Portions herein identified by [*****] have been omitted pursuant to a request
for confidential treatment under Rule 24b-2 of the Securities Exchange Act of
1934, as amended.  A complete copy of this document has been filed separately
with the Securities and Exchange Commission.

 

 

EXCLUSIVE OPTION AGREEMENT

 

This Exclusive Option Agreement (“Agreement”) is entered into this 5th day of
December, 2013 (“Effective Date”) by and among Cedars-Sinai Medical Center, a
California nonprofit public benefit corporation (“CSMC”), with offices at 8700
Beverly Boulevard, Los Angeles, CA 90048, Synthetic Biologics, Inc., a Nevada
corporation (hereinafter, “Synthetic”), with offices at 617 Detroit Street,
Suite 100, Ann Arbor, MI 48104 and Synthetic Biomics, Inc., a Nevada corporation
(hereinafter, “Company”), having offices at 617 Detroit Street, Suite 100, Ann
Arbor, MI 48104 and a wholly-owned subsidiary of Synthetic (each, a “Party,” and
together, the “Parties”).

 

RECITALS

 

A.           CSMC owns and is entitled to grant license rights with respect to
PCT Application No. **** (“Inventors”), and all patents and/or patent
applications (including provisional patent applications) existing as of the
Effective Date in any other country corresponding to any of the foregoing, and
all divisions, continuations, continuations-in-part, reissues, reexaminations,
supplementary protection certificates and extensions thereof, whether domestic
or foreign, and any patent that issues thereon (“Patent Rights”).

 

B.           CSMC desires to have the Patent Rights developed, used and
commercialized, and the Parties desire to enter into discussions regarding an
exclusive, worldwide license to Company to develop, manufacture, use and sell
products utilized or derived from the Patent Rights (“Exclusive License”)
pending successful completion by Company of certain limited testing of the
technology embodied in the Patent Rights (“Experiments”) described in Appendix A
hereto.

 

C.           CSMC desires to grant to Company and Company desires to accept from
CSMC, subject to the terms and conditions herein, an exclusive option to
negotiate and obtain the Exclusive License. Other than the rights expressly
granted by CSMC hereunder, Company acknowledges that CSMC shall retain all other
rights with respect to the Patent Rights.

 

D.           CSMC and Company intend that the execution, delivery and
performance of this Agreement by each Party, and the consummation of the
transactions contemplated hereunder, shall not at any time threaten CSMC’s
tax-exempt status under Section 501(c)(3) of the Internal Revenue Code and
Section 23701d of the California Revenue and Taxation Code, or cause CSMC to be
in default under any of CSMC’s issued and outstanding tax-exempt bonds.

 

Now, Therefore, in consideration of the mutual covenants and premises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as
follows:

 

 

Page 1 of 10

Portions herein identified by [*****] have been omitted pursuant to a request
for confidential treatment under Rule 24b-2 of the Securities Exchange Act of
1934, as amended. A complete copy of this document has been filed separately
with the Securities and Exchange Commission.

 

1.Grant of Option. Except as provided hereinafter and subject to the terms of
this Agreement, Company shall have until the expiration of six (6) months from
the Effective Date as an exclusive option period (“Option Period”) to notify
CSMC of its desire to initiate negotiations for an Exclusive License (“Option
Notice”). Company shall have the right to extend the Option Period for an
additional six (6) months prior to the expiration thereof by delivering written
notice to CSMC (“Extension Notice”), subject to Company’s agreement to pay the
non-refundable Extension Fee set forth in Section 3. Upon receipt of the Option
Notice within the Option Period, the Parties shall enter into negotiations for
the Exclusive License, which the Parties agree shall provide for (a) the payment
of an initial License Issue Fee equal to fifty thousand dollars ($50,000) plus
reimbursement of CSMC’s patent expenses incurred prior to the effective date of
the Exclusive License, such aggregate amount shall be payable in cash or in
shares of Synthetic common stock having a market value of 110% of such aggregate
amount; provided that such share issuance shall be subject to Section 4 hereof
and the terms of the Stock Purchase Agreement of even date herewith entered into
by and among the Parties (the “Synthetic Stock Purchase Agreement”); and (b) the
same milestone payments, royalties and sublicense fees that are payable under
the License Agreement among the Parties of even date herewith (the
“Contemporaneous License Agreement”); (c) the “Field of Use” definition set
forth in Appendix B hereto; and (d) such other customary terms and conditions as
CSMC includes in its licensing arrangements. If an Option Notice is not
delivered within the Option Period or the Parties fail to execute an Exclusive
License within three (3) months of CSMC’s receipt of an Option Notice, then this
Agreement and the exclusive option herein shall terminate, CSMC shall have no
further obligation whatsoever to Company with respect to the Patent Rights, and
CSMC may freely dispose of the Patent Rights as it sees fit in its own
discretion.

 

2.Option Fee. In consideration of the execution and delivery by CSMC of this
Agreement, no later than thirty (30) days after the execution of this Agreement,
Company shall pay to CSMC a non-refundable fee of Fifty Thousand Dollars
($50,000) (“Option Fee”), payable in cash or in shares of Synthetic common stock
having a market value of 110% of such aggregate amount; provided, that such
share issuance shall be subject to Section 4 hereof and the terms of the
Synthetic Stock Purchase Agreement. Failure of Synthetic either to issue such
shares to CSMC or pay the equivalent amount in cash to CSMC within thirty (30)
days of the execution of this Agreement shall render this Agreement null and
void (ab initio).

 

3.Extension Fee. In the event that Company desires to extend the six (6) month
Option Period for an additional six (6) months and delivers an Extension Notice
to CSMC as set forth in Section 1, Company shall pay to CSMC a non-refundable
extension fee of Twenty-Five Thousand Dollars ($25,000) (“Extension Fee”) no
later than thirty (30) days after the date of the Extension Notice, payable in
cash or in shares of Synthetic common stock having a market value of 110% of
such aggregate amount; provided, that such share issuance shall be subject to
Section 4 hereof and the terms of the Synthetic Stock Purchase Agreement.

 

Page 2 of 10

Portions herein identified by [*****] have been omitted pursuant to a request
for confidential treatment under Rule 24b-2 of the Securities Exchange Act of
1934, as amended. A complete copy of this document has been filed separately
with the Securities and Exchange Commission.

 

4.Exchange Approval. The Parties acknowledge that subject to Synthetic’s
obligations under the Synthetic Stock Purchase Agreement(s), any issuance of
stock by Synthetic hereunder may be subject to the prior approval of the NYSE
MKT or any other exchange upon which the shares of Synthetic are traded, and
shareholder approval, if so required by such exchange or any other rule or
regulation applicable to the Company or Synthetic. In the event that Synthetic
elects to pay any of the fees and expenses described herein by issuing shares of
Synthetic stock to CSMC, Synthetic shall submit an application to the NYSE MKT
for approval to issue such shares within the following timeframes: (a) in the
case of the option fee described in Section 2 hereof, within five (5) days of
the execution of this Agreement; (b) in the case of the extension fee described
in Section 3 hereof, within five (5) days of the date of the Company’s Extension
Notice; and (c) in the case of the license fee and patent expense reimbursement
obligations described in Section 1 hereof, within five (5) days of the execution
of the Exclusive License. In the event that Synthetic shall not have received
shareholder approval (if required) or NYSE MKT approval to issue any such shares
hereunder within fifteen (15) business days of the submission of any such
application to the NYSE MKT, then Company shall instead make cash payments in
satisfaction of its obligations under Sections 1, 2 and/or 3, as applicable.

 

5.Grant of Limited License. Subject to the terms of this Agreement, CSMC hereby
grants to Company, and Company hereby accepts from CSMC, a non-exclusive license
to the Patent Rights solely for the purpose of conducting the Experiments. The
license granted hereunder is not sublicensable by Company to any third party
other than as set forth herein, nor shall it include any other rights not
expressly enumerated herein. Company shall have the right to grant a limited
sublicense of the rights granted under this Section 5 to Intrexon Corporation
(the “Approved Sublicensee”), who shall be subject in all respects to the
provisions contained in this Agreement, and Company will remain primarily liable
to CSMC for, and shall be responsible for monitoring and enforcing, the
performance of all of Company’s obligations hereunder by the Approved
Sublicensee.

 

6.Limited Warranty. CSMC makes no representation or warranty other than those
expressly specified in this Agreement. For purposes of Section 5, Company
accepts the Patent Rights on an “AS-IS” basis. CSMC MAKES NO EXPRESS OR IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR OTHER
ATTRIBUTES OF ANY OF THE PATENT RIGHTS.

 

7.Guarantee of Company’s Performance. Synthetic hereby unconditionally
guarantees to CSMC the full and complete performance of all of the terms,
covenants and conditions of this Agreement as required to be performed by
Company, including, but not limited to, the payment of all amounts due
hereunder.

 

Page 3 of 10

Portions herein identified by [*****] have been omitted pursuant to a request
for confidential treatment under Rule 24b-2 of the Securities Exchange Act of
1934, as amended. A complete copy of this document has been filed separately
with the Securities and Exchange Commission.

 

8.Indemnification. Company shall hold harmless, defend and indemnify CSMC and
each of its officers, directors, employees and agents and each Inventor (each,
an “Indemnified Party”, and collectively, the “Indemnified Parties”) from and
against any and all claims, damages, losses, liabilities, costs and expenses
(including reasonable attorneys’ fees and expenses and costs of investigation,
whether or not suit is filed) suffered or incurred by any of the Indemnified
Parties in any action, suit, litigation, arbitration or dispute of any kind
(“Action”) arising or resulting from any negligence or willful acts or omissions
on the part of Company and/or its Approved Sublicensee in connection with this
Agreement, including without limitation: (a) its use of the Patent Rights under
this Agreement, (b) the design or conduct of the Experiments and/or (c) the
exercise of its rights hereunder. As part of its obligations hereunder, Company
shall defend any Action brought against any of the Indemnified Parties with
counsel of its own choosing and reasonably acceptable to CSMC, and neither CSMC
nor any other Indemnified Party shall enter into any settlement of any such
Action without first obtaining prior approval of Company. Should CSMC or any
other Indemnified Party not afford Company the right to defend any such Action,
or should CSMC or any other Indemnified Party not obtain the approval of Company
to any such settlement, Company shall have no obligation to indemnify CSMC or
any other Indemnified Party hereunder. Should Company fail to provide a defense
for the Indemnified Parties as required hereunder, then Company shall reimburse
CSMC for its out-of-pocket expenses (including reasonable attorneys’ fees and
expenses and costs of investigation) which are incurred as a result of any
investigation, defense or settlement relating to an indemnified matter, which
reimbursement shall be made to CSMC upon receipt by Company of invoices
reflecting in reasonable detail such expenses incurred by CSMC. Company shall
obtain and maintain insurance policies or a program of self-insurance (including
products liability and general liability policies at such time as is
appropriate) which are reasonable and necessary to cover its activities and to
comply with the indemnification obligations set forth above. CSMC shall promptly
notify Company in writing of any claim or Action or material threat thereof
brought against any Indemnified Party in respect of which indemnification may be
sought and, to the extent allowed by law, shall reasonably cooperate with
Company in defending or settling any such claim or Action.

 

9.Prosecution Costs. CSMC will prepare, file, prosecute and maintain the Patent
Rights during the Option Period. The Exclusive License shall provide that (a)
Company will reimburse CSMC for the costs and expenses, including reasonable
attorneys’ fees, filing fees and translation fees (“Prosecution Costs”),
actually incurred by CSMC in the prosecution of any Patent Rights prior to and
during the Option Period and through the effective date of the Exclusive
License; and (b) CSMC will continue to have full responsibility for patent
prosecution; provided, however, that CSMC’s patent counsel shall bill Company
directly for all Prosecution Costs related to the Patent Rights following the
effective date of the Exclusive License. If Company desires any foreign filings
to be pursued on the Patent Rights during the Option Period, Company shall be
responsible for the Prosecution Costs related to any such foreign filings,
regardless of whether the Option is exercised.

 

10.Use of Names. Company shall not make any written use of or reference to the
name of CSMC and/or any of its trademarks, service marks, trade names or
fictitious business names without the prior written consent of CSMC, which
consent may be withheld or granted in CSMC’s sole and absolute discretion,
unless required by law. Further, prior to any reference by Company to the names
or marks of CSMC in any manner, Company shall provide CSMC with a writing
reflecting the proposed reference so that CSMC can review the reference within a
reasonable period of time prior to the proposed use thereof by Company. This
limitation includes, but is not limited to, use by Company in any regulatory
filing, advertising, offering circular, prospectus, sales presentation, news
release or trade publication, unless required by law, and provided, however,
that certain specific language shall be mutually agreed upon by the Parties for
Company’s use in certain contexts and with respect to certain topics, and once
agreed upon, may be utilized by Company in connection with the approved contexts
and topics without further permission of CSMC.

 

Page 4 of 10

Portions herein identified by [*****] have been omitted pursuant to a request
for confidential treatment under Rule 24b-2 of the Securities Exchange Act of
1934, as amended. A complete copy of this document has been filed separately
with the Securities and Exchange Commission.

 

11.Confidentiality. The terms of this Agreement and any information disclosed by
either Party hereunder shall be maintained in the strictest of confidence by the
Parties hereto and their respective officers, directors, employees and agents,
including any proprietary, non-public information designated as such and
disclosed by one Party to the other in connection with the transactions proposed
in this Agreement. Furthermore, the Patent Rights are understood by Company to
be the Confidential Information of CSMC to the extent “unpublished” as such term
is construed under the United States Patent Laws. As such, Company’s
confidentiality obligations hereunder automatically extend to any and all patent
applications of CSMC relating to any Patent Rights. Company shall have no right
to share the Confidential Information with any third party other than the
Approved Sublicensee; provided, however, that (a) the Approved Sublicensee shall
have entered into a confidentiality agreement with Company that provides the
same standard of protection described in this Agreement; and (b) Company shall
be fully responsible and liable for any action of the Approved Sublicensee which
would constitute a breach of this Agreement if committed by Company as if
Company had committed such action itself.  Any public announcements, notices or
other communications regarding such matters to third parties, other than the
Parties’ respective professional advisors or potential investors or business
partners, including, without limitation, any disclosure regarding the
transactions contemplated hereby, shall require the prior written approval of
both Company and CSMC. Notwithstanding anything to the contrary set forth in
this Section 11, the Parties acknowledge that Synthetic may be obligated to file
a copy of this Agreement, any Schedules hereto, and summaries of the terms
hereof with the U.S. Securities and Exchange Commission as reasonably required
to comply with applicable laws or the rules of a nationally-recognized
securities exchange. Synthetic shall be entitled to make such filings, provided
that it requests confidential treatment of the commercial terms and sensitive
technical terms hereof and thereof to the extent such confidential treatment is
reasonably available. In the event of any such filing, Synthetic will provide
CSMC with a copy of this Agreement (including the Schedules hereto) and related
filings marked to show provisions for which Synthetic intends to seek
confidential treatment and shall reasonably consider and incorporate CSMC’s
comments thereon to the extent consistent with the legal requirements and the
rules of any nationally recognized securities exchange governing disclosure of
material agreements and material information to be publicly filed.

 

12.Notices. Any notice, request, instruction or other document required by this
Agreement, including the Option Notice, shall be in writing and shall be deemed
to have been given: (a) if mailed with the United States Postal Service by
prepaid, first class, certified mail, return receipt requested, at the time of
receipt by the intended recipient, (b) if sent by Federal Express®, Airborne®,
or other overnight carrier, signature of delivery required, at the time of
receipt by the intended recipient, or (c) if sent by facsimile transmission,
when so sent and when receipt has been acknowledged by appropriate telephone or
facsimile receipt, addressed as follows:

 

Page 5 of 10

Portions herein identified by [*****] have been omitted pursuant to a request
for confidential treatment under Rule 24b-2 of the Securities Exchange Act of
1934, as amended. A complete copy of this document has been filed separately
with the Securities and Exchange Commission.

 

 

in the case of CSMC, to:

 

Cedars-Sinai Medical Center

Room 2009, North Tower

8700 Beverly Boulevard

Los Angeles, CA 90048-1865

Attention: Senior Vice President for Academic Affairs & Dean of the Medical
Faculty

Fax: (310) 423-0119

 

Copy to: Vice President for Legal Affairs

 

or in the case of Company, to:

 

Chief Executive Officer

Synthetic Biologics, Inc.

617 Detroit Street, Suite 100

Attention: Jeffery Riley

Fax: (734) 332-7878

 

or to such other address or to such other person(s) as may be given from time to
time under the terms of this Section 12.

 

13.Miscellaneous.

 

a.Compliance with Laws. Each Party shall comply with all applicable federal,
state and local laws and regulations in connection with its activities pursuant
to this Agreement.

 

b.Governing Law. This Agreement shall be construed and enforced in accordance
with the laws of the United States of America and of the State of California,
irrespective of choice of laws provisions.

 

c.Waiver. Failure of any Party to enforce a right under this Agreement shall not
act as a waiver of that right or the ability to assert that right relative to
the particular situation involved.

 

d.Enforceability. If any provision of this Agreement shall be found by a court
of competent jurisdiction to be void, invalid or unenforceable, the same shall
be reformed to comply with applicable law or stricken if not so conformable, so
as not to affect the validity or enforceability of the remainder of this
Agreement.

 

Page 6 of 10

Portions herein identified by [*****] have been omitted pursuant to a request
for confidential treatment under Rule 24b-2 of the Securities Exchange Act of
1934, as amended. A complete copy of this document has been filed separately
with the Securities and Exchange Commission.

 

e.Modification. No change, modification, or addition or amendment to this
Agreement, or waiver of any term or condition of this Agreement, is valid or
enforceable unless in writing and signed and dated by the authorized officers of
the Parties to this Agreement.

 

f.Entire Agreement. This Agreement and the Confidentiality Agreement currently
in effect between CSMC and Synthetic constitute the entire agreements among the
Parties with respect to the subject matter hereof and thereof, and replace and
supersede as of the date hereof and thereof any and all prior agreements and
understandings, whether oral or written, among the Parties with respect to the
subject matter of such agreements.

 

g.Construction. This Agreement has been prepared, examined, negotiated and
revised by each Party and their respective attorneys, and no implication shall
be drawn and no provision shall be construed against any Party to this Agreement
by virtue of the purported identity of the drafter of this Agreement or any
portion thereof.

 

h.Counterparts. This Agreement may be executed simultaneously in one or more
counterparts, each of which shall constitute one and the same instrument. This
Agreement may be executed by facsimile.

 

i.Assignment. Except as otherwise expressly provided in this Agreement, this
Agreement shall be binding upon, inures to the benefit of, and is enforceable
by, the Parties and their respective heirs, legal representatives, successors
and permitted assigns. This Agreement shall not be assignable by Company absent
the prior written consent of CSMC unless to a successor to Company or a
purchaser of all or substantially all of the assets of Company relating to the
subject matter of this Agreement. Synthetic shall have no right to assign this
Agreement.

 

j.Further Assurances. At any time and from time to time after the Effective
Date, each Party shall do, execute, acknowledge and deliver, and cause to be
done, executed, acknowledged or delivered, all such further acts, transfers,
conveyances, assignments or assurances as may be reasonably required to
consummate the transactions contemplated by this Agreement.

 

k.Survival. The following sections shall survive any expiration or earlier
termination of this Agreement: Section 6 (“Limited Warranty”), Section 8
(“Indemnification”), and Section 10 (“Use of Names”).

 

Page 7 of 10

Portions herein identified by [*****] have been omitted pursuant to a request
for confidential treatment under Rule 24b-2 of the Securities Exchange Act of
1934, as amended. A complete copy of this document has been filed separately
with the Securities and Exchange Commission.

 

IN WITNESS WHEREOF, the Parties have caused their duly authorized
representatives to execute this Agreement as of the Effective Date.

 

“CSMC”:

 

Cedars-Sinai Medical Center,
a California nonprofit public

benefit corporation

 

By: /s/ Shlomo Melmed, M.D.     Shlomo Melmed, M.D.     Senior Vice President
for Academic Affairs     & Dean of the Medical Faculty         By: /s/ Edward M.
Prunchunas     Edward M. Prunchunas     Senior Vice President for Finance & CFO
 

  

“Company”: Synthetic Biomics, Inc., a nevada corporation

 

By: /s/ Steve Kanzer   Name: Steve Kanzer   Title:

CEO & President

      “Synthetic”:   Synthetic Biologics, Inc.,   a nevada corporation       By:

/s/ Jeff Riley

  Name:

Jeff Riley

  Title: CEO  

 

Page 8 of 10

Portions herein identified by [*****] have been omitted pursuant to a request
for confidential treatment under Rule 24b-2 of the Securities Exchange Act of
1934, as amended. A complete copy of this document has been filed separately
with the Securities and Exchange Commission.

 

 

Appendix A

 

Experiments

 

 

****

 

 

Page 9 of 10

Portions herein identified by [*****] have been omitted pursuant to a request
for confidential treatment under Rule 24b-2 of the Securities Exchange Act of
1934, as amended. A complete copy of this document has been filed separately
with the Securities and Exchange Commission.

 

Appendix B

 

“Field of Use” Definition for Exclusive License

 

All human or veterinary therapeutic and prophylactic applications, excluding the
following:

 

1.the therapeutic use of rifaximin;

 

2.the therapeutic use of any of the following, as each is more fully described
in U.S. Patent No. 6,558,708: (A) active lipids, (B) serotonin, serotonin
agonists, or serotonin re-uptake inhibitors, (C) peptide YY or peptide YY
functional analogs, (D) calcitonin gene-related peptide or functional analogs
thereof, (E) adrenergic agonists, (F) opioid agonists, (G) combinations of any
of (A), (B), (C), (D), (E) and/or (F); and (H) antagonists of receptors for any
of (B), (C), (D), (E) and/or (F));

 

3.the diagnosis, prognosis, or the testing of, or the provision of information
to clinicians or patients regarding, small intestinal bacterial overgrowth
(SIBO), and/or conditions or disorders related thereto in human subjects, using
breath testing products or breath testing services to detect SIBO or
SIBO-related conditions (provided, however, that methods of utilizing such
diagnostic information for the selection of one or more particular therapeutic
regimens shall not be excluded); and

 

4.the use of small molecules and/or agonists and antagonists of vinculin.

 

Page 10 of 10