COMMON STOCKHOLDERS AGREEMENT
This
COMMON
STOCKHOLDERS AGREEMENT
(this
“Agreement”)
is
made and entered into as of July 1, 2004, by and among Cleveland BioLabs, Inc.,
a Delaware corporation (the “Company”)
and
each Person (as defined below) who holds Common Stock (as defined below) and
any
other Person who becomes a stockholder of the Company, from time to time, and
executes an Instrument of Accession in the form of Exhibit B
(collectively referred to herein as “Stockholders”
and
each individually as a “Stockholder”).
RECITALS
A. The
Company has ten thousand (10,000) shares of common stock issued and
outstanding.
B. The
stock
ownership of the Company is set forth in Exhibit A,
attached hereto all of which shares are fully paid and
non-assessable.
C. The
parties hereto believe that it is in their mutual interest to make provisions
for the future disposition of the shares of common stock of the Company, to
the
end that continuity of harmonious management is assured, and a fair process
is
established by which said shares of common stock may be transferred, conveyed,
assigned or sold.
AGREEMENTS
In
consideration of the recitals and the mutual promises, covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as
follows:
1. Defined
Terms.
The
following terms, when used in this Agreement, have the respective meanings
set
forth below:
(a) “Approved
Sale”
means
the sale of the Company, whether by merger, consolidation, sale of all or
substantially all of the assets of the Company or a sale of all or substantially
all of the capital stock of the Company, in one transaction or a series of
transactions, which has been approved by a majority of the securities entitled
to vote thereon and by Special Board Approval.
(b) “Board”
shall
mean the Board of Directors of the Company.
(c) “CCF”
shall
mean The Cleveland Clinic Foundation, a not-for-profit Ohio
corporation.
(d) “Code”
shall
mean the United States Internal Revenue Code of 1986, as amended.
(e) “Commission”
shall
mean the United States Securities and Exchange Commission or any successor
thereto.
(f) “Common
Stock”
shall
mean the Company’s Common Stock, par value $0.005 per share.
(g) “Exchange
Act”
shall
mean the Securities Exchange Act, of 1934, as amended, or any similar federal
statute as the same shall be in effect from time to time.
(h) “Material
Deviation”
shall
mean any sum or allocation that, when aggregated with similar deviations made
during any calendar quarter, equals or exceeds a total of five percent (5%)
of
the then current annual budget as approved by the Board.
(i) “Person”
shall
mean any individual, partnership, limited liability company, corporation, joint
venture, trust, unincorporated organization, or other entity, or a governmental
entity or any department, agency or political subdivision thereof.
(j) “Qualified
IPO”
means
the Company’s first fully underwritten firm commitment public offering of shares
of Common Stock consummated pursuant to a registration statement declared
effective under the Securities Act, other than an offering made in connection
with a business acquisition or combination or an employee benefit plan, in
which
the aggregate gross proceeds to the Company after deducting underwriters’
discounts and commissions and related offering expenses equals or exceeds
Fifteen Million Dollars ($15,000,000) and in which the price per share of Common
Stock offered to the public equals or exceeds Two Dollars ($2) (such price
to be
equitably adjusted in the event of any stock dividend, stock split, combination,
recapitalization, reorganization, reclassification or other similar
event).
(k) “Restricted
Stock Agreements”
shall
mean the restricted stock agreements entered into by and between the Company
and
certain of the Stockholders, and placing certain restrictions on the transfer
and disposition of the Shares.
(l) “Rule
144”
shall
mean Rule 144 (including Rule 144(k)) of the Commission under the Securities
Act
or any similar provision then in force under the Securities Act.
(m) “Securities
Act”
means
the Securities Act of 1933, as amended, or any similar federal statute as the
same shall be in effect from time to time.
(n) “Senior
Securities”
shall
mean any class or series of securities of the Company which may be issued from
time to time by the Company or any shares of Common Stock of the Company issued
upon conversion of a security of such class or series, in either case,
designated as having registration rights senior to those rights granted in
this
Agreement with respect to the Stockholder Shares.
(o) “Shares”
means
shares of Common Stock which have not been (i) sold to the public pursuant
to a
registration statement declared effective by the Commission (other than one
on
Form S-8 or a comparable form), (ii) sold pursuant to Rule 144 or (iii) sold
or
otherwise transferred in a transaction in which the rights under this Agreement
have not been assigned. For the purposes of this Agreement, any Person will
be
deemed to own, in addition to any Shares such Person actually owns, any Shares
which would then be directly or indirectly issuable upon the conversion or
exercise (whether or not then convertible or exercisable) of any other
securities of the Company owned by such Person.
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(p) “Stockholder
Shares”
means,
at any time, (i) Shares then held by the Stockholders, (ii) Shares that were
at
one time held by any Stockholder but are then held by (A) a successor or assign
of any Stockholder or (B) a Person who becomes a party to this Agreement and
(iii) Shares that were issued upon conversion or exercise of other Stockholder
Shares, or that were issued as a dividend or other distribution with respect
to
or in replacement of other Stockholder Shares, and are then held by (1) any
Stockholder, (2) a successor or assign of any Stockholder or (3) a subsequent
Person who becomes a party to this Agreement.
(q) “Special
Board Approval”
shall
mean the prior approval of the holders of not less than 60% of the total number
of outstanding Shares.
(r) “transfer”
shall
mean any sale, exchange, assignment, transfer, mortgage, pledge, encumbrance,
hypothecation, disposition, gift, devise, bequest, or other disposition or
grant
of rights or interests, whether voluntarily or involuntarily, by operation
of
law or otherwise.
2. Board
of Directors.
(a) From
and
after the date hereof and until the provisions of this Section 2 cease to be
effective, each Stockholder will vote such Shares over which such Person has
voting control, and will take all other necessary or desirable actions within
his or its control and consistent with legal duty (whether in his capacity
as a
Stockholder, director, member of a Board committee or officer of the Company
or
otherwise), and the Company will take all necessary and desirable actions within
its control and consistent with legal duty, in order to cause:
(i) the
authorized number of directors on the Board to be established at five (5),
and
meetings of the Board to be scheduled quarterly until such time as the Board
votes to schedule such meetings less frequently;
(ii) the
election to the Board of:
(A) two
representatives (the “CCF
Representatives”)
designated by CCF who shall initially be:
▇▇▇▇
▇▇▇▇▇▇▇▇▇, Ph.D.; and
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, Esq.; and
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(B) three
representatives (the “Company
Representatives”)
designated by the holders of a majority of the then outstanding
Shares:
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, Ph.D.;
▇▇▇▇▇▇
▇▇▇▇▇▇, Ph.D.; and
▇▇▇▇▇
▇▇▇▇▇, Ph.D.
(iii) the
removal from the Board (with or without cause) of any representative(s), at
the
written request of the Persons entitled to designate such representative(s)
under (ii) above, but only upon such written request and under no other
circumstances; and
(iv) in
the
event that any representative designated hereunder for any reason ceases to
serve as a member of the Board during such representative’s term of office, the
resulting vacancy on the Board to be filled by a representative designated
as
provided in (ii) above by the Persons entitled to designate such
representative(s) under (ii) above.
(b) The
Company will pay the reasonable out-of-pocket expenses actually incurred by
each
director in connection with attending formal and informal meetings of the Board.
The Company will pay the non-employee Directors a reasonable fee for attending
Board meetings, such fee to be established by the Board from time to
time.
(c) The
rights of CCF to designate, approve or add Board members under this Section
2
will terminate when CCF owns, legally or beneficially, less than five percent
(5%) of the outstanding Shares.
(d) Notwithstanding
the foregoing, the provisions of this Section 2 will terminate automatically
and
be of no further force and effect upon the consummation of a Qualified
IPO.
3. Initial
Negative Covenants of the Company: Special Board
Approval.
Until
such time as the Company has raised at least two million dollars ($2,000,000)
in
financial investment(s), the Company, for itself and for each of its
Subsidiaries, whether now owned or hereafter formed or acquired, covenants
to
and agrees with the Stockholders that, so long as CCF owns, legally or
beneficially, more than ten percent (10%) of the outstanding Shares, neither
the
Company nor any Subsidiary will do any of the following without Special Board
Approval:
(a) Board
of Directors.
Increase the authorized number of members of the Board of
Directors;
(b) Chief
Executive Officer.
Hire or
terminate any Chief Executive Officer;
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(c) Dispositions
and Acquisitions.
Directly or indirectly (i) sell, lease or otherwise dispose of any asset or
assets in a single transaction or series of related transactions (including,
without limitation, shares of stock or other ownership interests in any Person
and assets constituting a business) with a value that constitutes a Material
Deviation; (ii) acquire in any single transaction or series of related
transactions assets of any Person (including, without limitation, shares of
stock or other ownership interests in any other Person and assets constituting
a
business) where the total consideration, including, without limitation,
employment contracts, non-competition provisions, assumption of liabilities
and
payment for assets, the value of which constitute a Material Deviation; or
(iii)
make any acquisitions outside the Business;
(d) Security
Interests.
Create,
incur, assume, or permit to exist, any Security Interest in any of its
properties or assets whether now owned or hereafter acquired, other than
Permitted Liens or a Security Interest granted in connection with (i) trade
debt
incurred in the ordinary course of business, (ii) purchase money debt that
constitutes a Material Deviation, (iii) capitalized leases that constitute
a
Material Deviation, and (iv) debt assumed in acquisitions which have received
such approval as is herein required;
(e) Indebtedness.
Create,
incur, assume, or otherwise become or remain liable, directly or indirectly,
for
any manner of Indebtedness, whether by loan, guaranty, mortgage or otherwise,
in
excess of the amounts disclosed to the Stockholders in the Purchase Agreement,
except (i) as trade debt incurred in the ordinary course of business, (ii)
as
purchase money debt that constitutes a Material Deviation, (iii) as capitalized
leases not to exceed any amount that constitutes a Material Deviation, and
(iv)
pursuant to the annual budget;
(f) Advances;
Investments.
Except
in connection with the formation of wholly- owned subsidiaries, (i) make any
advance or loan to any person, firm or corporation, except for reasonable travel
or business expenses advanced to the Company’s or a Subsidiary’s employees or
independent contractors in the ordinary course of business, or (ii) invest
in,
acquire or hold any securities of any other Person, except bank certificates
of
deposit that are fully insured by an agency of the United States or direct
obligations of the United States or short-term money market funds; provided,
however,
that
this paragraph will not include trade accounts receivable incurred in the
ordinary course of business;
(g) Capital
Expenditures.
Make
any Capital Expenditures or commitments for such expenditures on a consolidated
basis that constitute a Material Deviation per annum in excess of the amount
provided in the annual budget;
(h) Transactions
with Related Persons.
Except
where specifically disclosed to the Board prior to undertaking any such
transaction and where Board approval has been obtained if the transaction
exceeds Five Thousand Dollars ($5,000), knowingly enter into any transaction,
agreement or arrangement with any stockholder, director, or officer of the
Company or of any Subsidiary, any relative by blood or marriage of any
stockholder, director or officer of the Company or of any Subsidiary or any
supplier, service organization, customer or other entity in which any
stockholder, director or officer of the Company or of any Subsidiary has a
financial interest and, in addition to the foregoing restrictions, all
transactions between the Company or any of its Subsidiaries on the one hand,
and
any Affiliate of the Company on the other hand, will be on arms’ length terms
and conditions, including fair market values and prices equivalent to those
that
would be charged and paid between parties at arms’ length at the time of the
entering into of the transactions in question;
5
(i) Management
Agreements.
Make or
enter into any agreements whereby the management, supervision or control of
its
business is to be delegated to or placed in any persons other than its duly
elected Board and officers, or make or enter into any contract or agreement
whereby the operation of its business, in whole or in part, is delegated to,
or
placed in, any agent (third party) or independent contractor;
(j) Agreements
Regarding the Foregoing.
Agree,
or make any binding commitment or arrangement, to take any of the actions
specified in clauses (a) through (i) above.
4. Additional
Negative Covenants of the Company: Special Board
Approval.
Until
such time as the Company achieved total investment or commercial financing
events wherein the Company has raised a total of at least 15 million dollars
($15,000,000), the Company, for itself and for each of its Subsidiaries, whether
now owned or hereafter formed or acquired, covenants to and agrees with the
Stockholders that, so long as CCF owns, legally or beneficially, more than
ten
percent (10%) of the outstanding Shares, neither the Company nor any Subsidiary
will do any of the following without Special Board Approval:
(a) Change
in Number of Authorized Shares Issuance of Equity.
Increase or decrease the authorized number of shares of Common Stock; effect
any
stock split, combination, subdivision or share dividend; issue any shares of
capital stock of the Company or any of its Subsidiaries of any class, or
securities (excluding options issued under the Company’s incentive stock option
program) convertible into or exchangeable for, capital stock, other than up
to
an aggregate of 5% of the total outstanding Shares (as adjusted for all stock
dividends, stock splits, subdivisions and combinations and including any and
all
outstanding options as of the date hereof and any outstanding shares that were
issued upon exercise of previously outstanding options), issued or granted
as
compensation to directors, senior management of the Company or any Subsidiary,
or key employees of businesses acquired by the Company or any
Subsidiary;
(b) New
Class of Stock.
Create
any new class or series of stock of the Company which has preference over or
is
on parity with the Common Stock;
(c) Business.
Directly or indirectly change the nature of its business as carried on by the
Company or its Subsidiaries in any material respect;
(d) Public
Offering.
Make
any underwritten public offering of the Common Shares other than a Qualified
IPO;
6
(e) Merger.
Approve
or effect any merger or consolidation with another business or
company;
(f) Sale,
Dissolution or Liquidation.
(i)
sell, lease or otherwise dispose of all or substantially all of the Company’s
assets, to any Person; (ii) adopt any plan or arrangement for the dissolution
or
liquidation of the Company;
(g) Dividends.
Declare
or pay (or make any provision for the payment of) any dividend or distribution
on any equity security;
(h) Charter
Documents.
Amend
its Certificate of Incorporation or its By-Laws;
(i) Inconsistent
Agreements.
Enter
into any agreement containing any provision that would be violated or breached
by the performance by the Company of its obligations under this
Agreement;
(j) Registration
Rights.
Grant
additional registration rights beyond those granted as of the date hereof;
or
(k) Agreements
Regarding the Foregoing.
Agree,
or make any binding commitment or arrangement, to take any of the actions
specified in clauses (a) through (j) above.
5. Take-along.
(a) Except
for “Permitted Transferees” under certain of the Restricted Stock Agreements, no
Stockholder shall transfer Stockholder Shares in excess of the greater of (i)
five percent of such selling Stockholder’s Shares or (ii) one percent of the
aggregate outstanding Stockholder Shares, in a single transaction or related
series of transactions, to any Person (in such capacity, the “”Purchaser”)
unless
the terms and conditions of such sale, transfer or other disposition (the
“Disposition”)
to
such Purchaser shall contain an offer to each of the other Stockholders, to
include in such Disposition such number of shares of such Stockholder Shares
as
is determined in accordance with Section 5(b) below. At least 45 days prior
to
effecting any Disposition, such selling Stockholder (the “Selling
Stockholder”)
shall
promptly cause the terms and conditions of the Disposition to be reduced to
a
reasonably detailed writing (which writing shall identify the Purchaser and
shall include the offer to the other Stockholders to purchase or otherwise
acquire their Securities according to the terms and subject to the conditions
of
this Section 5), and shall deliver, or cause the Purchaser to deliver, written
notice (the “Notice”)
of
such terms of such Disposition to each other Stockholder. The Notice shall
be
accompanied by a true and correct copy of the agreement, if any, embodying
the
terms and conditions of the proposed Disposition or such written summary thereof
if there is no agreement. At any time after receipt of the Notice (but in no
event later than 10 Business Days after receipt), any Stockholder may accept
the
offer included in the Notice for up to such number of its shares of Stockholder
Shares as determined in accordance with the provisions of Section 5(b) below,
by
furnishing irrevocable written notice of such acceptance (the “Acceptance”)
to the
Selling Stockholder and to the Purchaser.
7
(b) In
the
event that any Stockholder elects to accept the offer included in the Notice
described in Section 5(a) above, such Stockholder (the “Included
Stockholder”)
shall
have the right to sell, transfer or otherwise dispose of such number of its
shares of Stockholder Shares pursuant to, and upon consummation of, the
Disposition which is equal to the product of: (i) the total number of Shares
owned by the Included Stockholder; and (ii) a fraction, the numerator of which
shall equal 50% of the total number of Shares to be sold to the Purchaser,
and
the denominator of which shall equal the total number of Shares owned by all
Stockholders. If the Purchaser is not willing to purchase all Shares proposed
to
be sold in the Disposition by the Selling Stockholder and all Included
Stockholders, the Selling Stockholder shall reduce, to the extent necessary,
the
number of number of Common Shares the Selling Stockholder otherwise would have
sold in the Disposition so as to permit Included Stockholders to sell the number
of Shares they are entitled to sell in such Disposition pursuant to this Section
5(b).
(c) The
purchase of Shares pursuant to this Section 5 shall be made on the same terms
(including, without limitation, the per share consideration and method of
payment, and the date of sale, transfer or other disposition), and subject
to
the same conditions, if any, as are provided to the Selling Stockholder and
stated in the Notice.
(d) Upon
the
consummation of the disposition of Shares to the Purchaser pursuant to the
Disposition, the Selling Stockholder shall: (i) cause the Purchaser to remit
directly to each Included Stockholder the sales price of its Securities disposed
of pursuant thereto; and (ii) furnish such other evidence of the completion
and
time of completion of such disposition and the terms thereof as may be
reasonably be requested by such Included Stockholder.
(e) If
a
Stockholder does not timely deliver the Acceptance to the Selling Stockholder
and the Purchaser, it shall be deemed to have waived any and all rights pursuant
to this Section 5 and with respect to the disposition of its Shares described
in
the Notice, and the Selling Stockholder and Included Stockholder(s) shall have
45 days (calculated from the first day next succeeding the expiration of the
10
Business Days acceptance period described above), in which to dispose of the
aggregate amount of Shares described in the Notice to the Purchaser identified
in the Notice, on terms not more favorable to the Selling Stockholder than
those
which were set forth in the Notice. If an Included Stockholder has timely
delivered the Acceptance and, if after 30 days following receipt of the Notice,
the Selling Stockholder and the Purchaser shall not have completed the
disposition of Shares to be sold in connection therewith in accordance with
the
terms of the Disposition, all the restrictions on the disposition of Shares
contained in Restricted Stock Agreements shall again be in full force and
effect.
6. Permitted
Transfers.
A
holder of Stockholder Shares may transfer Stockholder Shares, without complying
with Section 5 with respect to such transfer, to Permitted Transferees, if
any
(as defined in the Restricted Stock Agreements) of such holder, provided that
as
a condition precedent to any transfer of Stockholder Shares to a Permitted
Transferee (a) a transferring Stockholder must provide the Company with prior
notice of such transfer indicating the number of Shares to be transferred and
the identity of the Permitted Transferee and (b) such Stockholder’s Permitted
Transferee must agree to be bound by the terms of this Agreement as a
Stockholder, including without limitation, Sections 5 and 6, by executing an
Instrument of Accession in the form of Exhibit B.
8
7. Sale
of the Company or its Assets.
Each
holder of Stockholder Shares will consent to and raise no objections to an
Approved Sale and (a) if an Approved Sale is structured as a sale of stock,
each
holder of Stockholder Shares will agree to sell, and will sell, all of such
holder’s Stockholder Shares on the terms and conditions (including any escrow or
indemnification provisions) so Approved, (b) if an Approved Sale is structured
as a merger or consolidation, each holder of Stockholder Shares will vote in
favor thereof and will no exercise any dissenters’ rights of appraisal such
holder may have under law, including Delaware corporation law, and (c) if an
Approved Sale is structured as a sale of all or substantially all of the assets
of the Company and a subsequent dissolution and liquidation of the Company,
each
holder of Stockholder Shares will vote in favor thereof and will vote in favor
of the subsequent dissolution and liquidation of the Company. Each holder of
Stockholder Shares will take all necessary actions in connection with
consummation of an Approved Sale as are reasonably requested by the
Board.
8. Legends.
Each
certificate representing Shares (each, a “Certificate”)
shall
be endorsed with the following legends and such other legends as may be required
by applicable state securities laws:
TRANSFER
RESTRICTIONS
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF AN STOCKHOLDERS AGREEMENT, AMONG CLEVELAND BIOLABS, INC. AND
CERTAIN OTHER HOLDERS OF ITS SECURITIES, DATED AS OF JULY 1, 2004. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY’S
PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE.
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED AS OF
__________ __, 200_, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
ALSO
SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS
AND
CERTAIN OTHER AGREEMENTS SET FORTH IN A RESTRICTED STOCK AGREEMENT BETWEEN
THE
COMPANY AND _____________ OF THE COMPANY DATED AS OF __________ __, 200_.
A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY’S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE.”
9
9. Holdback
Agreement.
In
connection with any registration of the Company’s securities (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan) each Stockholder hereby agrees that, upon written request
of the Company or the underwriters managing any underwritten offering of the
Company’s securities, such Stockholder shall not sell, make any short sale of,
loan, pledge or otherwise hypothecate or encumber, grant any option for the
purchase of, or otherwise dispose of any Stockholder Shares (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
one hundred eighty (180) days following the effective date of a registration
statement of the Company filed under the Securities Act) as may be requested
by
the Company or such managing underwriters; provided that (i) the officers and
directors of the Company who own stock of the Company, as well as any
Stockholder who owns more than one percent (1%) of the Common Stock of the
Company on a fully diluted, fully converted basis, also agree to such
restrictions, and (ii) the underwriters shall not release any party from any
lock-up agreement or similar agreement (a “Lock
Up Release”)
without (x) providing the undersigned at least three (3) business days’ prior
written notice of the effective date of the Lock Up Release and (y)
simultaneously releasing the undersigned and their affiliates to the same extent
from any lock-up letter or similar agreement to which they are a party. Nothing
herein shall prevent a holder of Stockholder Shares that is a partnership from
making a distribution of Stockholder Shares to its partners, a holder of
Stockholder Shares that is a trust from making a distribution of Stockholder
Shares to its beneficiaries or a holder of Stockholder Shares that is a
corporation from making a distribution of Stockholder Shares to its
stockholders, provided that the transferees of such Stockholder Shares agree
to
be bound by the provisions of this Agreement to the extent the transferor would
be so bound by executing an Instrument of Accession in the form of Exhibit B.
10. Piggyback
Registration Rights.
(a) Right
to Piggyback.
After
the consummation of a Qualified IPO, whenever the Company proposes to register
any of its securities under the Securities Act, either pursuant to an
underwritten primary registration on behalf of the Company or pursuant to an
underwritten secondary registration on behalf of a holder or holders of the
Company’s securities (other than on Form ▇-▇, ▇▇▇▇ ▇-▇ or any successor form)
and the registration form to be used may be used for the registration of any
Stockholder Shares (a “Piggyback
Registration”),
the
Company will give prompt written notice to each holder of Stockholder Shares
of
its intention to effect such a registration and will include in such
registration all Stockholder Shares (subject to, and in accordance with, the
priorities set forth in Section 10(b)), with respect to which the Company has
received written requests for inclusion within ten (10) days after delivery
of
the Company’s notice.
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(b) Priority.
If the
managing underwriters advise the Company that in their opinion, the number
of
Shares requested to be included in such registration exceeds the number which
can be sold in such offering without adversely affecting the marketability
or
pricing thereof, the Company will include in such registration up to an
aggregate amount determined advisable by the underwriters: (i) first,
the
Shares that the Company and the holders of any Senior Securities wish to
register and (ii) second,
all
Stockholder Shares requested to be registered pro rata
among
the holders of such Stockholder Shares on the basis of the number of Stockholder
Shares which are requested to be registered.
(c) Withdrawal
of Registration Statement.
Notwithstanding anything herein to the contrary, the Company may withdraw any
registration statement referred to in this Section 10 at any time in its sole
discretion without thereby incurring any liability to the holders of Stockholder
Shares.
11. Registration
Procedures.
Whenever holders of Stockholder Shares have requested that any Stockholder
Shares be registered pursuant to this Agreement, the Company will use its
reasonable best efforts to effect the registration of such Stockholder Shares
in
accordance with the intended method of disposition thereof and, pursuant
thereto, the Company will:
(a) use
its
reasonable best efforts to register or qualify such Stockholder Shares under
the
securities or blue sky laws of the jurisdictions as any seller reasonably
requests in writing and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Stockholder Shares owned by such seller
(provided that the Company will not be required to (i) qualify generally to
do
business in any jurisdiction where it would not otherwise be required to qualify
but for this subparagraph or (ii) consent to general service of process in
any
such jurisdiction);
(b) notify
each seller of Stockholder Shares at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the happening of any
event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading, as promptly as
practicable thereafter, prepare and file with the Commission and furnish to
each
seller of Stockholder Shares subject to the registration statement, a supplement
or amendment to such prospectus so that, as thereafter delivered to the
purchasers of Stockholder Shares, such prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make
the statements therein, in light of the circumstances under which they were
made, not misleading;
(c) cause
all
such Stockholder Shares to be listed on each securities exchange, if any, on
which similar securities issued by the Company are then listed;
(d) enter
into customary agreements (including an underwriting agreement in customary
form) and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of such Stockholder Shares;
11
(e) make
reasonably available for inspection by (i) any holder of Stockholder Shares
subject to the registration statement, (ii) any underwriter participating in
any
disposition pursuant to such registration statement, and (iii) any attorney,
accountant or other agent retained by any holder of Stockholder Shares, or
an
underwriter (collectively, the “Inspectors”),
all
pertinent financial and other records, pertinent corporate documents and
properties of the Company (collectively, the “Records”)
as
shall be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company’s officers, directors and employees to
supply all information reasonably requested by any such Inspector in connection
with such registration statement. Records and other information which the
Company determines, in good faith, to be confidential and which it notifies
the
Inspectors are confidential will not be disclosed by the Inspectors unless
(x)
the disclosure of the Records in the opinion of counsel reasonably acceptable
to
the Company is necessary to avoid or correct a misstatement or omission in
the
registration statement or (y) the release of Records is ordered pursuant to
a
subpoena or other order from a court of competent jurisdiction. Each holder
of
Stockholder Shares subject to the registration statement will, upon learning
that disclosure of the Records is sought in a court of competent jurisdiction,
promptly give notice to the Company and allow the Company, at the Company’s
expense, to undertake appropriate action to prevent disclosure of the records
deemed confidential;
(f) in
the
event that the sale of Stockholder Shares is pursuant to an underwritten
offering, use its best efforts to obtain a “cold comfort” letter from the
Company’s independent public accountants in customary form and covering such
matters of the type customarily covered by “cold comfort” letters as the holders
of Stockholder Shares being sold or the managing underwriter reasonably
requests;
(g) use
all
reasonable efforts to obtain an opinion or opinions from counsel for the Company
in customary form;
(h) provide
a
transfer agent and registrar for all such Stockholder Shares not later than
the
effective date of such registration statement;
(i) at
least
forty-eight hours prior to the filing of any registration statement or
prospectus or any amendment or supplement to such registration statement or
prospectus, furnish a copy thereof to each holder of Stockholder Shares and
refrain from filing any such registration statement, prospectus, amendment
or
supplement to which counsel selected by the Stockholder Shares being registered
shall have reasonably objected on the grounds that such amendment or supplement
does not comply in all material respects with the requirements of the Securities
Act or the rules and regulations thereunder, unless, in the case of an amendment
or supplement, in the opinion of counsel for the Company the filing of such
amendment or supplement is reasonably necessary to protect the Company from
any
liabilities under any applicable federal or state law and such filing will
not
violate applicable laws; and
(j) advise
each seller of such Stockholder Shares promptly after it shall receive notice
or
obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such registration statement or the initiation
or
threatening of any proceeding for such purpose and use reasonable efforts to
prevent the issuance of any stop order or to obtain its withdrawal if such
stop
order should be issued.
12
12. Indemnification.
(a) By
the
Company.
The
Company agrees to indemnify, to the extent permitted by law, each holder of
Stockholder Shares, its partners, officers and directors and each Person who
controls any such holder (within the meaning of the Securities Act), against
all
losses, claims, damages, liabilities and expenses (including without limitation,
reasonable attorney’s fees and expenses) caused by any untrue statement of
material fact contained in any registration statement, prospectus or preliminary
prospectus, or any amendment thereof or supplement thereto, or any omission
of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as (i) the same are caused by or
contained in any information furnished to the Company by such holder expressly
for use therein, or (ii) a copy of such registration statement, prospectus
or
preliminary prospectus or any amendment thereof or supplement thereto was
provided to such seller of Stockholder Shares in compliance with Section 11(b)
hereof, and such seller failed to deliver such prospectus, preliminary
prospectus, amendment or supplement correcting such untrue or alleged untrue
statement of a material fact, or omission or alleged omission of a material
fact
required to be stated therein or necessary to make the statements therein not
misleading.
(b) By
Each Holder.
In
connection with any registration statement in which a holder of Stockholder
Shares is participating, each such holder will furnish to the Company in writing
such information and affidavits, in each case relating only to such holder,
as
the Company reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will indemnify
the
Company, its directors and officers and each Person who controls the Company
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses (including without limitation, reasonable attorneys’
fees and expenses) resulting from any untrue statement of material fact
contained in the registration statement, prospectus or preliminary prospectus,
or any amendment thereof or supplement thereto, or any omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or omission
is
contained in any information or affidavit so furnished by such holder; provided
that the obligation to indemnify will be several, not joint and several, among
such holders of Stockholder Shares.
(c) Procedure.
Any
Person entitled to indemnification under this Section 12 will (i) give prompt
written notice to the indemnifying Person of any claim with respect to which
it
seeks indemnification, and (ii) unless in the reasonable judgment of such
indemnified Person a conflict of interest between such indemnified Person and
indemnifying Person may exist with respect to such claim, permit such
indemnifying Person to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified Person. If such defense is assumed, the
indemnifying Person will not be subject to any liability for any settlement
made
by the indemnified Person without its consent, which consent will not be
unreasonably withheld. An indemnifying Person who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees
and
expenses of more than one (1) counsel for all indemnified Persons with respect
to such claim, unless in the reasonable judgment of any indemnified Person
a
conflict of interest may exist between such indemnified Person and any other
indemnified Person with respect to such claim. The payments required by this
Section 12 will be made periodically during the course of the investigation
or
defense, as and when bills are received or expenses incurred.
13
(d) Contribution.
If for
any reason the indemnification provided for in Section 12(a) or 12(b) hereof
is
unavailable to an indemnified Person as contemplated thereby, the indemnifying
Person, in lieu of indemnifying such indemnified Person, shall contribute to
the
amount paid or payable by such indemnified Person as a result of such loss,
claim, damage, liability or expense in such proportion as is appropriate to
reflect the relative fault of the indemnified Person and the indemnifying
Person, as well as any other relevant equitable considerations. The relative
fault of such indemnifying Person and indemnified Person shall be determined
by
reference to, among other things, whether the untrue statement of material
fact
or omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying Person or indemnified Person, and
the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The parties hereto agree that
it
would not be just and equitable if contribution pursuant to this Section 12
were
determined by pro rata
allocation or by any other method of allocation that does not take account
of
equitable considerations referred to in this paragraph. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of fraudulent misrepresentation.
(e) Survival.
This
Section 12 will remain in full force and effect regardless of any investigation
made by or on behalf of any indemnified Person or any officer, director, agent
or, controlling Person of such indemnified Person and will survive any transfer
of Shares pursuant to the terms hereunder.
13. Other
Registration Provisions.
(a) Priority
of Subsequent Investors.
Subject
to the provisions of this Agreement, the Company may grant unlimited demand
registration rights and a senior priority in any piggyback registration to
holders of Senior Securities from time to time, including without limitation,
classes or series of Senior Securities that do not exist as of the date of
this
Agreement, as determined by Special Board Approval.
(b) Registration
Expenses.
All
expenses incident to the Company’s performance of or compliance with this
Agreement, including without limitation (i) all registration and filing fees,
fees and expenses of compliance with Federal and state securities or blue sky
laws, (ii) all listing fees, printing expenses, messenger and delivery expenses,
(iii) fees and disbursements of counsel for the Company, (iv) fees and
disbursements of all independent certified public accountants and other Persons
retained by the Company including underwriters (other than underwriter’s
discounts and commissions) (all such expenses being herein called “Registration
Expenses”)
will
be borne by the Company; provided,
however,
that
each seller of Stockholder Shares shall bear (i) all fees and disbursements
of
counsel such seller retains in connection with the registration of Stockholder
Shares and (ii) all underwriting commissions and discounts and transfer taxes
attributable directly to any Stockholder Shares sold for such seller’s
account.
14
(c) Selection
of Underwriters.
The
Company shall have the right, subject, so long as CCF owns, legally or
beneficially, more than five percent (5%) of the outstanding Shares, to the
reasonable approval of CCF, to select the underwriter(s) or investment banker(s)
to administer any underwritten registration of shares of Common Stock, including
without limitation, any Piggyback Registration.
(d) Compliance
with Rule 144.
In the
event that the Company (i) registers a class of securities under Section 12
of
the Exchange Act, or (ii) commences to file reports under Section 13 or 15(d)
of
the Exchange Act, the Company agrees: (a) to use its reasonable best efforts
to
make and keep available to the public and all holders who propose to sell
securities in compliance with Rule 144 that information required by Rule 144
and
to enable such holders to make sales pursuant to Rule 144; and (b) to furnish
to
such holders forthwith upon request a written statement by the Company of
compliance with the filing requirements of the Commission as set forth in Rule
144.
(e) Participation
in Underwritten Registrations.
No
holder of Stockholder Shares may participate in any registration hereunder
which
is underwritten unless such holder (i) agrees to sell such holder’s Stockholder
Shares on the basis provided in any underwriting arrangements approved by the
Company or any other Persons entitled to approve such arrangements, and (ii)
completes and executes all questionnaires, powers-of-attorney, custody
agreements, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements; provided,
however,
that
any indemnity granted by a holder of Stockholder Shares under such agreements
shall be several and not joint.
14. Miscellaneous.
(a) Termination.
The
provisions set forth in Sections 2, 3, 4, 5 and 6 shall terminate upon the
consummation of a Qualified IPO and the rights provided under Section 10 shall
terminate with respect to a holder of Stockholder Shares as soon as such holder
is eligible to sell all of such holder’s Stockholder Shares pursuant to Rule 144
without restriction as to the number of Stockholder Shares sold within a stated
period of time.
(b) Notices.
Any
notice, demand, or communication required or permitted to be given by any
provision of this Agreement shall be delivered personally by overnight courier
or by registered or certified mail, return receipt requested, to the following
addresses, or such other address as any party hereto designates by written
notice to the Company, and shall be deemed to be given upon delivery, if
delivered personally, one business day after delivery to the courier, if
delivered by overnight courier, or two business days after mailing, if
mailed:
15
(i) If
to the
Company:
Cleveland
BioLabs, Inc.
____________________
____________________
Attention:
Chief Executive Officer
With
a
copy to:
▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
(ii) If
to
CCF, to:
The
Cleveland Clinic Foundation
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇
Attn:
[General Counsel]
with
required copies to:
Squire,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇
▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
and
CCF
Innovations
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇
Attn:
Chief Commercialization Counsel
(iii) If
to any
other Stockholder, to the address set forth on the stock record books of the
Company.
(c) Application
of Delaware Law.
This
Agreement and its interpretation shall be governed exclusively by its terms
and
by the laws of the State of Delaware.
(d) Amendments
Waivers.
Any
provision of this Agreement may be amended or waived in writing by the holders
of a majority of the Stockholder Shares and this Agreement may be amended by
the
Board, without the consent of the Stockholders, to cure any ambiguity, to
correct or supplement any provisions herein which may be inconsistent with
any
other provision herein, or to add other provisions with respect to matters
arising under this Agreement which will not be inconsistent with the provisions
of this Agreement; provided,
however
that no
amendment shall be adopted pursuant to this section unless the adoption thereof
is for the benefit of or not adverse to the interests of the
Stockholders.
16
(e) Execution
of Additional Instruments.
Each
Stockholder hereby agrees to execute such other and further statements of
interest and holdings, designations and other instruments necessary to comply
with any laws, rules, or regulations.
(f) Construction.
The
language used in this Agreement will be deemed the language chosen by the
parties hereto to express their mutual intent, and no rule of strict
construction will be used against any party hereto.
(g) Headings.
The
headings in this Agreement are inserted for convenience only and are in no
way
intended to describe, interpret, define, or limit the scope, extent or intent
of
this Agreement or any provision hereof.
(h) Severability.
If any
provision of this Agreement or the application thereof to any Person or
circumstances shall be invalid, illegal, or unenforceable to any extent, the
remainder of this Agreement and the application thereof shall not be affected
and shall be enforceable to the fullest extent permitted by law.
(i) Heirs,
Successors and Assigns.
Each
and all of the covenants, terms, provisions, and agreements herein contained
shall be binding upon and inure to the benefit of the parties hereto and, to
the
extent permitted by this Agreement, their respective heirs, legal
representatives, successors and assigns.
(j) Creditors.
None of
the provisions of this Agreement shall be for the benefit of or enforceable
by
any creditors of the Company or any Stockholder.
(k) Counterparts.
This
Agreement may be executed in counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same
instrument.
17
IN
WITNESS WHEREOF,
the
parties hereto have executed and delivered this Common Stockholders Agreement
as
of the date first above written.
| CLEVELAND BIOLABS, INC. | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ |
||
| Title: CEO | ||
| THE CLEVELAND CLINIC FOUNDATION | ||
| |
|
|
| By: | /s/ ▇▇▇▇▇▇▇ ▇. ▇’▇▇▇▇▇ | |
|
Name: ▇▇▇▇▇▇▇ ▇. ▇’▇▇▇▇▇ |
||
| Title: Chief Financial Officer | ||
(SIGNATURE
PAGE TO STOCKHOLDERS AGREEMENT)
SIGNATURE
BLOCK FOR INDIVIDUAL
|
Mr.
|
|||
|
(1)
|
Mrs.
|
Signature:
|
/s/____________________
|
|
Ms.
|
Date:
|
||
|
Joint
Tenant/Tenant in Common (if applicable):
|
|||
|
Mr.
|
|||
|
(2)
|
Mrs.
___________________
|
Signature:
|
_____________________
|
|
Ms.
|
Date:
|
_____________________
|
|
|
TYPE
OF OWNERSHIP:
|
|||
|
_____ Individual
|
________
|
Joint
Tenants with Right of Survivorship
|
|
|
_____ Tenants
in Common
|
________
|
Community
Property (check only if a resident of a Community Property
State)
|
|
SIGNATURE
BLOCK FOR ENTITIES
| Name: ________________________________ | |
| By: ________________________________ | |
|
(Signature)
|
|
|
________________________________
|
|
|
(Signer’s
Printed Name)
|
|
| Its: __________________________ | |
| Date: __________________________ | |
____ Partnership
____ Corporation
____ Trust
____ Bank
(SIGNATURE
PAGE TO STOCKHOLDERS
AGREEMENT)
EXHIBIT
A
STOCKHOLDERS
OF CLEVELAND BIOLABS, INC.
|
Stockholder
|
Common
Stock
|
%
of Outstanding Common Stock
|
Shares
Issuable upon exercise of Warrants
|
Fully
Diluted Ownership
|
Fully
Diluted Ownership %
|
|
Employees
|
|||||
|
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
|
2,200
|
22.0%
|
2,200
|
21.1%
|
|
|
▇▇▇▇▇
▇▇▇▇▇
|
1,200
|
12.0%
|
1,200
|
11.5%
|
|
|
▇▇▇▇
▇▇▇▇▇▇▇▇▇
|
450
|
4.5%
|
450
|
4.3%
|
|
|
▇▇▇▇▇▇
▇▇▇▇▇
|
350
|
3.5%
|
350
|
3.4%
|
|
|
▇▇▇▇
▇▇▇▇▇▇▇
|
▇▇
|
0.9%
|
85
|
0.8%
|
|
|
▇▇▇▇▇
▇▇▇▇▇▇
|
180
|
1.8%
|
180
|
1.7%
|
|
|
Vadim
Krivokrisenko
|
85
|
0.9%
|
85
|
0.8%
|
|
|
Outside
Directors
|
|||||
|
▇▇▇▇▇▇
▇▇▇▇▇▇
|
2,600
|
26.0%
|
2,600
|
24.9%
|
|
|
Institutional
Shareholders
|
|||||
|
ChemBridge
Corporation
|
600
|
6.0%
|
444
|
1,044
|
10.0%
|
|
Cleveland
Clinic Foundation
|
2,250
|
22.5%
|
2,250
|
21.5%
|
|
|
Totals
|
10,000
|
100.0%
|
444
|
10,444
|
100.0%
|
(SIGNATURE
PAGE TO STOCKHOLDERS
AGREEMENT)
EXHIBIT B
INSTRUMENT
OF ACCESSION
The
undersigned, The Cleveland Clinic Foundation, in connection with its acquisition
of shares of capital stock of Cleveland BioLabs, Inc. (the “Company”),
hereby agrees to become a party to and a Stockholder under that certain
Stockholders Agreement, dated as of July 1, 2004 (the “Stockholders
Agreement”)
and,
effective as of the date hereof shall be entitled to all of the rights and
benefits, and subject to all of the obligations, of a Stockholder under the
Stockholders Agreement. All of the securities of the Company owned, from time
to
time, by the undersigned, shall be subject to the restrictions on transfer
set
forth in the Stockholders Agreement.
This
Instrument of Accession shall take effect and shall become a part of said
Stockholders Agreement upon its execution and its delivery to the Company by
the
undersigned.
Executed
as of the date set forth below under the laws of the State of
Delaware.
| Signature: ________________________ | |
| Date: _______________________ | Address: ________________________ |
|
________________________
|
|
|
________________________
|
Received
and accepted:
Cleveland
BioLabs, Inc.
By:
_______________________
Date:
______________________