Item 5.02. Departure of Directors or
Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On December 6, 2018, Synthetic Biologics,
Inc. (the “Company”) entered into a three-year employment agreement with Steven A. Shallcross (the “Employment
Agreement”), the interim Chief Executive Officer who has served as the Company’s Chief Financial Officer since June
1, 2015 to serve as the Chief Executive Officer and to continue to serve as the Chief Financial Officer of the Company. The Employment
Agreement replaced the prior employment agreement with the Company that Mr. Shallcross entered into on April 28, 2015. In addition,
Mr. Shallcross was appointed as a director of the Company. Mr. Shallcross will not receive additional compensation for service
as a director of the Company and will not serve on any committees of the Board of Directors (the “Board”). The material
terms of the Employment Agreement are set forth below.
Pursuant to the Employment Agreement, Mr.
Shallcross is entitled to an annual base salary of $550,000 and an annual performance bonus of up to seventy five percent (75%)
of his annual base salary. The annual bonus will be based upon the assessment of the Board of Mr. Shallcross’s performance.
The Employment Agreement also includes confidentiality obligations and inventions assignments by Mr. Shallcross and non-solicitation
and non-competition provisions.
The Employment Agreement has a stated term
of three years but may be terminated earlier pursuant to its terms. If Mr. Shallcross’s employment is terminated for any
reason, he or his estate as the case may be, will be entitled to receive the accrued base salary, vacation pay, expense reimbursement
and any other entitlements accrued by him to the extent not previously paid (the “Accrued Obligations”); provided,
however, that if his employment is terminated (i) by the Company without Cause or by Mr. Shallcross for Good Reason (as each is
defined in the Employment Agreement) then in addition to paying the Accrued Obligations, (a) the Company will continue to pay his
then current base salary and continue to provide benefits at least equal to those that were provided at the time of termination
for a period of twelve (12) months and (b) he shall have the right to exercise any vested equity awards until the earlier of six
(6) months after termination or the remaining term of the awards; or (ii) by reason of his death or Disability (as defined in the
Employment Agreement), then in addition to paying the Accrued Obligations, Mr. Shallcross would have the right to exercise any
vested options until the earlier of six (6) months after termination or the remaining term of the awards. In such event, if Mr.
Shallcross commenced employment with another employer and becomes eligible to receive medical or other welfare benefits under another
employer-provided plan, the medical and other welfare benefits to be provided by the Company as described herein would terminate.
The Employment Agreement provides that
upon the closing of a “Change in Control” (as defined in the Employment Agreement), all unvested options shall immediately
vest and the time period that Mr. Shallcross will have to exercise all vested stock options and other awards that Mr. Shallcross
may have will be equal to the shorter of: (i) six (6) months after termination, or (ii) the remaining term of the award(s). If
within one (1) year after the occurrence of a Change in Control, Mr. Shallcross terminates his employment for “Good Reason”
or the Company terminates Mr. Shallcross’s employment for any reason other than death, disability or Cause, Mr. Shallcross
will be entitled to receive: (i) the portion of his base salary for periods prior to the effective date of termination accrued
but unpaid (if any); (ii) all unreimbursed expenses (if any); (iii) an aggregate amount (the “Change in Control Severance
Amount”) equal to two (2) times the sum of his base salary plus an amount equal to the bonus that would be payable if the
“target” level performance were achieved under the Company’s annual bonus plan (if any) in respect of the fiscal
year during which the termination occurs (or the prior fiscal year if bonus levels have not yet been established for the year of
termination); and (iv) the payment or provision of any other benefits. If within two (2) years after the occurrence of a Change
in Control, Mr. Shallcross terminates his employment for “Good Reason” or the Company terminates Mr. Shallcross’s
employment for any reason other than death, disability or Cause, Mr. Shallcross will be entitled to also receive for the period
of two (2) consecutive years commencing on the date of such termination of his employment, medical, dental, life and disability
insurance coverage for him and the members of his family that are not less favorable to him than the group medical, dental, life
and disability insurance coverage carried by the Company for him. The Change in Control Severance Amount is to be paid in a lump
sum if the Change in Control event constitutes a “change in the ownership” or a “change in the effective control”
of the Company or a “change in the ownership of a substantial portion of a corporation’s assets” (each within
the meaning of Section 409A of the Internal Revenue Code (“Rule 409A”)), or in 48 substantially equal payments, if
the Change in Control event does not so comply with Section 409A.
The information contained in this Item
5.02 regarding the Employment Agreement is qualified in its entirety by a copy of the Employment Agreement attached to this Current
Report on Form 8-K as Exhibit 10.1 and is incorporated herein by reference.
Mr. Shallcross, age 57, Mr. Shallcross
was appointed as the Company’s Interim Chief Executive Officer on December 5, 2017 and has served as the Company’s
Chief Financial Officer, Treasurer and Secretary since joining the Company in June 2015. Mr. Shallcross brings to the Company operational,
financial and international biotech industry experience, as well as an established track record at leading the financial development
and strategy for several publicly traded biotech companies. From May 2013 through May 2015, Mr. Shallcross served as Executive
Vice President and Chief Financial Officer of Nuo Therapeutics, Inc. (formerly Cytomedix, Inc.). In January 2016, Nuo Therapeutics,
Inc. filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for
the District of Delaware and on April 25, 2016, the Bankruptcy Court entered an order granting approval of Nuo’s plan of
reorganization. From July 2012 to May 2013, Mr. Shallcross held the offices of Executive Vice President, Chief Financial Officer
and Treasurer of Empire Petroleum Partners, LLC, a motor fuel distribution company. From July 2011 to March 2012, Mr. Shallcross
was Acting Chief Financial Officer of Senseonics, a privately-held medical device company located in Germantown, MD. From January
2009 to March 2011, he served as Executive Vice President and Chief Financial Officer of Innocoll AG (formerly privately held Innocoll
Holdings, Inc.), a global, commercial-stage biopharmaceutical company specializing in the development and commercialization of
collagen-based products. He also served for four years as the Chief Financial Officer and Treasurer of Vanda Pharmaceuticals, Inc.,
leading the company through its successful IPO and follow-on offering and previously served as the Senior Vice President and Chief
Financial Officer of Middlebrook Pharmaceuticals, Inc. (formerly Advancis Pharmaceutical Corporation). In addition, Mr. Shallcross
also served as the Chief Financial Officer of Bering Truck Corporation. He holds an MBA from the University of Chicago’s
Booth School of Business, a Bachelor of Science degree in Accounting from the University of Illinois, Chicago, and is a Certified
Public Accountant in the State of Illinois.
There are no family relationships between
Mr. Shallcross and any director, executive officer or person nominated or chosen by the Company to become as director or executive
officer of the Company. Additionally, there have been no transactions involving Mr. Shallcross that would require disclosure under
Item 404(a) of Regulation S-K.
On December 6, 2018, the Board of Directors
of the Company awarded Mr. Shallcross, a cash bonus equal to his full target bonus of 75% of his prior base salary and an option
to purchase 200,000 shares of the Company’s common stock (the “Common Stock”). The stock option granted to Mr.
Shallcross has an exercise price of $0.6895 per share, which is the closing price of the Common Stock on the date of the grant
(December 6, 2017), vests pro rata, on a monthly basis, over 36 consecutive months and expires in seven (7) years from the date
of the grant, unless terminated earlier. The stock option was granted pursuant to the Company’s 2010 Stock Incentive Plan
and the Company’s existing registration statement on Form S-8 for the 2010 Stock Incentive Plan.
On December 6, 2018, the Board of Directors
also granted to each non-executive member of the Board an option to purchase 79,500 shares of Common Stock at an exercise price
of $0.6895 per share, vest pro rata, on a monthly basis, over 36 consecutive months and expires in seven (7) years from the date
of the grant, unless terminated earlier.