SYNERGY PHARMACEUTICALS, INC. 17% Note Due: April 1, 2011

conservator or similar official for the Borrower or any of its affiliates, or for a substantial part of any of its or their property or assets, (d) file an answer admitting the material allegations of a petition filed against it or them in any such proceeding, (e) make a general assignment for the benefit of creditors, (f) become unable, admit in writing its inability or fail generally to pay its or their debts as they become due or (g) take any action for the purpose of effecting any of the foregoing; or

(viii)        one or more judgments for the payment of money in an aggregate amount in excess of $75,000 (to the extent not covered by insurance) shall be rendered against the Borrower or any of its affiliates and the same shall remain undischarged for a period of 30 days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of the Borrower or any of its affiliates to enforce any such judgment.

(c)           Acceleration.  If an Event of Default occurs hereunder, then the outstanding principal of and all accrued Interest on this Note shall automatically become immediately due and payable, without presentment, demand, protest or notice of any kind, all of the Borrower expressly waives. The Holder may rescind an acceleration and its consequences if all existing Events of Default have been cured or expressly waived in writing by Holder if the rescission would not conflict with any judgment or decree.

(d)           Suits for Enforcement.  Upon the occurrence of any Event of Default, the Holder of this Note may proceed to protect and enforce its rights hereunder by suit in equity, action at law or by other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Note or in the Loan Agreement or in aid of the exercise of any power granted in this Note or the Loan Agreement, or may proceed to enforce the payment of this Note, or to enforce any other legal or equitable right of the Holder of this Note.

(e)           Costs and Expenses.  In the Event of Default, Borrower shall pay to the Holder such amounts as shall be sufficient to cover the costs and expenses of such Holder due to such default, including reasonable attorneys’ fees., costs and expenses incurred by the Holder in connection with the collection, liquidation, enforcement and defense of the obligations of the Borrower to the Holder hereunder and under the Loan Agreement.

4.             Remedies Cumulative, etc.  No remedy herein conferred upon or reserved to the Holder is intended to be exclusive of any other remedy and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity. It is agreed that Holder may enforce all of its rights contemporaneously, and that Holder may pursue all remedies contemporaneously, including both (a) remedies for possession and sale of the Collateral and (b) an action for enforcement of the Note. No delay or omission of the Holder to exercise any right or power accruing upon any Event of Default shall impair any such right or power, or shall be construed to be a waiver of any such Event of Default or any acquiescence therein, and every power and remedy given by this Agreement to the Holder may be exercised from time to time. Receipt by the Holder of any payment required to be made pursuant to the obligations of the Note with knowledge of the breach of any provisions of this Agreement, the Notes or any of the other Loan Agreement shall not be deemed a waiver of such breach. In addition to all other remedies provided in this Agreement, the Holder shall be entitled,

to the extent permitted by applicable law, to injunctive relief in case of the violation, or attempted or threatened violation, of any of the provisions of the Note or any of the other Loan Agreement or to a decree concerning performance of any of the provisions of the Notes or any of the other Loan Agreement or to any other remedy legally allowed to the Holder.

5.             Covenants Bind Successors and Assigns.  All the covenants, stipulations, promises and agreements in this Note contained by or on behalf of the Borrower shall bind its successors and assigns, whether so expressed or not.

6.             Notices.  All notices, requests and demands hereunder shall be in writing and made to the Holder and the Borrower at their respective addresses set forth above, or to such other address as either party may designate by written notice to the other in accordance with this provision, and  deemed to have been given or made: if delivered in person, immediately upon delivery; if by facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next Business Day, one (1) Business Day after sending; and if by certified mail, return receipt requested, three (3) days after mailing.

7.             Amendment.  Amendments and modifications of this Note may be made only by way of a writing executed by the Borrower and Holder.

8.             GOVERNING LAW.  THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE.

9.             Forum Selection and Consent to Jurisdiction.  Any litigation based on or arising out of, under, or in connection with, this Note shall be brought and maintained exclusively in the courts of the State of New York, New York County.  The parties expressly and irrevocably submit to the jurisdiction of the courts of the State of New York for the purpose of any such litigation as set forth above and irrevocably  agree to  be  bound  by  any  final  judgment  rendered  thereby  in connection with such litigation. The Borrower further irrevocably consents to the service of process by registered mail, postage prepaid, or by personal service within or without the State of New York. The Borrower expressly and irrevocably waives, to the fullest extent permitted by law, any objection which it may have or hereafter may have to the laying of venue of any such litigation brought in any such court referred to above and any claim that any such litigation has been brought in any inconvenient forum.  To the extent that the Borrower has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution or otherwise) with respect to itself or its property, the Borrower irrevocably waives such immunity in respect of its obligations under this Note and the other loan documents.

10.          Waiver of Jury Trial.  The Holder and the Borrower knowingly, voluntarily and intentionally waive any rights they may have to a trial by jury in respect of any litigation based hereon, or arising out of, under, or in connection with, the Note, the collateral thereunder, or any other course of conduct relating to this loan transaction.

11.          Severability.  If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions hereof.

12.          Headings.  The headings in this Note are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

13.          Multiple Holders.  If at any time there shall be more than one Holder of this Note, any action required or permitted to be taken by the Holder, including without limitation acceleration of this Note and waiver of any default under this Note, may be taken by those persons holding a majority in principal amount of this Note outstanding.

14.          Binding Effect.  This Note and the Agreements and all of the covenants, stipulations, promises and agreements of the Borrower herein shall be binding upon the successors and assigns of the Borrower, if any, whether or not so expressed in any provision hereof.

IN WITNESS WHEREOF, Synergy Pharmaceuticals, Inc. has caused this Note to be signed in its corporate name by its Chief Executive Officer and to be dated the day and year above written.