SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report:
May 24, 1999
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CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
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(Exact Name of Registrant as Specified in Charter)
Maryland 1-12748 52-1176514
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(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
1111 South Paca Street
Baltimore, Maryland 21230
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(Address of principal executive offices) (Zip Code)
(410) 843-5000
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(Registrant's telephone number)
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Item 5. Other Events.
In a private placement, the Company raised $450,000 through the sale of
225,000 shares of its Common Stock to eight investors. In connection with that
sale, the Company has agreed to register the shares of Common Stock purchased by
the investors. The investors include board members Thomas P. Rice, Harvey L.
Miller, Regis F. Burke and Narlin B. Beaty. The proceeds of the investment will
be used for general corporate purposes.
The Company also raised $1,551,000 through the sale of 15,510 shares of
its Series A Convertible Preferred Stock (the "Preferred Stock") together with
warrants to purchase an aggregate of 51,700 shares of the Company's Common Stock
at an exercise price of $1.50 per share to four investors in a private
placement. In connection with that sale, the Company has agreed to register the
shares of Common Stock underlying the Preferred Stock purchased by the
investors. The Preferred Stock is convertible into the Company's Common Stock at
$1.50 per share, as adjusted for stock splits, stock dividends and the like.
Under the terms of the Preferred Stock, the investors are permitted, as a
separate class, to elect one person to the Company's Board of Directors. The
proceeds of the investment will be used for general corporate purposes.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit No. Description
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3.01 Articles Supplementary
10.01 Common Stock Purchase Agreement among Chesapeake
Biological Laboratories, Inc., Thomas P. Rice, Harvey L.
Miller, Regis F. Burke, Michael A. Besche, A.C. Besche
Foundation, Virginia B. Besche Trust, G. Grayson Boyce and
Narlin B. Beaty
10.02 Common Stock Registration Rights Agreement among
Chesapeake Biological Laboratories, Inc., Thomas P. Rice,
Harvey L. Miller, Regis F. Burke, Michael A. Besche, A.C.
Besche Foundation, Virginia B. Besche Trust, G. Grayson
Boyce and Narlin B. Beaty
10.03 Preferred Stock Purchase Agreement by and among Chesapeake
Biological Laboratories, Inc., Corporate Opportunities
Fund, L.P., Corporate Opportunities Fund (Institutional),
L.P., Howard and Phyllis J. Silverman as JTWROS and LAB
Partners.
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10.04 Registration Rights Agreement by and among Chesapeake
Biological Laboratories, Inc., Corporate Opportunities
Fund, L.P., Corporate Opportunities Fund (Institutional),
L.P., Howard and Phyllis J. Silverman as JTWROS and LAB
Partners.
10.05 Form of Warrant to Purchase Shares of Common Stock granted
to the Purchasers of Preferred Stock
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 24, 1999 CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
By: /s/ Thomas P. Rice
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Thomas P. Rice, President
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CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
FORM 8-K
EXHIBIT INDEX
Exhibit No. Description
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3.01 Articles Supplementary
10.01 Common Stock Purchase Agreement among Chesapeake
Biological Laboratories, Inc., Thomas P. Rice, Harvey L.
Miller, Regis F. Burke, Michael A. Besche, A.C. Besche
Foundation, Virginia B. Besche Trust, G. Grayson Boyce and
Narlin B. Beaty
10.02 Common Stock Registration Rights Agreement among
Chesapeake Biological Laboratories, Inc., Thomas P. Rice,
Harvey L. Miller, Regis F. Burke, Michael A. Besche, A.C.
Besche Foundation, Virginia B. Besche Trust, G. Grayson
Boyce and Narlin B. Beaty
10.03 Preferred Stock Purchase Agreement by and among Chesapeake
Biological Laboratories, Inc., Corporate Opportunities
Fund, L.P., Corporate Opportunities Fund (Institutional),
L.P., Howard and Phyllis J. Silverman as JTWROS and LAB
Partners.
10.04 Registration Rights Agreement by and among Chesapeake
Biological Laboratories, Inc., Corporate Opportunities
Fund, L.P., Corporate Opportunities Fund (Institutional),
L.P., Howard and Phyllis J. Silverman as JTWROS and LAB
Partners.
10.05 Form of Warrant to Purchase Shares of Common Stock granted
to the Purchasers of Preferred Stock
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CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
ARTICLES SUPPLEMENTARY
Chesapeake Biological Laboratories, Inc., a Maryland corporation, having
its principal office in Baltimore, Maryland (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland (the "SDAT") that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation (the "Board") by Article SEVENTH of the Articles of
Incorporation of the Corporation, as amended (the "Charter"), the Board has duly
reclassified and designated 15,510 authorized but unissued shares of the Class A
Common Stock, par value $0.01 per share, of the Corporation into a series
designated as Series A Convertible Preferred Stock and has provided for the
issuance of such series.
SECOND: The terms of the Series A Convertible Preferred Stock (including
the preferences, conversions or other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications, or terms or
conditions of redemption) as set by the Board are as follows:
1. Issuance; Rank. The issuance price of the Series A Convertible
Preferred Stock (the "Series A Preferred Stock") shall be $100 per share (the
"Original Purchase Price"). The Series A Preferred Stock shall rank senior to
the Common Stock and any other class or series of capital stock of the
Corporation ranking junior to the Series A Preferred Stock as to dividends and
upon liquidation, dissolution or winding up. The date on which any share of
Series A Preferred Stock was issued shall hereinafter be referred to as the
"Original Issue Date" with respect to such share.
2. Dividends. Annually on May 31st, the holders of record of shares of
Series A Preferred Stock as of May 10th of such year shall be entitled to
receive, out of funds legally available for that purpose, prior and in
preference to any declaration or payment of any dividends (payable other than in
Common Stock or other securities convertible into or entitling the holder
thereof to receive directly or indirectly, additional shares of Common Stock) on
the Common Stock, cumulative dividends ("Cumulative Dividends"), at an annual
rate of 6% of the Original Purchase Price per share, as adjusted for stock
splits, stock dividends, recapitalizations, combinations, reclassifications and
similar events which affect such shares of Series A Preferred Stock (each an
"Adjustment"). Notwithstanding anything to the contrary contained in the
foregoing, in lieu of payment of the Cumulative Dividends in any year, the Board
may issue to each such holder, a warrant to purchase a number of shares of
Common Stock calculated in accordance with the following formula and exercisable
at a price calculated by averaging the
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closing price of the Common Stock as reported by Nasdaq for the 20 day period
preceding the date of issuance of such warrant (each, a "Dividend Warrant"):
WS = .05 x (PS x (OPP/CP)
where:
WS is the number of shares of Common Stock for which the Dividend Warrant
may be exercised;
PS is the number of shares of Preferred Shares held by the Purchaser on
the date the Dividend Warrant is issued;
OPP is the Original Purchase Price; and
CP is the Conversion Price (as defined below).
If the Board fails to (i) declare a Cumulative Dividend or (ii) issue Dividend
Warrants, the Cumulative Dividend shall cumulate and become part of the
Liquidation Preference (as defined below) and Cumulative Dividends shall be
payable pro rata for partial year periods and shall not be payable upon
conversion of the Series A Preferred Stock in accordance with the terms of
Sections 5 or 6 or upon a Redemption in accordance with the terms of Section 7.
3. Liquidation Events.
(a) Upon the occurrence of any Liquidation Event (defined herein),
the assets of the Corporation available for distribution to its stockholders,
whether from capital, surplus or earnings (the "Corporate Assets") shall be
distributed as follows: before any distribution of assets shall be made to the
holders of Common Stock, the holder of each share of Series A Preferred Stock
then outstanding shall be entitled to be paid out of the Corporate Assets an
amount per share equal to the Original Purchase Price (subject to any
Adjustment) plus all dividends, including any accrued and unpaid Cumulative
Dividends on such share up to the date of distribution of the assets of the
Corporation (the "Liquidation Preference"). If upon the occurrence of a
Liquidation Event, the Corporate Assets shall be insufficient to pay the holders
of shares of Series A Preferred Stock the Liquidation Preference, the holders of
shares of Series A Preferred Stock and any class or series of stock ranking on
liquidation on a parity with the shares of Series A Preferred Stock shall share
ratably in the distribution of the entire remaining Corporate Assets in
proportion to the respective amounts which would otherwise be payable in respect
of the shares held by them upon such distribution if the full Liquidation
Preference payable on or with respect to such shares were paid in full.
(b) For purposes of this Section 3, the term "Liquidation Event"
shall mean (i) any liquidation, dissolution or winding up of the Corporation or
(ii) the merger or consolidation of the Corporation into or with another
corporation (except if the Corporation is
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the surviving entity) or other similar transaction or series of related
transactions in which all or substantially all of the assets of the Corporation
are sold, transferred or otherwise disposed.
(c) The amount available for distribution for purposes of satisfying
the obligation to pay the Liquidation Preference and other amounts payable under
Section 3(a) to the holders of shares of Series A Preferred Stock upon any
Liquidation Event described in Section 3(b)(ii) shall be the cash or the value
of the property, rights or securities distributed to such holders by the
acquiring person, firm or other entity. The value of such property, rights or
other securities shall be determined in good faith by the Board of Directors of
the Corporation.
(d) Written notice of such Liquidation Event, stating a payment
date, the Liquidation Preference and other amounts payable under Section 3(a),
and the place where said Liquidation Preference and other amounts shall be
payable, shall be delivered in person, mailed by certified or registered mail,
return receipt requested, or sent by telecopier or electronic mail, not less
than 20 days prior to the payment date stated therein, to the holders of record
of the Series A Preferred Stock, such notice to be addressed to each such holder
at its address as shown by the records of the Corporation.
4. Voting.
(a) Each holder of outstanding shares of Series A Preferred Stock
shall be entitled to the number of votes equal to the number of whole shares of
Common Stock into which the shares of Series A Preferred Stock held of record by
such holder are convertible (as adjusted from time to time pursuant to Section
5), at each meeting of stockholders of the Corporation (and written actions of
stockholders in lieu of meetings) with respect to any and all matters presented
to the stockholders of the Corporation for their action or consideration. Except
as provided by law and by the provisions of Sections 4(b), the holders of shares
of Series A Preferred Stock shall vote together with the holders of Common Stock
as a single class.
(b) So long as at least 1,551 shares of Series A Preferred Stock
(subject to any Adjustment) are outstanding, the holders of the Series A
Preferred Stock shall have the right, voting together as a single class, to
elect one director of the Corporation. Such right to vote separately as a class
shall be in addition to all other rights of the holders of Series A Preferred
Stock to vote with other classes of stock in the election of members of the
Corporation's Board of Directors.
(c) So long as at least 1,551 shares of Series A Preferred Stock
(subject to any Adjustment) are outstanding, if and whenever (i) the Corporation
breaches the terms and conditions contained herein, or (ii) an Event of Default
(as defined in the Preferred Stock Purchase Agreement between the Corporation
and the original purchasers of the Series A Preferred Stock named therein)
occurs and is continuing, the holders of any outstanding shares of Series A
Preferred Stock shall have the exclusive and special right, voting as a single
class, to elect by a plurality of the votes cast the largest whole number of
directors of the Corporation that, together with the director elected by the
holders of the Series A Preferred Stock pursuant to
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Section 4(b), shall not constitute a majority of the total number of directors
of the Corporation (and if there are not a sufficient number of resignations by
the members of the Board of Directors at the time of such default, the Board of
Directors shall be expanded as is necessary to give effect to the foregoing
right). The right granted to the holders of Series A Preferred Stock in this
Section 4(c) (the "Default Right") shall continue until the breach or Event of
Default has been cured or waived and, when so cured or waived the Default Right
shall cease until such time as the Corporation commits another breach or Event
of Default. At any time the Default Right becomes applicable, the Corporation
may, upon receipt of a written request from the holders in interest of at least
20% of the outstanding shares of Series A Preferred Stock, call a special
meeting of shareholders for the election of directors. Such meeting, if called,
shall be held (i) no later than 45 days after the receipt of the request and
(ii) at the place and upon the notice required by law and the bylaws of the
Corporation; provided, however, that the Corporation shall not call such a
special meeting if such request is received less than 60 days prior to the date
fixed for any annual meeting of the shareholders of the Corporation. Directors
elected pursuant to this Section 4(c) shall serve until the next annual meeting
of the shareholders of the Corporation or until their respective successors
shall be elected and qualify.
(d) Any director elected by the holders of the Series A Preferred
Stock (each, a "Preferred Director") may be removed only by the vote of the
holders of record of a plurality of the outstanding shares of Series A Preferred
Stock, voting together as a single class, at a meeting of the holders of shares
of Series A Preferred Stock called for such purpose. Any vacancy in the office
of a Preferred Director may be filled only in accordance with Section 4(b) or
4(c) as the case may be.
(e) At any meeting held for the purpose of electing directors, the
presence in person or by proxy of the holders of a majority of the shares of
Series A Preferred Stock then outstanding shall constitute a quorum of the
Series A Preferred Stock for the purpose of electing any directors to be elected
solely by the holders of Series A Preferred Stock and for all such other matters
upon which the holders of shares of Series A Preferred Stock vote as a single
class, and the presence in person or by proxy of the holders of a majority of
the shares of Common Stock then outstanding shall constitute a quorum of the
Common Stock for the purpose of electing any directors to be elected solely by
the holders of the Common Stock.
(f) So long as 1,551 or more shares of Series A Preferred Stock
(subject to any Adjustments) are outstanding, the Corporation shall not, without
first obtaining the written consent or affirmative vote of the holders of at
least a majority of the then outstanding shares of Series A Preferred Stock,
given in writing or by vote at a meeting, consenting or voting, as the case may
be, separately as a class:
(i) authorize any series of preferred stock or other security
of the Corporation having (i) dividend rights or liquidation preference senior
to the Series A Preferred Stock or (ii) voting rights entitling the holders
thereof to more than one vote per share of Common Stock on an as-converted
basis;
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(ii) amend, alter or repeal any rights of the Series A
Preferred Stock; or
(iii) approve any liquidation, dissolution, merger or sale of
the all or substantially all of the assets of the Corporation if such event
would result in a payment to the holders of Series A Preferred Stock of less
than the Liquidation Preference.
5. Optional Conversion. The holders of shares of Series A Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock shall
be convertible, at the option of the holder thereof, at any time and from time
to time, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing the Original Purchase Price by the Conversion Price
(as defined herein) in effect at the time of conversion. The conversion price at
which shares of Common Stock shall be deliverable upon conversion of Series A
Preferred Stock without payment of additional consideration by the holder
thereof (the "Conversion Price") shall initially be $1.50. The Conversion Price
in effect from time to time, and the rate at which shares of Series A Preferred
Stock may be converted into shares of Common Stock, shall be subject to
adjustment as provided herein. Upon a Liquidation Event or a Redemption, the
Conversion Rights shall terminate at the close of business on the first full day
preceding the date fixed for the payment of any amounts distributable upon such
Liquidation Event or Redemption to the holders of shares of Series A Preferred
Stock.
(b) Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of the shares of Series A Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Conversion Price. Whether or not a holder would otherwise be entitled
to a fractional share shall be determined on the basis of the total number of
shares of Series A Preferred Stock the holder is at the time converting into
Common Stock and the number of shares of Common Stock issuable upon such
aggregate conversion.
(c) Mechanics of Conversion.
(i) In order for a holder to convert shares of Series A
Preferred Stock into shares of Common Stock, such holder shall surrender the
certificate or certificates for such shares of Series A Preferred Stock at the
office of the transfer agent for such shares (or at the principal office of the
Corporation if the Corporation serves as its own transfer agent), together with
written notice that such holder elects to convert all or any number of the
shares of the Series A Preferred Stock represented by such certificate or
certificates. Such notice shall state such holder's name or the names of the
nominees in which such holder wishes the certificate or certificates for shares
of Common Stock to be issued. If required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by a written
instrument or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered
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holder or his or its attorney-in-fact duly authorized in writing. The date of
receipt of such certificates and notice by the transfer agent (or by the
Corporation if the Corporation serves as its own transfer agent) shall be the
conversion date (the "Conversion Date"). The Corporation shall, as soon as
practicable after the Conversion Date, issue and deliver at such office to such
holder of shares of Series A Preferred Stock, or to his or its nominees, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled, together with cash in lieu of any fraction of a
share. Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of the shares of Series A
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date. Other than as set forth in Section 6, if the conversion is in
connection with an underwritten offer of securities registered pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), the conversion may,
at the option of any holder tendering shares of Series A Preferred Stock for
conversion, be conditioned upon the closing of the sale of securities pursuant
to such offering, in which event the person entitled to receive the Common Stock
issuable upon such conversion of the shares of Series A Preferred Stock shall
not be deemed to have converted such shares of Series A Preferred Stock until
immediately prior to the closing of such sale of securities.
(ii) The Corporation shall, at all times when the Series A
Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
the shares of Series A Preferred Stock, such number of its duly authorized
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series A Preferred Stock. Before taking
any action that would cause an adjustment reducing the Conversion Price below
the then par value of the shares of Common Stock issuable upon conversion of the
shares of Series A Preferred Stock, the Corporation will take any corporate
action that may, in the opinion of its counsel, be necessary in order that the
Corporation may validly and legally issue fully paid and nonassessable shares of
Common Stock at such adjusted Conversion Price. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series A Preferred Stock, in
addition to such other remedies as shall be available to the holder of such
shares of Series A Preferred Stock, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purposes.
(iii) Upon any such conversion, no adjustment to the
Conversion Price shall be made for, nor shall any payment be made of, any
declared and unpaid dividends on the shares of Series A Preferred Stock
surrendered for conversion or on the Common Stock delivered upon conversion.
(iv) All shares of Series A Preferred Stock that shall have
been surrendered for conversion as herein provided shall no longer be deemed to
be outstanding and all rights with respect to such shares, including the rights,
if any, to receive notices and to vote,
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shall immediately cease and terminate on the Conversion Date, except only the
right of the holders thereof to receive shares of Common Stock in exchange
therefor. Any shares of Series A Preferred Stock so converted shall be retired
and canceled and shall not be reissued, and the Corporation may from time to
time take such appropriate action as may be necessary to eliminate the
authorized Series A Preferred Stock or reduce the authorized number thereof as
may be appropriate accordingly.
(d) Adjustments to Conversion Price for Diluting Issues:
(i) Special Definitions. For purposes of this Section 5(d),
the "First Original Issue Date" means the Original Issue Date of the first
issued share of Series A Preferred Stock.
(ii) Adjustment for Combinations or Consolidation of Common
Stock. If, at any time after the First Original Issue Date the number of shares
of Common Stock outstanding are decreased by a combination of the outstanding
shares of Common Stock, then following the record date fixed for such
combination (or the date of such combination, if no record date is fixed), the
applicable Conversion Price shall be increased so that the number of shares of
Common Stock issuable on conversion of each share of Series A Preferred Stock
shall be decreased in proportion to such decrease in outstanding shares of
Common Stock.
(iii) Adjustment for Stock Dividends, Splits, Etc. If the
Corporation shall at any time after the applicable First Original Issue Date fix
a record date for the subdivision, split-up or stock dividend of shares of
Common Stock, then, following the record date fixed for the determination of
holders of shares of Common Stock entitled to receive such subdivision, split-up
or dividend (or the date of such subdivision, split-up or dividend, if no record
date is fixed), the Conversion Price shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of each share of
Series A Preferred Stock shall be increased in proportion to such increase in
outstanding shares; provided, however, that the Conversion Price shall not be
decreased at such time if the amount of such reduction would be an amount less
than $.01, but any such amount shall be carried forward and reduction with
respect thereto made at the time of and together with any subsequent reduction
that, together with such amount and any other amount or amounts so carried
forward, shall aggregate $.01 or more.
(iv) Adjustment for Merger or Reorganization, etc. In case of
any consolidation, recapitalization or merger of the Corporation with or into
another corporation or the sale of all or substantially all of the assets of the
Corporation to another corporation (other than a subdivision or combination
provided for elsewhere in this Section 5 and other than a consolidation, merger
or sale that is treated as a Liquidation Event pursuant to Section 3), each
share of Series A Preferred Stock shall thereafter be convertible into the kind
and amount of shares of stock or other securities or property to which a holder
of the number of shares of Common Stock of the Corporation deliverable upon
conversion of such shares of Series A Preferred Stock would have been entitled
upon such consolidation, merger or sale; and, in such case, appropriate
adjustment (as determined in good faith by the Board of Directors ) shall be
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made in the application of the provisions in this Section 5 set forth with
respect to the rights and interest thereafter of the holders of the shares of
Series A Preferred Stock, to the end that the provisions set forth in this
Section 5 (including provisions with respect to changes in and other adjustments
of the Conversion Price) shall thereafter be applicable, as nearly as reasonably
may be, in relation to any shares of stock or other property thereafter
deliverable upon the conversion of the shares of Series A Preferred Stock.
(e) Other Adjustments. If the Corporation does not exercise its
option to redeem the outstanding shares of Series A Preferred Stock on or before
June 1, 2004, in accordance with Section 7 hereof, the Conversion Price in
effect after June 1, 2004 from time to time shall be the lower of (i) $1.50 or
(ii) 80% of market price as in effect at the date of conversion. For purposes of
this Section 5(e), the market price shall be the average of the closing per
share price to the public on Nasdaq for the 20 trading days immediately
preceding the date of conversion.
(f) No Impairment. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 5 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
shares of Series A Preferred Stock against impairment.
(g) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 5,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
shares of Series A Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price then in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property that then would
be received upon the conversion of the shares of Series A Preferred Stock.
(h) Notice of Record Date. In the event:
(i) that the Corporation takes a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a cash dividend) or any other
distribution, 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;
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(ii) that the Corporation subdivides or combines its
outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination of its outstanding shares
of Common Stock or a stock dividend or stock distribution thereon), or of any
consolidation or merger of the Corporation into or with another corporation, or
of the sale of all or substantially all of the assets of the Corporation; or
(iv) of the involuntary or voluntary dissolution, liquidation
or winding up of the Corporation;
then the Corporation shall cause to be filed at its principal office or at
the office of the transfer agent of the Series A Preferred Stock, and shall
cause to be mailed to the holders of the Series A Preferred Stock at their last
addresses as shown on the records of the Corporation or such transfer agent, at
least ten days prior to the record date specified in (A) below or twenty days
before the date specified in (B) below, a notice stating
(A) the record date of such dividend, distribution,
subdivision or combination, or, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to such dividend,
distribution, subdivision or combination are to be determined, or
(B) the date on which such reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up is expected
to become effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon such reclassification,
consolidation, merger, sale, dissolution or winding up.
6. Automatic Conversion.
(a) Triggering Event. All outstanding shares of Series A Preferred
Stock shall automatically convert to shares of Common Stock, at the then
effective Conversion Price pursuant to Section 5, if, at any time after the
first anniversary of the First Original Issue Date, (i) the average closing bid
price of the Common Stock for twenty (20) consecutive trading days is greater
than four times the then current Conversion Price and the average daily trading
volume (as reported by Nasdaq) for the same twenty day period is not less than
35,000 shares or (ii) upon the date of the consummation of an underwritten
public offering pursuant to an effective registration statement under the
Securities Act, resulting in at least $20,000,000 of gross proceeds to the
Corporation, at a per share price of at least four times the then current
Conversion Price.
(b) No Further Action. In the case of an automatic conversion
pursuant to this Section 6, the outstanding shares of Series A Preferred Stock
shall be converted automatically
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without any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation or its
transfer agent; provided, that the Corporation shall not be obligated to issue
to any holder certificates evidencing the shares of Common Stock issuable upon
such conversion unless certificates evidencing such shares of Series A Preferred
Stock are delivered either to the Corporation or any transfer agent of the
Corporation.
(c) Surrender of Certificates; Retirement and Cancellation of
Converted Shares. All certificates evidencing shares of Series A Preferred Stock
that are required to be promptly surrendered for conversion in accordance with
the provisions hereof shall, from and after the date such certificates are so
required to be surrendered, be deemed to have been retired and canceled and the
shares of Series A Preferred Stock represented thereby converted into Common
Stock for all purposes, notwithstanding the failure of the holder or holders
thereof to surrender such certificates on or prior to such date. The Corporation
may thereafter take such appropriate action as may be necessary to reduce the
authorized Series A Preferred Stock accordingly.
7. Redemption.
(a) The Corporation may, at its option redeem any or all of the then
outstanding shares of Series A Preferred Stock, out of funds legally available
for such purpose, on or after April 1, 2004, by providing notice to the holders
of outstanding shares of Series A Preferred Stock (a "Redemption Notice").
The Redemption Price shall specify the Redemption Date, the
Redemption Price, the aggregate number of shares to be redeemed, and with expect
to each holder of record, the number of shares to be redeemed; shall state that
payment of the Redemption Price will be made at the principal office of the
Corporation or if an agent for redemption if appointed, the office of the agent
for redemption, upon presentation and surrender of certificates for such shares;
that dividends accrued to the Redemption Date will be paid as specified in the
Redemption Notice and that on and after the Redemption Date dividends will cease
to accrue; shall state that the right to convert the shares to be redeemed into
shares of Common Stock in accordance with the provisions hereof will terminate
on the last business day prior to the redemption Date which date shall be
specified in the Redemption Notice; and shall state the then current Conversion
Price. In case of the redemption of a part only of the Series A Preferred Stock
at the time outstanding, the shares to be redeemed shall be selected by lot or
in such other manner as the Board of Directors may determine to be equitable;
(b) The date of any Redemption Notice shall be the "Redemption
Notice Date." The Corporation shall, no later than 30 days after the applicable
Redemption Notice Date (the "Redemption Date"), redeem the shares of Series A
Preferred Stock set forth in the notice (such redeemed shares being referred to
as the "Redemption Shares"), by paying in cash, out of funds legally available
therefor, a sum per share equal to the Liquidation Preference (the "Redemption
Price");
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(c) If the Corporation delivers a Redemption Notice to the holders
of Series A Preferred Stock, each such holder shall, no later than the close of
business on the last business day before the Redemption Date, surrender his or
its certificate or certificates representing the applicable Redemption Shares to
the Corporation. From and after the Redemption Date and the holders' receipt of
the Redemption Price, all rights of each holder with respect to such applicable
Redemption Shares shall cease and such shares shall not be deemed to be
outstanding for any purpose whatsoever. Such Redemption Shares shall not be
reissued, and the Corporation may from time to time take such appropriate action
as may be necessary to reduce the authorized Series A Preferred Stock
accordingly;
THIRD: As a result of the reclassifications described herein, the
Corporation's authorized capital stock currently consists of the following:
7,984,490 shares of Class A Common Stock, par value $.01 per share;
2,000,000 shares of Class B Common Stock, par value $.01 per share
and
15,510 shares of Series A Convertible Preferred Stock, par value
$.01 per share.
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COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of April
8, 1999, is by and between the individual investors set forth on Schedule I
attached hereto (the "Investors"), and CHESAPEAKE BIOLOGICAL LABORATORIES, INC.,
a Maryland corporation (the "Company").
RECITALS
WHEREAS, the Company desires to issue and sell to the Investors and the
Investors have agreed to purchase from the Company 225,000 shares of the
Company's Common Stock, par value $0.01 per share (the "Common Shares").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE I
THE SECURITIES
SECTION 1.01. Issuance, Sale and Delivery of the Common Shares.
Subject to the terms and conditions contained herein, on the Closing Date,
the Company shall issue and sell to the Investors, and the Investors shall
purchase from the Company, the Common Shares, in the amounts set forth on
Schedule I hereto, for an aggregate purchase price of $450,000 (the "Purchase
Price").
SECTION 1.02. Closing.
(a) The purchase and sale of the Common Shares shall take place at the
offices of Piper & Marbury L.L.P., Baltimore, Maryland, as soon as practicable
after execution of this Agreement, upon at least 24 hours notice to the
Investors from the Company (such event being called, the "Closing", and such
date and time being called, the "Closing Date"). At the Closing, the Company
shall deliver to Investors one or more certificates in each Investor's name
representing the number of Common Shares purchased by such Investor against his
payment of his pro rata portion of the Purchase Price to the Company by the
Investors.
(b) At the Closing, each Investor shall deliver to the Company an executed
copy of this Agreement and the Registration Rights Agreement (as hereinafter
defined), together with his
<PAGE>
payment of his pro rata portion of the Purchase Price by wire transfer (in
accordance with written wire transfer instructions provided by the Company) or
certified check payable to the Company.
(c) The obligation of each of the Investors to purchase the Common Shares
is contingent upon the fulfillment of each of the conditions set forth in
Section 4.01.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Investors, intending
that the Investors rely upon such representations and warranties, as follows:
SECTION 2.01. Organization, Good Standing, Qualifications and Corporate Power.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland, and is duly licensed or
qualified to transact business as a foreign corporation and is in good standing
in each jurisdiction in which the nature of the business transacted by it or the
character of the properties owned or leased by it requires such licensing or
qualification. At all times since its formation, the Company has been engaged
exclusively in the business of scientific research, development, manufacturing,
marketing and distributing chemicals and biologics used in human and animal
therapeutics or having applications in the human and veterinary health care
products field generally (the "Business"). The Company has the requisite
corporate power and authority to (i) own and hold its properties and to carry on
the Business as currently conducted and as proposed to be conducted, (ii)
execute and deliver this Agreement and the Registration Rights Agreement of even
date herewith by and among the Company and the Investors (the "Registration
Rights Agreement"), (iii) issue, sell and deliver the Common Shares and (iv)
carry out and perform the provisions of this Agreement and the Registration
Rights Agreement.
(b) Except for CBL Development Corporation (which is inactive) the Company
does not (i) own of record or beneficially, directly or indirectly, (A) any
shares of capital stock or securities convertible into capital stock of any
other corporation or (B) any participating or equity interest in any
partnership, joint venture or other non-corporate business enterprise or (ii)
control, directly or indirectly, any other entity.
SECTION 2.02. Authorization of Agreements, Etc.
(a) The (i) execution and delivery by the Company of this Agreement and
the Registration Rights Agreement, (ii) performance of all obligations of the
Company hereunder and thereunder, (iii) issuance, sale and delivery of the
Common Shares have been duly authorized by all requisite corporate action on the
part of the Company, its officers, directors and stockholders, and have not and
will not violate any provision of applicable law, any order of any court or
other agency of government, the Charter or the By-Laws, or any provision of any
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indenture, agreement or other instrument to which the Company or any of its
properties or assets is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, which conflict, breach or default
could reasonably be expected to have a material adverse effect on the Business
or the assets, results of operations, condition (financial or otherwise) or
prospects of the Company (a "Material Adverse Effect") or result in the creation
or imposition of any lien, charge, restriction, claim or encumbrance of any
nature whatsoever (a "Lien") upon any of the tangible or intangible assets of
the Company.
(b) The Common Shares, when issued, sold and delivered in accordance with
the terms of this Agreement for the Purchase Price, will be duly and validly
issued, fully paid and nonassessable, with no personal liability attaching to
the ownership thereof, and will be free and clear of all Liens imposed by or
through the Company, except as set forth in the Registration Rights Agreement.
The issuance, sale and delivery of the Common Shares is not subject to any
preemptive right of any stockholder of the Company or to any right of first
refusal or other right in favor of any person, except as herein provided or as
provided in the Charter or in the Registration Rights Agreement.
SECTION 2.03. Validity.
This Agreement and the Registration Rights Agreement have been duly
executed and delivered by the Company and, assuming the execution and delivery
of them by the other parties thereto, constitute the legal, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except as limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
SECTION 2.04. Authorized Capital Stock.
(a) At closing: (i) the authorized capital stock of the Company will
consist of 10,000,000 shares of Common Stock, of which 8,000,000 shares are
classified as Class A Common Stock, par value $0.01 per share, of which
5,365,101 shares are issued and outstanding as of the date hereof, and
2,000,0000 shares of which are classified as Class B Common Stock, par value
$0.01 per share, none of which are issued and outstanding as of the date hereof
and (ii) the designations, powers, preferences, rights, qualifications,
limitations and restrictions in respect of each class and series of authorized
capital stock of the Company as set forth in the Charter will be valid, binding
and enforceable and in accordance with all applicable laws. Except for this
Agreement, the Registration Rights Agreement or the Preferred Stock Purchase
Agreement and associated Registration Rights Agreement relative to the issuance
15,510 shares of the Company's newly classified Series A Convertible Preferred
Stock (together, the "Preferred Stock Agreement"), (i) there is no commitment by
the Company to issue any shares of capital stock, subscriptions, warrants,
options, convertible securities or other similar rights to purchase or
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receive Company securities or to distribute to the holders of any of its equity
securities any evidence of indebtedness, cash or other assets, (ii) the Company
is under no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity or debt securities or any interest therein
or to pay any dividend or make any other distribution in respect thereof, and
(iii) there are no voting trusts or similar agreements, stockholders'
agreements, pledge agreements, buy-sell agreements, rights of first refusal,
preemptive rights or proxies relating to any securities of the Company.
(b) All outstanding securities of the Company were issued in compliance
with applicable Federal and state securities laws.
SECTION 2.05. Financial Information.
(a) The Common Stock of the Company is registered pursuant to Section
12(g) of the Securities Exchange Act of 1934 (the "Exchange Act") and the
Company has filed all 34 Act Filings required to be filed by it with the SEC
pursuant to the reporting requirement of the Exchange Act. The Company has not
provided the Purchaser with any information that, according to applicable law,
rule, or regulation, should have been disclosed publicly by the Company but has
not been so disclosed. As of their respective dates, the 34 Act Filings complied
in all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC and other federal, state, and local laws applicable
to such 34 Act Filings, and none of the 34 Act Filings contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(b) The Company has filed with the Securities Exchange Commission (the
"SEC") audited financial statements as at March 31, 1997 and 1998 and for the
three years ended March 31, 1998 and unaudited financial statements as at and
for the nine months ended December 31, 1998, (collectively, the "Financial
Statements").
(c) Except as set forth on Schedule 2.05(b), the Company has no material
liabilities, contingent or otherwise, that have not been disclosed in the
Financial Statements, subsequent filings with the SEC or that arose after the
date of the Financial Statements or other such filings.
(d) The financial statements of the Company included in the 34 Act Filings
comply as to form in all respects with the applicable accounting requirements
and rules and regulations of the SEC or other applicable rules and regulations
with respect thereto. Such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of interim
unaudited financial statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
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SECTION 2.06. Certain Events.
Other than (i) as disclosed in this Agreement (including the Schedules
hereto), the Registration Rights Agreement or the filings made by the Company
with the SEC under the Securities Exchange Act of 1934 (the "34 Act Filings"),
(ii) Executive Employment Agreements and Stock Option Agreements with Thomas P.
Rice and John T. Botek (collectively, the "Executive Agreements"), and (iii) in
the ordinary course of business, since December 31, 1998. the Company has not
(a) issued any equity or debt securities, (b) borrowed any amount or incurred or
become subject to any liability (absolute, accrued or contingent), (c)
discharged or satisfied any Lien or incurred or paid any obligation or liability
(absolute, accrued or contingent), (d) declared or made any payment or
distribution to stockholders or purchased or redeemed any shares of its capital
stock or other security, (e) mortgaged, pledged or subjected to Lien any of its
assets, tangible or intangible, (f) entered into any commitment (contingent or
otherwise) to do any of the foregoing or (g) engaged in any transaction not in
the ordinary course of business with any Company director, officer, employee,
stockholder or any of their respective affiliates or relatives.
SECTION 2.07. Litigation; Compliance with Laws; Licenses.
Except as disclosed in the 34 Act Filings, there is no pending or, to the
knowledge of the Company, threatened (a) action, suit, claim, proceeding or
investigation against or affecting the Company, at law or in equity, or before
or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign (each,
a "Governmental Body"), (b) arbitration proceeding against or affecting the
Company, (c) governmental inquiry against or affecting the Company, or (d) any
action or suit by or on behalf of the Company pending or threatened against
others. The Company is not in default with respect to any order, writ,
injunction or decree known to the Company issued by any court or Governmental
Body. The Company has complied in all material respects with all laws, rules,
regulations and orders applicable to the Business and the Company's operations,
properties, assets, products and services, and the Company has all necessary
permits, licenses and other authorization, required to conduct the Business as
currently conducted or as proposed to be conducted. There is no existing or, to
the knowledge of the Company, any proposed law, rule, regulation or order,
whether Federal, state, or local, which reasonably could be expected to (a)
prohibit or restrict the Company from, (b) require the Company to obtain one or
more permits, licenses or other authorizations, or (c) otherwise materially
adversely affect the Company in, conducting the Business in any jurisdiction in
which it is now conducting business or in which it proposes to conduct business.
The Company has not received any legal opinion, memorandum or advice from
counsel to the effect that it is exposed, from a legal standpoint, to any
liability or disadvantage which may be material to the Business or the Company's
assets, properties, liabilities, results of operations, financial condition or
prospects or that the Company is, or may be, required to obtain one or more
permits, licenses or other authorizations in order to conduct the Business as
currently conducted or as proposed to be conducted.
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SECTION 2.08. Intellectual Property.
(a) Except as set forth on Schedule 2.08, (a) the Company has good, valid,
subsisting, unexpired and enforceable title to, or otherwise possesses adequate
rights to use, all the patents, trademarks, trade names, service marks,
copyrights and similar intangible assets or rights material to the Business
(collectively, the "Intellectual Property"); (b) the Company has no knowledge of
any adverse claim or facts which could give rise to a claim, which creates a
reasonable doubt as to the ownership or validity of the Intellectual Property;
(c) no Governmental Body has rendered any opinion, decision or judgment that
could limit, cancel, or question the validity of any of the Intellectual
Property; (d) to the Company's knowledge, no other intellectual property is
necessary to enable the Company to conduct the Business substantially as
currently conducted or as proposed to be conducted; (e) the Company is not
obligated or under any liability whatsoever to make any material payments in the
nature of royalties, license fees or otherwise to any owner of, licensee of or
other claimant to, any Intellectual Property; and (f) the Company has no
knowledge of intellectual property owned by others which is used by the Company
in the conduct of the Business as currently conducted or as proposed to be
conducted.
(b) To the knowledge of the Company, no assets, properties or rights used
in the Business infringe or, in the past have infringed, upon any patent,
trademark, trade name, copyright or other intellectual property, and the Company
has not misappropriated or misused any invention, trade secret or other
proprietary information entitled to legal protection. The continued use of the
Intellectual Property by the Company will not constitute an infringement,
misappropriation or misuse of any patent, trademark, trade name, copyright,
invention, trade secret, proprietary information, nondisclosure or other rights
of any third party. No person has asserted, or, to the knowledge of the Company,
threatened, any claim regarding the use of, or challenging or questioning the
Company's right or title in, any Intellectual Property, or challenging or
questioning the validity or effectiveness of the Intellectual Property or any
license, contract or commitment relating thereto, and the Company knows of no
valid basis for any such claim. To the Company's knowledge, all trade secrets,
know how and other proprietary information developed by or belonging to the
Company which has not been patented, trademarked or copyrighted has at all times
been kept confidential by the Company, its employees and agents so as to be
protectable under common law principles.
SECTION 2.09. Loans and Advances.
Except as set forth in the 34 Act Filings, the Company has no outstanding
loans or advances to any person and is not obligated to make any loans or
advances, except for routine advances to employees in respect of reimbursable
business expenses incurred by them in connection with their performance of
services for the Company.
SECTION 2.10. Assumptions, Guaranties, Etc., of Indebtedness of Other Persons.
Except as set forth in the 34 Act Filings, the Company has not assumed,
guaranteed, endorsed or otherwise become directly or contingently liable on any
indebtedness of any other
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person nor become obligated to purchase, provide funds for payment, supply funds
to or otherwise invest in a debtor or obligor or otherwise to assure a creditor
against loss.
SECTION 2.11. Governmental Approvals.
Assuming the accuracy of the representations and warranties of the
Investors set forth in Article III hereof, no registration or filing with, or
consent or approval of or other action by, any Governmental Body is or will be
necessary for (a) the valid execution, delivery and performance by the Company
of this Agreement or the Registration Rights Agreement or (b) the issuance, sale
and delivery of the Common Shares, other than (i) filings pursuant to Federal
and state securities laws (all of which filings have been, or with respect to
those filings which may be duly made after the Closing will be, made by or on
behalf of the Company) in connection with the offer, issuance and sale of the
Common Shares, (ii) with respect to the Agreement, the registration of the
shares covered thereby with the SEC and (iii) the filing of the Articles
Supplementary.
SECTION 2.12. Taxes.
The Company has filed, or caused to be filed, on a timely basis, all tax
returns (including payroll, unemployment and other taxes related to its
employees and independent contractors) required to be filed with any
Governmental Body and has paid or caused to be paid all taxes, levies,
assessments, tariffs, duties or other fees imposed, assessed or collected by any
Governmental Body that may have become due and payable pursuant to those tax
returns or otherwise. No deficiency assessment with respect to or proposed
adjustment of any of the Company's Federal, state, municipal or local tax
returns has occurred or, to the Company's knowledge, is threatened. There has
been no tax lien imposed by any Governmental Body outstanding against the
Company's assets or properties, except the lien for current taxes not yet due.
SECTION 2.13. Bankruptcy or Convictions.
None of the Company's directors or officers has ever been arrested,
charged with or convicted of any crime (other than minor traffic violations) nor
have any of them ever filed for bankruptcy or had a bankruptcy petition filed
against them, and none of them has ever been a director or officer of an entity
that filed for bankruptcy or had a bankruptcy petition filed against it.
SECTION 2.14. Brokers or Finders.
The Company is not liable, contingently or otherwise, for the payment of
any brokerage or finders' fees or agents' commissions or other similar payments
in connection with this Agreement or the transactions contemplated hereby.
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SECTION 2.15. Assets.
(a) Personal Property. The Company has good and valid title to all of its
assets. All of the Company's tangible personal property has been maintained in
accordance with generally accepted industry practice and is, in all material
respects, in good operating condition and repair, ordinary wear and tear
excepted. All leased personal property is, in all material respects, in the
condition required of such property by the terms of the lease applicable
thereto, and all such leases are in full force and effect and have not been
modified or amended, and no party thereto is in default in any material respect
thereunder.
(b) Title to Real Property.
The Company owns no real property or any interest in real property, other
than as described in the 34 Act Filings and leasehold interests granted pursuant
to written leases; (ii) the Company has neither granted nor is subject to any
options to purchase or rights of first refusal with respect to any real
property; and (iii) all of the Company's leases of real property are in full
force and effect and have not been modified or amended, and no party thereto is
in default in any material respect thereunder.
SECTION 2.16. Absence of Certain Changes.
Except (i) for certain covenant defaults under the Company's Loan
Agreement with First Union National Bank, (ii) a non-recurring charge estimated
at $1,400,000 for executive severance and a write-down on the Seton facility,
(iii) the Executive Agreements, (iv) the Preferred Stock Agreement, or (v) as
disclosed in the 34 Act Filings, since December 31, 1998, the Business has been
conducted only in the ordinary course consistent with past practice, and there
has been no Material Adverse Effect on the Company.
SECTION 2.17. Absence of Defaults, Etc.
The Company is not in default or alleged to be in default under any
material contract, agreement, lease or document to which it or any of its
properties or assets is bound. The Company and its properties and assets are in
compliance in all material respects with all applicable statutes, laws,
ordinances, rules and regulations of all Governmental Bodies, and all filing
requirements relating thereto.
SECTION 2.18. Material Agreements.
Except for the Executive Agreements or as described in the 34 Act Filings
and as contemplated by this Agreement, the Registration Rights Agreement or the
Preferred Stock Agreement, the Company is not a party to or bound by any written
or oral (a) contract not made in the ordinary course of business; (b) collective
bargaining agreement or other contract with any labor union or other employee
bargaining unit; (c) bonus, deferred compensation, profit sharing, pension,
retirement, stock option, stock purchase, hospitalization, insurance or other
plan or
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arrangement providing for employee benefits to present or former officers,
directors or employees; (d) contract with any manufacturer, producer,
warehouser, distributor, agent, broker or seller, or any agreement whereby the
Company is entitled to manufacture, distribute, warehouse, deal in or sell any
products; (e) contract requiring capital expenditures in excess of $100,000 in
any one year; (f) contract for the purchase of supplies, materials or services
for delivery over a period of more than 30 days from the date of this Agreement;
(g) contract with any of its officers, directors or employees, or (h) any other
agreement, contract, lease, license, commitment or instrument to which the
Company is a party or by or to which it or any of its assets or the Business is
bound or subject, which individually has an expected aggregate future liability
or obligation of $500,000 or more.
SECTION 2.19. Environmental Matters.
The Company has not released, emitted, buried or otherwise disposed of any
Regulated Substances (as hereinafter defined) on any of the Company's Properties
(as hereinafter defined) in violation of any Environmental Law (as hereinafter
defined). To the knowledge of the Company, no other person or entity has
released, emitted, buried or otherwise disposed of Regulated Substances on any
of the Company's Properties. To the knowledge of the Company, no storage tanks,
underground or otherwise, are or have been located on any of the Company's
Properties. The Company has in all material respects complied with all
Environmental Laws relating to the Business or the Company's Properties. The
Company has not received any notice, demand, suit or information request
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") or any comparable state or local law, nor does it have knowledge
of any other party's receipt of same relating to any of the Company's
Properties. The Company has not received written notice that any of the
Company's Properties is listed on any regulatory list of contaminated
properties, including the National Priorities List promulgated pursuant to
CERCLA, or any state or local counterpart. To the knowledge of the Company, the
Company has no existing or potential liability under any Environmental Law. No
environmental approvals, clearances or consents are required under applicable
law from any governmental entity or authority in order for the Investors to
purchase the Common Shares hereunder or for the Company to continue the Business
after the Closing Date.
As used in this Section 2.19, (i) "Environmental Law" means any statute,
regulation, rule, code, common law, order or judgment of any applicable Federal,
state, local or foreign jurisdiction relating to pollution, hazardous
substances, hazardous wastes, petroleum or otherwise relating to protection of
the environment, natural resources or human health, including the Clean Air Act,
the Clean Water Act, the Resource Conservation Recovery Act ("RCRA"), CERCLA,
the Toxic Substances Control Act ("TSCA"), and the Emergency Planning and
Community Right-to-Know Act, all as currently amended; (ii) "Regulated
Substances" means any substance regulated under any Environmental Law, including
hazardous waste, as defined in RCRA, hazardous substances, as defined in CERCLA,
toxic substances as defined in TSCA, hazardous materials, as defined under the
Hazardous Materials Transportation Act, petroleum and its fractions, ACM's and
PCB's; (iii) the "Company" includes any predecessors or affiliates;
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and (iv) the "Company's Properties" means any real property or facility
currently owned, leased, operated or used by the Company or previously owned,
leased, operated or used by the Company or any predecessor of the Company.
SECTION 2.20 Certain Payments.
Neither the Company nor any of its directors, officers, agents or
employees or any other person or entity associated with or acting for or on
behalf of the Company, has directly or indirectly (a) made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback or other payment to any
person or entity, private or public, regardless of form, in money, property or
services (i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, or (iii) to obtain special concessions
or for special concessions already obtained, for or in respect of the Company,
or (b) established or maintained any fund or asset that has not been recorded on
the books and records of the Company.
SECTION 2.21. Insurance.
The Company maintains policies of fire and casualty, extended coverage,
business interruption, public and product liability and other forms of insurance
in such amounts, with such deductibles and against such risks and losses as are
reasonable to protect the Business and the assets of the Company.
SECTION 2.22. Disclosure.
The representations and warranties contained in this Article II and the
information set forth in the Schedules hereto, are true, complete and correct in
all material respects, and none of the same contains any untrue statement of
material fact or omits to state any material fact necessary to make the
statements made therein not misleading. To the Company's knowledge, there is no
fact which the Company has not disclosed to the Investors which has had or could
reasonably be expected to have a Material Adverse Effect.
SECTION 2.23. Agreements.
Except as set forth in this Agreement (including the Schedules) or the 34
Act Filings, the Company is not a party to or otherwise bound by any written or
oral contract or instrument or, to the knowledge of the Company, other
restriction which individually or in the aggregate could reasonably be expected
to have a Material Adverse Effect. The Company and each other party to such
contracts or instruments have performed all obligations required to be performed
by them to date, have received no notice of default or alleged default and are
not in default, in any material respect (with due notice or lapse of time or
both) under any of the same. The Company is not in violation of any provision of
its Charter or Bylaws. The Company has no present expectation or intention of
not fully performing all its obligations under each such contract or instrument
in all material respects.
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SECTION 2.24. "Company"
When used in this Article II, "Company" shall mean, with respect to the
receipt of notice or knowledge, its directors, executive officers, counsel and
advisors.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each of the Investors, severally and not jointly, represents and warrants
to the Company as of the Closing Date that he:
(a) is an "accredited investor" within the meaning of Rule 501 of
Regulation D under the Securities Act of 1933, as amended (the "Securities Act")
and the rules and regulations promulgated thereunder;
(b) has sufficient knowledge and experience in investing in companies
similar to the Company so as to be able to evaluate the risks and merits of its
investment in the Company and is able financially to bear the risks of such
investment;
(c) has had an opportunity to discuss the Business and the Company's
management, prospects and financial affairs with the Company's management;
(d) is acquiring the Common Shares for his own account for the purpose of
investment and not with a view to or for resale in connection with any
distribution thereof;
(e) understands that (i) the Common Shares have not been registered under
the Securities Act by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act, (ii) the Common Shares must be
held indefinitely unless a subsequent disposition thereof is registered under
the Securities Act or is exempt from such registration, (iii) the Common Shares
will bear a legend to such effect, (iv) the Common Shares are subject to the
restrictions set forth in the Registration Rights Agreement, and (v) the Company
will make a notation on its transfer books to such effect; and
(f) has the full right, power and authority to enter into and perform this
Agreement and the Registration Rights Agreement, and each of this Agreement and
the Registration Rights Agreement, constitutes his legal, valid and binding
obligation, enforceable in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or other laws affecting the enforcement of creditors' rights generally, or by
general equitable principles.
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ARTICLE IV
CONDITIONS TO THE CLOSING
SECTION 4.01. Conditions to the Obligations of the Investors.
The obligations of each of the Investors to consummate the transactions
contemplated by this Agreement are subject to the fulfillment or the written
waiver of such Investor, at his sole discretion, on or before the Closing Date,
of each of the following conditions:
(a) Performance. The Company shall have performed and complied, in all
material respects, with all agreements, obligations and conditions contained
herein that are required by it to be performed or complied with on or before the
Closing Date, and such Investor shall have received a certificate to such effect
from the President of the Company.
(b) All Proceedings to be Satisfactory. All corporate proceedings required
to be taken by the Company in connection with the transactions contemplated
hereby and all documents incident thereto shall be reasonably satisfactory in
form and substance to the Investors and its counsel, and such Investor shall
have received all such evidence of such proceedings and counterpart originals or
certified or other copies of such documents as they have reasonably requested.
(c) Supporting Documents. Such Investor shall have received copies of the
following documents:
(i) a certificate of the Maryland State Department of
Assessments & Taxation, dated as of a recent date, as to the due incorporation
and good standing of the Company;
(ii) a certificate of the Secretary of the Company, dated the
Closing Date and certifying: (A) that attached thereto is a true and complete
copy of the By-Laws of the Company as in effect on the date of such
certification; (B) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors (the "Board") and the stockholders
of the Company authorizing the execution, delivery and performance of this
Agreement and the Registration Rights Agreement, the issuance and delivery of
the Common Shares and that all such resolutions are in full force and effect and
that the same are all resolutions adopted in connection with the transactions
contemplated by this Agreement and the Registration Rights Agreement; and (C) to
the incumbency and specimen signature of each officer of the Company executing
this Agreement, the Registration Rights Agreement, the certificates representing
the Common Shares and any certificate or instrument furnished pursuant hereto,
and a certification by another officer of the Company as to the incumbency of
the officer signing the certificate referred to in this clause (c); and
(iii) such additional supporting documents and other
information with respect to the operations and affairs of the Company as such
Investor reasonably may request.
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(d) The Registration Rights Agreement. The Company and each of the
Investors shall have executed and delivered the Registration Rights Agreement.
(e) The Common Shares. The Company shall have delivered to each Investor
stock certificates representing the Common Shares.
(f) Due Diligence. No fact shall have been discovered by such Investor
during his due diligence investigation of the Company, the Business, its
prospects and the Company's management that causes him to conclude, in his sole
discretion, that an investment in the Company is not appropriate.
(g) Governmental and Other Authorization. All authorizations, approvals or
permits, if any, of any Governmental Body or any other person or entity that are
required in connection with the lawful issuance and sale of the Common Shares
pursuant to this Agreement shall have been duly obtained, except for filings
pursuant to Federal or state securities laws which are legally permitted to be
made on or after the Closing Date.
(h) Additional Agreements. The Company shall have delivered such other
agreements and instruments as such Investor shall have reasonably requested.
(i) Opinions of Counsel. Piper & Marbury L.L.P., counsel to the Company,
shall have delivered to each of the Investors an opinion, dated the Closing
Date, in form and substance reasonably acceptable to the Investors.
(j) Absence of Legal Proceedings. No action or proceedings shall have been
instituted or threatened before a court or Governmental Body to restrict or
prohibit the transactions contemplated hereby or the operation by the Company of
the Business.
SECTION 4.02. Conditions to the Obligations of the Company.
The obligations of the Company under this Agreement are subject to the
fulfillment or its written waiver, at its sole discretion, on or before the
Closing Date, of each of the following conditions:
(a) Registration Rights Agreement. Each of the Investors shall have
executed and delivered the Registration Rights Agreement.
(b) Purchase by Investors. Each of the Investors shall have paid his pro
rata portion of the Purchase Price.
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ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with each of the Investors that so long
as any Common Shares are outstanding:
SECTION 5.01. Inspection and Information Rights.
The Company shall permit the Investors, or any authorized representative
thereof, upon reasonable prior notice, to visit and inspect the properties of
the Company and its corporate and financial books and records and to discuss the
Business and its finances with its officers, all at such reasonable times during
normal business hours as may be requested by the Investors. The Investors or
their representatives shall maintain the confidentiality of all information
acquired by them in exercising such rights and shall execute a written
non-disclosure agreement if requested by the Company in form reasonably
acceptable to the Company and the Investors;
SECTION 5.02. Corporate Existence; Business.
Except as contemplated hereunder, the Company shall maintain its corporate
existence, rights and franchises in full force and effect. The Company will not
engage in any business other than the Business.
SECTION 5.03. Properties, Business, Insurance.
The Company shall maintain, as to its properties and the Business, with
financially sound and reputable insurers, insurance against such casualties and
contingencies and of such types and in such amounts as is customary for
companies similarly situated.
SECTION 5.04. Compliance with Laws.
The Company shall comply with all applicable laws, rules, regulations and
orders, noncompliance with which could reasonably be expected to have a Material
Adverse Effect.
SECTION 5.05. Maintain Records and Books of Account.
The Company shall maintain complete and accurate records and books of
account, in which entries will be made in accordance with GAAP, reflecting all
financial transactions of the Company and which will include, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other items in connection with the Business.
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SECTION 5.06. Subsidiaries.
If at any time the Company has any subsidiaries, it will not permit any
such subsidiary to take any action which would violate any of the covenants
contained herein. The Company shall not sell or otherwise transfer any shares of
capital stock of any of its subsidiaries, except to the Company or another
subsidiary, or permit any of its subsidiaries to issue, sell or otherwise
transfer any shares of its capital stock or the capital stock of any of its
subsidiaries, except to the Company or another Company subsidiary.
SECTION 5.07. Restrictive Agreements Prohibited.
The Company shall not become a party to, or bound by, any agreement which
by its terms restricts the Company's performance of this Agreement, its Charter
or the Registration Rights Agreement.
SECTION 5.08. Use of Proceeds.
The Company shall use the proceeds from the sale of the Common Shares to
fund capital expenditures and for working capital.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Fees and Expenses.
Each of the Company and the Investors shall pay their own expenses
associated with the transactions contemplated by this Agreement and the
Registration Rights Agreement.
SECTION 6.02. Survival of Agreements.
The representations and warranties, covenants and other agreements made
herein and in the Registration Rights Agreement, as well as in each certificate
delivered to the Investors pursuant hereto, shall survive the Closing and remain
in effect so long as any of the Common Shares remain outstanding. The Company
agrees to indemnify and hold the Investors harmless from and against and will
pay to the Investors the full amount of any loss, damage, liability, cost or
expense (including amounts paid in settlement and reasonable attorneys' fees and
expenses) to the Investors resulting either directly or indirectly from any
breach of the representations and warranties, covenants or agreements of the
Company contained in this Agreement or the Registration Rights Agreement or in
any certificate delivered to the Investors pursuant hereto or thereto or in
connection herewith or therewith. The Investors agrees to indemnify and hold the
Company harmless from and against and will pay to the Company the full amount of
any loss, damage, liability, cost or expense (including amounts paid in
settlement and reasonable attorneys' fees and expenses) to the Company or such
person resulting either directly or
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indirectly from any breach of the representations, warranties, covenants or
agreements of the Investors contained in this Agreement or the Registration
Rights Agreement or in any certificate delivered to the Company pursuant hereto
or thereto in connection herewith or therewith.
SECTION 6.03. Parties in Interest.
All representations, warranties, covenants and agreements contained in
this Agreement, and the Registration Rights Agreement, by or on behalf of any of
the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not;
provided, however, that the foregoing shall not in and of itself permit the
assignment by the Company and its successors of the Company's obligations
hereunder.
SECTION 6.04. Notices.
All notices, requests, consents and other communications hereunder shall
be in writing and shall be delivered in person, by overnight express mail, or
mailed by certified or registered mail, return receipt requested, addressed as
follows:
(a) If to the Company:
Chesapeake Biological Laboratories, Inc.
1111 South Paca Street
Baltimore, MD 21230
Attn: President
Facsimile: (410) 843-4414
with a copy to:
Richard C. Tilghman, Jr., Esquire
Piper & Marbury L.L.P.
36 South Charles Street
Baltimore, Maryland 21201
Facsimile: (410) 576-1763
(b) If to the Investors, to their respective addresses set forth on
Schedule I hereto
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
SECTION 6.05. Governing Law.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Maryland, without giving effect to its conflicts
of laws provisions.
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SECTION 6.06. Entire Agreement.
This Agreement, including the Schedules and Exhibits hereto, together with
the Charter and the Registration Rights Agreement, constitute the sole and
entire agreements of the parties hereto and supersede all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof. All Schedules and Exhibits hereto are incorporated herein
by reference. To the extent an item is disclosed or set forth in a Schedule or
exhibit, its inclusion anywhere in the Schedules or Exhibits shall be deemed to
be an automatic cross-reference to, and inclusion in, all Schedules and Exhibits
as may be appropriate throughout the Agreement and any and all applicable
sections or paragraphs thereof, whether or not a specific cross-reference is
noted.
SECTION 6.07. Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, and all of which together shall constitute one and
the same instrument.
SECTION 6.08. Amendments.
This Agreement may not be amended or modified, and no provisions hereof
may be waived, without the written consent of the Company and a majority of the
Investors.
SECTION 6.09. Severability.
Each provision of this Agreement shall be treated as a separate and
independent clause, and the unenforceability of any one clause shall in no way
impair the enforceability of any of the other clauses herein. If one or more of
the provisions contained in this Agreement shall for any reason be held to be
unenforceable, such provision or provisions shall be construed by the
appropriate judicial body by limiting or reducing it or them, so as to be
enforceable to the maximum extent compatible with applicable law, and no other
provision hereof shall be affected by such holding, limitation or reduction.
SECTION 6.10. Titles and Subtitles.
The titles and subtitles used in this Agreement are for convenience only
and are not to be considered in construing or interpreting any term or provision
of this Agreement.
SECTION 6.11. Recitals.
The Recitals hereto are specifically made a part of this Agreement.
SECTION 6.12. Pronouns.
All pronouns used herein shall be deemed to refer to the masculine,
feminine or neuter gender as the context requires.
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COMMON STOCK REGISTRATION RIGHTS AGREEMENT
THIS COMMON STOCK REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated
as of April 8,1999, is between Chesapeake Biological Laboratories, Inc., a
Maryland corporation (the "Company"), and the holders of the Company's Common
Stock (as defined below) whose names appear on Schedule I attached hereto (each,
a "Stockholder" and collectively, the "Stockholders").
RECITALS
WHEREAS, the Company and the Stockholders have entered into a Common Stock
Purchase Agreement dated as of April 8, 1999 (the "Purchase Agreement"), and
execution and delivery of this Agreement is a condition precedent to the
obligations of the Company and the Stockholders to consummate the transactions
described in the Purchase Agreement.
WHEREAS, upon Closing under the Purchase Agreement, the Stockholders will
own 225,000 shares of the Company's Common Stock, par value $0.01 per share (the
"Common Stock"); and
WHEREAS, the Company has agreed with the Stockholders, among other things,
to provide for registration of the shares of Common Stock, and, to that end, the
parties wish to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound, agree as follows:
ARTICLE I. DEFINITIONS
Section 1.01. Definitions.
The following definitions shall be applicable to the terms set forth below
as used in this Agreement:
(a) "Affiliate" shall mean, with respect to any Person, any other
Person which directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with such Person.
(b) "Board" shall mean the Board of Directors of the Company.
<PAGE>
(c) "Charter" shall mean the Company's Articles of Incorporation, as
amended and supplemented.
(d) "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the federal securities
laws.
(e) "Common Stock" shall mean the Company's Common Stock, par value
$.01 per share.
(f) "Equity Securities" shall mean all shares of the Company's
capital stock, now or hereafter authorized and all warrants, options, rights or
other securities convertible into, or exchangeable for, shares of the Company's
capital stock.
(g) "Permitted Transferees" shall mean (i) any Affiliate of a
Stockholder or (ii) any member of the immediate family of a Stockholder or any
trust for the exclusive benefit of a Stockholder and/or one or more members of
his immediate family.
(h) "Person." The term "Person" shall mean any individual, firm,
corporation, partnership, limited liability company, trust, joint venture,
governmental authority or other entity, and shall include any successor (by
merger or otherwise) of such entity.
(i) "Register" including the terms "register," "registered" and
"registration" shall mean a registration effected by preparing and filing a
registration statement in compliance with the Securities Act.
(j) "Registrable Stock." The term "Registrable Stock" shall mean all
shares of the Common Stock purchased by the Stockholders on the date hereof. A
Person shall be deemed to be a holder of Registrable Stock when such Person has
a right to acquire such Registrable Stock regardless of whether such
acquisition, conversion or exercise has actually been effected. Each share of
Registrable Stock shall continue to be Registrable Stock in the hands of each
subsequent holder thereof, subject to the limitations set forth in this
Agreement; provided that each share of Registrable Stock shall cease to be
Registrable Stock when transferred (x) to any Person who is not a Permitted
Transferee or if the transfer does not comply with the terms of this Agreement,
(y) pursuant to a registered public offering, or (z) in accordance with Rule 144
promulgated by the Commission under the Securities Act.
(k) "Securities Act" shall mean the Securities Act of 1933, as
amended.
Section 1.01.1. Additional Definitions.
Capitalized terms used in this Agreement and not defined herein shall have
the meanings given to them in the Purchase Agreement.
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ARTICLE II
REGISTRATION RIGHTS
Section 2.01 Required Registration. The Company shall use its efforts to
effect the registration of the Registrable Stock (including without limitation
the execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act) as would permit or facilitate the sale or distribution of all the
Registrable Stock in the manner (including manner of sale) and in all states
reasonable requested by the Holder no later than 180 days after the date hereof.
Section 2.02 Registration Procedures.
(a) To carry out its agreement to register the Registrable Stock,
the Company shall:
(i) prepare and file with the Commission a registration
statement on form S-2 or S-3 covering the Registrable Stock and use its
best efforts to cause such registration statement to become effective as
soon as practicable thereafter and to remain effective for the period of
time described in Section 2.09 hereof;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectuses used in
connection therewith as may be necessary to keep such registration
statement effective and current and to comply with the provisions of the
Securities Act, including such amendments and supplements as may be
necessary to reflect the intended method of disposition from time to time
of Registrable Stock included therein by holders of Registrable Stock (the
"Prospective Sellers");
(iii) furnish to each Prospective Seller such number of copies
of each preliminary and final prospectus in conformity with the
requirements of the Securities Act, and such other documents as the
Prospective Seller may reasonably request in order to facilitate the
disposition of the shares owned by it;
(iv) use its best efforts to register or qualify the shares
covered by such registration statement under such state securities or blue
sky laws of such jurisdictions as any Prospective Seller shall reasonably
request; provided that the Company shall not be required in connection
therewith to qualify to do business or to file a general consent to
service of process in any such jurisdiction; and
(v) cause all such Registrable Stock to be listed on each
securities exchange or other securities trading market on which the same
class of the Company's securities are then listed.
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(b) Each Prospective Seller of Registrable Stock shall furnish to
the Company such information as the Company, its underwriter or its counsel may
reasonably request from the Prospective Seller for inclusion in the registration
statement (and the prospectus included therein).
(c) The Prospective Sellers shall not effect sales of the shares
covered by the registration statement after receipt of facsimile or other
written notice from the Company to suspend sales to permit the Company to
correct or update a registration statement or prospectus; provided, however,
that the Company shall not so suspend sales for any period of more than 30
consecutive days.
Section 2.03 Expenses of Registration.
The Company shall pay all expenses incurred in effecting the registration,
including, without limitation, all registration and filing fees, printing
expenses, expenses of compliance with blue sky laws, fees and disbursements of
counsel for the Company, and fees and expenses of its auditors; provided,
however, that each Prospective Seller shall pay the underwriting discounts and
commissions relating to the sale of its Registrable Stock.
Section 2.04 Indemnification.
(a) In connection with the registration of the Registrable Stock
pursuant to this Agreement, the Company shall indemnify and hold harmless each
Prospective Seller against any losses, claims, damages or liabilities, joint or
several (or actions in respect thereof), to which such Prospective Seller may be
subject under the Securities Act, under any other statute or at common law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement (or alleged
untrue statement) of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any summary
prospectus issued in therewith, or any amendment or supplement thereto, or any
other document, (ii) 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 (iii) any violation by the Company of the Securities
Act or any blue sky law, or any rule or regulation promulgated under the
Securities Act or any blue sky law, or any other law, applicable to the Company
in connection with any such registration, and shall reimburse each such
Prospective Seller for any legal or other expenses reasonably incurred by such
Prospective Seller in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company shall
not be liable to any Prospective Seller in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon any such
untrue statement or omission made in such registration statement, preliminary
prospectus, final prospectus, summary prospectus or amendment or supplement
thereto, or any other document, in reliance upon and in conformity with written
information furnished to the Company by such Prospective Seller specifically for
use therein. The indemnity provided for herein shall remain in full force
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and effect regardless of any investigation made by or on behalf of such
Prospective Seller and shall survive the transfer of the Registrable Stock held
by such Prospective Seller.
(b) If the indemnification provided for above is unavailable to an
indemnified party in respect of any losses, claims, damages or liabilities
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities, in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of the indemnified parties on the
other in connection with the statements or omissions or violations which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and of the indemnified parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Prospective Sellers agree that it would not be
just and equitable if contribution pursuant to this Section 2.04(b) were
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages and liabilities or actions in
respect thereof referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 2.04(b), no Prospective Seller shall be required to
contribute any amount in excess of the net proceeds from the sale of the
Prospective Seller's Registrable Stock pursuant to such registration statement.
No person guilty of fraudulent misrepresentations (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not also guilty of such fraudulent misrepresentation.
(c) Promptly after receipt by an indemnified party under Section
2.04(a) of written notice of the commencement of any legal action, such
indemnified party promptly shall, if a claim in respect thereof is to be made
under such Section, notify the indemnifying party in writing of the commencement
thereof but the omission so to notify the indemnifying party shall relieve it
from any liability which it may have had to any indemnified party hereunder only
to the extent that it has been prejudiced directly as the result of such
failure. In case any such action shall be brought against any indemnified party,
the indemnifying party shall assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, that, if the
defendants in any such action include both the indemnified party and the
indemnifying party and counsel to the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party or a possible conflict of interests exists, the
indemnified party or parties shall have the right to select separate counsel (in
which case the
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indemnifying party shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties). Upon the assumption by the
indemnifying party of the defense of such action, and approval by the
indemnified party of counsel, the indemnifying party shall not be liable to such
indemnified party under this Section 2.04(a) for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnifying party shall have failed to employ counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time, (ii) the indemnifying party and its counsel fail
to actively and vigorously pursue the defense of such action in the reasonable
judgment of counsel to the indemnified party, or (iii) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party.
Section 2.05 Inclusion of Additional Shares in Required Registrations.
The Company may include securities for sale for the account of any other
holder of the Company's Common Stock in the registration pursuant to Section
2.01 hereof.
Section 2.06 Rule 144 Requirements.
The Company shall make publicly available such information as is necessary
to enable the holders of Registrable Stock to make sales of Registrable Stock
pursuant to Rule 144 of the Securities Act. The Company shall furnish to any
holder of Registrable Stock, upon request, a written statement executed by the
Company as to the steps it has taken to comply with the current public
information requirements of Rule 144.
Section 2.07 Underwriters' Lock-Up.
If the Company files a registration statement in connection with an
underwritten public offering, each holder of Registrable Stock, if so requested
by the managing underwriter of such public offering, shall not effect any sale
or distribution of any Equity Securities for up to 180 days after effectiveness
of such registration statement; provided that the Company's executive officers
and directors agree to be similarly bound.
Section 2.08 Transfer of Registration Rights.
The registration rights of the Stockholders under this Agreement may be
transferred to any Permitted Transferee regardless of the number of shares of
Registrable Stock transferred.
Section 2.09 Effective Period of Registration.
Once the registration statement filed by the Company pursuant to Section
2.01 becomes effective, the Company shall promptly file all reports, financial
statements and other documents necessary to keep such registration statement
current and the registration in effect until the earlier of (a) the sale of all
securities included in the registration statement, or (b) five years from the
effective date of the registration statement.
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Section 2.10 Changes in Common Stock.
If there is any change in the Common Stock by way of a stock split, stock
dividend, combination or reclassification, or through a merger, consolidation,
reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made in the provisions hereof so that the registration
rights granted hereby shall continue with respect to the Common Stock as so
changed.
Section 2.11 Termination of Registration Rights.
The obligations of the Company under this Agreement shall terminate on the
earlier of: (a) the date on which there are no longer any shares of Registrable
Stock held by the Stockholder or Permitted Transferees, or (b) the fifth
anniversary of the effective date of the registration statement filed by the
Company pursuant to Section 2.01.
ARTICLE III
MISCELLANEOUS
Section 3.01 Stock Certificate Legends.
Upon the execution of this Agreement, each certificate representing shares
of the Common Stock held by the Stockholders shall be endorsed by the Secretary
of the Company with the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN SO REGISTERED
UNDER THOSE LAWS OR IF EXEMPTIONS FROM REGISTRATION ARE AVAILABLE.
THIS CERTIFICATE AND THE SECURITIES REPRESENTED HEREBY ARE TRANSFERABLE
ONLY UPON COMPLIANCE WITH THE PROVISIONS OF THAT CERTAIN COMMON STOCK
PURCHASE AGREEMENT DATED AS OF APRIL __, 1999, BY AND BETWEEN THE COMPANY
AND THE STOCKHOLDERS NAMED THEREIN, A COPY OF WHICH IS ON FILE IN THE
OFFICE OF THE SECRETARY OF THE COMPANY AND WILL BE MADE AVAILABLE UPON
REQUEST TO ANY STOCKHOLDER WITHOUT CHARGE."
Section 3.02 Notices.
All notices, offers, acceptances, requests and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in hand or by facsimile or mailed by certified or registered mail to
the Stockholders at their addresses shown on the Company's records or to the
Company at the Company's principal place of business. Any party
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hereto may change its address for notice by giving notice thereof in the manner
herein above provided.
Section 3.03 Parties in Interest.
All covenants and agreements contained in this Agreement made by any of
the parties hereto shall bind such parties, and shall bind and inure to the
benefit of their successors and permitted assigns whether so expressed or not;
provided, however, that the foregoing shall not in and of itself permit the
assignment of any of the rights and obligations hereunder.
Section 3.04 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Maryland, without giving effect to its conflicts of laws
provisions.
Section 3.05 Entire Agreement.
This Agreement, together with the Purchase Agreement, including the
Schedules and Exhibits thereto, constitute the sole and entire agreement of the
parties hereto and supersede all prior agreements and understandings, oral and
written, among the parties hereto with respect to the subject matter hereof and
thereof.
Section 3.06 Amendments.
This Agreement may not be amended or modified, and no provisions hereof
may be waived, without the written consent of the Company and the holders of a
majority of the Registrable Stock.
Section 3.07 Severability.
Each provision of this Agreement shall be treated as separate and
independent, and the unenforceability of any one provision shall in no way
impair the enforceability of any other provisions. If one or more provisions
contained in this Agreement shall for any reason be held to be unenforceable,
such provision or provisions shall be construed by the appropriate judicial body
by limiting or reducing it or them, so as to be enforceable to the maximum
extent compatible with applicable law, and no other provision hereof shall be
affected by such holding, limitation or reduction.
Section 3.08 Titles and Subtitles.
The titles and subtitles used in this Agreement are for convenience only
and are not to be considered in construing or interpreting any term or provision
of this Agreement.
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PREFERRED STOCK PURCHASE AGREEMENT
THIS PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") dated as of May
20, 1999 is by and among the investors named on Schedule I hereto (individually,
a "Purchaser" or collectively the "Purchasers") and CHESAPEAKE BIOLOGICAL
LABORATORIES, INC., a Maryland corporation (the "Company").
RECITALS
WHEREAS, the Company desires to issue and sell to the Purchasers and the
Purchasers have agreed to purchase from the Company 15,510 shares of the
Company's Series A Convertible Preferred Stock, par value $0.01 per share (the
"Preferred Shares"), and warrants to purchase an aggregate of 51,700 shares of
the Company's Common Stock, par value $0.01 per share (the "Common Stock").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the parties hereto, intending to be legally bound,
agree as follows:
ARTICLE I
THE SECURITIES
SECTION 1.01. Issuance, Sale and Delivery of the Preferred Shares
and the Warrants.
(a) The Company shall adopt and file with the office of the Maryland State
Department of Assessments and Taxation, on or before the Closing Date (as
defined in Section 1.02 hereof), Articles Supplementary (the "Articles
Supplementary") to the Company's Articles of Incorporation (as amended to date
and as supplemented by the Articles Supplementary, the "Charter"), in
substantially the form attached hereto as Exhibit A, which Articles
Supplementary shall contain the designations, rights and preferences of the
Preferred Shares.
(b) Subject to the terms and conditions contained herein, on the Closing
Date the Company shall issue and sell to the Purchasers, and the Purchasers,
shall purchase from the Company, 15,510 Preferred Shares for an aggregate
purchase price of $1,551,000 (the "Purchase Price"), with each Purchaser
purchasing the number of shares of Preferred Stock set forth opposite its name
of Schedule I hereto.
(c) On the Closing Date, the Company shall issue to the Purchasers
warrants to purchase 51,700 shares of Common Stock at an exercise price of $1.50
per share (the "Initial Warrants"). On each anniversary of the Closing Date, at
the option of the Company, the
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Company will either (i) pay a cash dividend of $6.00 per Preferred Share or (ii)
a warrant (in substantially the form of the Initial Warrants) to purchase a
number of shares of Common Stock calculated in accordance with the following
formula and exercisable at a price calculated by averaging the closing price of
the Common Stock as reported by Nasdaq for the 20 day period preceding the date
of issuance of such warrants (the "Dividend Warrants"):
WS = .05 x (PS x (OPP/CP)
where:
WS is the number of shares of Common Stock for which the Warrant may be
exercised;
PS is the number of shares of Preferred Shares held by the Purchaser on
the date the Warrant is issued;
OPP is the Original Purchase Price (as defined in the Charter); and
CP is the Conversion Price (as defined in the Charter).
(d) If the Company issues any Dividend Warrants, the Company and the
Purchasers shall simultaneously enter into a registration rights agreement
(substantially in the form of the Registration Rights Agreement) covering the
registrations of the shares of Common for which such Dividend Warrants are
exercisable.
SECTION 1.02. Closing.
(a) The purchase and sale of the Preferred Shares shall take place at the
offices of Piper & Marbury L.L.P., Baltimore, Maryland, on or before May 31,
1999, or at such other location, date and time as may be agreed upon between the
Purchasers and the Company (such event being called, the "Closing", and such
date and time being called, the "Closing Date"). At the Closing, the Company
shall deliver to Purchasers the Initial Warrants, together with one or more
certificates in each Purchaser's name representing an aggregate of 15,510
Preferred Shares, against payment of the Purchase Price to the Company by the
Purchasers.
(b) At the Closing, the Purchasers shall deliver to the Company an
executed copy of this Agreement and the Registration Rights Agreement (as
hereinafter defined), together with the Purchase Price by wire transfer (in
accordance with written wire transfer instructions provided by the Company) or
certified check payable to the Company.
(c) The obligation of the Purchasers to purchase the Preferred Shares is
contingent upon the fulfillment of each of the conditions set forth in Section
4.01.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchasers, intending
that each Purchaser rely upon such representations and warranties, as follows:
SECTION 2.01.
Organization, Good Standing, Qualifications and Corporate Power.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maryland, and is duly licensed or
qualified to transact business as a foreign corporation and is in good standing
in each jurisdiction in which the nature of the business transacted by it or the
character of the properties owned or leased by it requires such licensing or
qualification. At all times since its formation, the Company has been engaged
exclusively in the business of scientific research, development, manufacturing,
marketing and distributing chemicals and biologics used in human and animal
therapeutics or having applications in the human and veterinary health care
products field generally (the "Business"). The Company has the requisite
corporate power and authority to (i) own and hold its properties and to carry on
the Business as currently conducted and as proposed to be conducted, (ii)
execute and deliver this Agreement and the Registration Rights Agreement of even
date herewith by and among the Company and the Purchaser (the "Registration
Rights Agreement"), (iii) issue, sell and deliver the Preferred Shares and all
shares of Common Stock issuable upon conversion of the Preferred Shares and
exercise of the Initial Warrant (collectively, the "Conversion Shares"), and
(iv) carry out and perform the provisions of this Agreement and the Registration
Rights Agreement.
(b) Except for CBL Development Corporation (which is inactive), the
Company does not (i) own of record or beneficially, directly or indirectly, (A)
any shares of capital stock or securities convertible into capital stock of any
other corporation or (B) any participating or equity interest in any
partnership, joint venture or other non-corporate business enterprise or (ii)
control, directly or indirectly, any other entity.
SECTION 2.02. Authorization of Agreements, Etc.
(a) The (i) execution and delivery by the Company of this Agreement, the
Registration Rights Agreement and the Warrants, (ii) performance of all
obligations of the Company hereunder and thereunder, (iii) issuance, sale and
delivery of the Preferred Shares and the Warrants, and (iv) issuance and
delivery of the Conversion Shares upon conversion of the Preferred Shares and
exercise of the Warrants, have been duly authorized by all requisite corporate
action on the part of the Company, its officers, directors and stockholders, and
have not and will not violate any provision of applicable law, any order of any
court or other agency of government, the Charter or the By-Laws, or any
provision of any indenture, agreement or other instrument to which the Company
or any of its properties or assets is bound, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement or other instrument, which conflict, breach
or default could reasonably
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be expected to have a material adverse effect on the Business or the assets,
results of operations, condition (financial or otherwise) or prospects of the
Company (a "Material Adverse Effect") or result in the creation or imposition of
any lien, charge, restriction, claim or encumbrance of any nature whatsoever (a
"Lien") upon any of the tangible or intangible assets of the Company.
(b) The Preferred Shares, when issued, sold and delivered in accordance
with the terms of this Agreement for the Purchase Price, will be duly and
validly issued, fully paid and nonassessable (assuming in the case of exercise
of the Initial Warrant, payment of the exercise price), with no personal
liability attaching to the ownership thereof, and will be free and clear of all
Liens imposed by or through the Company, except as set forth in the Articles
Supplementary and the Registration Rights Agreement. The Conversion Shares have
been duly and validly reserved for issuance upon conversion of the Preferred
Shares and exercise of the Initial Warrant, and upon such conversion or
exercise, will be duly authorized, validly issued, fully paid and nonassessable,
with no personal liability attaching to the ownership thereof and will be free
and clear of all Liens imposed by or through the Company, except as set forth in
the Charter and the Registration Rights Agreement. Neither the issuance, sale or
delivery of the Preferred Shares or the Warrants, nor the issuance or delivery
of the Conversion Shares, is subject to any preemptive right of any stockholder
of the Company or to any right of first refusal or other right in favor of any
person, except as herein provided or as provided in the Charter or in the
Registration Rights Agreement.
SECTION 2.03. Validity.
This Agreement and the Registration Rights Agreement have been duly
executed and delivered by the Company and, assuming the execution and delivery
of them by the other parties thereto, constitute the legal, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms, except as limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies.
SECTION 2.04. Authorized Capital Stock.
(a) Upon the filing and acceptance by the office of the Maryland State
Department of Assessments and Taxation of the Articles Supplementary: (i) the
authorized capital stock of the Company will consist of 9,984,490 shares of
Common Stock, of which 7,984,490 shares are classified as Class A Common Stock,
par value $0.01 per share, of which 5,590,101 shares will be issued and
outstanding as of the date hereof, and 2,000,0000 shares of which are classified
as Class B Common Stock, par value $0.01 per share, none of which are issued and
outstanding as of the date hereof, and 15,510 shares of preferred stock, all of
which have been designated Series A Convertible Preferred Stock, par value $0.01
per share, none of which are issued and outstanding as of the date hereof and
(ii) the designations, powers, preferences, rights, qualifications, limitations
and restrictions in respect of each class and series of authorized capital
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<PAGE>
stock of the Company as set forth in the Charter will be valid, binding and
enforceable and in accordance with all applicable laws. Except for this
Agreement, the Registration Rights Agreement, the Initial Warrant and as
described on Schedule 2.04 hereto, (i) there is no commitment by the Company to
issue any shares of capital stock, subscriptions, warrants, options, convertible
securities or other similar rights to purchase or receive Company securities or
to distribute to the holders of any of its equity securities any evidence of
indebtedness, cash or other assets, (ii) the Company is under no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity or debt securities or any interest therein or to pay any dividend or make
any other distribution in respect thereof, and (iii) there are no voting trusts
or similar agreements, stockholders' agreements, pledge agreements, buy-sell
agreements, rights of first refusal, preemptive rights or proxies relating to
any securities of the Company.
(b) All outstanding securities of the Company were issued in compliance
with applicable Federal and state securities laws.
SECTION 2.05. Financial Information.
(a) The Common Stock of the Company is registered pursuant to Section
12(g) of the Securities Exchange Act of 1934 (the "Exchange Act") and the
Company has filed all 34 Act Filings required to be filed by it with the SEC
pursuant to the reporting requirement of the Exchange Act. The Company has not
provided the Purchaser with any information that, according to applicable law,
rule, or regulation, should have been disclosed publicly by the Company but has
not been so disclosed. As of their respective dates, the 34 Act Filings complied
in all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC and other Federal, state, and local laws applicable
to such 34 Act Filings, and none of the 34 Act Filings contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(b) The Company has filed with the Securities Exchange Commission (the
"SEC") audited financial statements at March 31, 1997 and 1998 and for the three
years ended March 31, 1998 and unaudited financial statements as at and for the
nine months ended December 31, 1998, (collectively, the "Financial Statements").
(c) Except as set forth on Schedule 2.05(b), the Company has no material
liabilities, contingent or otherwise, that have not been disclosed in the
Financial Statements, subsequent filings with the SEC or that arose after the
date of the Financial Statements or other such filings.
(d) The financial statements of the Company included in the 34 Act Filings
comply as to form in all respects with the applicable accounting requirements
and rules and regulations of the SEC or other applicable rules and regulations
with respect thereto. Such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of interim
unaudited financial
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<PAGE>
statements) and fairly present in all material respects the financial position
of the Company as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
SECTION 2.06. Certain Events.
Other than (i) as disclosed in this Agreement (including the Schedules
hereto), the Registration Rights Agreement or the filings made by the Company
with the SEC under the Securities Exchange Act of 1934 (the "34 Act Filings"),
(ii) the sale of 225,000 shares of Common Stock to six investors as of April 8,
1999, (iii) Executive Employment Agreements and Stock Option Agreements with
Thomas P. Rice and John T. Botek (collectively, the "Executive Agreements"), and
(iv) in the ordinary course of business, since December 31, 1998. the Company
has not (a) issued any equity or debt securities, (b) borrowed any amount or
incurred or become subject to any liability (absolute, accrued or contingent),
(c) discharged or satisfied any Lien or incurred or paid any obligation or
liability (absolute, accrued or contingent), (d) declared or made any payment or
distribution to stockholders or purchased or redeemed any shares of its capital
stock or other security, (e) mortgaged, pledged or subjected to Lien any of its
assets, tangible or intangible, (f) entered into any commitment (contingent or
otherwise) to do any of the foregoing or (g) engaged in any transaction not in
the ordinary course of business with any Company director, officer, employee,
stockholder or any of their respective affiliates or relatives.
SECTION 2.07. Litigation; Compliance with Laws; Licenses.
Except as disclosed in the 34 Act Filings, there is no pending or, to the
knowledge of the Company, threatened (a) action, suit, claim, proceeding or
investigation against or affecting the Company, at law or in equity, or before
or by any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign (each,
a "Governmental Body"), (b) arbitration proceeding against or affecting the
Company, (c) governmental inquiry against or affecting the Company, or (d) any
action or suit by or on behalf of the Company pending or threatened against
others. The Company is not in default with respect to any order, writ,
injunction or decree known to the Company issued by any court or Governmental
Body. The Company has complied in all material respects with all laws, rules,
regulations and orders applicable to the Business and the Company's operations,
properties, assets, products and services, and the Company has all necessary
permits, licenses and other authorization, required to conduct the Business as
currently conducted or as proposed to be conducted. There is no existing or, to
the knowledge of the Company, any proposed law, rule, regulation or order,
whether Federal, state, or local, which reasonably could be expected to (a)
prohibit or restrict the Company from, (b) require the Company to obtain one or
more permits, licenses or other authorizations, or (c) otherwise materially
adversely affect the Company in, conducting the Business in any jurisdiction in
which it is now conducting business or in which it proposes to conduct business.
The Company has not received any legal opinion, memorandum or advice from
counsel to the effect that it is exposed, from a legal standpoint, to any
liability or
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<PAGE>
disadvantage which may be material to the Business or the Company's assets,
properties, liabilities, results of operations, financial condition or prospects
or that the Company is, or may be, required to obtain one or more permits,
licenses or other authorizations in order to conduct the Business as currently
conducted or as proposed to be conducted.
SECTION 2.08. Intellectual Property.
(a) Except as set forth on Schedule 2.08, (a) the Company has good, valid,
subsisting, unexpired and enforceable title to, or otherwise possesses adequate
rights to use, all the patents, trademarks, trade names, service marks,
copyrights and similar intangible assets or rights material to the Business
(collectively, the "Intellectual Property"); (b) the Company has no knowledge of
any adverse claim or facts which could give rise to a claim, which creates a
reasonable doubt as to the ownership or validity of the Intellectual Property;
(c) no Governmental Body has rendered any opinion, decision or judgment that
could limit, cancel, or question the validity of any of the Intellectual
Property; (d) to the Company's knowledge, no other intellectual property is
necessary to enable the Company to conduct the Business substantially as
currently conducted or as proposed to be conducted; (e) the Company is not
obligated or under any liability whatsoever to make any material payments in the
nature of royalties, license fees or otherwise to any owner of, licensee of or
other claimant to, any Intellectual Property; and (f) the Company has no
knowledge of intellectual property owned by others which is used by the Company
in the conduct of the Business as currently conducted or as proposed to be
conducted.
(b) To the knowledge of the Company, no assets, properties or rights used
in the Business infringe or, in the past have infringed, upon any patent,
trademark, trade name, copyright or other intellectual property, and the Company
has not misappropriated or misused any invention, trade secret or other
proprietary information entitled to legal protection. The continued use of the
Intellectual Property by the Company will not constitute an infringement,
misappropriation or misuse of any patent, trademark, trade name, copyright,
invention, trade secret, proprietary information, nondisclosure or other rights
of any third party. No person has asserted, or, to the knowledge of the Company,
threatened, any claim regarding the use of, or challenging or questioning the
Company's right or title in, any Intellectual Property, or challenging or
questioning the validity or effectiveness of the Intellectual Property or any
license, contract or commitment relating thereto, and the Company knows of no
valid basis for any such claim. To the Company's knowledge, all trade secrets,
know how and other proprietary information developed by or belonging to the
Company which has not been patented, trademarked or copyrighted has at all times
been kept confidential by the Company, its employees and agents so as to be
protectable under common law principles.
SECTION 2.09. Loans and Advances.
Except as set forth in the 34 Act Filings, the Company has no outstanding
loans or advances to any person and is not obligated to make any loans or
advances, except for routine
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advances to employees in respect of reimbursable business expenses incurred by
them in connection with their performance of services for the Company.
SECTION 2.10.
Assumptions, Guaranties, Etc., of Indebtedness of Other Persons.
Except as set forth in the 34 Act Filings, the Company has not assumed,
guaranteed, endorsed or otherwise become directly or contingently liable on any
indebtedness of any other person nor become obligated to purchase, provide funds
for payment, supply funds to or otherwise invest in a debtor or obligor or
otherwise to assure a creditor against loss.
SECTION 2.11. Governmental Approvals.
Assuming the accuracy of the representations and warranties of the
Purchaser set forth in Article III hereof, no registration or filing with, or
consent or approval of or other action by, any Governmental Body is or will be
necessary for (a) the valid execution, delivery and performance by the Company
of this Agreement or the Registration Rights Agreement, (b) the issuance, sale
and delivery of the Preferred Shares and the Initial Warrant or (c) upon
conversion of the Preferred Shares or exercise of the Initial Warrant, the
issuance and delivery of the Conversion Shares, other than (i) filings pursuant
to Federal and state securities laws (all of which filings have been, or with
respect to those filings which may be duly made after the Closing will be, made
by or on behalf of the Company) in connection with the offer, issuance and sale
of the Preferred Shares, the Initial Warrant and the Conversion Shares, (ii)
with respect to the Agreement, the registration of the shares covered thereby
with the SEC and (iii) the filing of the Articles Supplementary.
SECTION 2.12. Taxes.
The Company has filed, or caused to be filed, on a timely basis, all tax
returns (including payroll, unemployment and other taxes related to its
employees and independent contractors) required to be filed with any
Governmental Body and has paid or caused to be paid all taxes, levies,
assessments, tariffs, duties or other fees imposed, assessed or collected by any
Governmental Body that may have become due and payable pursuant to those tax
returns or otherwise. No deficiency assessment with respect to or proposed
adjustment of any of the Company's Federal, state, municipal or local tax
returns has occurred or, to the Company's knowledge, is threatened. There has
been no tax lien imposed by any Governmental Body outstanding against the
Company's assets or properties, except the lien for current taxes not yet due.
SECTION 2.13. Bankruptcy or Convictions.
None of the Company's directors or officers has ever been arrested,
charged with or convicted of any crime (other than minor traffic violations) nor
have any of them ever filed for bankruptcy or had a bankruptcy petition filed
against them, and none of them has ever been a
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director or officer of an entity that filed for bankruptcy or had a bankruptcy
petition filed against it.
SECTION 2.14. Brokers or Finders.
The Company is not liable, contingently or otherwise, for the payment of
any brokerage or finders' fees or agents' commissions or other similar payments
in connection with this Agreement or the transactions contemplated hereby,
except to Gruntal & Co., L.L.C., in the amount of $75,000.
SECTION 2.15. Assets.
(a) Personal Property. The Company has good and valid title to all of its
assets. All of the Company's tangible personal property has been maintained in
accordance with generally accepted industry practice and is, in all material
respects, in good operating condition and repair, ordinary wear and tear
excepted. All leased personal property is, in all material respects, in the
condition required of such property by the terms of the lease applicable
thereto, and all such leases are in full force and effect and have not been
modified or amended, and no party thereto is in default in any material respect
thereunder.
(b) Title to Real Property.
The Company owns no real property or any interest in real property, other
than as described in the 34 Act filings and leasehold interests granted pursuant
to written leases; (ii) the Company has neither granted nor is subject to any
options to purchase or rights of first refusal with respect to any real
property; and (iii) all of the Company's leases of real property are in full
force and effect and have not been modified or amended, and no party thereto is
in default in any material respect thereunder.
SECTION 2.16. Absence of Certain Changes.
Except (i) for certain covenant defaults under the Company's Loan
Agreement with First Union National Bank, (ii) a non-recurring charge estimated
at $1,400,000 for executive severance and a write-down on the Seton facility,
(iii) the Executive Agreements, or (iv) as disclosed in the 34 Act Filings,
since December 31, 1998, the Business has been conducted only in the ordinary
course consistent with past practice, and there has been no Material Adverse
Effect on the Company.
SECTION 2.17. Absence of Defaults, Etc.
The Company is not in default or alleged to be in default under any
material contract, agreement, lease or document to which it or any of its
properties or assets is bound. The Company and its properties and assets are in
compliance in all material respects with all
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applicable statutes, laws, ordinances, rules and regulations of all Governmental
Bodies, and all filing requirements relating thereto.
SECTION 2.18. Material Agreements.
Except for the Executive Agreements or as described in the 34 Act Filings
and as contemplated by this Agreement and the Registration Rights Agreement, the
Company is not a party to or bound by any written or oral (a) contract not made
in the ordinary course of business; (b) collective bargaining agreement or other
contract with any labor union or other employee bargaining unit; (c) bonus,
deferred compensation, profit sharing, pension, retirement, stock option, stock
purchase, hospitalization, insurance or other plan or arrangement providing for
employee benefits to present or former officers, directors or employees; (d)
contract with any manufacturer, producer, warehouser, distributor, agent, broker
or seller, or any agreement whereby the Company is entitled to manufacture,
distribute, warehouse, deal in or sell any products; (e) contract requiring
capital expenditures in excess of $100,000 in any one year; (f) contract for the
purchase of supplies, materials or services for delivery over a period of more
than 30 days from the date of this Agreement; (g) contract with any of its
officers, directors or employees, or (h) any other agreement, contract, lease,
license, commitment or instrument to which the Company is a party or by or to
which it or any of its assets or the Business is bound or subject, which
individually has an expected aggregate future liability or obligation of
$500,000 or more.
SECTION 2.19. Environmental Matters.
The Company has not released, emitted, buried or otherwise disposed of any
Regulated Substances (as hereinafter defined) on any of the Company's Properties
(as hereinafter defined) in violation of any Environmental Law (as hereinafter
defined). To the knowledge of the Company, no other person or entity has
released, emitted, buried or otherwise disposed of Regulated Substances on any
of the Company's Properties. To the knowledge of the Company, no storage tanks,
underground or otherwise, are or have been located on any of the Company's
Properties. The Company has in all material respects complied with all
Environmental Laws relating to the Business or the Company's Properties. The
Company has not received any notice, demand, suit or information request
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") or any comparable state or local law, nor does it have knowledge
of any other party's receipt of same relating to any of the Company's
Properties. The Company has not received written notice that any of the
Company's Properties is listed on any regulatory list of contaminated
properties, including the National Priorities List promulgated pursuant to
CERCLA, or any state or local counterpart. To the knowledge of the Company, the
Company has no existing or potential liability under any Environmental Law. No
environmental approvals, clearances or consents are required under applicable
law from any governmental entity or authority in order for the Purchaser to
purchase the Preferred Shares hereunder or for the Company to continue the
Business after the Closing Date.
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As used in this Section 2.19, (i) "Environmental Law" means any statute,
regulation, rule, code, common law, order or judgment of any applicable Federal,
state, local or foreign jurisdiction relating to pollution, hazardous
substances, hazardous wastes, petroleum or otherwise relating to protection of
the environment, natural resources or human health, including the Clean Air Act,
the Clean Water Act, the Resource Conservation Recovery Act ("RCRA"), CERCLA,
the Toxic Substances Control Act ("TSCA"), and the Emergency Planning and
Community Right-to-Know Act, all as currently amended; (ii) "Regulated
Substances" means any substance regulated under any Environmental Law, including
hazardous waste, as defined in RCRA, hazardous substances, as defined in CERCLA,
toxic substances as defined in TSCA, hazardous materials, as defined under the
Hazardous Materials Transportation Act, petroleum and its fractions, ACM's and
PCB's; (iii) the "Company" includes any predecessors or affiliates; and (iv) the
"Company's Properties" means any real property or facility currently owned,
leased, operated or used by the Company or previously owned, leased, operated or
used by the Company or any predecessor of the Company.
SECTION 2.20 Certain Payments.
Neither the Company nor any of its directors, officers, agents or
employees or any other person or entity associated with or acting for or on
behalf of the Company, has directly or indirectly (a) made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback or other payment to any
person or entity, private or public, regardless of form, in money, property or
services (i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, or (iii) to obtain special concessions
or for special concessions already obtained, for or in respect of the Company,
or (b) established or maintained any fund or asset that has not been recorded on
the books and records of the Company.
SECTION 2.21. Insurance.
The Company maintains policies of fire and casualty, extended coverage,
business interruption, public and product liability and other forms of insurance
in such amounts, with such deductibles and against such risks and losses as are
reasonable to protect the Business and the assets of the Company.
SECTION 2.22. Disclosure.
The representations and warranties contained in this Article II and the
information set forth in the Schedules hereto, are true, complete and correct in
all material respects, and none of the same contains any untrue statement of
material fact or omits to state any material fact necessary to make the
statements made therein not misleading. To the Company's knowledge, there is no
fact that the Company has not disclosed to the Purchaser which has had or could
reasonably be expected to have a Material Adverse Effect.
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SECTION 2.23. Agreements.
Except as set forth in this Agreement (including the Schedules) or the 34
Act Filings, the Company is not a party to or otherwise bound by any written or
oral contract or instrument or, to the knowledge of the Company, other
restriction which individually or in the aggregate could reasonably be expected
to have a Material Adverse Effect. The Company and each other party to such
contracts or instruments have performed all obligations required to be performed
by them to date, have received no notice of default or alleged default and are
not in default, in any material respect (with due notice or lapse of time or
both) under any of the same. The Company is not in violation of any provision of
its Charter or Bylaws. The Company has no present expectation or intention of
not fully performing all its obligations under each such contract or instrument
in all material respects.
SECTION 2.24. Company
When used in this Article II, "Company" shall mean, with respect to the
receipt of notice or knowledge, the Company's directors, executive officers,
counsel and advisors.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Each Purchaser, severally and not jointly, represents and warrants to the
Company as of the Closing Date that it:
(a) is an "accredited investor" within the meaning of Rule 501 of
Regulation D under the Securities Act of 1933, as amended (the "Securities Act")
and the rules and regulations promulgated thereunder and was not organized for
the specific purpose of acquiring the Preferred Shares;
(b) has sufficient knowledge and experience in investing in companies
similar to the Company so as to be able to evaluate the risks and merits of its
investment in the Company and is able financially to bear the risks of such
investment;
(c) has had an opportunity to discuss the Business and the Company's
management, prospects and financial affairs with the Company's management;
(d) is acquiring the Preferred Shares and the Initial Warrants for its own
account for the purpose of investment and not with a view to or for resale in
connection with any distribution thereof;
(e) understands that (i) the Preferred Shares, the Conversion Shares and
the Initial Warrants have not been registered under the Securities Act by reason
of their issuance in a transaction exempt from the registration requirements of
the Securities Act, (ii) the Preferred Shares, the Conversion Shares and the
Initial Warrants must be held indefinitely unless a
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subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration, (iii) the Preferred Shares, the Conversion Shares
and the Initial Warrants will bear a legend to such effect, (iv) the Preferred
Shares, the Conversion Shares and the Initial Warrants are subject to the
restrictions set forth in the Registration Rights Agreement, and (v) the Company
will make a notation on its transfer books to such effect; and
(f) has the full right, power and authority to enter into and perform this
Agreement and the Registration Rights Agreement, and each of this Agreement and
the Registration Rights Agreement, constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or other laws affecting the enforcement of creditors' rights generally, or by
general equitable principles.
ARTICLE IV
CONDITIONS TO THE CLOSING
SECTION 4.01. Conditions to the Obligations of the Purchasers.
The obligations of the Purchasers to consummate the transactions
contemplated by this Agreement are subject to the fulfillment or the written
waiver of the Purchasers, at their sole discretion, on or before the Closing
Date, of each of the following conditions:
(a) Performance. The Company shall have performed and complied, in all
material respects, with all agreements, obligations and conditions contained
herein that are required by it to be performed or complied with on or before the
Closing Date, and the Purchasers shall have received a certificate to such
effect from the President of the Company.
(b) All Proceedings to be Satisfactory. All corporate proceedings required
to be taken by the Company in connection with the transactions contemplated
hereby and all documents incident thereto shall be reasonably satisfactory in
form and substance to the Purchasers and their counsel, and the Purchasers and
their counsel shall have received all such evidence of such proceedings and
counterpart originals or certified or other copies of such documents as they
have reasonably requested.
(c) Supporting Documents. The Purchasers and their counsel shall have
received copies of the following documents:
(i) (A) the Articles Supplementary, certified by the Maryland
State Department of Assessments & Taxation and (B) a certificate of the Maryland
State Department of Assessments & Taxation, dated as of a recent date, as to the
due incorporation and good standing of the Company;
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(ii) a certificate of the Secretary of the Company, dated the
Closing Date and certifying: (A) that attached thereto is a true and complete
copy of the By-Laws of the Company as in effect on the date of such
certification; (B) that attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors (the "Board") the Company
authorizing the execution, delivery and performance of this Agreement, the
Articles Supplementary and the Registration Rights Agreement, the filing of the
Articles Supplementary with the Maryland State Department of Assessments &
Taxation, the issuance and delivery of the Preferred Shares and Initial Warrant
and the reservation of the applicable Conversion Shares, and that all such
resolutions are in full force and effect and that the same are all resolutions
adopted in connection with the transactions contemplated by this Agreement and
the Registration Rights Agreement; and (C) to the incumbency and specimen
signature of each officer of the Company executing this Agreement, the Articles
Supplementary, the Registration Rights Agreement, the certificates representing
the Preferred Shares, the Initial Warrants and any certificate or instrument
furnished pursuant hereto, and a certification by another officer of the Company
as to the incumbency of the officer signing the certificate referred to in this
clause (c); and
(iii) such additional supporting documents and other
information with respect to the operations and affairs of the Company as the
Purchasers or their counsel reasonably may request.
(d) The Registration Rights Agreement. The Company and the Purchasers
shall have executed and delivered the Registration Rights Agreement.
(e) The Preferred Shares and Initial Warrants. The Company shall have
delivered to the Purchasers stock certificates representing the Preferred Shares
and the Initial Warrants.
(f) Articles Supplementary. The Company's Board of Directors shall have
approved the Articles Supplementary as required by the laws of Maryland, and the
Company shall have filed the same with the Maryland Department of Assessments
and Taxation.
(g) Fees and Expenses. The Company, at or prior to the Closing, shall have
paid the fees and expenses set forth in Section 7.01 hereof.
(h) Due Diligence. No fact shall have been discovered by the Purchasers
during their due diligence investigation of the Company, the Business, its
prospects and the Company's management that causes them to conclude, in their
sole discretion, that an investment in the Company is not appropriate.
(i) Governmental and Other Authorization. All authorizations, approvals or
permits, if any, of any Governmental Body or any other person or entity that are
required in connection with the lawful issuance and sale of the Preferred
Shares, the Initial Warrants and the Conversion Shares pursuant to this
Agreement shall have been duly obtained, except for filings pursuant to Federal
or state securities laws which are legally permitted to be made on or after the
Closing Date.
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(j) Additional Agreements. The Company shall have delivered such other
agreements and instruments as the Purchasers shall have reasonably requested.
(k) Opinions of Counsel. Piper & Marbury L.L.P., counsel to the Company,
shall have delivered to the Purchasers an opinion, dated the Closing Date, in
form and substance reasonably acceptable to the Purchasers and their counsel.
(l) Absence of Legal Proceedings. No action or proceedings shall have been
instituted or threatened before a court or Governmental Body to restrict or
prohibit the transactions contemplated hereby or the operation by the Company of
the Business.
SECTION 4.02. Conditions to the Obligations of the Company.
The obligations of the Company under this Agreement are subject to the
fulfillment or its written waiver, at its sole discretion, on or before the
Closing Date, of each of the following conditions:
(a) Registration Rights Agreement. Each Purchaser shall have executed and
delivered the Registration Rights Agreement.
(b) Purchase by Purchaser. The Purchasers shall have paid the Purchase
Price.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Purchasers that so long as any
Preferred Shares are outstanding:
SECTION 5.01. Inspection and Information Rights.
The Company shall:
(a) permit the Purchasers, or any authorized representative thereof, upon
reasonable prior notice, to visit and inspect the properties of the Company and
its corporate and financial books and records and to discuss the Business and
its finances with its officers, all at such reasonable times during normal
business hours as may be requested by the Purchasers. The Purchasers or their
representatives shall maintain the confidentiality of all information acquired
by them in exercising such rights and shall execute a written non-disclosure
agreement if requested by the Company in form reasonably acceptable to the
Company and the Purchasers;
(b) furnish to the Purchasers within five business days after receipt
thereof, any notification relating to the Company's default or alleged default
under any loan agreement, lease or material contract to which the Company is a
party; and
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(c) furnish to the Purchasers promptly upon sending, making available or
filing the same, all reports, financial statements or other documents that the
Company sends or makes available to its Common Stockholders or files with the
SEC.
SECTION 5.02. Reserve for Conversion Shares.
The Company shall, at all times, reserve and keep available out of its
authorized but unissued shares of Common Stock such number of shares as shall be
sufficient to permit the conversion of all of the Preferred Shares and exercise
of the Initial Warrants. If at any time, the number of authorized but unissued
shares of the Common Stock shall not be sufficient to permit conversion of all
of the Preferred Shares and exercise of the Initial Warrants or otherwise to
comply with the terms of this Agreement, the Company will immediately take such
corporate action as may be necessary to increase its authorized but unissued
shares of the Common Stock to such number of shares as shall be sufficient for
such purposes. The Company will obtain any authorization, consent, approval or
other action by or make any filing with any court or administrative body that
may be required under applicable Federal or state securities laws in connection
with the issuance of shares of the Common Stock upon conversion of the Preferred
Shares or exercise of the Initial Warrants.
SECTION 5.03. Corporate Existence; Business.
Except as contemplated hereunder, the Company shall maintain its corporate
existence, rights and franchises in full force and effect. The Company will not
engage in any business other than the Business.
SECTION 5.04. Properties, Business, Insurance.
The Company shall maintain, as to its properties and the Business, with
financially sound and reputable insurers, insurance against such casualties and
contingencies and of such types and in such amounts as is customary for
companies similarly situated.
SECTION 5.05. Expenses of Directors.
The Company shall promptly reimburse each director of the Company who is
not an employee of the Company for all reasonable out-of-pocket expenses
incurred in attending meetings of the Board or any committee thereof.
SECTION 5.06. Board of Directors.
The Company shall use its best efforts to ensure that meetings of the
Board are held at least once every three months, and, in any event, that the
Board shall meet not less than four times per year.
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SECTION 5.07. Compliance with Laws.
The Company shall comply with all applicable laws, rules, regulations and
orders, noncompliance with which could reasonably be expected to have a Material
Adverse Effect.
SECTION 5.08. Maintain Records and Books of Account.
The Company shall maintain complete and accurate records and books of
account, in which entries will be made in accordance with GAAP, reflecting all
financial transactions of the Company and which will include, for each fiscal
year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other items in connection with the Business.
SECTION 5.09. Subsidiaries.
If at any time the Company has any subsidiaries, it will not permit any
such subsidiary to take any action that would violate any of the covenants
contained herein. The Company shall not sell or otherwise transfer any shares of
capital stock of any of its subsidiaries, except to the Company or another
subsidiary, or permit any of its subsidiaries to issue, sell or otherwise
transfer any shares of its capital stock or the capital stock of any of its
subsidiaries, except to the Company or another Company subsidiary.
SECTION 5.10. Restrictive Agreements Prohibited.
The Company shall not become a party to, or bound by, any agreement that
by its terms restricts the Company's performance of this Agreement, its Charter
or the Registration Rights Agreement.
SECTION 5.11. Use of Proceeds.
The Company shall use the proceeds from the sale of the Preferred Shares
to fund capital expenditures and for working capital.
SECTION 5.12. Registration and Listing.
Until the later of (i) such time as no Series A Preferred Shares are
outstanding, (ii) May 20, 2004, or (iii) such time as the Company is not a
reporting company under the Exchange Act, the Company will cause shares of
Common Stock to continue to be registered under Section 12(g) of the Exchange
Act, will comply in all respects, with its reporting and filing obligations
under the Exchange Act, and will not take any action or file any document
(whether or not permitted by the Exchange Act or the rules thereunder) to
terminate or suspend such reporting and filing obligations. Until the later of
(i) such time as no Series A Preferred Shares are outstanding or (ii) May 20,
2004, the Company shall, unless the Board of Directors of the Company determines
in good faith that such continuation is not beneficial to the Company, (i)
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continue listing or trading the Common Stock on Nasdaq, or another national
exchange and (ii) comply in all respects with the Company's reporting, filing
and other obligations under the By-Laws or rules of Nasdaq and any other
exchange or market on which shares of the Common Stock are then traded.
SECTION 5.13. Board Observation Rights.
So long as any Purchaser holds any Series A Preferred Shares, the
Purchasers shall have the right to collectively designate an observer to receive
notice of and attend meetings of the Company's Board of Directors. Such observer
shall have no right to vote on or with respect to any matter considered by the
Board of Directors. Such observer shall agree to maintain as confidential any
non-public information it obtains as a result of the provisions of this Section
5.13. The Company agrees to reimburse the observer for the reasonable travel and
other expenses incurred by such observe in connection with his or her attendance
at meetings of the Company's Board of Directors.
SECTION 5.14. Number of Directors.
Without the consent of the holders of a majority of the shares of Series A
Preferred Stock, the Company shall not have a board of directors with more than
six members.
ARTICLE VI
EVENTS OF NONCOMPLIANCE; EVENTS OF DEFAULT
SECTION 6.01. Events of Noncompliance.
For so long as any Preferred Shares remain outstanding, each of following
events shall constitute an "Event of Noncompliance":
(a) The Company shall fail to effect the redemption of the Preferred
Shares within 60 days of the date upon which redemption is required by the
Articles Supplementary;
(b) The Company shall default in the performance of any covenant or other
provision of this Agreement, the Articles Supplementary or the Registration
Rights Agreement, or any other agreement which is material to the Business, and
such default continues uncured for a period of thirty days after receipt by the
Company of written notice thereof from the Purchaser;
(c) Any representation or warranty made by the Company in this Agreement
or the Registration Rights Agreement or in any certificate or other document
contemplated by, delivered pursuant to, or in connection with, this Agreement or
the Closing hereunder shall prove to have been incorrect when made in any
material respect;
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(d) The Company reports an operating loss for any two consecutive fiscal
quarters ending on or after December 31, 1999.
(e) The Company shall fail to repay the principal of, or interest or
premium on, any indebtedness when due (or, if permitted by the terms of the
relevant document, within any applicable grace period), whether such
indebtedness shall become due by scheduled maturity, by required prepayment, by
demand or otherwise, or shall fail to perform any term, covenant or agreement on
its part to be performed under any agreement or instrument evidencing or
securing or relating to such indebtedness when required to be performed (or, if
permitted by the terms of the relevant document, within any applicable grace
period), if the effect of such failure to pay or perform is to accelerate, or to
permit the holders thereof to accelerate, the maturity of such indebtedness;
(f) The Company shall (i) admit in writing its inability to pay its debts
generally as they become due; (ii) commence a voluntary case under Title 11 of
the United States Bankruptcy Code or comparable state statute (collectively, a
"Bankruptcy Statute"), or authorize, through its Board of Directors, the
commencement of such a voluntary case; (iii) file an answer or other pleading
admitting or failing to deny the material allegations of a petition filed
against it in an involuntary case under a Bankruptcy Statute, or seeking,
consenting to or acquiescing in the relief therein provided, or by its failing
to controvert timely the material allegations of any such petition; (iv) have an
order for relief entered against it in any involuntary case commenced under a
Bankruptcy Statute, which order is not dismissed within 60 days; (v) seek relief
as a debtor under any other law relating to the liquidation or reorganization of
debtors or to the modification or alteration of the rights of creditors or
consent to or acquiesce in such relief; (vi) have an order entered against it by
a court of competent jurisdiction (A) finding it to be bankrupt or insolvent,
(B) ordering or approving its liquidation, reorganization or any modification or
alteration of the rights of its creditors, or (C) assuming custody of, or
appointing a receiver or other custodian for, all or a substantial part of its
property, which order is not dismissed within 60 days; or (vii) make an
assignment for the benefit of, or enter into a composition with, its creditors
or consent to the appointment of a receiver or other custodian for all or a
substantial part of its property; or
(g) A final judgment is rendered against the Company or its properties in
an amount in excess of ten percent of the then value of the Company's net assets
and such judgment remains unsatisfied for a period of 30 days after all appeals
have been exhausted or the time for appeal has expired.
SECTION 6.02. Declaration of Event of Default; Special Board Rights.
(a) So long as any of the Preferred Shares remain outstanding, in addition
to and without limiting any of the rights and remedies otherwise available to
the Purchasers and any subsequent holder of any Preferred Shares, upon the
occurrence of an Event of Non-Compliance, a majority in interest of the
Purchasers may declare an Event of Default.
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(b) Until the Event of Noncompliance which caused the Event of Default is
either (i) cured, or (ii) waived by a majority in interest of the Purchasers,
the Purchasers shall be entitled to elect the largest number of directors of the
Company that, together with the director elected by the holders of the Preferred
Shares shall not constitute a majority of the Board of Directors (the "Default
Directors"). The Default Directors shall serve until the Event of Noncompliance
is cured or waived, after which time the directors removed or other persons may
be reelected to the Board by the holders of Common Stock.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Fees and Expenses.
(a) Upon Closing, the Company shall pay the reasonable fees and
disbursements of one counsel to the Purchasers, in connection with the review of
this Agreement, the Articles Supplementary, the Registration Rights Agreement
and the transactions contemplated hereby and thereby, and the costs and
out-of-pocket expenses of the Purchasers in connection with its due diligence
investigation of the Company; provided that the total amount payable to the
Purchasers or their counsel and representatives hereunder shall not exceed
$15,000.
SECTION 7.02. Survival of Agreements.
The representations and warranties, covenants and other agreements made
herein and in the Registration Rights Agreement, as well as in each certificate
delivered to the Purchasers pursuant hereto, shall survive the Closing and
remain in effect so long as any of the Preferred Shares remain outstanding. The
Company agrees to indemnify and hold each of the Purchasers harmless from and
against and will pay to the Purchasers the full amount of any loss, damage,
liability, cost or expense (including amounts paid in settlement and reasonable
attorneys' fees and expenses) to each of the Purchasers resulting either
directly or indirectly from any breach of the representations and warranties,
covenants or agreements of the Company contained in this Agreement or the
Registration Rights Agreement or in any certificate delivered to the Purchasers
pursuant hereto or thereto or in connection herewith or therewith. Each of the
Purchasers agrees to indemnify and hold the Company harmless from and against
and will pay to the Company the full amount of any loss, damage, liability, cost
or expense (including amounts paid in settlement and reasonable attorneys' fees
and expenses) to the Company or such person resulting either directly or
indirectly from any breach of the representations, warranties, covenants or
agreements of the Purchaser contained in this Agreement or the Registration
Rights Agreement or in any certificate delivered to the Company pursuant hereto
or thereto in connection herewith or therewith.
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SECTION 7.03. Parties in Interest; Action by Purchasers.
(a) All representations, warranties, covenants and agreements contained in
this Agreement, and the Registration Rights Agreement, by or on behalf of any of
the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not;
provided, however, that the foregoing shall not in and of itself permit the
assignment by the Company and its successors of the Company's obligations
hereunder.
(b) Whenever this Agreement calls for action by the Purchasers, any such
action shall be taken by, and be effective if taken by, those Purchasers holding
a majority of the then outstanding Preferred Shares. Any such action shall
thereafter be binding upon all the Purchasers.
SECTION 7.04. Notices.
All notices, requests, consents and other communications hereunder shall
be in writing and shall be delivered in person, by overnight express mail, or
mailed by certified or registered mail, return receipt requested, addressed as
follows:
(a) If to the Company:
Chesapeake Biological Laboratories, Inc.
111 South Paca Street
Baltimore, MD 21230
Attn: President
Facsimile: (410) 843-4414
with a copy to:
Richard C. Tilghman, Jr., Esquire
Piper & Marbury L.L.P.
36 South Charles Street
Baltimore, Maryland 21201
Facsimile: (410) 576-1763
(b) If to a Purchaser:
at the address set forth opposite such Purchaser's name on
Schedule I hereto
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With a copy to:
John T. Unger
c/o Snell & Smith P.C.
1000 Louisiana, Suite 1200
Houston, Texas 77002
Facsimile: 713-651-8010
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
SECTION 7.05. Governing Law.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Maryland, without giving effect to its conflicts
of laws provisions.
SECTION 7.06. Entire Agreement.
This Agreement, including the Schedules and Exhibits hereto, together with
the Charter and the Registration Rights Agreement, constitute the sole and
entire agreements of the parties hereto and supersede all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof. All Schedules and Exhibits hereto are incorporated herein
by reference. To the extent an item is disclosed or set forth in a Schedule or
exhibit, its inclusion anywhere in the Schedules or Exhibits shall be deemed to
be an automatic cross-reference to, and inclusion in, all Schedules and Exhibits
as may be appropriate throughout the Agreement and any and all applicable
sections or paragraphs thereof, whether or not a specific cross-reference is
noted.
SECTION 7.07. Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, and all of which together shall constitute one and
the same instrument.
SECTION 7.08. Amendments.
This Agreement may not be amended or modified, and no provisions hereof
may be waived, without the written consent of the Company and the Purchasers.
SECTION 7.09. Severability.
Each provision of this Agreement shall be treated as a separate and
independent clause, and the unenforceability of any one clause shall in no way
impair the enforceability of any of the other clauses herein. If one or more of
the provisions contained in this Agreement shall for any
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reason be held to be unenforceable, such provision or provisions shall be
construed by the appropriate judicial body by limiting or reducing it or them,
so as to be enforceable to the maximum extent compatible with applicable law,
and no other provision hereof shall be affected by such holding, limitation or
reduction.
SECTION 7.10. Titles and Subtitles.
The titles and subtitles used in this Agreement are for convenience only
and are not to be considered in construing or interpreting any term or provision
of this Agreement.
SECTION 7.11. Recitals.
The Recitals hereto are specifically made a part of this Agreement.
SECTION 7.12. Pronouns.
All pronouns used herein shall be deemed to refer to the masculine,
feminine or neuter gender as the context requires.
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated May 20, 1999,
is between Chesapeake Biological Laboratories, Inc., a Maryland corporation (the
"Company"), and the holders of the Company's Preferred Stock (as defined below)
whose names appear on Schedule I attached hereto (each, a "Stockholder" and
collectively, the "Stockholders").
RECITALS
WHEREAS, the Company and the Stockholders have entered into a Preferred
Stock Purchase Agreement of even date herewith (the "Purchase Agreement"), and
execution and delivery of this Agreement is a condition precedent to the
obligations of the Company and the Stockholders to consummate the transactions
described in the Purchase Agreement.
WHEREAS, upon Closing under the Purchase Agreement, the Stockholders will
own 15,510 shares of the Company's Series A Convertible Preferred Stock, par
value $0.01 per share (the "Preferred Stock") and the Initial Warrants (as
defined in the Purchase Agreement); and
WHEREAS, the Company has agreed with the Stockholders, among other things,
to provide for registration of the shares of Common Stock (as defined below)
into which the Preferred Stock is convertible and for which the Initial Warrants
are exercisable, and, to that end, the parties wish to enter into this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound, agree as follows:
ARTICLE I. DEFINITIONS
Section 1.01. Definitions.
The following definitions shall be applicable to the terms set forth below
as used in this Agreement:
(a) "Affiliate" shall mean, with respect to any Person, any other
Person which directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with such Person.
(b) "Board" shall mean the Board of Directors of the Company.
<PAGE>
(c) "Charter" shall mean the Company's Articles of Incorporation, as
amended and supplemented.
(d) "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the federal securities
laws.
(e) "Common Stock" shall mean the Company's Common Stock, par value
$.01 per share.
(f) "Conversion Shares" shall mean the shares of Common Stock issued
or issuable upon conversion of the Preferred Stock and upon exercise of the
Initial Warrants.
(g) "Equity Interest" shall mean the Preferred Stock and the
Conversion shares issued upon conversion thereof or upon exercise of the Initial
Warrants.
(h) "Equity Securities" shall mean all shares of the Company's
capital stock, now or hereafter authorized and all warrants, options, rights or
other securities convertible into, or exchangeable for, shares of the Company's
capital stock, and shall include the Reserved Shares.
(i) "Permitted Transferees" shall mean (i) any Affiliate of a
Stockholder; (ii) any partner of a Stockholder upon a pro rata distribution of
that Stockholder's entire Equity Interest.
(j) "Person." The term "Person" shall mean any individual, firm,
corporation, partnership, limited liability company, trust, joint venture,
governmental authority or other entity, and shall include any successor (by
merger or otherwise) of such entity.
(k) "Register" including the terms "register," "registered" and
"registration" shall mean a registration effected by preparing and filing a
registration statement in compliance with the Securities Act.
(l) "Registrable Stock." The term "Registrable Stock" shall mean all
Conversion Shares issued upon conversion of the Preferred Stock and upon
exercise of the Initial Warrants. A Person shall be deemed to be a holder of
Registrable Stock when such Person has a right to acquire such Registrable Stock
(whether by conversion, exercise or otherwise) regardless of whether such
acquisition, conversion or exercise has actually been effected. Each share of
Registrable Stock shall continue to be Registrable Stock in the hands of each
subsequent holder thereof, subject to the limitations set forth in this
Agreement; provided that each share of Registrable Stock shall cease to be
Registrable Stock when transferred (x) to any Person who is not a Permitted
Transferee or if the transfer does not comply with the terms of this Agreement,
(y) pursuant to a Registered public offering, or (z) in accordance with Rule 144
promulgated by the Commission under the Securities Act.
(m) "Securities Act" shall mean the Securities Act of 1933, as
amended.
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Section 1.02. Additional Definitions.
Capitalized terms used in this Agreement and not defined herein shall have
the meanings given to them in the Purchase Agreement.
ARTICLE II
REGISTRATION RIGHTS
Section 2.01 Required Registration. The Company shall use its efforts to
effect the registration of the Registrable Stock (including without limitation
the execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act) as would permit or facilitate the sale or distribution of all the
Registrable Stock in the manner (including manner of sale) and in all states
reasonable requested by the Holder no later than 180 days after the date hereof.
Section 2.02 Registration Procedures.
(a) To carry out its agreement to register the Registrable Stock,
the Company shall:
(i) prepare and file with the Commission a registration
statement covering the Registrable Stock on such appropriate registration
form of the Commission as shall be reasonably selected by the Company
within 45 days of the date hereof and use its best efforts to cause such
registration statement to become effective as soon as practicable
thereafter and to remain effective for the period of time described in
Section 2.09 hereof.
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectuses used in
connection therewith as may be necessary to keep such registration
statement effective and current and to comply with the provisions of the
Securities Act, including such amendments and supplements as may be
necessary to reflect the intended method of disposition from time to time
of Registrable Stock included therein by holders of Registrable Stock (the
"Prospective Sellers");
(iii) furnish to each Prospective Seller such number of copies
of each preliminary and final prospectus in conformity with the
requirements of the Securities Act, and such other documents as the
Prospective Seller may reasonably request in order to facilitate the
disposition of the shares owned by it;
(iv) use its best efforts to register or qualify the shares
covered by such registration statement under such state securities or blue
sky laws of such jurisdictions as any Prospective Seller shall reasonably
request; provided that the Company shall not be
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<PAGE>
required in connection therewith to qualify to do business or to file a
general consent to service of process in any such jurisdiction; and
(v) cause all such Registrable Stock to be listed on each
securities exchange or other securities trading market on which the same
class of the Company's securities are then listed.
(b) Each Prospective Seller of Registrable Stock shall furnish to
the Company such information as the Company, its underwriter or its counsel may
reasonably request from the Prospective Seller for inclusion in the registration
statement (and the prospectus included therein).
(c) The Prospective Sellers shall not effect sales of the shares
covered by the registration statement after receipt of facsimile or other
written notice from the Company to suspend sales to permit the Company to
correct or update a registration statement or prospectus; provided, however,
that the Company shall not so suspend sales for any period of more than 30
consecutive days.
Section 2.03 Expenses of Registration.
The Company shall pay all expenses incurred in effecting the registration,
including, without limitation, all registration and filing fees, printing
expenses, expenses of compliance with blue sky laws, fees and disbursements of
counsel for the Company, and fees and expenses of its auditors; provided,
however, that each Prospective Seller shall pay the underwriting discounts and
commissions relating to the sale of its Registrable Stock.
Section 2.04 Indemnification.
(a) In connection with the registration of the Registrable Stock
pursuant to this Agreement, the Company shall indemnify and hold harmless each
Prospective Seller against any losses, claims, damages or liabilities, joint or
several (or actions in respect thereof), to which such Prospective Seller may be
subject under the Securities Act, under any other statute or at common law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement (or alleged
untrue statement) of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any summary
prospectus issued in therewith, or any amendment or supplement thereto, or any
other document, (ii) 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 (iii) any violation by the Company of the Securities
Act or any blue sky law, or any rule or regulation promulgated under the
Securities Act or any blue sky law, or any other law, applicable to the Company
in connection with any such registration, and shall reimburse each such
Prospective Seller for any legal or other expenses reasonably incurred by such
Prospective Seller in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however,
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that the Company shall not be liable to any Prospective Seller in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon any such untrue statement or omission made in such registration
statement, preliminary prospectus, final prospectus, summary prospectus or
amendment or supplement thereto, or any other document, in reliance upon and in
conformity with written information furnished to the Company by such Prospective
Seller specifically for use therein. The indemnity provided for herein shall
remain in full force and effect regardless of any investigation made by or on
behalf of such Prospective Seller and shall survive the transfer of the
Registrable Stock held by such Prospective Seller.
(b) If the indemnification provided for above is unavailable to an
indemnified party in respect of any losses, claims, damages or liabilities
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities, in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of the indemnified parties on the
other in connection with the statements or omissions or violations which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and of the indemnified parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Prospective Sellers agree that it would not be
just and equitable if contribution pursuant to this Section 2.04(b) were
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages and liabilities or actions in
respect thereof referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 2.04(b), no Prospective Seller shall be required to
contribute any amount in excess of the net proceeds from the sale of the
Prospective Seller's Registrable Stock pursuant to such registration statement.
No person guilty of fraudulent misrepresentations (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not also guilty of such fraudulent misrepresentation.
(c) Promptly after receipt by an indemnified party under Section
2.04(a) of written notice of the commencement of any legal action, such
indemnified party promptly shall, if a claim in respect thereof is to be made
under such Section, notify the indemnifying party in writing of the commencement
thereof but the omission so to notify the indemnifying party shall relieve it
from any liability which it may have had to any indemnified party hereunder only
to the extent that it has been prejudiced directly as the result of such
failure. In case any such action shall be brought against any indemnified party,
the indemnifying party shall assume the defense
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thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and counsel to the indemnified
party shall have reasonably concluded that there may be legal defenses available
to it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party or a possible conflict of interests
exists, the indemnified party or parties shall have the right to select separate
counsel (in which case the indemnifying party shall not have the right to direct
the defense of such action on behalf of the indemnified party or parties). Upon
the assumption by the indemnifying party of the defense of such action, and
approval by the indemnified party of counsel, the indemnifying party shall not
be liable to such indemnified party under this Section 2.04(a) for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnifying party shall have failed to
employ counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time, (ii) the indemnifying party and its
counsel fail to actively and vigorously pursue the defense of such action in the
reasonable judgment of counsel to the indemnified party, or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party.
Section 2.05 Inclusion of Additional Shares in Required Registrations.
The Company may include securities for sale for the account of any other
holder of Common Stock in the registration pursuant to Section 2.01 hereof.
Section 2.06 Rule 144 Requirements.
The Company shall make publicly available such information as is necessary
to enable the holders of Registrable Stock to make sales of Registrable Stock
pursuant to Rule 144 of the Securities Act. The Company shall furnish to any
holder of Registrable Stock, upon request, a written statement executed by the
Company as to the steps it has taken to comply with the current public
information requirements of Rule 144.
Section 2.07 Underwriters' Lock-Up.
If the Company files a registration statement in connection with an
underwritten public offering, each holder of Registrable Stock, if so requested
by the managing underwriter of such public offering, shall not effect any sale
or distribution of any Equity Securities for up to 180 days after effectiveness
of such registration statement; provided that the Company's executive officers
and directors agree to be similarly bound.
Section 2.08 Transfer of Registration Rights.
The registration rights of the Stockholders under this Agreement may be
transferred to any Permitted Transferee regardless of the number of shares of
Registrable Stock transferred.
Section 2.09 Effective Period of Registration.
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Once the registration statement filed by the Company pursuant to Section
2.01 becomes effective, the Company shall promptly file all reports, financial
statements and other documents necessary to keep such registration statement
current and the registration in effect until the earlier of (a) the sale of all
securities included in the registration statement, or (b) five years from the
effective date of the registration statement.
Section 2.10 Changes in Preferred Stock or Common Stock.
If there is any change in the Preferred Stock or Conversion Shares by way
of a stock split, stock dividend, combination or reclassification, or through a
merger, consolidation, reorganization or recapitalization, or by any other
means, appropriate adjustment shall be made in the provisions hereof so that the
registration rights granted hereby shall continue with respect to the Preferred
Stock or Conversion Shares as so changed.
Section 2.11 Termination of Registration Rights.
The obligations of the Company under this Agreement shall terminate on the
earlier of: (a) the date on which there are no longer any shares of Registrable
Stock held by the Stockholder or transferees permitted by Section 2.07 hereof,
or (b) the fifth anniversary of the effective date of the registration statement
filed by the Company pursuant to Section 2.01.
ARTICLE III
MISCELLANEOUS
Section 3.01 Stock Certificate Legends.
Upon the execution of this Agreement, each certificate representing shares
of Preferred Stock, Conversion Shares or the Initial Warrants held by the
Stockholders shall be endorsed by the Secretary of the Company with the
following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN SO REGISTERED
UNDER THOSE LAWS OR IF EXEMPTIONS FROM REGISTRATION ARE AVAILABLE.
THIS CERTIFICATE AND THE SECURITIES REPRESENTED HEREBY ARE TRANSFERABLE
ONLY UPON COMPLIANCE WITH THE PROVISIONS OF THAT CERTAIN PURCHASE
AGREEMENT DATED MAY 1999 BY AND AMONG THE COMPANY AND THE STOCKHOLDER
NAMED THEREIN, A COPY OF WHICH IS ON FILE IN THE OFFICE OF THE SECRETARY
OF THE COMPANY AND WILL BE MADE AVAILABLE UPON REQUEST TO ANY STOCKHOLDER
WITHOUT CHARGE."
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Section 3.02 Notices.
All notices, offers, acceptances, requests and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered in hand or by facsimile or mailed by certified or registered mail to
the Stockholders at their addresses shown on the Company's records or to the
Company at the Company's principal place of business. Any party hereto may
change its address for notice by giving notice thereof in the manner herein
above provided.
Section 3.03 Parties in Interest.
All covenants and agreements contained in this Agreement made by any of
the parties hereto shall bind such parties, and shall bind and inure to the
benefit of their successors and permitted assigns whether so expressed or not;
provided, however, that the foregoing shall not in and of itself permit the
assignment of any of the rights and obligations hereunder.
Section 3.04 Governing Law.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Maryland, without giving effect to its conflicts of laws
provisions.
Section 3.05 Entire Agreement.
This Agreement, together with the Purchase Agreement, including the
Schedules and Exhibits thereto, and the Charter constitute the sole and entire
agreement of the parties hereto and supersede all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof and thereof.
Section 3.06 Amendments.
This Agreement may not be amended or modified, and no provisions hereof
may be waived, without the written consent of the Company and the holders of a
majority of the Registrable Stock.
Section 3.07 Severability.
Each provision of this Agreement shall be treated as separate and
independent, and the unenforceability of any one provision shall in no way
impair the enforceability of any other provisions. If one or more provisions
contained in this Agreement shall for any reason be held to be unenforceable,
such provision or provisions shall be construed by the appropriate judicial body
by limiting or reducing it or them, so as to be enforceable to the maximum
extent compatible with applicable law, and no other provision hereof shall be
affected by such holding, limitation or reduction.
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Section 3.08 Titles and Subtitles.
The titles and subtitles used in this Agreement are for convenience only
and are not to be considered in construing or interpreting any term or provision
of this Agreement.
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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.
<PAGE>
(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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<PAGE>
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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<PAGE>
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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<PAGE>
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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