; (ii) past or future
open market or other transactions by any Purchaser, specifically including,
without limitation, Short Sales or “derivative” transactions, before or after
the closing of this or future private placement transactions, may negatively
impact the market price of the Company’s publicly-traded securities; (iii) any
Purchaser, and counter-parties in “derivative” transactions to which any such
Purchaser is a party, directly or indirectly, presently may have a “short”
position in the Common Stock, and (iv) each Purchaser shall not be deemed to
have any affiliation with or control over any arm’s length counter-party in any
“derivative” transaction.  The Company
further understands and acknowledges that (y) one or more Purchasers may engage
in hedging activities at various times during the period that the Securities
are outstanding, and (z) such hedging activities (if any) could reduce the
value of the existing stockholders’ equity interests in the Company at and
after the time that the hedging activities are being conducted.  The Company acknowledges that such
aforementioned hedging activities do not constitute a breach of any of the Transaction
Documents.


 


(cc)         Regulation
M Compliance.  The Company has not,
and to its knowledge no one acting on its behalf has, (i) taken, directly or
indirectly, any action designed to cause or to result in the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of any of the Securities, (ii) sold, bid for, purchased, or, paid any
compensation for soliciting purchases of, any of the Securities, or (iii) paid
or agreed to pay to any Person any compensation for soliciting another to
purchase any other securities of the Company, other than, in the case of
clauses (ii) and (iii), compensation paid to the Company’s selling agents in
connection with the placement of the Securities.


 


3.2  Representations
and Warranties of the Purchasers.  Each Purchaser, for itself and for no other
Purchaser, hereby represents and warrants as of the date hereof and as of the
Closing Date to the Company as follows (unless as of a specific date therein):


 


(a)           Organization; Authority.  Such Purchaser is either an individual or an
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization with full right, corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its obligations
hereunder and thereunder. The execution and delivery of this Agreement


 


15

















 


and
performance by such Purchaser of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate, partnership,
limited liability company or similar action, as applicable, on the part of such
Purchaser.  Each Transaction Document to
which it is a party has been duly executed by such Purchaser, and when
delivered by such Purchaser in accordance with the terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms, except: (i) as limited by
general equitable principles and applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may
be limited by applicable law.


 


(b)           Purchaser Status.  At the time such Purchaser was offered the
Securities, it was, and as of the date hereof it is, an “accredited investor”
as defined in Rule 501(a) under the Securities Act.  Such Purchaser is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act.


 


(c)           Experience of such Purchaser.  Such Purchaser, either alone or together with
its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Securities, and has so evaluated the
merits and risks of such investment. 
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of such
investment.


 


(d)           Certain Transactions and Confidentiality.  Other than consummating the transactions
contemplated hereunder, such Purchaser has not, nor has any Person acting on
behalf of or pursuant to any understanding with such Purchaser, directly or
indirectly executed any purchases or sales, including Short Sales, of the
securities of the Company during the period commencing as of the time that such
Purchaser first received a term sheet (written or oral) as of the Company or
any other Person representing the Company setting forth the material terms of
the transactions contemplated hereunder and ending immediately prior to the
execution hereof.  Notwithstanding the
foregoing, in the case of a Purchaser 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 Purchaser’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 Securities covered by this
Agreement.  Other than to other Persons
party to this Agreement, such Purchaser has maintained the confidentiality of
all disclosures made to it in connection with this transaction (including the
existence and terms of this transaction).  Notwithstanding the foregoing, for avoidance of doubt, nothing contained
herein shall constitute a representation or warranty, or preclude any actions,
with respect to the identification of the availability of, or securing of,
available shares to borrow in order to effect Short Sales or similar
transactions in the future.


 


The Company acknowledges and agrees that the
representations contained in Section 3.2 shall not modify, amend or affect such
Purchaser’s right to rely on the Company’s representations and


 


16

















 


warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transaction contemplated hereby.


 


ARTICLE IV.

OTHER AGREEMENTS OF THE PARTIES


 


4.1  Furnishing
of Information.  For a period of 2 years from the Closing
Date, the Company covenants to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to the Exchange Act even if
the Company is not then subject to the reporting requirements of the Exchange
Act.


 


4.2  Integration.  The Company shall not sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of
any security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market such that it would require shareholder
approval prior to the closing of such other transaction unless shareholder
approval is obtained before the closing of such subsequent transaction.


 


4.3  Securities
Laws Disclosure; Publicity.  The Company shall (a) by 8:30 a.m. (New York
City time) within four (4) Trading Days immediately following the date hereof,
issue a press release disclosing the material terms of the transactions
contemplated hereby and (b) file a Current Report on Form 8-K with the
Commission, including the Transaction Documents as exhibits thereto, within
four Trading Days following the date hereof. 
From and after the issuance of such press release, the Company shall
have publicly disclosed all material, non-public information delivered to any
of the Purchasers by the Company or any of its subsidiaries, or any of their
respective officers, directors, employees or agents in connection with the
transactions contemplated by the Transaction Documents.  The Company and each Purchaser shall consult
with each other in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any
such press release nor otherwise make any such public statement without the
prior consent of the Company, with respect to any press release of any
Purchaser, or without the prior consent of each Purchaser, with respect to any
press release of the Company, which consent shall not unreasonably be withheld
or delayed, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication. 
Notwithstanding the foregoing, the Company shall not publicly disclose
the name of any Purchaser, or include the name of any Purchaser in any filing
with the Commission or any regulatory agency or Trading Market, without the
prior written consent of such Purchaser, except (a) as required by federal
securities law in connection with the filing of final Transaction Documents
(including signature pages thereto) with the Commission and (b) to the extent
such disclosure is required by law or Trading Market regulations, in which case
the Company shall provide the Purchasers with prior notice of such disclosure
permitted under this clause (b).


 


4.4  Shareholder
Rights Plan.  No claim will be made or enforced by the
Company or, with the consent of the Company, any other Person, that any
Purchaser is an “Acquiring Person”


 


17

















 


under any control share
acquisition, business combination, poison pill (including any distribution
under a rights agreement) or similar anti-takeover plan or arrangement in
effect or hereafter adopted by the Company, or that any Purchaser could be
deemed to trigger the provisions of any such plan or arrangement, by virtue of
receiving Securities under the Transaction Documents or under any other
agreement between the Company and the Purchasers.


 


4.5  Non-Public
Information.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company covenants and agrees that neither it, nor any other Person acting on
its behalf will provide any Purchaser or its agents or counsel with any
information that the Company believes constitutes material non-public
information, and each Purchaser agrees, and shall direct its agents and counsel
not to, request any material non-public information from the Company or any
Person acting on its behalf, unless prior thereto such Purchaser shall have
executed a written agreement with the Company regarding the confidentiality and
use of such information.  The Company
understands and confirms that each Purchaser shall be relying on the foregoing
covenant in effecting transactions in securities of the Company.


 


4.6  Use of
Proceeds.  Except as set forth on Schedule 4.6
attached hereto, the Company shall use the net proceeds from the sale of the
Securities hereunder for working capital purposes and shall not use such
proceeds for: (a) the satisfaction of any portion of the Company’s debt (other
than payment of trade payables in the ordinary course of the Company’s business
and prior practices), (b) the redemption of any Common Stock or Common Stock
Equivalents, or (c) the settlement of any outstanding litigation.


 


4.7  Indemnification
of Purchasers.   Subject to the provisions of this Section
4.7, the Company will indemnify and hold each Purchaser and its directors,
officers, shareholders, members, partners, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a “Purchaser
Party”) harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against a Purchaser in any capacity,
or any of them or their respective Affiliates, by any stockholder of the
Company who is not an Affiliate of such Purchaser, with respect to any of the
transactions contemplated by the Transaction Documents (unless such action is
based upon a breach of such Purchaser’s representations, warranties or
covenants under the Transaction Documents or any agreements or understandings
such Purchaser may have with any such stockholder or any violations by such
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence, willful misconduct or
malfeasance).  If any action shall be
brought against any Purchaser Party in respect of which indemnity may be sought
pursuant to this Agreement, such Purchaser Party shall promptly notify the
Company in writing, and the


 


18

















 


Company shall have the right
to assume the defense thereof with counsel of its own choosing reasonably
acceptable to the Purchaser Party.  Any Purchaser
Party shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Purchaser Party except to the extent that (i)
the employment thereof has been specifically authorized by the Company in
writing, (ii) the Company has failed after a reasonable period of time to
assume such defense and to employ counsel or (iii) in such action there is, in
the reasonable opinion of counsel, a material conflict on any material issue
between the position of the Company and the position of such Purchaser Party,
in which case the Company shall be responsible for the reasonable fees and
expenses of no more than one such separate counsel.  The Company will not be liable to any
Purchaser Party under this Agreement (y) for any settlement by a Purchaser
Party effected without the Company’s prior written consent, which shall not be
unreasonably withheld or delayed; or (z) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party’s
breach of any of the representations, warranties, covenants or agreements made
by such Purchaser Party in this Agreement or in the other Transaction
Documents. The indemnification required by this Section 4.7 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or are incurred. The indemnity
agreements contained herein shall be in addition to any cause of action or
similar right of any Purchaser Party against the Company or others, and (y) any
liabilities the Company may be subject to pursuant to law.


 


4.8  Listing
of Common Stock. The Company hereby agrees to
use best efforts to maintain the listing or quotation of the Common Stock on
the Trading Market on which it is currently listed, and concurrently with or
prior to the Closing, the Company shall apply to list or quote all of the
Shares on such Trading Market and promptly secure the listing of all of the
Shares on such Trading Market. The Company further agrees, if the Company
applies to have the Common Stock traded on any other Trading Market, it will
then include in such application all of the Shares, and will take such other
action as is necessary to cause all of the Shares to be listed or quoted on
such other Trading Market as promptly as possible.  The Company will then take all action
reasonably necessary to continue the listing and trading of its Common Stock on
a Trading Market and will comply in all respects with the Company’s reporting,
filing and other obligations under the bylaws or rules of the Trading Market.


 


4.9  Equal
Treatment of Purchasers.  No consideration (including any modification
of any Transaction Document) shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of the Transaction
Documents unless the same consideration is also offered to all of the parties
to the Transaction Documents.  For
clarification purposes, this provision constitutes a separate right granted to
each Purchaser by the Company and negotiated separately by each Purchaser, and
is intended for the Company to treat the Purchasers as a class and shall not in
any way be construed as the Purchasers acting in concert or as a group with
respect to the purchase, disposition or voting of Securities or otherwise.


 


4.10        Certain
Transactions and Confidentiality. Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
neither it nor any Affiliate acting on its behalf or pursuant to any
understanding with it will execute any purchases or sales, including Short
Sales of any of the Company’s securities during the period commencing with the
execution of this Agreement and ending at such time that the transactions
contemplated by this Agreement are


 


19
















 


first publicly announced
pursuant to the initial press release as described in Section 4.3.  Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company pursuant to the initial press release as described in
Section 4.3, such Purchaser will maintain the confidentiality of the existence
and terms of this transaction and the information included in the Disclosure
Schedules.  Notwithstanding the foregoing, and notwithstanding anything
contained in this Agreement to the contrary, the Company expressly acknowledges
and agrees that (i) no Purchaser makes any representation, warranty or covenant
hereby that it will not engage in effecting transactions in any securities of
the Company after the time that the transactions contemplated by this Agreement
are first publicly announced pursuant to the initial press release as described
in Section 4.3, (ii) no Purchaser shall be restricted or prohibited from
effecting any transactions in any securities of the Company in accordance with
applicable securities laws from and after the time that the transactions
contemplated by this Agreement are first publicly announced pursuant to the
initial press release as described in Section 4.3 and (iii) no Purchaser shall
have any duty of confidentiality to the Company or its Subsidiaries after the
issuance of the initial press release as described in Section 4.3. 
Notwithstanding the foregoing, in the case of a Purchaser 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 Purchaser’s assets, the covenant 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 Securities covered by
this Agreement.


 


4.11         Delivery of Warrants After Closing.  The Company shall deliver, or cause to be
delivered, the respective Warrant certificates purchased by each Purchaser to
such Purchaser within 3 Trading Days of the Closing Date.


 


ARTICLE V.

MISCELLANEOUS


 


5.1   Termination. 
This Agreement may be terminated by any Purchaser, as to such Purchaser’s
obligations hereunder only and without any effect whatsoever on the obligations
between the Company and the other Purchasers, by written notice to the other
parties, if the Closing has not been consummated on or before October 31, 2010
(the “Termination Date”); provided, however, that no such
termination will affect the right of any party to sue for any breach by the
other party (or parties).


 


5.2   Fees and Expenses.  Except as expressly set forth in the
Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation, preparation,
execution, delivery and performance of this Agreement.  The Company shall pay all Transfer Agent
fees, stamp taxes and other taxes and duties levied in connection with the
delivery of any Securities to the Purchasers.


 


5.3   Entire Agreement.  The Transaction Documents, together with the
exhibits and schedules thereto, the Prospectus and the Prospectus Supplement,
contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior


 


20

















 


agreements and understandings,
oral or written, with respect to such matters, which the parties acknowledge
have been merged into such documents, exhibits and schedules.


 


5.4   Notices.  Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earliest of: (a) the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number set forth on the signature pages attached
hereto prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next
Trading Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number set forth on the signature
pages attached hereto on a day that is not a Trading Day or later than 5:30
p.m. (New York City time) on any Trading Day, (c) the second (2nd) Trading Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service or (d) upon actual receipt by the party to
whom such notice is required to be given. 
The address for such notices and communications shall be as set forth on
the signature pages attached hereto.


 


5.5   Amendments; Waivers.  No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchasers holding at least 67% in
interest of the Shares based on the initial Subscription Amounts hereunder or,
in the case of a waiver, by the party against whom enforcement of any such
waived provision is sought.  No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver
of any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right.


 


5.6   Headings.  The headings herein are for convenience only,
do not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.


 


5.7   Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted
assigns.  The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of each Purchaser (other than by merger).  Any Purchaser may assign any or all of its
rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided that such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions of the
Transaction Documents that apply to the “Purchasers.”


 


5.8   No Third-Party Beneficiaries.  This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.7.


 


5.9   Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof.  Each party agrees that all
legal proceedings concerning the interpretations, enforcement and defense of
the transactions contemplated by this Agreement and any other Transaction
Documents (whether brought against a party hereto or its respective


 


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affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively in
the state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the adjudication
of any dispute hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein (including with respect to the
enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper or is an inconvenient venue for
such proceeding.  Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof.  Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any other manner permitted by law.  If
either party shall commence an action or proceeding to enforce any provisions
of the Transaction Documents, then, in addition to the obligations of the
Company under Section 4.7, the prevailing party in such action or proceeding
shall be reimbursed by the other party for its reasonable attorneys’ fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.


 


5.10         Survival.  The
representations and warranties contained herein shall survive the Closing and
the delivery of the Securities.


 


5.11         Execution. 
This Agreement may be executed in two or more counterparts, all of which
when taken together shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered
to the other party, it being understood that both parties need not sign the
same counterpart.  In the event that any
signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf”
format data file, such signature shall create a valid and binding obligation of
the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile or “.pdf” signature page were an
original thereof.


 


5.12         Severability. 
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, illegal, void or
unenforceable, the remainder of the terms, provisions, covenants and restrictions
set forth herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such
that may be hereafter declared invalid, illegal, void or unenforceable.


 


5.13         Rescission and Withdrawal Right.  Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) any of the other
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion


 


22

















 


from time to time upon written notice to the Company,
any relevant notice, demand or election in whole or in part without prejudice
to its future actions and rights.


 


5.14         Replacement of Securities.  If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction.  The applicant for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
(including customary indemnity) associated with the issuance of such
replacement Securities.


 


5.15         Remedies.  In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchasers and the Company will
be entitled to specific performance under the Transaction Documents.  The parties agree that monetary damages may
not be adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agree to waive
and not to assert in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.


 


5.16         Payment Set Aside. 
To the extent that the Company makes a payment or payments to any
Purchaser pursuant to any Transaction Document or a Purchaser enforces or
exercises its rights thereunder, and such payment or payments or the proceeds
of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law,
common law or equitable cause of action), then to the extent of any such
restoration the obligation or part thereof originally intended to be satisfied
shall be revived and continued in full force and effect as if such payment had
not been made or such enforcement or setoff had not occurred.


 


5.17         Independent Nature of Purchasers’ Obligations and Rights.  The obligations of each Purchaser under any
Transaction Document are several and not joint with the obligations of any
other Purchaser, and no Purchaser shall be responsible in any way for the
performance or non-performance of the obligations of any other Purchaser under
any Transaction Document.  Nothing
contained herein or in any other Transaction Document, and no action taken by
any Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as
a partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by
the Transaction Documents.  Each
Purchaser shall be entitled to independently protect and enforce its rights
including, without limitation, the rights arising out of this Agreement or out
of the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.  Each Purchaser has been
represented by its own separate legal counsel in their review and negotiation
of the Transaction Documents.  The
Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by any of the Purchasers.  It is expressly understood and


 


23

















 


agreed that each provision contained in this Agreement
and in each other Transaction Document is between the Company and a Purchaser,
solely, and not between the Company and the Purchasers collectively and not
between and among the Purchasers.


 


5.18         Saturdays,
Sundays, Holidays, etc.       If the
last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall not be a Business Day, then such action
may be taken or such right may be exercised on the next succeeding Business
Day.


 


5.19         Construction. The parties agree
that each of them and/or their respective counsel has reviewed and had an
opportunity to revise the Transaction Documents and, therefore, the normal rule
of construction to the effect that any ambiguities are to be resolved against
the drafting party shall not be employed in the interpretation of the
Transaction Documents or any amendments hereto. In addition, each and every
reference to share prices and shares of Common Stock in any Transaction
Document shall be subject to adjustment for reverse and forward stock splits,
stock dividends, stock combinations and other similar transactions of the
Common Stock that occur after the date of this Agreement.


 


5.20         WAIVER OF JURY TRIAL.  IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH
KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE
LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES
FOREVER TRIAL BY JURY.


 


 


(Signature Pages Follow)


 


24

















 


IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.


 


 


	
  SYNERGY PHARMACEUTICALS, INC.

  	
   

  	
  Address for Notice:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  420 Lexington Avenue, Suite 1609

  
	
   

  	
   

  	
  New York, NY 10170

  
	
   

  	
   

  	
  Attn:

  	
  CEO

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  Fax:

  	
  212-297-0019

  
	
   

  	
  Name:

  	
  Gary Jacob

  	
   

  	
   

  
	
   

  	
  Title: 

  	
  CEO

  	
   

  	
   

  
	
  With a copy to (which shall not constitute notice):

  	
   

  	
   

  



 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK


SIGNATURE PAGE FOR PURCHASER FOLLOWS]


 


25

















 


[PURCHASER SIGNATURE PAGE TO SYNERGY SECURITIES
PURCHASE AGREEMENT]


 


IN WITNESS WHEREOF, the undersigned have caused this
Securities Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.


 


	
  Name of Purchaser: 

  	
   

  	
   

  
	
   

  	
   

  
	
  Signature of Authorized Signatory of Purchaser: 

  	
   

  	
   

  
	
   

  	
   

  
	
  Name of Authorized Signatory: 

  	
   

  	
   

  
	
   

  	
   

  
	
  Title of Authorized Signatory: 

  	
   

  	
   

  
	
   

  	
   

  
	
  Email Address of Authorized Signatory:

  	
   

  	
   

  
	
   

  	
   

  
	
  Facsimile Number of Authorized Signatory: 

  	
   

  	
   

  
	
   

  	
   

  
	
  Address and Contact Number for Notice of Purchaser:

  	
   

  
	
   

  
	
   

  
	
  Address for Delivery of Securities for Purchaser (if
  not same as address for notice):

  
	
   

  
	
   

  
	
  Subscription Amount: $

  
	
   

  
	
  Shares: 

  
	
   

  
	
  Warrant Shares: 

  
	
   

  
	
  EIN Number (if applicable): 

  
	
   

  
	
  Broker Name: 

  
	
   

  
	
  DTC Participant Number: 

  
									



 


 


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