<PAGE>
ANNEX A
OPINION OF ARNHOLD AND S. BLEICHROEDER INC.
[Letterhead of Arnhold & S. Bleichroeder]
October 12, 2000
Board of Directors
Chesapeake Biological Laboratories, Inc.
Camden Industrial Park
1111 South Paca St.
Baltimore, MD 21230-2591
Gentlemen:
You have informed us that Chesapeake Biological Laboratories, Inc.
("Chesapeake", or the "Company") has received an offer from Cangene Corporation
("Cangene") to acquire all of the outstanding shares of common stock of
Chesapeake (the "Shares") on a fully diluted basis. You have provided us with
the Merger Agreement in substantially final form (the "Merger Agreement") among
Chesapeake and Cangene. As more fully described in the Merger Agreement,
Cangene would promptly commence a tender offer to purchase all of the Shares
for $4.60 per share in cash (the "Transaction").
You have requested our opinion regarding the fairness as of the date
hereof, from a financial point of view, of the cash consideration to be
received by the stockholders of Chesapeake pursuant to the Transaction.
In connection with the opinion, we have, among other things, (i) reviewed
the Merger Agreement, (ii) reviewed the reported price and trading activity for
the Shares, (iii) compared certain financial and stock market information for
Chesapeake with similar information for various other companies whose equity
securities are publicly traded which we deemed generally comparable in whole or
in part, (iv) reviewed the financial terms of certain recent business
combinations which we deemed generally comparable in whole or in part, (v)
performed such other studies and analyses as we considered appropriate, (vi)
reviewed certain publicly available financial statements and other information
of the Company, (vii) reviewed certain operating and financial information,
including projections, provided to us by the management of Chesapeake, relating
to the Company's business and prospects, and (viii) met with certain members of
Chesapeake's management at the Company's main facility in Baltimore, Maryland
to discuss its operations, historical financial statements and future
prospects.
With your consent, we have assumed and relied, without independent
verification, upon the accuracy and completeness of the information provided to
us for purposes of this opinion. The financial projections used in our analyses
have been provided to us by the management of Chesapeake who have informed us
that these projections reflect their best and most current estimates and
judgments as to the likely future financial performance of Chesapeake and have
authorized and instructed us to use such projections in arriving at our
opinion. We have not made an independent valuation or appraisal of the assets
of Chesapeake nor have we been furnished with any such valuation or appraisal.
For the purposes of the opinion, we have not been asked to consider, and we
have not considered, the effect of any federal, state or local tax laws on the
stockholders of Chesapeake. Further, our opinion necessarily reflects
accounting standards, economic, monetary, market and other conditions in effect
on, and the information made available to us as of, the date hereof.
Arnhold and S. Bleichroeder, Inc., is acting as financial advisor to the
Company in connection with the Transaction and the Board of Directors of
Chesapeake in rendering this opinion as to the fairness of the Transaction and
will receive a fee for such services, a substantial portion of which is
contingent upon the consummation of the Transaction.
A-1
<PAGE>
This opinion is being rendered solely to the Board of Directors of
Chesapeake for its use in evaluating the Transaction and may not be relied upon
by any other person without our prior written consent. This letter does not
constitute a recommendation to any stockholder as to whether such stockholder
should tender their shares or as to how such stockholder should vote on the
proposed Transaction. This letter may be referred to and reproduced in its
entirety in offer or proxy materials sent to the stockholders or filed with the
U.S. Securities and Exchange Commission in connection with the tender offer
anticipated in the Transaction, but may not be otherwise reproduced,
disseminated, quoted from or referred to by the Company or its Board of
Directors without our prior written consent.
Based on the analysis described above and subject to the foregoing
limitations and qualifications, it is our opinion that the cash consideration
to be received by the stockholders of Chesapeake pursuant to the Transaction is
fair from a financial point of view to such stockholders as of the date of this
letter.
Very truly yours,
ARNHOLD AND S. BLEICHROEDER, INC.
By: /s/ David A. Holbrook
------------------------------------
David A. Holbrook
Vice President
A-2
<PAGE>
ANNEX B
CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
1111 SOUTH PACA STREET
BALTIMORE, MARYLAND 21230
INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
This information statement is being mailed to you on our about November 17,
2000 as part of the Recommendation Statement on Schedule 14D-9 of Chesapeake
Biological Laboratories, Inc. You are receiving this statement in connection
with the possible election of persons designated by AC Acquisition Subsidiary,
Inc., a Maryland corporation and a wholly-owned subsidiary of Cangene
Corporation, a Canadian corporation, to a majority of the seats of Chesapeake's
board of directors. On October 30, 2000, Chesapeake entered into an Agreement
and Plan of Merger with AC Acquisition Subsidiary and Cangene, the terms of
which require AC Acquisition Subsidiary to commence a tender offer to purchase
all outstanding shares of Chesapeake class A common stock, par value $.01 per
share, at a price per share of $4.60, net to the seller in cash, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated November
17, 2000, and in the related Letter of Transmittal. Copies of the Offer to
Purchase and the Letter of Transmittal have been mailed to Chesapeake
shareholders and are filed as Exhibits (a)(1) and (a)(2), respectively, to the
Tender Offer Statement on Schedule TO filed by AC Acquisition Subsidiary with
the Securities and Exchange Commission on November 17, 2000. The merger
agreement provides that, subject to satisfaction or waiver of conditions,
following completion of the offer, and in accordance with the Maryland General
Corporation Law, AC Acquisition Subsidiary will merge with and into Chesapeake.
Following consummation of the merger, Chesapeake will continue as the surviving
corporation and will be a wholly-owned subsidiary of Cangene. At the effective
time of the merger, each issued and outstanding share of Chesapeake's stock,
other than shares held by Cangene, AC Acquisition Subsidiary or another
subsidiary of Cangene, will be converted into the right to receive $4.60 in
cash.
This Information Statement is being mailed to you in accordance with
Section 14(f) of the Securities Exchange Act of 1934, as amended, and Rule
14f-1 promulgated thereunder. The information set forth herein supplements
information contained in the Recommendation Statement. Information set forth
herein related to Cangene, AC Acquisition Subsidiary or their designees for
director, has been provided by Cangene. You are urged to read this Information
Statement carefully. You are not, however, required to take any action in
connection with the matters set forth herein.
AC Acquisition Subsidiary commenced the offer on November 17, 2000. The
offer is currently scheduled to expire at 12:00 midnight, New York City time,
on January 3, 2001, unless AC Acquisition Subsidiary extends the offer.
Chesapeake class A common stock and series A-1 convertible preferred stock are
the only classes of equity securities outstanding which are entitled to vote at
a meeting of the shareholders of Chesapeake. As of November 14, 2000, 5,893,030
shares of Chesapeake class A common stock, 14,511 shares of series A-1
convertible preferred stock and warrants to purchase 123,370 shares of class A
common stock were outstanding, of which Cangene and AC Acquisition Subsidiary
owned no shares as of the date hereof.
Designation of Directors by AC Acquisition Subsidiary. The merger
agreement provides that immediately upon acceptance for payment of and payment
for shares of the Chesapeake common stock by AC Acquisition Subsidiary or any
of its affiliates pursuant to the tender offer, AC Acquisition Subsidiary shall
be entitled to designate a number of persons that would constitute a majority
of the board of directors, and Chesapeake shall use its best efforts to, upon
request by AC Acquisition Subsidiary, promptly, at Chesapeake's election,
either increase the size of the board of directors or secure the resignation of
such number of directors as is necessary to enable AC Acquisition Subsidiary's
designees to be elected to the board of directors and to cause AC Acquisition
Subsidiary's designees to be so elected and to constitute at all times after
the purchase of the tendered shares a majority of the board of directors.
Chesapeake has agreed to use its best efforts to cause persons designated by AC
Acquisition Subsidiary to constitute the same percentage as is on the board of
directors of (i) each committee of the board of
B-1
<PAGE>
directors (other than any committee of the board of directors established to
take action under the merger agreement), (ii) each board of directors of each
subsidiary of Chesapeake and (iii) each committee of each such board. At least
three members of the current board of directors will remain on Chesapeake's
board of directors until the effective time of the merger. Chesapeake's
obligation to appoint designees to the board of directors shall be subject to
Section 14(f) of the Exchange Act and Rule 14f-1.
As of the date of this Information Statement, AC Acquisition Subsidiary has
designated the four people set forth on Schedule I as their representatives on
the board of directors of Chesapeake after the closing of the tender offer and
prior to the closing of the merger. Each of the persons listed on Schedule I has
consented to serve as a director. None of such persons currently is a director
of, or holds any position with, Chesapeake. Cangene and AC Acquisition
Subsidiary have advised Chesapeake that, to the best of their knowledge, none of
the persons listed on Schedule I or any of their affiliates beneficially owns
any equity securities or rights to acquire any such securities of Chesapeake,
nor has any such person been involved in any transaction with Chesapeake or any
of its directors, executive officers or affiliates that is required to be
disclosed pursuant to the rules and regulations of the SEC other than with
respect to the proposed offer and merger transaction.
DIRECTORS AND EXECUTIVE OFFICERS OF CHESAPEAKE
The directors and executive officers of Chesapeake as of March 31, 2000, are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH CHESAPEAKE
-------------------------------------- ----- ------------------------------------------------------
<S> <C> <C>
Thomas P. Rice ....................... 50 President, Chief Executive Officer and Director
John T. Botek ........................ 43 Vice President, Chief Operating Officer
Narlin B. Beaty, Ph.D ................ 50 Vice President, Chief Technical Officer and Director
John T. Janssen ...................... 61 Vice President, Chief Financial Officer and Treasurer
Charles M. Proby(5) .................. 54 Vice President, Sales and Marketing
Regis F. Burke(1)(2) ................. 52 Director
Harvey L. Miller(1)(3) ............... 60 Director
Elliot F. Hahn, Ph.D.(1)(4) .......... 56 Director
</TABLE>
----------
(1)Member of Compensation, Stock Option and Audit Committees.
(2)Chairman of the Audit Committee.
(3)Chairman of the Stock Option Committee.
(4)Chairman of the Compensation Committee.
(5)Appointed as an Officer, March 2000.
Thomas P. Rice, age 50, was elected a director in 1997 and was appointed
President and Chief Executive Officer as of January 11, 1999. Mr. Rice is a
Certified Public Accountant. In 1996, Mr. Rice co-founded Columbia Investments,
LLC, which made selective investments, primarily in the health care industry.
From 1993 to 1996, Mr. Rice was Executive Vice President, Chief Operating and
Financial Officer and a member of the Board of Directors of Circa
Pharmaceuticals, Inc., a publicly-traded pharmaceutical firm. From 1991 to
1993, Mr. Rice was a principal of Competitive Advantage, a Baltimore-based
management consulting firm. From 1985 to 1990, Mr. Rice was Vice President of
Administration and Finance of PharmaKinetics Laboratories, Inc.
John T. Botek, age 43, joined Chesapeake as Vice President and Chief
Operating Officer in April 1999. In 1996, Mr. Botek was also a co-founder of
Columbia Investments, LLC. From 1993 to 1996, he was Senior Vice President of
Operations of Circa Pharmaceuticals, Inc.
Narlin B. Beaty, Ph.D., age 50, joined Chesapeake in 1983 and currently
serves as Vice President and Chief Technical Officer. He served as President of
Chesapeake from 1991 until May 1996 and has been a director of Chesapeake since
1989. Dr. Beaty also served as Acting President of Chesapeake from 1989 to 1991
and as Director of Development for Chesapeake from 1985 to 1988.
B-2
<PAGE>
John T. Janssen, age 61, joined Chesapeake in 1993 as CFO. He is a
Certified Public Accountant with over 35 years of diversified financial
management experience. During the 12 years prior to joining Chesapeake, he was
a member of the Board of Directors and Chief Financial Officer of
Barre-National, Inc. of Baltimore, Maryland, for 3 years, and Genessee Brewing
Co. of Rochester, New York, for 9 years, respectively.
Charles M. Proby, age 54, joined Chesapeake in 1998 as Director of Sales,
and was promoted to Vice President Sales and Marketing in March 2000. From 1996
to 1998, he served as Business Development Manager with BioScience Contract
Production Corporation. Prior to that Mr. Proby was Vice President -- Sales and
Marketing for Asepco, Inc., a manufacturer of aseptic processing equipment and
General Manager at L.H. Fermentation, a bioprocessing equipment company.
Regis F. Burke, age 52, was elected a director of Chesapeake in 1995. Mr.
Burke is a Certified Public Accountant in private practice, since 1988. Mr.
Burke specializes in corporate transaction consulting, business planning,
business valuation and litigation support services. Mr. Burke currently serves
as an outside director to several privately held companies located in Maryland
and Pennsylvania. Prior to 1988, Mr. Burke was a partner with Touche Ross &
Co., an international accounting firm.
Harvey L. Miller, age 60, was elected a director in 1996. Since 1980, Mr.
Miller has been Chairman of GSI Corporation, a manufacturer of high-tech wire
assemblies. Since 1986, Mr. Miller has been president of DM Realty Corporation,
a developer of commercial real estate sites. Mr. Miller has served as a
director of Maryland Midland Railway, Inc. since 1997.
Elliot F. Hahn, Ph.D., age 56, was elected a director in September 1999.
He is President and a director of Andrx Corporation, a publicly traded
pharmaceutical company. He is also a director of two privately held
corporations. Since 1988, he has been an Adjunct Associate Professor at the
University of Miami School of Medicine.
Board Committees and Meetings
The Board of Directors has three standing committees: a Compensation
Committee, an Audit Committee and a Stock Option Committee. The current members
of each committee are Messrs. Burke, Miller and Dr. Hahn. The Compensation
Committee makes recommendations concerning salaries and incentive compensation
for employees of and consultants to Chesapeake. The Audit Committee reviews the
results and scope of the audit and other services provided by Chesapeake's
independent public accountants. The Stock Option Committee administers and
grants stock options and awards pursuant to Chesapeake's Incentive Stock Option
Plans.
The Audit Committee, which includes the outside directors, met with
Chesapeake's independent public accountants, both before and after the year-end
audit. During fiscal year 2000, the Audit Committee met once to review the
final results of the fiscal year 1999 audit and once to review the fiscal year
2000 audit.
During the fiscal year ended March 31, 2000, the Board of Directors held
eight formal meetings. All directors attended at least 80% of the meetings.
B-3
<PAGE>
EXECUTIVE COMPENSATION AND RELATED INFORMATION
Summary of Compensation
The following table sets forth the compensation earned by Chesapeake's
Chief Executive Officer, Chesapeake's four other highest compensated executive
officers and the former Chairman for services rendered in all capacities to
Chesapeake for the Fiscal Years ended March 31, 2000, 1999 and 1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION
---------------------------------------------------------------------------------------
ANNUAL COMPENSATION
---------------------------------------------
SALARY AND INCENTIVE COMPENSATION LONG TERM COMPENSATION
--------------------------------------------- ---------------------------------------
OTHER ANNUAL
YEAR $ BONUS ($) COMPENSATION ($) STOCK OPTIONS (#)
------ ---------------------- ----------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Thomas P. Rice 2000 $ 150,000 -- $ 1,247(3) 75,000
President and Chief Executive 1999 $ 34,134(1)(2) $ 8,271(3) 253,000(4)
Officer 1998 -- $ 9,600(3) 3,000
John T. Botek 2000 $ 125,333(5) -- -- 200,000
Vice President and Chief 1999 -- -- -- --
Operating Officer 1998 -- -- -- --
Narlin B. Beaty 2000 $ 131,200 -- -- 75,000
Vice President and Chief 1999 $ 143,601 -- -- --
Technical Officer 1998 $ 150,053 -- -- 13,786
John T. Janssen 2000 $ 129,300 -- -- 7,500
Vice President, Chief 1999 $ 141,521 -- -- --
Financial Officer and 1998 $ 147,880 $4,000 -- 13,786
Treasurer
Robert J. Mello (A) 2000 $ 121,325(6) -- -- 10,000
Secretary and Vice President 1999 $ 138,566 -- -- --
1998 $ 144,792 -- -- 13,786
William P. Tew (B) 2000 $ 31,250(9) -- $ 183,432(8) --
Former Chairman 1999 $ 174,818 -- $ 51,353(7) 154,089
1998 $ 194,428 -- $ 849 30,130
</TABLE>
----------
(A) Dr. Mello resigned as Secretary and Vice President March 15, 2000.
(B) Dr. Tew resigned as Chairman June 30, 1999.
(1) Represents a partial fiscal year. Mr. Rice was appointed President of
Chesapeake in January 1999, after a two-year tenure on the Board of
Directors.
(2) Includes $17,067 of deferred compensation.
(3) Represents fees and options given to Mr. Rice as a non-employee director
prior to January 1999 and life insurance premiums paid on behalf of Mr.
Rice between January 11, 1999 and March 31, 2000.
(4) Includes 3,000 options given Mr. Rice as an outside director and 250,000
upon joining Chesapeake.
(5) Represents a partial fiscal year. Mr. Botek was appointed Vice President,
Chief Operating Officer on April 13, 1999.
(6) Represents a partial fiscal year. Dr. Mello resigned on March 15, 2000.
(7) Includes $50,000 paid in January 1999 as part of management realignment.
(8) Represents fees for consulting and management reorganization for the period
July 1, 1999 through March 31, 2000 and life insurance premiums.
(9) Represents compensation for Dr. Tew as Chairman through June 30, 1999.
B-4
<PAGE>
Employment Agreements
Mr. Rice entered into an agreement with Chesapeake on January 11, 1999.
Upon joining Chesapeake as President and Chief Executive Officer, Mr. Rice
received an annual salary of $150,000 of which $75,000 was deferred until
January 2000. The agreement was scheduled to continue through December 31, 2000
and be automatically renewed for one year periods unless Mr. Rice or Chesapeake
gave 90 day written notice of non-renewal. Mr. Rice was granted qualified stock
options for 50,000 shares of which 50% will vest on December 2, 2000 and are
100% vested January 2, 2001 and had an exercise price of $3.75 per share, which
was the market at the day of the grant. Mr. Rice also received non-qualified
stock options for 200,000 shares at $1.00 per share, which was below the then
$2.50 market price. 100,000 of these shares vested upon grant. The vesting of
the remaining shares vest at 20,000 shares per year over the next five years or
based upon the achievement of certain milestones, which if achieved would
result in accelerated vesting.
Mr. Botek entered into an employment agreement in March 1999 and joined
Chesapeake as Vice President and Chief Operating Officer in April 1999. The
initial term of the employment agreement was scheduled to continue through
December 31, 2000 and be automatically renewed annually each January 1, unless
Mr. Botek or Chesapeake gave 90 days written notice of non-renewal. Mr. Botek
receives an annual salary of $130,000. During 1999, 50% of his salary was
deferred until January 3, 2000. Mr. Botek is also entitled to periodic bonuses
at the discretion of the Compensation Committee. Mr. Botek was granted
qualified stock options for 25,000 shares of Class A Common Stock, one-half of
which vest on June 30, 2000, and the remainder of which will vest on December
31, 2001. The exercise price of these options is $2.125 per share, the market
price on the date of grant. Mr. Botek also received non-qualified stock options
for 125,000 shares of Class A Common Stock at an exercise price of $1.00 per
share, one-half of which vested on the date of grant and the remainder of which
vest 20% per year over the next five years or earlier upon Chesapeake's
achievement of certain milestones.
Effective June 1, 2000, Messrs. Rice and Botek extended the terms of their
employment agreements with Chesapeake through May 31, 2002. The new employment
agreements may be renewed for one additional year, at the option of Mr. Rice or
Mr. Botek, respectively, with at least 90 day written notice. Both Messrs. Rice
and Botek received salary increases to $200,000 and $160,000, respectively, and
remain entitled to annual bonuses at the discretion of the Compensation
Committee. Under each new employment agreement, the executive is entitled to
two times his most recent annual compensation if (i) his employment is
terminated upon a change of control or (ii) he terminates his employment within
six months after a change in control. In connection with these new employment
agreements, Messrs. Rice and Botek purchased 100,000 restricted shares and
75,000 restricted shares, respectively, subject to forfeiture, under
Chesapeake's Fifth Stock Incentive Plan, for $2.50 per share, the fair market
value on the date of purchase. Messrs. Rice and Botek each signed a promissory
note to Chesapeake for the purchase price for the shares.
Chesapeake has also entered into employment agreements with Dr. Beaty and
Mr. Janssen. These agreements generally provide for payment of a base salary,
together with incentive compensation in an amount to be determined by the Board
of Directors or Compensation Committee from time to time. Base salaries
established in the employment agreements for Dr. Beaty and Mr. Janssen are
$131,200 and $129,300, respectively. The base salary applicable to any
executive officer may be changed through action of the Compensation Committee
or Board of Directors.
The employment agreements provide, in the case of Dr. Beaty, for an
initial term of three years, with successive three-year renewal terms; and, in
the case of Mr. Janssen, for an initial term of two years, with successive
two-year renewal terms. The initial term of each employment agreement commenced
July 1, 1995. Pursuant to the employment agreements, each of the executive
officers is required to devote substantially all of his business time to
Company related matters and has agreed not to solicit clients or customers of
Chesapeake for a period following termination of employment.
The employment agreements also provide for severance payments to the
executive officers of Chesapeake in certain circumstances. Dr. Beaty and Mr.
Janssen are each entitled to receipt of severance payments in the amount equal
to approximately one-half of their respective annual compensation upon
termination of their employment following a breach by Chesapeake of their
respective employment agreements or for good reason by the employee.
B-5
<PAGE>
William P. Tew, Ph.D., resigned as Chairman June 30, 1999. From July 1,
1999 through June 30, 2000, Dr. Tew served as a consultant to Chesapeake at a
monthly retainer of $10,208.
Stock Option Grants
Stock options were granted during the fiscal year to the officers listed below:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL APPRECIATION
OPTIONS EXERCISE FOR OPTION TERM(3)
SHARES GRANTED PRICE EXPIRATION ----------------------------
GRANTED IN FISCAL '00 PER SHARE DATE 5%($) 10%($)
---------------- --------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Thomas P Rice 75,000 11.3% $ 2.438 12/13/09 $118,304 $312,125
John T. Botek 125,000(2) 18.9% $ 1.000 12/21/08 $171,859 $453,422
25,000(1) 3.8% $ 2.125 4/13/09 $ 34,372 $ 90,684
50,000 7.5% $ 2.438 12/13/09 $ 78,869 $208,083
Narlin B. Beaty 50,000 7.5% $ 2.438 12/13/09 $ 78,869 $208,083
25,000 3.8% $ 2.313 4/8/09 $ 37,413 $ 98,707
John T. Janssen 7,500 1.1% $ 2.313 4/8/09 $ 11,224 $ 29,612
Robert J. Mello(a) 10,000 1.5% $ 2.313 4/8/09 $ 14,965 $ 39,483
</TABLE>
----------
(a) Robert J. Mello resigned as Secretary and Vice-President on March 15, 2000.
(1) 50% of these options vest June 30, 2000 and are 100% vested December 31,
2001.
(2) Non-qualified options. 62,500 were vested upon grant and were issued at
$1.00 compared to $2.25 market on date of grant. The balance of the shares
vest over a five year period or upon a qualifying event.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options at the end of the ten-year option term. The assumed 5%
and 10% rates of stock appreciation are mandated by rules of the Securities
and Exchange Commission and do not represent Chesapeake's estimate of the
future market price of the Common Stock.
B-6
<PAGE>
Stock Option Exercises and Holdings
The table below sets forth information concerning the exercise of options
during the 2000 fiscal year and unexercised options held at the end of the
fiscal year by Chesapeake's Chief Executive Officer and Chesapeake's four other
most highly compensated executive officers.
AGGREGATED OPTION EXERCISES IN THE 2000 FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FISCAL AT FISCAL
SHARES YEAR-END(#) YEAR-END(#)(1)
ACQUIRED VALUE EXERCISABLE(E)/ EXERCISABLE(E)/
ON EXERCISE (#) REALIZED ($) UNEXERCISABLE(U) UNEXERCISABLE(U)
----------------- -------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Thomas P. Rice 0 0 187,000(E) $ 482,775(E)
152,000(U) $ 368,750(U)
John T. Botek 0 0 112,500(E) $ 307,788(E)
87,500(U) $ 269,688(U)
Narlin B. Beaty 0 0 93,786(E) $ 167,341(E)
45,000(U) $ 84,543(U)
John T. Janssen 0 0 33,786(E) $ 49,866(E)
22,500(U) $ 42,340(U)
Robert J. Mello(A) 15,000 $73,750 53,768(E) $ 81,736(E)
</TABLE>
----------
(1) Assumes, for all unexercised in-the-money options, the difference between
fair market value and the exercise price. The fair market value on March
31, 2000 was $4.375 per share.
(A) Robert J. Mello, Ph.D., who resigned as Secretary and Vice President on
March 15, 2000 exercised options on March 6, 2000 to purchase 5,000 shares
at $1.50 which had been granted November 30, 1995 and 10,000 shares at
$1.75 granted June 25, 1996.
Compensation of Board of Directors
Executive Officers of Chesapeake who also serve on the Board of Directors
receive no additional compensation for their service as such. Members of the
Board of Directors who are not also employed by Chesapeake receive annual
compensation of $9,600 per year for their service on the Board of Directors. In
addition, Chesapeake grants to each director, upon that individual's initial
appointment or election to the Board of Directors, an option to purchase 8,000
shares of Common Stock at the then current market price. Accordingly, Mr. Burke
was granted an option to purchase 8,000 shares of Common Stock at $1.50 per
share in November 1995, Mr. Miller was granted an option to purchase 8,000
shares of Common Stock at $3.125 per share in November 1996, Mr. Rice was
granted an option to purchase 8,000 shares of Common Stock at an exercise price
of $5.1875 per share in March 1997 and Dr. Hahn was granted an option to
purchase 8,000 shares of Common Stock at an exercise price of $3.00 on
September 14, 1999. Each of these respective options is evidenced by a
Director's Agreement and a related Option Agreement by and between Chesapeake
and the director and becomes exercisable based on a vesting schedule over a
four-year period measured from the date of grant.
In addition, in March 1997, the Board of Directors approved the 1997
Directors' Stock Option Plan (the "Directors" Plan). The Directors' Plan
provides for the issuance of a qualified stock option to purchase 3,000 shares
of Common Stock to each director of Chesapeake who is not an officer and who is
serving as chairperson of any standing committee of the Board of Directors at
the date of grant. Options under the Directors' Plan are automatically granted
annually at the first meeting of the Board of Directors following the Annual
Meeting of the Stockholders at an exercise price equal to the then current
market price of the Common Stock. Accordingly, on October 14, 1999, options to
purchase 3,000 shares each were granted to Messrs. Burke, Miller and Dr. Hahn,
exercisable at the then current market price of $3.375 per share. These options
were vested on the date of grant.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of June 1, 2000, with
respect to the number of shares owned by each person who is known by Chesapeake
to own beneficially 5% or more of its Class A Common Stock, each director of
Chesapeake and all directors and officers of Chesapeake as a group.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OWNED
--------------------------------------------------- ---------------- -------------
<S> <C> <C>
Regis F. Burke 78,200(2) 1.1%
6 Kincaid Court
Baldwin, MD 21013
Elliot F. Hahn, Ph.D. 3,000(3) *
Andrx Corporation
4001 SW 47th Avenue
Ft. Lauderdale, FL 33314
Harvey L. Miller 107,500(4) 1.5%
200 Village Square
Cross Keys
Baltimore, MD 21210
Thomas P. Rice 239,500(5) 3.3%
4209 Buckskin Wood Drive
Ellicott City, MD 21042
Narlin B. Beaty, Ph.D. 237,791(6) 3.3%
13406 Blythenia Road
Phoenix, MD 21131
William P. Tew, Ph.D. 524,568 7.3%
412 Stablers Church Road
Parkton, MD 21220
Corporate Opportunities Fund (Institutional) L.P. 798,458(8) 11.1%
126 East 56th Street
New York, NY 10022
Corporate Opportunities Fund L.P. 147,427(9) 2.0%
126 East 56th Street
New York, NY 10022
All directors and officers as a group (8 persons) 897,452(7) 12.5%
</TABLE>
----------
* Less than 1% .
(1) Unless otherwise noted, all shares indicated are held with sole voting
and sole investment power.
(2) Includes 27,000 shares purchasable under option exercisable within 60
days of June 1, 2000.
(3) Includes 3,000 shares purchasable under option exercisable within 60 days
of June 1, 2000.
(4) Includes 25,000 purchasable under option exercisable within 60 days of
June 1, 2000.
(5) Includes 187,000 purchasable under option exercisable within 60 days of
June 1, 2000.
(6) Includes 106,288 purchasable under option exercisable within 60 days of
June 1, 2000.
(7) Includes 516,447 purchasable under option exercisable within 60 days of
June 1, 2000.
(8) Includes the common stock equivalent of Series A-1 Preferred Stock
purchased May 20, 1999.
(9) Includes the common stock equivalent of Series A-1 Preferred Stock
purchased May 20, 1999.
B-8
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A partnership of which Lillian Hahn is managing partner purchased 999
shares of Series A-1 Convertible Preferred Stock from Chesapeake in its private
placement in May 1999 for $99,900. Lillian Hahn is the wife of Elliott F. Hahn,
Ph.D., a member of CBL's Board of Directors. Dr. Hahn disclaims beneficial
ownership of these shares.
Also in May 1999, Chesapeake completed a private placement of 225,000
shares of its Class A Common Stock for $2.00 per share, the then fair market
price. Investors included Messrs. Beaty, Burke, Miller and Rice, who purchased
12,500, 42,500, 42,500 and 42,500 shares, respectively.
B-9
<PAGE>
SCHEDULE I
The designees of AC Acquisition Subsidiary to the Chesapeake board
directors are set forth below. The information contained herein concerning
Cangene and its directors and executive officers and those of its affiliates
has been furnished by Cangene and AC Acquisition Subsidiary. Chesapeake assumes
no responsibility for the accuracy or completeness of such information. The
name and present principal occupation or employment of each of the persons is
set forth below. Each of the persons set forth below has been employed in his
present position for more than five years. None of the persons listed below
owns any shares of Chesapeake common stock or has engaged in any transactions
with respect to shares of Chesapeake common stock during the past 60 days.
During the last five years, none of the persons listed below has been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors)
nor was such person a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction, and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws. None of the persons
listed below (i) is currently a director of, or holds any position with,
Chesapeake (ii) has a familial relationship with any of the directors or
executive officers of Chesapeake or (iii) based on information provided to
Chesapeake by Cangene (which is to the best of Cangene's knowledge),
beneficially owns any securities or rights to acquire any securities of
Chesapeake. Chesapeake has been advised by Cangene that, to the best of
Cangene's knowledge, none of the persons listed below has been involved in any
transaction with Chesapeake or any of its directors, executive officers or
affiliates which is required to be disclosed pursuant to the rules and
regulations of the SEC. Unless otherwise indicated, the business address of
each such person is c/o Cangene at 3403 American Drive, Units 3/4, Mississauga,
Ontario, Canada, L4V 1T4 and each such person is a citizen of Canada.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
AND FIVE YEAR EMPLOYMENT
NAME HISTORY AGE
------------------------- ----------------------------- ----
<S> <C> <C>
William Labossiere Bees Vice President, Operations 47
Cangene Corporation.
Alex Glasenberg Vice President-Finance 43
Apotex Inc.
150 Signet Drive
Weston, Ontario
M9L 1T9
Canada
John Langstaff President and CEO 47
Cangene Corporation
104 Chancellor-Matheson Road
Winnipeg, Manitoba
R3T 2N2
Canada
John W. McMillan General Manager 49
Cangene Corporation
</TABLE>
B-10
