SUCAMPO PHARMACEUTICALS, INC. INVESTOR RIGHTS AGREEMENT

Exhibit 10.16

     The Registrant has entered into an Investor Rights Agreement substantially similar to the attached agreement with each of the following stockholders:

Exhibit 10.16

SUCAMPO PHARMACEUTICALS, INC.

INVESTOR RIGHTS AGREEMENT

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Table of Contents

SUCAMPO PHARMACEUTICALS, INC.
INVESTOR RIGHTS AGREEMENT

     This INVESTOR RIGHTS AGREEMENT (this “ Agreement ”) is made effective as of ___, 20___ by and between Sucampo Pharmaceuticals, Inc., a Delaware corporation (the “ Company ”), and ___, a ___ (the “ Investor ”).

      WHEREAS , the Company and the Investor are parties to a Stock Purchase Agreement dated as of the date hereof (the “ Purchase Agreement ”), whereby the Company will sell, and the Investor will purchase, newly issued shares of Class A Stock of the Company (the “ Class A Common Stock ”); and

      WHEREAS , the obligations the Company and the Investor under the Purchase Agreement are conditioned, among other things, upon the execution and delivery of this Agreement by the Company and the Investor;

      NOW, THEREFORE , in consideration of the mutual promises and covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Article 1
Certain Definitions

     As used in this Agreement, the following terms shall have the following respective meanings:

      “Affiliate” means, with respect to any Person, any other Person, directly or indirectly controlling, controlled by or under common control with such Person and any partner of a Person which is a partnership and any member of a Person which is a limited liability company. For purposes of determining who is an Affiliate, the stock holdings of Dr. Ryuji Ueno and Dr. Sachiko Kuno shall be aggregated.

     “ Commission ” means the United States Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

     “ Common Stock ” means the Class A Common Stock and the Class B Common Stock, par value $0.01 per share, of the Company (the “ Class B Common Stock ”).

     “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, or any similar federal rule or statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

     ” Founders ” means, collectively, Dr. Ryuji Ueno, Dr. Sachiko Kuno, any Persons controlled by each of them, including without limitation, S&R Technology Holdings, LLC, a Delaware limited liability company, R-Tech Ueno, Ltd., a Japanese corporation, Sucampo AG, a

Swiss corporation, and any transferee of a Founder who hereafter becomes a party to the Stockholders Agreement, and each individually, a “ Founder .”

     “ Holders ” means (i) the Investor, so long as it continues to hold Registrable Securities and (ii) each person holding Registrable Securities to whom the rights under this Agreement have been transferred in accordance with Article 10 hereof.

     “ Person ” means any individual, trust (or any of its beneficiaries), estate, partnership, limited partnership, limited liability partnership, association, limited liability company, corporation, any other enterprise engaged in the conduct of business or operating as a non-profit entity, however formed or wherever organized, or any governmental body, agency or unit.

     “ Preferred Stock ” means any series of preferred stock of the Company issued from time to time.

     “ register ,” “ registered ” and “ registration ” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement.

     “ Registrable Securities ” means, at any time, (i) the Class A Common Stock acquired pursuant to the Purchase Agreement and (iii) any Common Stock issued or issuable upon any stock split, stock dividend, recapitalization or similar event; provided , however , that securities shall only be treated as Registrable Securities if and so long as (i) they have not been registered or sold to or through a broker, dealer, market maker or underwriter in a public distribution or a public securities transaction (including but not limited to a public distribution pursuant to Rule 144) and (ii) the registration rights with respect to such securities have not terminated pursuant to Section 5.8 below.

     “ Registration Expenses ” shall mean all expenses, except Selling Expenses, incurred by the Company in complying with Sections 5.1 and 5.2 below, including without limitation, all registration, qualification and filing fees, printing expenses, and escrow fees, reasonable fees and disbursements of counsel for the Company and one counsel for the Holders, “blue sky” fees and expenses, the expense of any special audits incidental to or required by any such registration (but excluding the compensation of regular employees of the Company which shall be paid in any event by the Company).

     “ Restricted Securities ” shall mean the securities of the Company required to bear the legends set forth in Article 3 below.

     “ Rule 144 ” and “ Rule 145 ” shall mean Rules 144 and 145, respectively, promulgated under the Securities Act, or any similar federal rules thereunder, all as the same shall be in effect at the time.

     “ Securities Act ” shall mean the Securities Act of 1933, as amended, or any similar federal rule or statute and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time.

     “ Selling Expenses ” shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to the securities registered by the Investor and all fees and disbursements of counsel for the Holders other than reasonable fees and disbursements of one counsel for the Holders.

     “ Series B Financing ” means the sale by the Company of up to 326,912 shares of newly issued Class A Common Stock in a private placement completed by May 31, 2006.

     “ Stockholders Agreement ” shall mean the Stockholders Agreement, dated July 31, 2002, by and among the Company, the Investor and the other stockholders of the Company who thereafter become parties thereto.

Article 2
Restrictions on Transferability

     The Class A Common Stock and any other securities issued in respect of such stock upon any stock split, stock dividend, recapitalization, merger or similar event shall not be sold, assigned, transferred or pledged except pursuant to the provisions of Article 4 below and the applicable provisions of the Stockholders Agreement. The Investor will cause any proposed purchaser, assignee, transferee or pledgee of any such shares held by the Investor to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.

Article 3
Restrictive Legend

     Each certificate representing the Class A Common Stock or any other securities issued in respect of such stock upon any stock split, stock dividend, recapitalization, merger or similar event shall (unless otherwise permitted by the provisions of Article 4 below) be stamped or otherwise imprinted with legends in substantially the following form (in addition to any legends required by agreement or by applicable state securities laws):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CONTRACTUAL TRANSFER RESTRICTIONS AS SET FORTH IN THE STOCKHOLDERS’ AGREEMENT DATED AS OF JULY 31, 2002, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SECURITIES.

     The Investor consents to the Company making a notation on its records and giving stop transfer instructions to any transfer agent of its capital stock in order to implement the restrictions on transfer established in this Agreement.

     The Company shall reissue unlegended certificates as soon as practicable following the request of any Holder if the Holder shall have obtained an opinion of counsel reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of without registration, qualification or legend.

Article 4
Notice of Proposed Transfers

     The Holder, by acceptance of certificates representing Restricted Securities, agrees to comply in all respects with the provisions of this Article 4. Without in any way limiting the immediately preceding sentence, no sale, assignment, transfer or pledge of Restricted Securities shall be made by the Holder to any person unless such person shall first agree in writing to be bound by the restrictions of this Agreement. Prior to any proposed sale, assignment, transfer or pledge of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transfer, the Holder shall give written notice to the Company of the Holder’s intention to effect such transfer, sale, assignment or pledge. Each such notice shall describe the manner and circumstances of the proposed transfer, sale, assignment or pledge in sufficient detail, and, if reasonably requested by the Company, the Holder shall also provide, at the Holder’s expense, a written opinion of legal counsel reasonably satisfactory to the Company addressed to the Company, to the effect that the proposed transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder shall be entitled to transfer such Restricted Securities in accordance with the terms of the notice delivered by the Holder to the Company.

     Each certificate evidencing Restricted Securities transferred as provided above shall bear, except if such transfer is registered pursuant to an effective registration statement or is made pursuant to Rule 144, the appropriate restrictive legend set forth in Article 3 above, except that such certificate shall not bear such restrictive legend if in the opinion of counsel for the Holder and counsel for the Company such legend is not required in order to establish compliance with any provision of the Securities Act.

     Notwithstanding the foregoing provisions of this Article 4, no opinion of counsel shall be necessary for (I) a transfer by a Holder that is (A) a partnership to its partners or former partners in accordance with partnership interests, (B) a corporation to its shareholders in accordance with their interests in the corporation, (C) a limited liability company to its members or former members in accordance with their interests in the limited liability company, (D) an Investor to an Affiliate of such Investor, who shall become party to this Agreement and shall sign an investor representation letter satisfactory to the Company, or (E) an individual to a member of the transferor’s immediate family or trust created for the benefit of such individual or members of such individual’s immediate family or (II) a transfer by a Holder pursuant to Rule 144 if such Holder shall have delivered to the Company a certificate in form satisfactory to the Company certifying that (a) such Holder has held the securities to be transferred for a period of not less than two consecutive years, (b) such Holder has not been an affiliate of the Company, as defined

in Rule 144, for a period of at least 90 days prior to such transfer and (iii) such other matters as may be appropriate in accordance with Rule 144(b).

Article 5
Registration

     5.1 Company Registration .

     (a)  Notice of Registration . If at any time or from time to time following a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act covering the offer and sale of Class A Common Stock of which the aggregate gross proceeds are at least $30 Million (a “ Qualified IPO ”), the Company shall determine to register any of its equity securities, either for its own account or the account of a Holder or other holders, other than (i) a registration relating solely to employee benefit plans, (ii) a registration relating solely to a Rule 145 transaction or (iii) a registration in which the only equity security being registered is Common Stock issuable upon conversion of convertible debt securities which are also being registered, the Company will:

     (i) give to the Holder written notice thereof as soon as reasonably practicable; and

     (ii) use its best efforts to include in such registration (and any related qualifications including compliance with “blue sky” laws) on the same terms and conditions as the securities otherwise being sold in such registration, and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made within 20 business days after the date of such written notice from the Company, by the Holder.

     (b)  Underwriting . If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holder as part of the written notice given pursuant to Section 5.1(a)(i) above. In such event, the right of the Holder to registration pursuant to this Section 5.1 shall be conditioned upon the Holder’s participation in such underwriting, and the inclusion of Registrable Securities in the underwriting shall be limited to the extent provided herein.

     (c)  Underwriting Agreement; Limitation of Underwritten Securities . If a Holder proposes to distribute its securities through such underwriting, it shall (together with the Company and all the other Holders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by the Company. Notwithstanding any other provision of this Section 5.1, if the managing underwriter determines that marketing factors require a limitation of the number of shares to be underwritten, the managing underwriter may limit the Registrable Securities to be included in such registration and each Holder will have the number of Registrable Securities reduced pro rata (with the Founders and any other holders of Company securities having similar “piggy-back” registration rights) based upon the number of Registrable Securities requested to be included in such registration so that the resultant aggregate number of such Registrable Securities so included in such registration shall equal the number of shares determined by the

underwriters. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares. If the Investor disapproves of the terms of any such underwriting, it may elect to withdraw therefrom by written notice to the Company.

     (d)  Right to Terminate Registration . The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 5.1 prior to the effectiveness of such registration whether or not a Holder has elected to include securities in such registration.

     5.2 Registration on Form S-3 .

     (a)  Request for Registration . In the event the Company receives from the Holders a written request that the Company file a registration statement on Form S-3 (or any successor form to Form S-3) for a public offering of shares of Registrable Securities, and the Company is a registrant entitled to use Form S-3 to register the sale of Registrable Securities for such an offering, the Company shall use best efforts to cause such Registrable Securities to be registered for the offering on such form and to cause such Registrable Securities to be qualified in such jurisdictions as the Holders may reasonably request. The Company shall inform the other Holders of the proposed registration and offer them the opportunity to participate. In the event the registration is proposed to be part of a firm commitment underwritten public offering, the provisions of Section 5.1(c) above shall be applicable to each such registration initiated under this Section 5.2.

     (b) Notwithstanding the foregoing, the Company shall not be obligated to take any action pursuant to this Section 5.2:

     (i) During the period starting with the date 60 days prior to the Company’s estimated date of filing of, and ending on the date 180 days immediately following the effective date of, any registration statement pertaining to securities of the Company (other than a registration of securities in a Rule 145 transaction or with respect to an employee benefit plan), provided that the Company is actively employing in good faith best efforts to cause such registration statement to become effective;

     (ii) If the number of Registrable Securities proposed to be registered by the Holder under such registration is less than 25% of the aggregate Registrable Securities originally issued to the Investor pursuant to the Purchase Agreement and issued upon any stock split, stock dividend, recapitalization or other similar event;

     (iii) If, during the previous 4 months, the Company has effected one registration pursuant to this Section 5.2 above;

     (iv) If the Company shall furnish to the Holder a certificate signed by the President of the Company stating that such registration would require disclosure of material non-public information regarding a potential financing, acquisition, merger or other corporate development and such disclosure, in the good faith judgment of the Board of Directors, would not be in the best interest of the Company or its stockholders; provided , however , that the Company shall not utilize this right more than three times in any 12-month period.

     5.3 Expenses of Registration . All Registration Expenses incurred in connection with all registrations pursuant to Section 5.1, and Section 5.2 shall be borne by the Company. Unless otherwise agreed, all Selling Expenses relating to securities registered on behalf of the Holders and all other registration expenses shall be borne by the Holders pro rata on the basis of the number of shares so registered or proposed to be so registered.

     5.4 Registration Procedures . The Company will keep the Holders of securities being registered advised in writing as to the initiation of each registration effected by the Company pursuant to this Agreement and as to the completion thereof. The Company will:

     (a) prepare and file with the Commission a registration statement and such amendments and supplements as may be necessary, and use best efforts to cause such registration statement to become and remain effective (i) in the case of a registration statement filed pursuant to Section 5.1, until the earlier of 120 days from the date of effectiveness or the distribution described in the registration statement has been completed and (ii) in the case of a registration statement filed pursuant to Section 5.2, until the earlier of the date on which all Registrable Securities registered thereon have been sold or all such securities cease to be Registrable Securities;

     (b) furnish to the Holders and to the underwriters, if any, of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as the Holders or such underwriters may reasonably request in order to facilitate the public offering of such securities;

     (c) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the periods set forth in Section 5.4(a) and to comply with the provisions of the Securities Act with respect to the sale or other disposition of such Registrable Shares;

     (d) use its best efforts to cause all Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be