Document:

Exhibit 10.2

 

CONSULTING AGREEMENT

 

This Consulting Agreement (“Agreement”) is made as of the 16th day of November, 2011 (“Effective Date”) by and between Tornier Inc., and all subsidiaries and affiliates owned or controlled, directly or indirectly, by Tornier (“Tornier”), located at 7701 France Avenue South, Suite 600, Edina, MN 55435 and Andy Joiner (“Consultant”) (Tornier and Consultant being referred to individually as “Party” and collectively as “Parties”).

 

NOW, THEREFORE, in consideration of the mutual promises exchanged herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agrees as follows:

 

1.                                       Consulting Services.  Consultant agrees to render consulting services of the nature described in the Addendum signed by the Parties and attached hereto, and as may be requested from time to time by Tornier.  The Addendum is incorporated into and made part of this Agreement.  Consultant may determine, in Consultant’s sole discretion, the means and manner of performing the Services except as expressly limited by this Agreement.  Tornier retains the right to require that Consultant satisfactorily perform the Services.  Consultant will be responsible for furnishing such supplies, tools and equipment as may be necessary to complete Consultant’s tasks under this Agreement.  Consultant shall perform and/or personally supervise all services provided to Tornier under this Agreement.  In performing the services under this Agreement, Consultant may but is not required to utilize Tornier offices and equipment.  Consultant may set his or her own hours with respect to Consultant’s duties under this Agreement.  Nothing in this Agreement shall be construed so as to prohibit Consultant from pursuing other work, except to the extent that such work would conflict with Consultant’s duties under this Agreement.

 

2.                                       Compensation.  Tornier shall pay to Consultant, as compensation for the services performed hereunder, the amount or amounts stated in the Addendum to this Agreement.  Tornier shall be responsible to pay for hours actually worked by Consultant in performing services under the Addendum, subject to the minimum monthly payment, but Tornier shall not be responsible for payment for normal commuting time nor, if travel is required, for travel time in excess of a total time of 8 hours per day.  Tornier will reimburse Consultant for all agreed-upon travel (other than the normal daily expenses of working and commuting) and other reasonable expenses incurred in connection with performing services for Tornier.  Consultant will submit invoices to Tornier at least once per month, and payment of agreed-upon charges will be made within 30 days of receipt of invoice.  If invoices are not submitted within 90 days after services are performed, Tornier will not consider invoices for payment.  The Consultant agrees not to incur any expenses in Tornier’s name without the prior written authorization of Tornier.

 

3.                                       Taxes.  Consultant is an independent contractor and shall have sole responsibility for payment of all federal, state and local taxes or contributions imposed or required under unemployment insurance, social security and income tax laws and for filing all required tax forms with respect to any amounts paid by Tornier to Consultant hereunder and any amounts paid by Consultant to its employees.  Consultant shall indemnify and hold Tornier harmless against any claim or liability (including penalties) resulting from failure of Consultant to pay such taxes or contributions, or failure of Consultant to file any such tax forms.  Tornier shall file and provide to consultant the appropriate Form 1099 relating to payments made pursuant to this Agreement.

 

4.                                       Insurance.  Consultant will maintain, at Consultant’s expense, such insurance as will fully protect

 

 

Consultant from any claims for damage for bodily injury, including death, and for property damage, which may arise from Consultant’s activities under this Agreement, whether such activities are performed by Consultant or by any subcontractor or anyone directly or indirectly employed by either of them.

 

5.                                       Confidential Information.  Confidential Information shall mean written information, oral information, or information obtained by the inspection of tangible objects, that relates to, business, technical, customer, marketing, and financial information (whether written, oral or otherwise), including without limitation, ideas, inventions, trade secrets, know how, documents, charts, lists, software, drawings, materials, goods, product designs and plans, equipment or samples, disclosed or delivered to Consultant by Tornier, or arising from work or services done by Consultant for Tornier.  Confidential Information shall not include to any information for which that Consultant can demonstrate by competent written proof was (a) known to the public at the time of Tornier’s disclosure to Consultant or entered the public domain thereafter through no fault of Consultant; (b) in Consultant’s possession free of any obligation of confidentiality at the time of Tornier’s disclosure to Consultant; or (c) rightfully communicated to Consultant by a third party who was not under any obligation of confidentiality.

 

6.                                       Authorized Uses.  Confidential Information shall be used by the Consultant only for purposes authorized in writing by Tornier, shall be treated by the Consultant as confidential proprietary information of Tornier, and shall not be reproduced or disclosed or made available to others without prior written permission of Tornier except to those that have a specific need to know.  The Consultant shall take at least those measures that Consultant takes to protect its own highly confidential information.  The Consultant shall reproduce Tornier’s proprietary rights notices on any such approved copies, in the same manner in which such notices were set forth in or on the original.  The authorized uses of Confidential Information are limited to (a) performing the consulting services described in the Addendum; (b) supplying Tornier with goods or services; or (c) any other purpose Tornier may hereafter authorize in writing.  Consultant will immediately notify Tornier of receipt by Consultant or any of his agents of any process, subpoena, demand, or request by any third party, requiring or requesting the production of Confidential Information.

 

7.                                       Title.  The title to the Confidential Information provided to the Recipient by the Discloser, including without limitation any tangible property, shall be vested in the Discloser.  Nothing in this Agreement is intended to grant any rights to the Interested Party under any patent, mask work right or copyright of Tornier, nor shall this Agreement grant the Interested Party any rights in or to Confidential Information except as expressly set forth herein.

 

8.                                       Representations, Warranties and Indemnification.

 

8.1                                 The Consultant represents that during the term of this Agreement no business relationships, employment relationships and consulting obligations of the Consultant shall be a conflict with the obligations to Tornier set forth herein, or involve the disclosure of Confidential Information, and or interfere with the performance of the Consultant’s obligations under this Agreement.

 

8.2                                 The Consultant warrants to Tornier that the Consultant: (a) has the right to enter into this Agreement, (b) has no obligations to any other person or organization that are in conflict with the Consultant’s obligations under this Agreement, and (c) that all Inventions and Preexisting Materials (as defined herein) are and will be original, and will not infringe the copyrights, trade secrets, rights of privacy or similar proprietary rights of others.  The Consultant agrees to indemnify and hold harmless Tornier against any expenses, damages, costs, losses and fees

 

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(including legal fees) incurred by Tornier in any suit, claim or proceeding brought by a third party and which is based on facts which constitute a breach of any of the warranties in this Paragraph.

 

9.                                       Term and Termination.

 

9.1                                 Either Party shall have the right to terminate this Agreement upon ten days written notice to the other Party.

 

9.2                                 This Agreement shall automatically expire on June 30, 2012, unless extended by the mutual written agreement of the Parties.

 

9.3                                 The continuing obligations of Consultant under this Agreement with respect to Confidential Information shall survive for five years after the termination date of this Agreement.

 

10.                                 Independent Contractor/No Agency.  Nothing in this Agreement may be construed to establish Tornier as an employer and Consultant as an employee, to establish either party hereto as a partner or agent of the other party, or to create any other form of legal association that would impose liability upon a party for any act or omission of the other party or provide a party with the right, power, or authority to create or impose any duty or obligation on the other party, it being intended that each party hereto shall remain an independent contractor acting in its own name and for its own account.  Consultant agrees that the Consultant is not entitled to any Tornier employee benefits or benefit plans of any kind, including but not limited to, worker’s compensation insurance, unemployment insurance, health insurance, life insurance, pension plan or any other benefit or insurance that Tornier provides to its employees.  In the event the United States Internal Revenue Service (“IRS”) makes a determination contrary to the status of consultant, Consultant will furnish to Tornier a completed and fully executed IRS Form 4669 on or before April 15 of the year such request is made by Company.  The submission of such Form 4669 will not be deemed to create an employer-employee relationship.  Consultant will not take a position on its income tax return inconsistent with Consultant’s status as an independent contractor and will cooperate in any inquiry and dispute regarding Consultant’s status as an independent contractor that may arise from an IRS audit of Tornier.

 

11                                    Third-party Confidential Information.  The Consultant understands that Tornier does not desire to receive any confidential information in breach of the Consultant’s obligation to others and agrees that during the term of this Agreement, the Consultant will not disclose to Tornier or use in the performance of services for Tornier, any confidential information in breach of the obligations to any third party.

 

12.                                 Use of Consultant’s Written Materials.  Tornier shall have the right, at no additional charge, to use, modify, reproduce and prepare derivative works based on the Consultant’s documentation and literature, provided to Tornier by Consultant in connection with the performance of services under this Agreement, including without limitation, operating and maintenance manuals, technical publications, prints, drawings, training manuals, sales literature, and other similar materials.

 

13.                                 No Commitment.  It is understood that this Agreement does not obligate Tornier to request proposals, bids, or estimates from or to enter into contracts or place orders with the Consultant, and does not constitute all of the conditions or terms of a contract, request, or order from Tornier to the Consultant.  Further conditions and terms of any such contract, request, or order shall be agreed upon between Parties from time to time.

 

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14.                                 No Reverse Engineering.  Except as expressly provided herein, the Consultant shall not (a) reverse engineer or analyze samples furnished by Tornier, (b) create derivatives of such samples for commercial purposes, or (c) file any patent application containing a claim to any subject matter derived from the Confidential Information, without the prior written consent of Tornier.

 

15.                                 Return of Confidential Information.  At any time upon Tornier’s request, or upon the termination of this Agreement, all records and any compositions, articles, devices, Inventions and other items which disclose or embody Confidential Information (and all copies thereof) shall be promptly returned to Tornier and not retained by the Consultant or the Consultant representatives in any form.  Analyses, summaries or other writings prepared by the Consultant or the Consultant advisors based on the Confidential Information shall be promptly destroyed and all electronic memories data containing Confidential Information, including archival media, shall be promptly purged of such Confidential Information.

 

16.                                 Injunctive Relief.  The Consultant also agrees that, in the event of any breach or threatened breach, Tornier will be entitled to equitable relief, including injunctive relief and specific performance without posting a bond.  Such relief will not be exclusive of Tornier, but will be in addition to all other remedies.  In the event disclosure is legally compelled, the Consultant shall provide Tornier with prompt written notice so that Tornier can seek appropriate protections and remedies.

 

17.                                 Disclaimer.  Tornier provides Confidential Information disclosed hereunder on an “AS IS” basis, without warranties of any kind.  Without limiting the foregoing, Tornier does not represent or warrant that such Confidential Information is accurate, complete or current.  The disclosure of Confidential Information is for discussion purposes only.  Tornier may change the content of Confidential Information at any time at Tornier’s sole discretion.

 

18.                                 Applicable Law and Jurisdiction.  The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of Minnesota (without giving effect to the choice of law principles thereof).  Tornier and Consultant each hereby (a) agrees that any action, cause of action, claim, or dispute arising under or relating to this Agreement must be brought only in the courts of the State of Minnesota, located in the County of Hennepin, or the federal court of the United States located in the District of  Minnesota, (b) expressly consents to personal jurisdiction in the State of Minnesota, with respect to such action, cause of action, claim, or dispute, (c) irrevocably and unconditionally consents to the exclusive jurisdiction and venue of such courts for the purposes of enforcing the terms of this Agreement or interpreting any provision, remedying any breach, or otherwise adjudicating any action, cause of action, claim, or dispute of or under this Agreement, (d) irrevocably and unconditionally waives any objection to the jurisdiction and venue required in this Section 18,  and (e) agrees not to plead or claim in any such court that any such action, cause of action, claim, or dispute has been brought in an inconvenient forum.  The Consultant hereby irrevocably appoints the Secretary of State of the State of Minnesota as his agent for service of any process, summons or other document related to initiating any action hereunder to enforce the rights of Tornier.

 

19.                                 Miscellaneous.               No amendment to this Agreement shall be binding upon the Parties unless it is in writing and executed by both Parties.  The failure of either Party at any time to require performance of any provision of this Agreement or to exercise any right provided for herein shall not be deemed a waiver of such provision or such right.  All waivers must be in writing.  Unless the written waiver contains an express statement to the contrary, no waiver by either Party of any breach of any provision of this Agreement or of any right provided for herein shall be construed as a waiver of any continuing or succeeding breach of such provision, a waiver of the provision itself, or a waiver of any right under this

 

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Agreement.  All remedies provided for in this Agreement shall be cumulative and in addition to and not in lieu of any other remedies available to either Party at law, in equity or otherwise.  This Agreement contains the entire understanding and agreement between the Parties with respect to the subject matter hereof and supersedes all previous communications, negotiations and agreements, whether oral or written, between the parties with respect to such subject matter. If any provision or clause of this Agreement, or the application thereof under certain circumstances is held invalid, the remainder of this Agreement, or the application of such provision or clause under other circumstances, shall not be affected thereby.

 

20.                                 Assignment.  Tornier reserves the right to assign all or part of its rights under this Agreement.  Tornier agrees to notify Consultant within thirty days of such assignment.

 

21.                                 Indemnification. All representatives of Consultant, while on Tornier’s premises shall comply with all reasonable rules and regulations established by Tornier. Consultant hereby agrees to indemnify and hold harmless Tornier and its affiliates, and their officers, agents and employees, from and against any and all liability, loss, damage, cost and expense (including attorneys fees) on account of any claim, suit or action made or brought against Tornier, or their officers, agents or employees, arising from the services performed by Consultant hereunder, including any act of negligence of Consultant or its employees in connection with such services, or arising from any accident, injury or damage caused to any person or to the property of any person during the performance of such services, or arising from injury (including death) to any of Consultant’s employees or damage to or loss of Consultant’s property while on the premises of Tornier in connection with this Agreement.

 

22.                                 Non-compete.  Consultant agrees that the Restricted Period referenced in Sections 7(a) and 7(c) of his Employment Agreement dated April 28, 2008, is extended for a period of one (1) year after the termination or expiration date of this Agreement and that subject to that extension of the Restricted Period, the terms of Sections 7(a) and 7(c) of the Employment Agreement are hereby incorporated into and made part of this Agreement by reference.

 

23.                                 Export Control.  The Consultant agrees not to export, directly or indirectly, any U.S. source technical data acquired from Tornier or any products utilizing such data to countries outside the United States, which export may be in violation of the United States export laws or regulations.

 

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their authorized representatives as of the date written below.

 

	
CONSULTANT
    	
 
    	
TORNIER
    
	
 
    	
 
    	
 
    
	
/s/   Andrew E. Joiner
    	
 
    	
/s/   Douglas W. Kohrs
    
	
Signature,   individually and on behalf of the business identified above
    	
 
    	
[Name]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
President   and Chief Executive Officer
    
	
Title
    	
 
    	
Title
    
	
 
    	
 
    	
 
    
	
November   15, 2011
    	
 
    	
November   15, 2011
    
	
Date
    	
 
    	
Date
    

 

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ADDENDUM

 

to the

 

TORNIER CONSULTING AGREEMENT

 

NATURE OF CONSULTING SERVICES

 

It is expected that Tornier will pay all direct out-of-pocket expenses in connection with the Consulting Services, provided that Consultant obtains Tornier’s advanced written authorization before obligating Tornier for any such out-of-pocket expenses.

 

CONSULTANT’S FEE

 

Tornier agrees to pay Consultant $2500 per month, not to exceed 15 hours per month, for six months starting on November 16, 2011, and ending on May 15, 2012, pro rated for any partial month.  Consultant may work in excess of 15 hours per month only with prior written consent of Tornier.  Tornier agrees to pay Consultant $150 per hour for such excess service time.  Invoices for services shall be monthly as work progresses (but in no event later than forty-five days after such services are rendered).  Tornier will also reimburse Consultant only for pre-approved travel expense.

 

CONSULTANT’S POINT OF CONTACT AT TORNIER

 

Consultant’s point of contact at Tornier shall be Doug Kohrs.  All questions regarding this Agreement should be directed to the point of contact.

 

 

	
CONSULTANT
    	
 
    	
TORNIER
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
/s/   Andrew E. Joiner
    	
 
    	
/s/   Douglas W. Kohrs
    
	
Signature,   individually and on behalf of the business identified above
    	
 
    	
[Name]
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
President   and Chief Executive Officer
    
	
Title
    	
 
    	
Title
    
	
 
    	
 
    	
 
    
	
November   15, 2011
    	
 
    	
November   15, 2011
    
	
Date
    	
 
    	
DateExhibit 4.1

 

COMMON STOCK PURCHASE WARRANT

 

 SYNERGY PHARMACEUTICALS, INC.

 

	
Warrant   Shares:
    	
 
    	
Initial   Exercise Date:           ,   2011
    

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received,                               or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after                2011 (the “Initial Exercise Date”) and on or prior to the close of business on the five year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Synergy Pharmaceuticals, Inc., a Florida corporation (the “Company”), up to            shares (as subject to adjustment hereunder, the “Warrant Shares”) of Common Stock. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1.               Definitions.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase Agreement (the “Purchase Agreement”), dated November     , 2011, among the Company and the purchasers signatory thereto.

 

Section 2.               Exercise.

 

a)             Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto. Within three (3) Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three (3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased.  The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise Form within one (1) 

 

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Business Day of receipt of such notice.  The Holder and any assignee, by acceptance  of this Warrant, acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.

 

b)            Exercise Price.  The exercise price per share of the Common Stock under this Warrant shall be $2.75, subject to adjustment hereunder (the “Exercise Price”).

 

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b)  if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (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 (c) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

 

c)             Mechanics of Exercise.

 

i.      Delivery of Certificates Upon Exercise.  Certificates for shares purchased hereunder shall be transmitted by the Transfer Agent to the Holder by crediting the account of the Holder’s prime broker with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder, and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise by the date that is three (3) Trading Days after the latest of (A) the delivery to the Company of the Notice of Exercise, (B) surrender of this Warrant (if required) and (C) payment of the aggregate Exercise Price as set forth above (such date, the “Warrant Share Delivery Date”).   The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 2(c)(v) prior to the issuance of such shares, having been paid.

 

ii.     Delivery of New Warrants Upon Exercise.  If this Warrant shall have been exercised in part, the Company shall, at the request of a 

 

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Holder and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

iii.    Rescission Rights.  If the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing the Warrant Shares pursuant to Section 2(c)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.

 

iv.    No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant.  As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.

 

v.     Charges, Taxes and Expenses.  Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

 

vi.    Closing of Books.  The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

 

d)            Holder’s Exercise Limitations.  The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below).  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude 

 

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the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other  Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith.   To the extent that the limitation contained in this Section 2(d) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination.   In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  For purposes of this Section 2(d), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant.  The Holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(d), provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(d) shall continue to apply.  Any such increase or decrease will not be effective until the 61st day after such notice is delivered to the Company.  The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(d) to correct this paragraph (or 

 

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any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Warrant.

 

Section 3.               Certain Adjustments.

 

a)             Subsequent Equity Sales. From January 1, 2012 until three years thereafter, if the Company or any Subsidiary shall issue any Common Stock or Common Stock Equivalents, in a transaction other than in an Exempt Transaction (“Subsequent Financing”) entitling any person or entity to acquire shares of Common Stock at an effective price per share less than the Exercise Price (subject to prior adjustment for reverse and forward stock splits and the like) (the “Discounted Exercise Price,” as further defined below), then, the Exercise Price shall be reduced then to an amount equal to the Discounted Exercise Price. 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 Exercise 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 Exercise Price shall be deemed to be the lowest adjustment price. 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 such investor in such offering. The Company shall not refuse to adjust the Exercise Price hereunder based on any claim that such Purchaser or any one associated or affiliated with such Purchaser 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 Purchaser’s right to pursue actual damages for the Company’s failure to adjust the Exercise Price hereunder and such Purchaser 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 3(a) shall not apply in respect of an Exempt Issuance. The Purchaser’s rights under this Section 3(a) shall terminate upon the earlier of (i) the Company completing a Subsequent Financing at an effective price per share equal to or greater than the Exercise Price to institutional investors which results in minimum gross proceeds to the Company of $15 million or (ii) listing of the Company’s Common Stock on the NYSE AMEX or The NASDAQ Stock Market provided, however, that notwithstanding the foregoing, the Purchaser’s rights under this Section 3(a) shall be in effect for a  minimum of eighteen (18) months after the date of this Warrant.

 

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b)            Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged.  Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

c)             Pro Rata Distributions.  If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common Stock (and not to the Holder) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security, then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith.  In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock.  Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.

 

d)            Combination: Liquidation.  While this Warrant is outstanding, (i) in the event of a Combination (as defined below), each Holder shall have the right to receive upon exercise of the Warrant the kind and amount of shares of capital stock or other securities or property which such Holder would have been entitled to receive upon or as a result of such Combination had such Warrant been exercised immediately prior to such event (subject to further adjustment in accordance with the terms hereof).  Unless paragraph (ii) is applicable to a Combination, the Company shall provide that the surviving or acquiring Person (the “Successor Company”) in such Combination will assume by written instrument the obligations under this Section 3 and the obligations to deliver to the Holder such shares of stock, securities or assets as, in accordance with the 

 

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foregoing provisions, the Holder may be entitled to acquire. “Combination” means an event in which the Company consolidates with, mergers with or into, or sells all or substantially all of its assets to another Person, where “Person” means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity; (ii)  In the event of (x) a Combination where consideration to the holders of Common Stock in exchange for their shares is payable solely in cash or (y) the dissolution, liquidation or winding-up of the Company, the Holders shall be entitled to receive, upon surrender of their Warrant, distributions on an equal basis with the holders of Common Stock or other securities issuable upon exercise of the Warrant, as if the Warrant had been exercised immediately prior to such event, less the Exercise Price.  In case of any Combination described in this Section 3, the surviving or acquiring Person and, in the event of any dissolution, liquidation or winding-up of the Company, the Company, shall deposit promptly with an agent or trustee for the benefit of the Holders of the funds, if any, necessary to pay to the Holders the amounts to which they are entitled as described above.  After such funds and the surrendered Warrant are received, the Company is required to deliver a check in such amount as is appropriate (or, in the case or consideration other than cash, such other consideration as is appropriate) to such Person or Persons as it may be directed in writing by the Holders surrendering such Warrant.

 

e)             Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

f)             Notice to Holder.

 

i.      Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

ii.     Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock 

 

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is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.  To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K.  The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

 

 

Section 4.               Transfer of Warrant.

 

a)             Transferability.  This Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.  Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.  The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.

 

b)            New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 

 

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4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

c)             Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

 

Section 5.               Miscellaneous.

 

a)             No Rights as Stockholder Until Exercise.  This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(c)(i).

 

b)            Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.

 

c)             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.

 

d)            Authorized Shares.

 

The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.  The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.  The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or 

 

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regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.  The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment.  Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.

 

Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

 

e)             Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Purchase Agreement.

 

f)             Restrictions.  The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

 

g)            Nonwaiver and Expenses.  No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies.  Without limiting any other provision of this Warrant or the Purchase Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as

 

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shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.

 

h)            Notices.  Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement.

 

i)              Limitation of Liability.  No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

j)              Remedies.  The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

 

k)             Successors and Assigns.  Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.

 

l)              Amendment.  This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

m)            Severability.  Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

 

n)            Headings.  The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

 

********************

 

(Signature Page Follows)

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

 

	
 
    	
SYNERGY   PHARMACEUTICALS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:    Gary Jacob
    
	
 
    	
 
    	
Title:    CEO
    

 

12

 

NOTICE OF EXERCISE

 

TO:         SYNERGY PHARMACEUTICALS, INC.

 

(1)   The undersigned hereby elects to purchase                  Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2)   Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

 

 

 

The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:

 

 

 

[SIGNATURE OF HOLDER]

 

	
Name   of Investing Entity:
    	
 
    
	
Signature   of Authorized Signatory of Investing Entity:
    	
 
    
	
Name   of Authorized Signatory:
    	
 
    
	
Title   of Authorized Signatory:
    	
 
    
	
Date:
    	
 
    
						

 

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute
 this form and supply required information. 
 Do not use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, [        ] all of or [              ] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

whose address is

 

.

 

Dated:                              ,             

 

	
 
    	
Holder’s   Signature:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
Holder’s   Address:
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    

 

	
Signature   Guaranteed:
    	
 
    	
 
    

 

NOTE:  The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company.  Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

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