NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO
SALE, TRANSFER OR OTHER DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE
EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii)
AN OPINION OF COUNSEL FOR THE HOLDER THAT SUCH REGISTRATION IS NOT REQUIRED OR
(iii) RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION
TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
CSW-__
Right to Purchase Shares of Common
Stock of Chesapeake Biological Laboratories, Inc.
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
Common Stock Warrant
Chesapeake Biological Laboratories, Inc., a Maryland corporation (the
"Company"), hereby certifies that, for value received, __________________ or
designees thereof ("Holder"), is entitled, subject to the terms set forth below,
to purchase from the Company at any time or from time to time between the date
hereof (the "Issue Date") and the fifth anniversary of the Issue Date, or such
earlier time as may be specified in Section 19 hereof, up to ______ shares of
fully paid and nonassessable shares of Common Stock.
As used herein, the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include Chesapeake Biological
Laboratories, Inc. and any corporation that may succeed or
assume the obligations of the Company hereunder.
(b) The term "Common Stock" means the Company's common stock,
$0.01 par value per share.
(c) The term "Exercise Price" shall be $1.50 per share, as
adjusted pursuant to the terms hereof.
(d) The term "Warrant" means this Warrant and any and all
additional Warrants to be issued by the Company to Holder or
its assigns, as approved by the Company pursuant to the terms
and conditions set forth in Section 13 hereof.
(e) The term "Warrant Shares" refers to the shares of Common Stock
that are to be issued to the holder of this Warrant upon such
holder's exercise of this Warrant.
1. Exercise of Warrant.
1.1. Full Exercise. This Warrant may be exercised in whole or in
part by the holder hereof by surrender of this Warrant, with the form of
subscription attached hereto, duly executed by such holder, to the Company at
its principal office, accompanied by payment, in cash or by certified or
official bank check payable to the order of the Company, in the amount obtained
by multiplying the number of shares of Common Stock for which this Warrant is
exercisable by the Exercise Price.
1.2. Partial Exercise. This Warrant may be exercised in part by
surrender of this Warrant in the manner and at the place provided in subsection
1.1 except that the amount payable by the holder on such partial exercise shall
be the amount obtained by multiplying (a) the number of shares of Common Stock
designated by the holder in the subscription attached hereto by (b) the Exercise
Price. On any such partial exercise the Company at its expense will forthwith
issue and deliver to or upon the order of the holder hereof a new Warrant or
Warrants of like tenor, in the name of the holder hereof or as such holder may
request, calling in the aggregate on the face or faces thereof for the number of
shares of Series Common Stock for which such Warrant or Warrants may still be
exercised.
1.3. Right to Exercise Warrant for Common Stock; Net Issuance.
(a) Notwithstanding any provisions herein to the contrary, in
lieu of exercising this Warrant for cash in the manner set forth in Sections 1.1
and 1.2, the Warrant holder may elect to exercise this Warrant ("Warrant Right")
for shares of Common Stock, the aggregate value of which shares shall be equal
to the Exercise Price multiplied by the number of shares of Common Stock
designated by the holder in the subscription attached hereto (as each value may
be adjusted from time to time as described elsewhere herein). The Warrant Right
may be exercised by delivery to the principal office of the Company together
with notice of the Warrant holder's intention to exercise the Warrant Right, in
which event the Company shall issue to the holder a number of shares of the
Common Stock calculated pursuant to application of the following formula:
X = (Y(A-B))/A
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X = The number of shares of Common Stock to be issued to
holder.
Y = The number of shares of Common Stock purchasable under
this Warrant.
A = The fair market value of one share of Common Stock (at
the date of such calculation).
B = Exercise Price (as adjusted to the date of such
calculation).
(b) For purposes of this Section 1.3, "fair market value" per
share of the Company's Common Stock shall be the closing price per share to the
public on Nasdaq, as reported in The Wall Street Journal, on the business day
immediately preceding the day upon which the Holder exercises this Warrant.
1.4. Company Acknowledgment. The Company will, at the time of the
exercise of this Warrant, upon the request of the holder hereof, acknowledge in
writing its continuing obligation to afford to such holder any rights to which
such holder shall continue to be entitled after such exercise in accordance with
the provisions of this Warrant. If the holder shall fail to make any such
request, such failure shall not affect the continuing obligation of the Company
to afford to such holder any such rights.
1.5. Restrictions on Transfer of Common Stock.
Holder acknowledges and agrees that all shares of Common Stock
acquired pursuant to the exercise of this Warrant will be subject to certain
restrictions on transfer and that, upon the exercise of this Warrant, Holder
shall be required to execute such standard form of Stock Restriction Agreement
as the Company may be utilizing on the date or dates of exercise of this
Warrant.
2. Delivery of Stock Certificates, on Exercise. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event within
fifteen (15) days thereafter, the Company at its expense (including the payment
by it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the holder hereof, or as such holder (upon payment by such holder
of any applicable transfer taxes) may direct, a certificate or certificates for
the number of fully paid and nonassessable shares of Common Stock to which such
holder shall be entitled on such exercise, plus, in lieu of any fractional share
to which such holder would otherwise be entitled, cash equal to such fraction
multiplied by the Exercise Price of one full share, together with any other
stock or other securities and property (including cash, where applicable) to
which such holder is entitled upon such exercise pursuant to Section 1 or
otherwise.
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3. Adjustment for Dividends in Other Stock, Property, Reclassification. In
case at any time or from time to time, the holders of Common Stock shall have
received, or (on or after the record date fixed for the determination of
shareholders eligible to receive) shall have become entitled to receive, without
payment therefor:
(a) other or additional stock or other securities or property
(other than cash) by way of dividend;
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company); or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up,
reclassification, recapitalization, combination of shares or
similar corporate rearrangement,
other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided in Section 5), then
and in each such case the holder of this Warrant, on the exercise hereof as
provided in Section 1, shall be entitled to receive the amount of stock and
other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this Section 3) that such holder would hold on the
date of such exercise if on the date hereof he had been the holder of record of
the number of shares of Common Stock called for on the face of this Warrant and
had thereafter, during the period from the date hereof to and including the date
of such exercise, retained such shares and all such other or additional stock
and other securities and property (including cash in the cases referred to in
subdivisions (b) and (c) of this section 3) receivable by him as aforesaid
during such period, giving effect to all adjustments called for during such
period by Sections 4 and 5.
4. Adjustment for Reorganization, Consolidation, Merger.
4.1. General. If, at any time or from time to time, the Company
shall (a) effect a reorganization, (b) consolidate with or merge into any other
person, or (c) transfer all or substantially all of its properties or assets to
any other person under any plan or arrangement contemplating the dissolution of
the Company, then, in each such case, except as otherwise provided in Section
4.3 hereof, the holder of this Warrant, on the exercise hereof as provided in
Section 1 at any time after the consummation of such reorganization,
consolidation or merger or the effective date of such dissolution, as the case
may be, shall receive, in lieu of the Common Stock issuable on such exercise
prior to such consummation or such effective date, the stock and other
securities and property (including cash) to which such holder would have been
entitled upon such consummation or in connection with such dissolution, as the
case may be, if such holder had so exercised this Warrant, immediately prior
thereto, all subject to further adjustment thereafter as provided in Sections 3
and 5.
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4.2. Dissolution. Except as otherwise provided in Section 4.3
hereof, in the event of any dissolution of the Company following the transfer of
all or substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered the stock and
other securities and property (including cash, where applicable) receivable by
the holder of this Warrant after the effective date of such dissolution pursuant
to this Section 4 to a bank or trust company, as trustee for the holder of this
Warrant.
4.3. Continuation of Terms. Except as otherwise hereinafter
provided, upon any reorganization, consolidation, merger or transfer (and any
dissolution following any transfer) referred to in this Section 4, this Warrant
shall continue in full force and effect and the terms hereof shall be applicable
to the shares of stock and other securities and property receivable on the
exercise of this Warrant after the consummation of such reorganization,
consolidation or merger or the effective date of dissolution following any such
transfer, as the case may be, and shall be binding upon the issuer of any such
stock or other securities, including, in the case of any such transfer, the
person acquiring all or substantially all of the properties or assets of the
Company, regardless of whether such person shall have expressly assumed the
terms of this Warrant as provided in Section 6; provided, however, that if the
holders of Warrants exercisable into at least that number of shares of Common
Stock that represents a majority in interest of the Common Stock issuable upon
exercise of all the Warrants then issued and outstanding, agree in writing to
waive the terms of this Section 4, on and as of the date of the consummation of
such reorganization, consolidation or merger or the effective date of
dissolution, as the case may be, the rights of the holder of this Warrant and
the obligations of the Company under this Section 4 shall terminate and the
provisions of this Section 4 shall be of no further force and effect.
5. Adjustment for Extraordinary Events. In the event that the Company
shall (a) issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (b) subdivide its outstanding shares
of Common Stock, or (c) combine its outstanding shares of the Common Stock into
a smaller number of shares of the Common Stock, then, in each such event, the
Exercise Price shall, simultaneously with the happening of such event, be
adjusted by multiplying the Exercise Price then in effect by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such event, and the
product so obtained shall thereafter be the Exercise Price then in effect.
The Exercise Price, as so adjusted, shall be readjusted in the same manner
upon the happening of any successive event or events described herein in this
Section 5. The holder of this Warrant shall thereafter, on the exercise hereof
as provided in Section 1, be entitled to receive that number of shares of Common
Stock determined by multiplying the number of shares of Common Stock which would
otherwise (but for the provisions of this Section 5) be issuable on such
exercise by a fraction of which (i) the numerator is the Exercise Price which
would otherwise (but for the provisions of this Section 5) be in effect, and
(ii) the denominator is the Exercise Price in effect on the date of such
exercise.
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6. Certificate as to Adjustments. In each case of any adjustment or
readjustment in the shares of Common Stock issuable on the exercise of the
Warrants, the Company at its expense will promptly cause its treasurer or chief
financial officer to compute such adjustment or readjustment in accordance with
the terms of the Warrants and prepare a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of the Exercise Price
and the number of shares of Common Stock to be received upon exercise of this
Warrant in effect immediately prior to such event and as adjusted and readjusted
as provided in this Warrant. The Company will forthwith mail a copy of each such
certificate to each holder of a Warrant, and will, on the written request at any
time of any holder of a Warrant, furnish to such holder a like certificate
setting forth the Exercise Price at the time in effect and showing how it was
calculated.
7. Notices of Record Date, etc. In the event of:
(a) any taking by the Company of a record of the holders of any
class or securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other
distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right,
or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of
the Company or any transfer of all or substantially all the
assets of the Company to or consolidation or merger of the
Company with or into any other person, or any voluntary or
involuntary dissolution, liquidation or winding-up of the
Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder a notice specifying (i) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and stating the amount
and character of such dividend, distribution or right, (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock (or other securities of the Company) shall be entitled to exchange their
shares of Common Stock (or other securities of the Company) for securities or
other property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up, and (iii) the amount and character of any stock or other securities,
or rights or options with respect thereto, proposed to be issued or granted, the
date of such proposed issue or grant and the persons or class of persons to whom
such proposed issue or grant is to be offered or made. Such notice shall be
mailed at least 20 days prior to the date specified in such notice on which any
such action is to be taken.
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8. Amendment. The terms of this Warrant may be amended, modified or waived
only with the written consent of the Company and the Holder.
9. Reservation of Stock Issuable on Exercise of Warrant. The Company will
at all times reserve and keep available, solely for issuance and delivery on the
exercise of this Warrant, all shares of Common Stock from time to time issuable
on the exercise of this Warrant.
10. Exchange of Warrants. On surrender for exchange of any Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new Warrant or Warrants of
like tenor, in the name of such holder or as such holder (on payment by such
holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant or Warrants so surrendered.
11. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
12. Warrant Agent. The Company may, by written notice to each holder of a
Warrant, appoint an agent for the purpose of issuing Common Stock (or other
securities of the Company) on the exercise of this Warrant pursuant to Section
1, exchanging Warrants pursuant to Section 10, and replacing Warrants pursuant
to Section 11, or any of the foregoing, and thereafter any such issuance,
exchange or replacement, as the case may be, shall be made at such office by
such agent.
13. Negotiability, etc. This Warrant is issued upon the following terms,
to all of which each holder or owner hereof by the taking hereof consents and
agrees:
(a) title to this Warrant may be transferred or assigned to any
individuals Holder shall designate.
(b) any person in possession of this Warrant properly endorsed, is
authorized to represent himself as absolute owner hereof and
is empowered to transfer absolute title hereto by endorsement
and delivery hereof to a bona fide purchaser hereof for value;
each prior taker or owner waives and renounces all of his
equities or rights in this Warrant in favor of each such bona
fide purchaser, and each such bona fide purchaser shall
acquire absolute title hereto and to all rights represented
hereby; and
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(c) until this Warrant is transferred on the books of the Company,
the Company may treat the registered holder hereof as the
absolute owner hereof for all purposes, notwithstanding any
notice to the contrary.
14. Notices, etc. All notices and other communications from the Company to
the holder of this Warrant shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been furnished to
the Company in writing by such holder or, until any such holder furnishes to the
Company an address, then to, and at the address of, the last holder of this
Warrant who has so furnished an address to the Company.
15. Governing Law. This Warrant shall be governed by, and construed in
accordance with, the laws of the State of Maryland.
16. Miscellaneous. The headings in this Warrant are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
This Warrant is being executed as an instrument under seal. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
17. Entire Agreement. This Warrant contains the entire agreement between
the parties with respect to the subject matter contained herein.
18. Expiration. The right to exercise this Warrant shall expire at 5:00
P.M., Eastern Time, on the earlier of (i) the fifth anniversary of the Issue
Date or (ii) the effective date of the waiver exercised pursuant to Section 4.3
hereof.
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