RESTRICTED STOCK AND INVESTOR RIGHTS AGREEMENT
THIS
RESTRICTED
STOCK AND INVESTOR RIGHTS AGREEMENT
(this
“Agreement”)
is
made as of April 27, 2004, between Cleveland BioLabs, Inc., a Delaware
corporation (the “Company”),
and
ChemBridge Corporation (“ChemBridge”).
ChemBridge
has subscribed for and the Company has accepted a subscription agreement
pursuant to which ChemBridge has committed to purchase, and the Company has
committed to sell, 600 shares of the Company’s Common Stock, par value
$0.005 per share (the “Common
Stock”),
plus
such additional shares as may be specified in Section 1(b)
hereof.
All of such shares of Common Stock are referred to herein as “ChemBridge
Shares.”
Certain definitions are set forth in Section 5
of this
Agreement.
The
Company warrants that its total outstanding equity at the time of this Agreement
is 10,000 shares of Common Stock, including all warrants, options and rights
and
including, at their conversion rate to Common Stock, all preferred stock and
convertible notes. (Should the Company have more than 10,000 shares
outstanding at the time of the execution of this Agreement, then the
aforementioned 600 shares will be increased on a pro
rata
basis.)
It
is the
intention and expectation of the parties hereto that the Company will raise
at
least $1 million at a pre-money
valuation
of at
least $10 million and that, at
the
conclusion
of this
fund-raising by the Company and the issuance of all shares associated with
this
fund-raising, ChemBridge will own 6.0% of the Company’s total outstanding
equity, including all warrants, options and rights and including, at their
conversion rate to Common Stock, all preferred stock and convertible notes.
For
instance, should the Company issue an additional 1,000 shares of Common
Stock (or any other obligation convertible to 1,000 shares of Common Stock)
in the course of raising the aforementioned investment capital, then ChemBridge
would receive 660 shares of Common Stock instead of the 600 shares
noted above.
Any
reference to the “total
outstanding equity of the Company”
shall
mean the Company’s total outstanding equity, including all Common Stock and all
warrants, options and rights and including, at their conversion rate to Common
Stock, all Preferred Stock and Convertible Notes.
As
an
inducement for the Company to issue and sell the ChemBridge Shares to
ChemBridge, the Company is requiring ChemBridge to enter into this
Agreement.
The
parties hereto agree as follows:
1. ChemBridge
Shares.
(a) Upon
execution of this Agreement, ChemBridge will purchase, and the Company will
sell, 600 shares of Common Stock. If, however, the total outstanding equity
of
the Company shall equate to more than 10,000 total shares of Common Stock,
then the aforementioned 600 shares will be increased on a pro
rata
basis
such that the total shares purchased by ChemBridge shall be 6.0% of the total
outstanding equity of the Company.
(b) Under
certain circumstances, the Company will award to ChemBridge additional shares
beyond those defined in Section 1(a).
It is
agreed and expected by the parties that the Company will raise at least
$1 million in equity capital, most likely in the form of Preferred Stock or
Convertible Notes. Should the Company succeed in raising at least
$1 million at a premoney
valuation of at least $10,000,000 and
without
the issuance of any additional shares beyond the aforementioned total
outstanding equity of the Company of 10,000 shares, then the Company will owe
no
additional shares to ChemBridge. Should the total outstanding equity of the
Company, however, up to and including the time when the Company shall complete
a
fund-raising of $1 million in equity capital, including the issuance of all
equity associated with this fund-raising, be more than 10,000 shares or should
the Company raise equity capital at a pre money valuation of less than
$10,000,000, then ChemBridge shall be granted additional shares as described
in
the following two paragraphs, the effects of these two paragraphs being
additive:
(i) Correction
for issuance of additional shares.
If the
total outstanding equity of the Company shall exceed 10,000 shares at any
time up to and including the conclusion of the Company’s raising of
$1 million in equity capital and the issuance of all equity associated with
this fund-raising, then the number of shares granted to ChemBridge under this
Agreement shall be increased accordingly. (For instance, if the total
outstanding equity of the Company totals 20,000 shares, then ChemBridge would
receive an additional 600 shares of Common Stock);
(ii) Correction
for reduced pre-money valuation of the Company.
If the
Company shall raise equity capital at any time prior to the Company’s receiving
from ChemBridge the Library compounds contemplated in Section 2
of the
attached Library Access Agreement, at a pre-money valuation of the Company
of
less than $10,000,000, then the number of ChemBridge shares awarded under this
Agreement shall be increased by 1.0% for each 2.0% of decreased pre-money
valuation [for instance, if the equity capital is raised at a pre-money
valuation of $7,500,000 (a 25 % reduction in valuation), then ChemBridge would
receive 675 shares (a 12.5% increase), rather than
600 shares.]
(iii) Paragraphs
1(b)(i) and 1(b)(ii) are additive.
For
instance, if the Company raises $1 million at a pre-money valuation of
$5,000,000 and, in the course of so doing, issues an additional 5,000 shares
(for a total of 15,000 shares), then ChemBridge would be granted an
additional 450 shares [300 shares for the 50% increase in the total
outstanding equity of the Company plus
150 shares (a 25% increase) for the 50% decrease in pre-money valuation of
the Company].
(c) In
connection with the purchase and sale of the ChemBridge Shares pursuant hereto,
ChemBridge represents and warrants to the Company that:
(i) ChemBridge
is sophisticated in financial matters and is able to evaluate the risks and
benefits of the investment in the ChemBridge Shares;
(ii) This
Agreement and each of the other agreements contemplated hereby to which
ChemBridge is a party constitute legal, valid and binding obligations of
ChemBridge, enforceable in accordance with their terms, and the execution,
delivery and performance of this Agreement and such other agreements by
ChemBridge does not and will not conflict with, violate or cause a breach of
any
agreement, contract or instrument to which ChemBridge is a party or any
judgment, order or decree to which ChemBridge is subject; and
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(iii) ChemBridge
is not a party to or bound by any other noncompete agreement or confidentiality
agreement which conflicts with the obligations set forth in this
Agreement.
2. Vesting
of Shares.
The
ChemBridge Shares purchased hereunder shall be fully vested at the time of
issuance.
3. Restrictions
on Transfer of ChemBridge Securities.
(a) Transfer
of ChemBridge Securities.
ChemBridge shall not Transfer any interest in any ChemBridge Securities, except
at such time as the restrictions herein terminate as provided in Section
3(b)
below.
(b) Termination
of Restrictions.
The
restrictions on the Transfer of ChemBridge Securities set forth in this
Section 3
will
continue with respect to each ChemBridge Security until the earlier of
(i) a Qualified Public Offering; or (ii) a Sale of the
Company.
4. Additional
Restrictions on Transfer of ChemBridge Securities.
(a) Legend.
The
certificates representing the ChemBridge Securities will bear a legend in
substantially the following form:
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED AS OF
,
2004,
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 CHEMBRIDGE CORPORATION DATED AS OF _____, 2004. A COPY OF SUCH AGREEMENT
MAY
BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY’S PRINCIPAL PLACE OF BUSINESS
WITHOUT CHARGE.”
(b) Opinion
of Counsel.
No
holder of ChemBridge Securities may transfer any ChemBridge Securities (except
pursuant to an effective registration statement under the Securities Act)
without first delivering to the Company an opinion of counsel (reasonably
acceptable in form and substance to the Company) that neither registration
nor
qualification under the Securities Act and applicable state securities laws
is
required in connection with such Transfer.
3
5. Definitions.
“ChemBridge
Securities”
means
the ChemBridge Shares and any other securities of the Company held by ChemBridge
or any of ChemBridge’s transferees permitted hereunder. All ChemBridge
Securities will continue to be ChemBridge Securities in the hands of any holder
other than ChemBridge (except for the Company and except for transferees in
a
Public Sale). Except as otherwise provided herein, each such other holder of
ChemBridge Securities will succeed to all rights and obligations attributable
to
ChemBridge as a holder of ChemBridge Securities hereunder. ChemBridge Securities
will also include shares of the Company’s capital stock or other securities of
the Company issued with respect to ChemBridge Securities by way of a stock
split, dividend or other recapitalization or reclassification.
“Person”
means
an individual, a partnership, a limited liability company, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
“Public
Sale”
means
any sale pursuant to a registered public offering under the Securities Act
or
any sale to the public pursuant to Rule 144 promulgated under the
Securities Act effected through a broker, dealer or market maker.
“Qualified
Public Offering”
means
the sale in an underwritten public offering registered under the Securities
Act
of shares of the Company’s Common Stock approved by the Board resulting in net
proceeds to the Company of no less than $7.5 million.
“Sale
of the Company”
means
any transaction or series of transactions pursuant to which (A) any
Person(s) acquire(s) (i) capital stock of the Company possessing the voting
power (other than voting rights accruing only in the event of a default, breach
or event of noncompliance) to elect a majority of the Company’s board of
directors (whether by merger, consolidation, reorganization, combination, sale
or transfer of the Company’s capital stock, shareholder or voting agreement,
proxy, power of attorney or otherwise) or (ii) all or substantially all of
the Company’s assets determined on a consolidated basis; provided
that the
term “Sale of the Company” shall not include any sale of equity or debt
securities by the Company in a private offering to other investors; or
(B) more than 50% of the assets of the Company is spun off, split off or
otherwise distributed.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Transfer”
means
to sell, transfer, assign, pledge or otherwise dispose of (whether with or
without consideration and whether voluntarily or involuntarily or by operation
of law).
6. Seniority
of ChemBridge Shares and Registration Rights.
All of
the shares issued to ChemBridge hereunder, including those shares resulting
from
the exercise of warrants, shall have liquidation seniority and registration
preferences at least as favorable as those of any of the shares held now or
in
the future by any of the current shareholders of the Company. ChemBridge,
moreover, shall have the right to participate on a pro
rata
basis
with any current shareholder of the Company in any sale or exchange of any
of
the shares possessed now or in the future by any current shareholder of the
Company.
4
7. Anti-dilution
Provision.
ChemBridge shall have the right to purchase, at the lowest price offered to
any
other entity or individual, a percentage of any new equity issued by the
Company, any successor company or affiliate, such percentage to be up to that
percentage of issued equity of the Company which ChemBridge, at the time
ChemBridge shall make such purchase, shall own under Sections 1
and
2
of this
Agreement and including, in addition, any exercised warrants or other stock
which ChemBridge shall own in the Company. ChemBridge’s rights under this
Section 7
shall
survive termination of this Agreement and shall continue until ChemBridge has
disposed of its entire equity interest in the Company and its successor
companies
8. Down-round
Protection of ChemBridge.
Section 1(b)
provides
for protection of ChemBridge in the event that the first $1 million of
equity capital raised by the Company shall be raised at a pre-money valuation
of
less than $10,000, in which case the number of compounds given to the Company
under a certain Library Access Agreement would be decreased and the number
of
shares of the Company’s Common Stock granted to ChemBridge would be increased.
Should the Company, subsequent to its raising the first $1 million in
equity capital, raise any additional equity capital at a pre-money valuation
of
less than $10,000,000, then the total number of shares owned by ChemBridge
would
be increased on a pro
rata
basis.
(For instance, if ChemBridge owns 600 shares of the Company’s stock and the
Company raises capital at a pre-money valuation of only $5,000,000, then
ChemBridge will be granted an additional 600 shares.)
9. Financial
Statements.
Once
per year, on the anniversary of this Agreement, the Company will provide to
ChemBridge a complete set of the Company’s financial statements. At such time as
the Company shall obtain audited financial statements, the Company will provide
to ChemBridge annually a complete copy of these audited financial statements
with 30 days of their receipt by the Company, these audited financial statements
to be in lieu of those defined in the first sentence of this
paragraph.
10. ChemBridge
Representation on the Company’s Board of Directors.
Associated with this Agreement is another agreement between the parties entitled
“Warrant to Purchase Common Stock,” which agreement provides to ChemBridge a
right to purchase additional shares of the Company’s Common Stock. At such time
as ChemBridge shall elect to exercise all the warrants provided in the Warrant
to Purchase Common Stock, ChemBridge shall gain the right to appoint a member
of
the Company’s Board of Directors, and this right shall continue until such time
as ChemBridge has disposed of more than fifty percent of its holdings of the
Company’s equity, or the Company shall make a Qualified Public Offering or there
shall be a Sale of the Company. ChemBridge, at its sole election, in lieu of
appointing a member of the Company’s Board of Directors, shall have the right to
send a representative to each and every meeting of the Company’s Board of
Directors, and the Company shall have the affirmative obligation to provide
to
ChemBridge Notice of any such meeting.
11. Notice
to ChemBridge of the Company’s Financial Transactions.
The
Company shall have the affirmative obligation to inform ChemBridge of each
and
every transaction that has a total value in excess of $250,000.00 to which
the
Company is a party. Such notice shall be provided to ChemBridge within thirty
days of the completion of the transaction, and, upon the Company’s request to
XxxxXxxxxx, XxxxXxxxxx shall hold in confidence its knowledge of the
transaction.
5
12. Notices.
Any
notice provided for in this Agreement must be in writing and must be either
personally delivered, mailed by first class mail (postage prepaid and return
receipt requested), sent by reputable overnight courier service (charges
prepaid), or sent via facsimile to the recipient at the address or facsimile
number below indicated:
|
If
to the Company:
Cleveland
BioLabs,
Inc.
0000
Xxxxxxxxxx Xxxx
Xxxxx
Xxxxx, Xxxx
00000
Attn: Xxxxxxx
Xxxxxxxx
|
|
With
a copy to:
Xxxxxx
Xxxxxx Xxxxxxxx
LLP
000
Xxxx Xxxxxx
Xxxxxx
Xxxxx
0000
Xxxxxxx,
Xxxxxxxx
00000
Fax: (000)
000-0000
Tel: (000)
000-0000
Attn: Xxxx
X. Xxxxxxx,
Esq.
|
|
If
to CamBridge:
ChemBridge
Corporation
16981
Via Tazon
Xxx
Xxxxx, Xxxxxxxxxx
00000
Attn: Mr.
Xxxxxx
Altshteyn
|
or
such
other address, facsimile number or to the attention of such other person as
the
recipient party shall have specified by prior written notice to the sending
party. Any notice under this Agreement will be deemed to have been given when
so
delivered, sent or transmitted or, if mailed, five days after deposit in the
U.S. mail.
13. General
Provisions.
(a) Transfers
in Violation of Agreement.
Any
Transfer or attempted Transfer of any ChemBridge Securities in violation of
any
provision of this Agreement shall be void, and the Company shall not record
such
Transfer on its books or treat any purported transferee of such ChemBridge
Securities as the owner of such securities for any purpose.
(b) Severability.
Whenever possible, each provision of this Agreement will be interpreted in
such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision or any other
jurisdiction, but this Agreement will be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
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(c) Complete
Agreement.
This
Agreement, those documents expressly referred to herein and other documents
of
even date herewith embody the complete agreement and understanding among the
parties and supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way.
(d) Counterparts.
This
Agreement may be executed in separate counterparts, each of which is deemed
to
be an original and all of which taken together constitute one and the same
agreement.
(e) Successors
and Assigns.
Except
as otherwise provided herein, this Agreement shall bind and inure to the benefit
of and be enforceable by ChemBridge and the Company and their respective
successors and assigns (including subsequent holders of ChemBridge Securities),
provided that the rights and obligations of ChemBridge under this Agreement
shall not be assignable except in connection with a permitted transfer of
ChemBridge Securities hereunder.
(f) Choice
of Law.
This
Agreement shall be construed in accordance with the laws of the State of
Delaware, without regard to principals of conflicts of law. Any and all
litigation arising out of this Agreement shall be conducted only in courts
located in the State of Delaware.
(g) Remedies.
Each of
the parties to this Agreement will be entitled to enforce its rights under
this
Agreement specifically, to recover damages and costs (including attorney’s fees)
caused by any breach of any provision of this Agreement and to exercise all
other rights existing in its favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may in its sole discretion
apply
to any court of law or equity of competent jurisdiction (without posting any
bond or deposit) for specific performance and/or other injunctive relief in
order to enforce or prevent any violations of the provisions of this
Agreement.
(h) Amendment
and Waiver.
The
provisions of this Agreement may be amended and waived only with the prior
written consent of the Company and ChemBridge. No course of conduct or failure
or delay in enforcing the provisions of this Agreement shall affect the
validity, binding effect or enforceability of this Agreement.
(i) Business
Days.
If any
time period for giving notice or taking action hereunder expires on a day which
is a Saturday, Sunday or holiday in the state in which the Company’s chief
executive office is located, the time period shall be automatically extended
to
the business day immediately following such Saturday, Sunday or
holiday.
(j) Indemnification
and Reimbursement of Payments on Behalf of ChemBridge.
The
Company shall be entitled to deduct or withhold from any amounts owing from
the
Company to ChemBridge any federal, state, local or foreign withholding taxes,
or
excise taxes (“Taxes”)
imposed with respect to ChemBridge’s ownership interest in the
Company.
(k) Generally
Accepted Accounting Principles; Adjustments of Numbers.
Where
any accounting determination or calculation is required to be made under this
Agreement or the exhibits hereto, such determination or calculation (unless
otherwise provided) shall be made in accordance with generally accepted
accounting principles, consistently applied. All numbers set forth herein which
refer to share prices or amounts will be appropriately adjusted to reflect
stock
splits, stock dividends, combinations of shares, recapitalizations or other
similar transactions affecting the subject class of stock.
7
(l) Waiver
of Jury Trial.
Each of
the parties hereto hereby irrevocably waives any and all right to trial by
jury
of any claim or cause of action in any legal proceeding arising out of or
related to this Agreement or the transactions or events contemplated hereby
or
any course of conduct, course of dealing, statements (whether verbal or written)
or actions of any party hereto, The parties hereto each agree that any and
all
such claims and causes of action shall be tried by a court trial without a
jury.
Each of the parties hereto further waives any right to seek to consolidate
any
such legal proceeding in which a jury trial has been waived with any other
legal
proceeding in which a jury trial cannot or has not been waived.
(m) Conflict
Between Agreements.
In
association with this Agreement, the parties have executed four other
agreements. Should any of the terms of this Agreement conflict with any of
the
terms of any of the other agreements between the parties, then the terms of
this
Agreement shall prevail.
*****
8
IN
WITNESS WHEREOF,
the
parties hereto have executed this Restricted Stock Agreement as of the date
first written above.
CLEVELAND
BIOLABS, INC.
By: /s/Xxxxxxx
Xxxxxxxx
Name: Xxxxxxx
Xxxxxxxx
Its: CEO
CHEMBRIDGE
CORPORATION
By: /s/
Xxxxxx
Xxxxxxxx
Name: Xxxxxx
Xxxxxxxx
Its: CEO
9
