Item 1.01.
Entry into Material Definitive Agreement.
Purchase Agreement and Series A Preferred
Stock
On September
11, 2017, Synthetic Biologics, Inc. (the “
Company
”) entered into a share purchase agreement
(the “
Purchase Agreement
”) with MSD Credit Opportunity Master Fund, L.P., an accredited investor
(the “
Investor
”), pursuant to which the Company offered and sold in a private placement 120,000 shares of
its Series A Convertible Preferred Stock, par value $0.001 per share (the “
Series A Preferred Stock
”) for
an aggregate purchase price of $12 million, or $100 per share. The Company announced this transaction in a press release
issued on September 12, 2017 which is attached hereto as Exhibit 99.1.
The Series A Preferred
Stock will rank senior to the shares of the Company’s common stock, par value $0.001 per share (the “
Common Stock
”),
and any other class or series of stock issued by the Company with respect to dividend rights, redemption rights and rights on the
distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. Holders
of Series A Preferred Stock will be entitled to a cumulative dividend at the rate of 2.0% per annum, payable quarterly in
arrears, as set forth in the Certificate of Designation of Series A Convertible Preferred Stock classifying the Series A Preferred
Stock, a form of which is attached as an annex to the Purchase Agreement (the “
Certificate of Designation
”).
The Series A Preferred Stock will be convertible at the option of the holders at any time into shares of Common Stock at an initial
conversion price of $0.54 per share, subject to certain customary anti-dilution adjustments. Any conversion of Series A Preferred
Stock may be settled by the Company in shares of Common Stock only.
The holder’s ability
to convert the Series A Preferred Stock into Common Stock is subject to (i) a 19.99% blocker provision to comply with NYSE
American Listing Rules, (ii) if so elected by the Investor, a 4.99% blocker provision that will prohibit beneficial ownership
of more than 4.99% of the outstanding shares of the Company’s Common Stock or voting power at any time, and (iii) applicable
regulatory restrictions.
In the event of any liquidation,
dissolution or winding-up of the Company, holders of the Series A Preferred Stock shall be entitled to a preference on liquidation
equal to the greater of (i) an amount per share equal to the stated value plus any accrued and unpaid dividends on such share of
Series A Preferred Stock (the “Accreted Value”), and (ii) the amount such holders would receive in such liquidation
if they converted their shares of Series A Preferred Stock (based on the Accreted Value and without regard to any conversion limitation)
into shares of the Common Stock immediately prior to any such liquidation, dissolution or winding-up (the greater of (i) and (ii),
is referred to as the “
Liquidation Value
”).
Except as otherwise required
by law, the holders of Series A Preferred Stock shall have no voting rights, other than customary protections against adverse amendments
and issuance of
pari passu
or senior preferred stock. Upon certain change of control events involving the Company, the Company
will be required to repurchase all of the Series A Preferred Stock at a redemption price equal to the greater of (x) the Accreted
Value and (y) the amount that would be payable in the Change of Control in respect of Common Stock issuable upon conversion of
such share of Series A Convertible Preferred Stock if all outstanding shares of Series A Convertible Preferred Stock were converted
into Common Stock immediately prior to the Change of Control.
On or at any time after
(i) the VWAP (as defined in the Certificate of Designation) for at least twenty (20) trading days in any thirty (30) trading day
period is greater than $2.00, subject to adjustment in the case of stock split, stock dividends or the like the Company shall have
the right, after providing notice not less than 6 months prior to the redemption date, to redeem, in whole or in part, on a pro
rata basis from all holders thereof based on the number of shares of Series A Convertible Preferred Stock then held, the outstanding
Series A Convertible Preferred Stock, for cash, at a redemption price per share of Series A Convertible Preferred Stock of
$225.00, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization
with respect to the Series A Convertible Preferred Stock or (ii) the five year anniversary of the issue date, the Company shall
have the right to redeem, in whole or in part, on a pro rata basis from all holders thereof based on the number of shares of Series
A Convertible Preferred Stock then held, the outstanding Series A Convertible Preferred Stock, for cash, at a redemption price
per share equal to the Liquidation Value.
The foregoing
description of the terms of the Series A Preferred Stock, the Purchase Agreement and the transactions contemplated thereby
does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Purchase Agreement
and the annexes thereto and the Certificate of Designation, which are attached hereto as Exhibits 10.1 and 3.1, respectively, and
are incorporated herein by reference.
The Purchase Agreement has been included as
an exhibit to this Current Report on Form 8-K to provide investors and security holders with information regarding its terms. It
is not intended to provide any other financial information about the parties thereto or their respective subsidiaries or affiliates. The
representations, warranties and covenants contained in the Purchase Agreement are made only for purposes of that agreement and
as of specific dates; are solely for the benefit of the parties thereto; may be subject to limitations agreed upon by such parties,
including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties
thereto instead of establishing these matters as facts; and may be subject to standards of materiality applicable to the contracting
parties that differ from those applicable to investors. Investors should not rely on the representations, warranties and covenants
or any description thereof as characterizations of the actual state of facts or condition of the parties to the Purchase Agreement
or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations,
warranties and covenants may change after the dates of the Purchase Agreement, which subsequent information may or may not be fully
reflected in public disclosures by the parties thereto.
Registration Rights
Agreement
Pursuant to the terms
of the Purchase Agreement, the Company entered into a registration rights agreement with the Investor of the Series A Preferred
Stock (the “
Registration Rights Agreement
”). Pursuant to the terms of the Registration Rights Agreement, the
Company agreed to file a registration statement covering resales of the shares of Common Stock issuable upon conversion of the
Series A Preferred Stock with the Securities and Exchange Commission (the “
SEC
”) within 60 days following receipt
of a request from the Investor at any time (as long as it beneficially owns at least ten percent (10%) of the Company’s Common
Stock then outstanding) or is otherwise deemed an affiliate of the Company, and to use reasonable best efforts to have the registration
statement declared effective within 120 days following receipt of such request.
The Company has agreed
to pay certain penalties if the registration statement is not declared effective by the SEC on or before the required deadline.
After that deadline and until such time as the registration statement is declared effective (or until the Company is no longer
required to cause the registration statement to be declared effective), the Company will be required to pay additional liquidated
damages.
The foregoing description
of the terms of the Registration Rights Agreement and the transactions contemplated thereby does not purport to be complete and
is subject to, and qualified in its entirety by, the full text of the Registration Rights Agreement, which is attached hereto as
Exhibit 4.1, and is incorporated herein by reference