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CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
OPTION TO PURCHASE PREFERRED STOCK
Chesapeake Biological Laboratories, Inc., a Maryland corporation (the
"Company"), hereby certifies that, for value received, AC Acquisition
Subsidiary, Inc., a Maryland corporation (the "Holder"), is entitled, subject to
the terms set forth below, to purchase from the Company at any time after it has
accepted for purchase at least a majority of the issued and outstanding Class A
common stock ("Common Stock") of the Company (giving effect to the conversion of
all outstanding shares of the Company's Series A-1 Convertible Preferred Stock
and the exercise of all outstanding warrants to purchase shares of Common Stock)
at the Tender Offer Purchase Time (the "Eligibility Date") and before the
earlier of (a) the termination of the Merger Agreement (the "Merger Agreement")
among Company, Holder and Cangene Corporation dated October 30, 2000, (b) the
abandonment by Acquisition of the Offer (as such term is defined in the Merger
Agreement) and (c) 5:00 P.M., New York time, on February 28, 2001 (the
"Expiration Date"), the number of shares of fully paid and nonassessable shares
of Series B preferred stock of the Company ("Preferred Stock") as set forth in
Section 1(a), at an aggregate price of $2,500,000 (the "Exercise Price").
Capitalized terms not otherwise defined herein shall have the meaning given them
in the Merger Agreement.
1. Exercise of Option.
(a) Subject to the approval of the holders of the Common Stock if
counsel to the Company reasonably determines that such approval is required as a
condition to the continued listing of the Common Stock on the Nasdaq National
Market, the Holder may exercise this Option at any time after the Eligibility
Date for such number of shares of newly issued Preferred Stock that would result
in Holder's being entitled to cast 90% of all votes entitled to be cast by
stockholders of the Company on the Merger (as defined in the Merger Agreement)
after exercise of this option, up to 50,000 shares.
(b) Full Exercise. This Option may be exercised by the Holder after the
Eligibility Date by surrender of this Option, with the form of subscription at
the end hereof duly executed by the Holder to the Company at its principal
office, accompanied by payment, in cash, by certified or official bank check or
by wire transfer payable to the order of the Company, in the amount of the
Exercise Price.
2. Delivery of Stock Certificates on Exercise. As soon as practicable
after the exercise of this Option in full, and in any event within five 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, or as the Holder (upon payment by the Holder of any applicable
transfer taxes) may direct, a certificate or certificates for the number of
fully paid and non-assessable shares of Preferred Stock to which the Holder
shall be entitled on such exercise.
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3. No Dilution or Impairment. The Company will not, by amendment of its
charter 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 of this
Option, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against dilution or
other impairment. Without limiting the generality of the foregoing, the Company
(a) will not increase the par value of any shares of stock receivable on the
exercise of this Option above the amount payable therefor on such exercise, and
(b) will take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and non-assessable shares
of stock on the exercise of this Option.
4. Reservation of Stock Issuable on Exercise of Option. The Company
will at all times reserve and keep available, solely for issuance and delivery
on the exercise of this Option, all shares of Preferred Stock from time to time
issuable on the exercise hereof.
5. Notices, Etc. All notices and other communications from the Company
to the Holder of this Option 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 the Holder or, by facsimile to such number as may have
been furnished to the Company in writing by the Holder.
6. Governing Law. This Option shall be governed by, and construed in
accordance with, the laws of the State of Maryland.
7. Miscellaneous. The headings in this Option are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
This Option 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.
Issue Date: October 30, 2000 CHESAPEAKE BIOLOGICAL LABORATORIES, INC.
By: /s/ Thomas P. Rice
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Thomas P. Rice, President
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FORM OF SUBSCRIPTION
(To be signed only on exercise of Option)
TO: Chesapeake Biological Laboratories, Inc.
The undersigned, the Holder of the within Option, hereby irrevocably
elects to exercise this Option for, and to purchase thereunder, _______ shares
of Preferred Stock of Chesapeake Biological Laboratories, Inc. and herewith
makes payment of $2,500,000 therefor, and requests that the certificates for
such shares be issued in the name of, and delivered to _________________, whose
address is _______________________________.
Dated:
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(Signature must conform to name of holder as
specified on the face of this Option)
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(Address)
