Exhibit
10.1


 


SYNERGY
PHARMACEUTICALS, INC.


 


SECURITIES
PURCHASE AGREEMENT


 


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


 


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


 


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


 


SECTION 1.


 


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


 


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


 


SECTION 2.


 


2.1                                 Acceptance or Rejection.


 


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


 

















 


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


 


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


 


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


 


SECTION 3.


 


3.1                                 Investor Representations and Warranties.


 


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


 


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


 


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


 


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


 

















 


(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