EXHIBIT 4.8
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") NOR IS SUCH REGISTRATION CONTEMPLATED. SUCH SECURITIES MAY
NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED AT ANY TIME
WHATSOEVER UNLESS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS
OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THE SECURITIES REPRESENTED
BY THIS CERTIFICATE ARE ALSO SUBJECT TO A CALL OPTION AS IS FURTHER DESCRIBED
BELOW.
WARRANT TO PURCHASE COMMON STOCK OF
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
This is to certify that, for value received, FIRST UNION NATIONAL BANK, or
registered assigns (in each case, the "Holder"), is entitled to purchase,
subject to the provisions of this Warrant (the "Warrant"), from CHESAPEAKE
BIOLOGICAL LABORATORIES, INC., a Maryland corporation (the "Company"), having
its principal place of business at 1111 South Paca Street, Baltimore City,
Maryland 21230, at any time during the period from the date hereof (the
"Commencement Date") to 5:00 P.M., Baltimore, Maryland time, on June 11, 2003,
as such date may be extended pursuant to Section 4.6 hereof (the "Expiration
Date"), at which time this Warrant shall expire and become void, 75,000 shares
("Warrant Shares") of the Company's Common Stock, no par value (the "Common
Stock"). This Warrant shall be exercisable at a price ("Exercise Price") which
shall initially be Two Dollars and Twenty-Five Cents ($2.25) per share. The
number of shares of Common Stock to be received upon exercise of this Warrant
shall be adjusted from time to time as set forth below, and the Exercise Price
per share shall be subject to adjustment as provided in this Warrant. This
Warrant also is subject to the following terms and conditions:
1. EXERCISE OF WARRANT AND PAYMENT OF EXERCISE PRICE.
(a) EXERCISE OF WARRANT. This Warrant may be exercised in
accordance with the terms hereof at any time from and after the Commencement
Date until the Expiration Date, but if such date is a day on which federal or
state chartered banking institutions located in the State of Maryland are
authorized to close, then on the next succeeding day which shall not be such a
day. Exercise shall be by presentation and surrender to the Company at its
principal office, or at the office of any transfer agent designated by the
Company, of (i) this Warrant, (ii) the attached exercise form properly executed,
and either (iii) cash, certified or cashiers check or wire transfer for the
Exercise Price for the number of Warrant Shares specified in the exercise
form, or (iv) if the exercise is to be a cashless exercise pursuant to Section
1.(b), written notice of the number of shares of Common Stock with respect to
which this Warrant is being surrendered in payment of the aggregate Exercise
Price for the Common Stock to be delivered to Holder. If this Warrant is
exercised in part only, the Company or its transfer agent shall, upon surrender
of the Warrant, execute and deliver a new Warrant evidencing the rights of the
Holder to purchase the remaining number of Warrant Shares purchasable hereunder.
Upon receipt by the Company of this Warrant in proper form for exercise,
accompanied by payment as aforesaid, the Holder shall be deemed to be the holder
of record of the Common Stock issuable upon such exercise, notwithstanding that
the stock transfer books of the Company shall then be closed or that
certificates representing such Warrant Shares shall not then be actually
delivered by the Holder.
(b) PAYMENT OF WARRANT EXERCISE PRICE.
Payment of the Exercise Price may be made by any of the
following, or a combination thereof, at the election of Holder:
(i) cash, certified check or cashiers check or wire transfer;
or
(ii) surrender of this Warrant at the principal office of the
Company together with notice of election, in which event the Company shall issue
Holder a number of shares of Common Stock computed using the following formula:
X = Y(A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder (not to
exceed the number of Warrant Shares set forth on the cover page of this
Warrant, as adjusted pursuant to the provisions of Section 4 of this Warrant);
Y = the number of shares of Common Stock for which this Warrant is
being exercised;
A = the Fair Market Value of one share of Common Stock (for purposes of
this Section 1.(b), the "Fair Market Value" shall be defined in
accordance with Section 4.4 hereof;
B = the Exercise Price (as adjusted to the date of such calculation).
It is intended that the Common Stock issuable upon exercise of this Warrant in a
cashless exercise transaction, if any, shall be deemed to have been acquired at
the time this Warrant was issued, for purposes of Sec Rule 144(d)(3)(ii).
2. RESERVATION OF SHARES AND EXPENSES. The Company shall, at all times
until the expiration of this Warrant, reserve for issuance and delivery upon
exercise of this Warrant the
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number of Warrant Shares which shall be required for issuance and delivery upon
exercise of this Warrant, and the Company represents and warrants to the Holder
that its Board of Directors has authorized and approved the same. The Company
covenants that the shares of Common Stock issuable on exercise of the Warrant
shall be duly and validly issued and fully paid and non-assessable and free of
liens, charges and all taxes with respect to the issue thereof. The Company
shall pay all expenses, taxes (other than income or similar taxes imposed on
Holder) and other charges payable in connection with the preparation, issue and
delivery of stock certificates pursuant to this Warrant. The transfer agent for
the Common Stock, which may be the Company ("Transfer Agent"), and every
subsequent Transfer Agent for any shares of the Company's stock issuable upon
the exercise of this Warrant, are hereby irrevocably authorized and directed at
all times until the Expiration Date to reserve such number of authorized and
unissued shares as shall be requisite for such purpose. The Company shall keep
copies of this Warrant on file with the Transfer Agent.
3. NO RIGHTS AS STOCKHOLDERS. This Warrant shall not entitle the Holder to
any rights as a stockholder of the Company, either at law or in equity.
4. ADJUSTMENTS.
4.1. SUBDIVISION OR COMBINATION OF SHARES. If the Company is
recapitalized through the subdivision or combination of its outstanding shares
of Common Stock into a larger or smaller number of shares, the number of Warrant
Shares shall be increased or reduced, as of the record date for such
recapitalization, in the same proportion as the increase or decrease in the
outstanding shares of Common Stock, and the Exercise Price shall be adjusted so
that the aggregate amount payable for the purchase of all of the Warrant Shares
issuable hereunder immediately after the record date for such recapitalization
shall equal the aggregate amount so payable immediately before such record date.
4.2. DIVIDENDS IN COMMON STOCK OR SECURITIES CONVERTIBLE INTO COMMON
STOCK. If the Company declares a dividend or distribution on Common Stock
payable in Common Stock or securities convertible into Common Stock, the number
of shares of Common Stock for which this Warrant may be exercised shall be
increased, as of the record date for determining which holders of Common Stock
shall be entitled to receive such dividend, in proportion to the increase in the
number of outstanding shares (and shares of Common Stock issuable upon
conversion of all such securities convertible into Common Stock) of Common Stock
as a result of such dividend or distribution, and the Exercise Price shall be
adjusted so that the aggregate amount payable for the purchase of all the
Warrant Shares issuable hereunder immediately after the record date for such
dividend or distribution shall equal the aggregate amount so payable immediately
before such record date.
4.3. DISTRIBUTIONS OF OTHER SECURITIES OR PROPERTY. If the Company
distributes to holders of any of its securities (other than Common Stock or
securities convertible into Common Stock), property or any evidence of
indebtedness, then in each case, the number of
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Warrant Shares thereafter purchasable upon exercise of this Warrant shall be
determined by multiplying the number of Warrant Shares theretofore purchasable
by a fraction, of which the numerator shall be the Fair Market Value price per
share of Common Stock (as determined pursuant to Section 4.4) on the record date
mentioned below in this Section 4.3, and of which the denominator shall be the
Fair Market Value price per share of Common Stock on such record date, less the
then fair value (as determined by the Board of Directors of the Company in good
faith) of the portion of the shares of the Company's capital stock, property or
evidence of indebtedness distributable with respect to each share of Common
Stock. Such adjustment shall be made whenever any such distribution is made, and
shall become effective retroactively as of the record date for the determination
of stockholders entitled to receive such distribution.
4.4. FAIR MARKET VALUE. Fair market value of the Common Stock
("Fair Market Value") shall be determined as follows:
(a) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such an exchange, or is
listed on the NASDAQ National Market or Small Cap Market, the current Fair
Market Value shall be the average closing bid price for the Common Stock on such
exchange or NASDAQ during the last thirty (30) trading days; or
(b) If the Common Stock is not so listed or admitted to
unlisted trading privileges or quoted on NASDAQ, the current Fair Market Value
shall be the last bid price reported on the last business day prior to the date
of the exercise of this Warrant (i) by NASDAQ, or (ii) if reports are
unavailable under clause (i) above, by the National Quotation Bureau
Incorporated; or
(c) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid prices are not so reported, the current Fair
Market Value shall be determined in good faith as promptly as reasonably
practicable by the mutual agreement of the Board of Directors and the Holder. If
such parties are unable to reach agreement within 20 days after the need for
such determination arises, the Board of Directors shall appoint a nationally
recognized investment banking firm acceptable to the Holder (the "Appointed
Firm") to make such determination. The parties shall use their best efforts to
cause the Appointed Firm to resolve all disagreements as soon as practicable,
but in any event within 45 days after the submission of the disputes to such
Appointed Firm. The resolution of such disagreements and the determination of
Fair Market Value by the Appointed Firm shall be final and binding on the
Company and the Holder. The Appointed Firm will determine the allocation of its
fees and expenses in connection with its determination of Fair Market Value
based upon the percentage which the portion of the contested amount not awarded
to each party bears to the amount actually contested by such party. For example,
if the Board of Directors claims that the Fair Market Value is $1,000 less than
the amount claimed by the Holder, and if the Appointed Firm ultimately resolves
the dispute by awarding the Holder $300 of the $1,000
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contested, then the fees and expenses of the Appointed Firm will be allocated
70% (I.E.: 700/1000) to the Holder and 30% (I.E. : 300/1000) to the Company.
4.5. RIGHTS OFFERING. If the Company offers rights or warrants to
persons which entitle them to subscribe to or purchase Common Stock or
securities convertible into Common Stock, and if the price per share (together
with the value of the consideration, if any, paid for such rights or warrants)
is lower on the record date referred to below than the then Fair Market Value
price per share of Common Stock, the Company shall immediately pay an Adjustment
Fee (as hereinafter defined) in cash to the Holder calculated in accordance with
the formula set forth below. As used herein, the following terms shall have the
following meanings:
(i) "WS" shall mean the number of shares of Common
Stock of the Company for which this Warrant is exercisable;
(ii) "CDO" shall mean Common Stock of the Company
deemed outstanding at the time of a dilutive issuance;
(iii) "DI" shall mean the number of shares of Common
Stock of the Company deemed issued in a dilutive issuance;
(iv) "NDI" shall mean the number of shares of Common
Stock of the Company that would have been issued in a dilutive issuance had Fair
Market Value been paid;
(iv) "FMV" shall mean Fair Market Value;
(vi) "EP" shall mean the Exercise Price then in
effect;
(vii) "AWS" shall mean (CDO +DI) /(CDO +NDI) x WS;
and
(viii) "AEP" shall mean (EP x WS) /AWS.
The term "Adjustment Fee," as used herein, shall mean and be calculated in
accordance with the following formula:
Adjustment Fee = ((AWS - WS) x (FMV - AEP)) + (WS x (EP - AEP))
The following is an example of a calculation of the Adjustment Fee as defined
above:
Example:
WS = $ 75,000.00
EP = $ 2.25
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FMV = $ 4.00
NDI = $1,000,000.00
DI = $1,500,000.00
CDO = $5,500,000.00
Adjustment Fee = ((80,775 - 75,000) x ($4.00 - $2.089)) + ((75,000 x ($2.25 -
$2.089))
= (5775 x $1.911) + (75,000 x $0.161)
= $11,036.03 + $12,075
= $23,111.03
AWS = ((5,500,000 + 1,500,000) / (5,500,000 + 1,000,000)) x 75,000
= ((7,000,000) /(6,500,000)) x 75,000
= 1.077 x 75,000
= 80,775
AEP = ($2.25 x 75,000) /80,775
= $168,750 /80,775
= $2,089
An Adjustment Fee shall be immediately paid by the Company to the Holder
whenever such rights or warrants are issued, and shall become effective
retroactively as of the record date for the determination of stockholders
entitled to receive such rights or warrants.
4.6. MERGER, SALE OF ASSETS. If at any time while this Warrant, or
any portion thereof, is outstanding and unexpired there shall be: (a) a
reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein); (b) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash, or
otherwise; or (c) a sale or transfer of the Company's properties and assets as,
or substantially as, an entirety to any other person, then, (x) the Expiration
Date shall be extended to June 11, 2004, and (y) as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Exercise Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a Holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as
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provided in this Section 4. The foregoing provisions of this Section 4.6 shall
similarly apply to successive reorganizations, consolidations, mergers, sales
and transfers and to the stock or securities of any other corporation that are
at the time receivable upon the exercise of this Warrant. In all events,
appropriate adjustment shall be made in the application of the provisions of
this Warrant with respect to the rights and interests of the Holder after the
transaction, to the end that the provisions of this Warrant shall be applicable
after that event, as near as reasonably may be, in relation to any shares or
other property deliverable after that event upon exercise of this Warrant.
4.7. RECLASSIFICATION. If the Company, at any time while this
Warrant, or any portion thereof, remains outstanding and unexpired, shall change
any of the securities as to which purchase rights under this Warrant exist, by
reclassification of securities or otherwise, into the same or a different number
of securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Warrant immediately prior to such
reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 4.
4.8. ADJUSTMENT OF EXERCISE PRICE. Whenever the number of Warrant
Shares purchasable upon the exercise of the Warrant is adjusted, the Exercise
Price with respect to the Warrant Shares shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the exercise of
the Warrant immediately prior to such adjustment, and of which the denominator
shall be the number of Warrant Shares so purchasable immediately thereafter.
4.9. NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares
purchasable upon the exercise of the Warrant or the Exercise Price of the
Warrant Shares is adjusted as provided herein, the Company shall mail to the
Holder a notice of such adjustment or adjustments, prepared and signed by the
Chief Financial Officer or Secretary of the Company, which sets forth the number
of Warrant Shares purchasable upon the exercise of the Warrant and the Exercise
Price of such Warrant Shares after such adjustment, a brief statement of the
facts requiring such adjustment, and the computation by which such adjustment
was made.
5. NOTICES TO HOLDER. So long as this Warrant shall be outstanding: (a)
if the Company shall pay any dividends or make any distribution upon the Common
Stock otherwise than in cash; or (b) if the Company shall offer generally to the
holders of Common Stock the right to subscribe to or purchase any shares of any
class of Common Stock or securities convertible into Common Stock or any similar
rights; or (c) if there shall be any capital reorganization of the Company in
which the Company is not the surviving entity, recapitalization of the capital
stock of the Company, consolidation or merger of the Company with or into
another corporation, sale, lease or other transfer of all or substantially all
of the property and assets of
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the Company, or voluntary or involuntary dissolution, liquidation or winding up
of the Company, then in such event, the Company shall cause to be mailed to the
Holder, at least fifteen (15) days prior to the relevant date described below, a
notice containing a description of the proposed action and stating the date or
expected date on which a record of the Company's stockholders is to be taken for
the purpose of any such dividend, distribution of rights, or such
reclassification, reorganization, consolidation, merger, conveyance, lease or
transfer, dissolution, liquidation or winding up is to take place, the effect of
the action, to the extent such effect may be known on the date of such notice,
on the Exercise Price and the kind and amount of shares of stock or other
securities or property deliverable on the exercise of the Warrant, and the date
or expected date, if any is to be fixed, as of which the holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such event. All such notices shall
be deemed to have been received (i) in the case of personal delivery, on the
date of such delivery, and (ii) in the case of mailing, on the third business
day following the date of such mailing.
6. WARRANT REGISTRATION; TRANSFER OR LOSS OF WARRANT.
6.1. WARRANT REGISTER. This Warrant shall be numbered and registered in
a warrant register as it is issued and transferred, which warrant register shall
be maintained by the Company at its principal office or, at the Company's
election and expense, by a warrant agent or the Company's Transfer Agent.
6.2. TRANSFER. This Warrant may be transferred, exercised, exchanged or
assigned ("transferred"), in whole or in part, subject to the provisions of this
Section 6.2. The Holder shall have the right to transfer all or a part of this
Warrant and all or part of the Warrant Shares. The Company shall register in the
warrant register any transfer of the Warrant, upon surrender of same to the
Company with a written instrument of transfer duly executed by the registered
Holder or by a duly authorized attorney. Upon any such registration of a
transfer, new Warrant(s) shall be issued to the transferee(s) and the
surrendered Warrant shall be canceled by the Company. A Warrant may also be
exchanged, at the option of the Holder, for one or more new Warrants
representing the aggregate number of Warrant Shares evidenced by the Warrant
surrendered. This Warrant and the Warrant Shares or any other securities ("Other
Securities") received upon exercise of this Warrant or the conversion of the
Warrant Shares shall be subject to restrictions on transferability unless
registered under the SECURITIES ACT OF 1933, as amended ("1933 Act"), or unless
an exemption from registration is available. Until this Warrant and the Warrant
Shares are so registered, this Warrant and any certificate for Warrant Shares
issued or issuable upon exercise of this Warrant shall contain a legend on the
face thereof, stating that this Warrant or the Warrant Shares may not be sold,
transferred or otherwise disposed of unless the Warrant or the Warrant Shares
may be transferred without such registration under the 1933 Act. This Warrant
and the Warrant Shares may also be subject to restrictions on transferability
under applicable state securities or blue sky laws.
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6.3. COMPLIANCE WITH LAWS. Until this Warrant or the Warrant Shares
are registered under the 1933 Act, the Company may require, as a condition of
transfer of this Warrant or the Warrant Shares that the transferee (who may be
the Holder in the case of an exchange) represent that the securities being
transferred are being acquired for investment purposes and for the transferee's
own account and not with a view to or for sale in connection with any
distribution of the security.
6.4. LOSS OF WARRANT. Upon receipt by the Company of evidence
reasonably satisfactory to it of loss, theft, destruction or mutilation of this
Warrant and, in the case of loss, theft or destruction, of reasonable
satisfactory indemnification, or, in the case of mutilation, upon surrender of
this Warrant, the Company will execute and deliver, or instruct its Transfer
Agent to execute and deliver, a new Warrant of like tenor and date, any such
lost, stolen or destroyed Warrant thereupon shall become void.
7. REGISTRATION RIGHTS. The Company shall be obligated to the Holder of the
Warrants and the Warrant Shares as follows:
(a) Whenever the Company proposes to file with the Securities and
Exchange Commission a Registration Statement (other than on Form S-8 or as to
securities issued pursuant to an employee benefit plan or a transaction subject
to Rule 145 promulgated under the 1933 Act), it shall, at least 15 days prior to
each such filing, give written notice of such proposed Filing (a "Filing
Notice") to the Holder and each holder of Warrant Shares at their respective
addresses as they appear on the records of the Company, pursuant to which the
Company shall offer to include in such Filing any or all of the Warrant Shares
purchasable under the Warrant and any Warrant Shares theretofore issued on
exercise of any portion of the Warrant. The Holder and holders of Warrant Shares
shall have until the 10th day after receipt of such notice to send to the
Company a written request or requests (a "Registration Request") that shall
specify the number of Warrant Shares which the Holder or holder of Warrant
Shares desires to have included in such filing (the aggregate amounts of which
specified in all such Registration Requests of the Holder and the holders of
Warrant Shares shall be referred to hereinafter as the "Registrable Securities")
and the manner of disposition for such Registrable Securities proposed by the
Holder or holders of Warrant Shares. The Company shall include in such filing,
for registration under the 1933 Act and disposition in accordance with the
method of disposition set forth in such Registration Requests, the aggregate
number of Registrable Securities which the Holder or holders of Warrant Shares
requested be included in such filing. In the event that the managing underwriter
for said offering advises the Company and the holders of the Registrable
Securities in writing that the inclusion of such securities in the offering
would be detrimental to the offering of any shares or other securities to be
sold and issued by the Company pursuant to such Registration Statement, the
Company will include in such Registration Statement the number of Registrable
Securities which in the opinion of such managing underwriter can be included in
such Registration Statement, together with the shares of all other shareholders
who exercised similar registration rights to have their shares sold pursuant to
such Registration Statement ("Other Shares"), on a pro rata basis among all
holders of such Registrable Securities and Other Shares according to the ratio
that the number
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of Registrable Securities owned by the Holder hereof and any such other holder
bears to the total number of Registrable Securities and Other Shares owned by
all such holders.
(b) In addition to any Registration Statement required pursuant to
subsection (a) above, the Company: (a) shall, within thirty (30) days after the
execution of this Warrant by the Company, prepare and file, at the Company's own
expense, a Registration Statement with the Securities and Exchange Commission
and appropriate Blue Sky authorities sufficient to immediately render the
Warrant Shares appropriately registered under all applicable federal and state
laws, and will use its best efforts, at its own expense, through its officers,
directors, auditors and counsel, in all matters necessary or advisable, to cause
such Registration Statement to become effective as promptly as practicable and
to maintain such effectiveness so as to permit resale of the Warrant Shares
covered by this Warrant at all times; and (b) at any time prior to the
Expiration Date, the Company shall, as promptly as practicable (but in any event
within thirty (30) days), after written request (the "Request") by Holder, or by
a person or persons holding (or having the right to acquire by virtue of holding
the Warrant) at least fifty percent (50%) of the shares of Common Stock which
have been (or may be) issued upon exercise of the Warrant, prepare and file, at
the Company's own expense, a Registration Statement with the Securities and
Exchange Commission and appropriate Blue Sky authorities sufficient to permit
the public offering of the Warrant Shares and will use its best efforts at its
own expense through its officers, directors, auditors and counsel, in all
matters necessary or advisable, to cause such Registration Statement to become
effective as promptly as practicable and to maintain such effectiveness so as to
permit resale of the Warrant Shares covered by the Request under applicable
federal and state securities law without restriction. Notwithstanding the
foregoing, if a Registration Statement is filed pursuant to this Section 7.2(b)
but is not declared effective within 120 days of the date of the filing thereof
or, despite being declared effective within such period of time, is not kept
effective as required above, then, it shall not be deemed to be a Registration
Statement meeting the requirements hereunder and shall not satisfy or discharge
the Company's obligations under this Section 7.2(b).
(c) The Company shall not be required to file a Registration Statement
pursuant to Section 7.2(b) if, in the opinion of counsel for the Holder and
holders of Warrant Shares and counsel for the Company (or, should they not
agree, in the opinion of another counsel experienced in securities law matters
acceptable to counsel for such holders and the Company), the proposed public
offering or other disposition as to which such Registration Statement is
requested is exempt from registration and no longer subject to the volume and
manner of sales restrictions of Rule 144 under federal securities law, and also
exempt from qualification under applicable state securities laws and such
offering or other disposition would result in all purchasers or transferees of
such Warrant Shares proposed to be sold by any holders of the Warrants or
Warrant Shares obtaining Warrant Shares may be sold publicly pursuant to Section
4(1) of, the 1933 Act.
(d) In consideration for the Company agreeing to its obligations under
this Section 7, the holder of Registrable Securities agrees in connection with
any registration of the
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Company's securities that, upon the request of the Company or the underwriters
managing any underwritten-offering of the Company's securities, not to sell,
make any short sale of, loan, grant any option for the purchase of or otherwise
dispose of any Registrable Securities (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 the
lesser of the lowest number of days any other holder of the Company's securities
which are included in such registration is required not to take the actions
described in this Section 7(d), and 180 days) from the effective date of such
registration as the Company or the underwriters may specify.
(e) If requested by the underwriters for any underwritten offering by
holders of Registrable Securities pursuant to a registration requested under
Section 7(b), the Company will enter into an underwriting agreement with such
underwriters for such offering, such agreement to be reasonably satisfactory in
substance and form to the Company, each such holder and the underwriters, and to
contain such representations and warranties by the Company and such other terms
as are generally prevailing in agreements of this type, including, without
limitations, indemnities to the effect and to the extent provided in Section 8
hereof.
8. INDEMNIFICATION.
(a) The Company will, and does hereby undertake to, indemnify and hold
harmless each Holder, each of such Holder's officers, directors, partners and
agents, and each person controlling such Holder, with respect to any
registration, qualification, or compliance effected pursuant to Section 7, and
each underwriter, if any, and each person who controls any underwriter, of the
Registrable Securities held by or issuable to such Holder, against all claims,
losses, damages, and liabilities (or actions in respect thereto) to which they
may become subject under the 1933 Act, the Securities Exchange Act of 1934, as
amended, (the "1934 Act"), or other federal or state law arising out of or based
on (i) any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other similar document
(including any related Registration Statement, notification, or the like)
incident to any such registration, qualification, or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(ii) any violation or alleged violation by the Company of any federal, state or
common law rule or regulation applicable to the Company in connection with any
such registration, qualification, or compliance, and will reimburse, as
incurred, each Holder, each underwriter, and each director, officer, partner,
agent and controlling person, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action; provided that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability or
expense, arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by an instrument duly executed
by any of the Holders or underwriter and stated to be specifically for use
therein.
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(b) Each Holder will, if Registrable Securities held by or issuable to
such Holder are included in such registration, qualification, or compliance,
severally and not jointly, indemnify the Company, each of its directors, and
each officer who signs a Registration Statement in connection therewith, and
each person controlling the Company, each underwriter, if any, and, each person
who controls any underwriter, of the Company's securities covered by such a
Registration Statement, against all claims, losses, damages, and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such Registration
Statement, prospectus, offering circular, or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse,
as incurred, the Company, and each such underwriter or other person, for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability, or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) was made in such
Registration Statement, prospectus, offering circular, or other document, in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein; provided, however, that the liability of each such
Holder hereunder shall be limited to the net proceeds received by such Holder
from the sale of securities under such Registration Statement. In no event will
any Holder be required to enter into any agreement or undertaking in connection
with any registration under this Section 8 providing for any indemnification or
contribution obligations on the part of such Holder greater than such Holder's
obligations under this Section 8.
(c) Each party entitled to indemnification under this Section 8 (the
"Indemnified Party") shall give notice to the party required to provide such
indemnification (the "Indemnifying Party") of any claim as to which
indemnification may be sought promptly after such Indemnified Party has actual
knowledge thereof, and the Indemnifying Party shall assume the defense of any
such claim or any litigation resulting therefrom; provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be subject to approval by the Indemnified Party (whose approval shall not
be unreasonably withheld) and the Indemnified Party may participate in such
defense with its separate counsel at the Indemnifying Party's expense if
representation of such Indemnified Party would be inappropriate due to actual or
potential differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding; and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 8, except
to the extent that such failure to give notice shall materially adversely affect
the Indemnifying Party in the defense of any such claim or any such litigation.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the
12
giving by the claimant or plaintiff therein, to such Indemnified Party, of a
release from all liability in respect to such claim or litigation.
(d) If any Holder includes Registrable Securities in any registration,
such Holder shall furnish to the Company such information regarding such Holder,
and the distribution proposed by such or Holder, as the Company may reasonably
request in writing and as shall be required in connection with any registration,
qualification, or compliance referred to in Sections 7 and 8.
9. CONTRIBUTION. In order to provide for just and equitable contribution
under the 1933 Act in any case in which: (a) the Holder or any holder of the
Warrant Shares or controlling person makes a claim for indemnification pursuant
to Section 8 hereof but it is judicially determined (by the entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
the express provisions of Section 8 hereof provide for indemnification in such
case; or (b) contribution under the 1933 Act may be required on the part of the
Holder or any holder of the Warrant Shares or controlling person, then the
Company and the Holder or any such holder of the Warrant Shares or controlling
person shall contribute to the aggregate losses, claims, damages or liabilities
to which they may be subject (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
attorneys' fees), in either such case (after contribution from others) on the
basis of relative fault as well as any other relevant equitable considerations.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Holder or holder of Warrant
Shares or controlling person on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and such holders of such securities and such
controlling persons agree that it would not be just and equitable if
contribution pursuant to this Section 9 were determined by pro rata allocation
or by any other method which does not take account of the equitable
considerations referred to in this Section 9. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof referred to above in this Section 9 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the meaning of Section
12(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
10. CALL OPTION. The Company shall have the right to purchase all of this
Warrant from the Holder, to the extent the Holder has not exercised this Warrant
or provided notice to the Company of its decision to exercise this Warrant, for
a cash purchase price equal to (a) the number of Warrant Shares still subject to
this Warrant, multiplied by (b) three and one-half
13
times the Exercise Price. Payment of the purchase price shall be made by the
Company to the Holder in cash within seven (7) calendar days after notice from
the Company to the Holder of its election to purchase all or a portion of this
Warrant. In the event the Holder has acquired any Common Stock as a result of
exercising all or any portion of this Warrant and the Holder still owns such
Common Stock for its own account and has not entered into any agreement to sell
such Common Stock to any other party, the Company shall have the right to
repurchase such Common Stock from the Holder for a per share purchase price
equal to five times the Exercise Price paid by the Holder for such Common Stock.
Such purchase price shall be paid in cash within seven (7) calendar days after
notice from the Company to the Holder of its election to acquire such Common
Stock. The Holder also agrees that prior to selling any Common Stock acquired
from the exercise of this Warrant to any third-party or entering into any
agreement to sell any such Common Stock to any third-party, the Holder shall
provide written notice to the Company of its intent to sell Common Stock
acquired from the exercise of this Warrant and the purchase price and other
relevant terms of the proposed sale of such Common Stock ("Sale Notice"). The
Company shall have a period of forty-eight (48) hours to purchase such Common
Stock from the Holder for a per share purchase price equal to five times the
Exercise Price paid by the Holder for such Common Stock. If the Company fails to
purchase such Common Stock from the Holder within such forty-eight (48) hour
period and as otherwise provided for above, the Holder shall have the right to
sell such Common Stock to any party, free and clear of the options in this
Section 10, on the terms set forth in the Sale Notice.
11. NO IMPAIRMENT. The Company will not, by amendment of its Articles of
Incorporation or otherwise, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times, in good faith, take
all such action as may be necessary or appropriate in order to protect the
rights of the Holder against impairment.
12. RESTRICTIVE LEGEND. Unless and until otherwise permitted by this
Section 12, each certificate for Warrants issued under this Agreement, each
certificate for any Warrants issued to any transferee of any such certificate,
each certificate for any Common Stock issued upon exercise of any Warrant and
each certificate for any Common Stock issued to any transferee of any such
certificate, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") NOR IS SUCH REGISTRATION CONTEMPLATED. SUCH SECURITIES MAY
NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED AT ANY TIME
WHATSOEVER UNLESS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS
OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THE SECURITIES REPRESENTED
BY THIS CERTIFICATE ARE ALSO
14
SUBJECT TO A CALL OPTION DESCRIBED IN A WARRANT AGREEMENT DATED JUNE 11, 1999."
13. NOTICES. Notices and other communications to be given to the Holder
shall be deemed sufficiently given if delivered by hand, or three (3) business
days after mailing if mailed by registered or certified mail, postage prepaid,
addressed in the name and at the address of such Holder appearing on the records
of the Company. Notices or other communications to the Company shall be deemed
to have been sufficiently given if delivered by hand or three (3) business days
after mailing if mailed by registered or certified mail, postage prepaid, to the
Company at:
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
1111 South Paca Street
Baltimore, Maryland 21230
Attn.: Thomas P. Rice, President
Either party may change the address to which notices shall be given by notice
pursuant to this Section 13.
14. GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of Maryland.
15
ANNEX A
[FORM OF EXERCISE]
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented by
the Warrant dated June 11, 1999, to purchase ________________ shares of Common
Stock and herewith tenders payment for such shares. The undersigned requests
that a certificate for such shares of Common Stock be registered in the name of
_________________________________________, whose address is
___________________________________. If such number of shares of Common Stock is
less than all of the shares of Common Stock purchasable hereunder, the
undersigned requests that a new Warrant Certificate representing the remaining
balance of the shares of Common Stock be registered in the name of
_________________________________, whose address is
______________________________________________.
Dated:
Signature:
------------------------------
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrant)
- -------------------------------
Insert Social Security or Taxpayer
I.D. No. of Holder)