<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-QSB
(MARK ONE)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 0-27578
----------------------------
SUNPHARM CORPORATION
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF F593097048
INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
4651 SALISBURY ROAD, SUITE 205
JACKSONVILLE, FLORIDA 32256
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
ISSUER'S TELEPHONE NUMBER: (904) 296-3320
----------------------------
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes /x/ No / /
Number of shares of the issuer's Common Stock outstanding as of May 14,
1997: 5,537,165
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<PAGE>
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
The Quarterly Report on Form 10-QSB contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Actual results could differ materially
from those projected in the forward-looking statements as a result of a number
of important factors. For a discussion of important factors that could affect
the Company's results, please refer to the discussions below, and to the
discussions in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996 under the caption "Item 1. Business - Risk Factors."
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited financial statements have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission.
Certain information and notes disclosures normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to these rules and
regulations. However, the Company believes that the disclosures made herein
are adequate, and accordingly, the Company believes the information presented
is not misleading. These financial statements should be read in conjunction
with the financial statements for the year ended December 31, 1996 included
in the Company's Annual Report on Form 10-KSB for the year ended December 31,
1996, filed pursuant to the Securities Exchange Act of 1934.
-2-
<PAGE>
SUNPHARM CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
1996 MARCH 31, 1997
------------ --------------
<S> <C> <C>
ASSETS
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . $ 341,145 $ 6,677,133
Short term investments . . . . . . . . . . . . . . . . . 1,795,312 1,197,343
Receivables. . . . . . . . . . . . . . . . . . . . . . . 500,000 --
Other current assets . . . . . . . . . . . . . . . . . . 112,066 118,649
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . 2,748,523 7,993,125
Receivables from shareholder. . . . . . . . . . . . . . . . . 10,000 96,500
Other assets-long term. . . . . . . . . . . . . . . . . . . . 12,437 13,865
------------ ------------
$ 2,770,960 $ 8,103,490
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . $ 323,451 $ 355,272
Accrued liabilities. . . . . . . . . . . . . . . . . . . 869,245 1,010,900
Accrued legal fees . . . . . . . . . . . . . . . . . . . -- --
Notes payable. . . . . . . . . . . . . . . . . . . . . . 112,201 75,298
------------ ------------
Total current liabilities. . . . . . . . . . . . . . . 1,304,897 1,441,470
------------ ------------
Stockholders' equity:
Undesignated Preferred Stock, par value $.0001 per
share; 2,500,000 shares authorized, none issued
and outstanding . . . . . . . . . . . . . . . . . . . -- --
Common stock, par value $.0001 per share; 25,000,000
shares authorized, 3,708,879 and 5,537,165 shares
issued and outstanding, respectively . . . . . . . . 371 554
Additional paid-in-capital . . . . . . . . . . . . . . . 13,062,321 19,178,638
Accumulated deficit during the development stage . . . . (11,596,629) (12,517,172)
------------ ------------
Total stockholders' equity . . . . . . . . . . . . . . 1,466,063 6,662,020
------------ ------------
$ 2,770,960 $ 8,103,490
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
SUNPHARM CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE PERIOD
MARCH 31, FROM INCEPTION
-------------------------- THROUGH
1996 1997 MARCH 31, 1997
---------- ---------- --------------
<S> <C> <C> <C>
Sponsored research/sublicensing revenue. . . . . . . . $ -- $ -- $ 2,885,000
Interest income. . . . . . . . . . . . . . . . . . . . 17,084 24,537 259,799
---------- ---------- ------------
Total revenues. . . . . . . . . . . . . . . . . . 17,084 24,537 3,144,799
---------- ---------- ------------
Expenses:
Research and development. . . . . . . . . . . . . 337,655 538,952 8,107,983
General and administrative. . . . . . . . . . . . 332,893 406,128 7,063,988
Royalty expense . . . . . . . . . . . . . . . . . -- -- 490,000
---------- ---------- ------------
Total expenses. . . . . . . . . . . . . . . . . 670,548 945,080 15,661,971
---------- ---------- ------------
Net loss . . . . . . . . . . . . . . . . . . . . . . . $ (653,464) $ (920,543) $(12,517,172)
---------- ---------- ------------
---------- ---------- ------------
Net loss per share . . . . . . . . . . . . . . . . . . $ (0.23) $ (0.24)
---------- ----------
---------- ----------
Shares used in computing loss per share. . . . . . . . 2,884,535 3,769,822
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
SUNPHARM CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
REDEEMABLE CONVERTIBLE
PREFERRED STOCK
------------------------------------ ACCUMULATED
SERIES A SERIES B COMMON STOCK ADDITIONAL DURING
---------------- ---------------- ---------------- PAID-IN DEFERRED DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION STAGE
------ ------ ------ ------ --------- ------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 -- -- -- -- 3,708,879 $371 $13,062,321 -- $(11,596,629)
Issuance of Common Stock -- -- -- -- 1,828,286 183 6,116,317 -- --
Net Loss -- -- -- -- -- -- -- (920,543)
------ ------ ------ ------ --------- ------ ----------- ------------ -------------
Balance, March 31, 1997 -- -- -- -- 5,537,165 $554 $19,178,638 -- $(12,517,172)
------ ------ ------ ------ --------- ------ ----------- ------------ -------------
------ ------ ------ ------ --------- ------ ----------- ------------ -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
SUNPHARM CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE FOR THE PERIOD
THREE MONTHS ENDED FROM INCEPTION
MARCH 31, (MAY 3, 1990)
--------------------- THROUGH
1996 1997 MARCH 31, 1997
----------- --------- --------------
Cash flows from Operating Activities:
Net Loss . . . . . . . . . . . . . . . . .$ (653,464) $(920,543) $(12,517,172)
Adjustments to reconcile net loss to net
cash used in operating activities -
Depreciation and Amortization. . . . . . 900 900 72,606
Expense related to issuance of
stock for services . . . . . . . . . . 43,750
Compensation expense related to
operations, warrants and stock
appreciation rights. . . . . . . . . . 865,246
Amortization of deferred offering costs
incurred in connection with issuance
of Bridge Notes. . . . . . . . . . . . . 775,000
Write-off patents. . . . . . . . . . . . . 70,120
(Increase) Decrease in receivable from
Stockholder. . . . . . . . . . . . . . . . 3,114 (86,500) (96,500)
Decrease (increase) in prepaid
expenses and other assets. . . . . . . . 47,736 493,417 (120,290)
Increase (decrease) in Accounts Payable. 140,620 31,821 355,272
Increase (decrease) in accrued liabilities 20,882 141,655 1,017,150
Decrease (increase) in accrued legal fees (68,502) 300,000
---------- ---------- ------------
Total Adjustments. . . . . . . . . . . . 144,750 581,293 3,282,354
Net cash used in operating activities. . . . (508,714) (339,250) (9,234,818)
---------- ---------- ------------
Cash flows from investing activities:
Purchases of Short Term investments. . . . (5,119,374)
Sales & Maturities of short-term
investments. . . . . . . . . . . . . . . 1,290,464 597,969 3,922,031
Purchases of Office Equipment. . . . . . . (2,328) (19,526)
Payment of patent costs. . . . . . . . . . (67,424)
---------- ---------- ------------
Net cash used in investing activities. . . . 1,290,464 595,641 (1,284,293)
---------- ---------- ------------
Cash flows from financing activities:
Repayments of notes payable. . . . . . . . (28,682) (36,903) (24,702)
Increase in deferred offering costs. . . . (597,348)
Issuance of Series A preferred . . . . . . 513,525
Issuance of Series B preferred . . . . . . 450,000
Issuance of Common Stock . . . . . . . . . 6,116,500 16,854,769
Proceeds from payable to stockholders. . . 542,500
Repayment of payable to stockholders . . . (542,500)
---------- ---------- ------------
Net cash (used in) provided by financing
activities . . . . . . . . . . . . . . . . (28,682) 6,079,597 17,196,244
---------- ---------- ------------
Net change in cash . . . . . . . . . . . . . 753,068 6,335,988 6,677,133
Cash at beginning of period. . . . . . . . . 331,069 341,145
---------- ---------- ------------
Cash at end of period. . . . . . . . . . . .$1,084,137 $6,677,133 $ 6,677,133
---------- ---------- ------------
---------- ---------- ------------
Supplemental Information . . . . . . . . . .
Cash Paid for Interest . . . . . . . . . . .$ 1,606 $ 1,335 $ 164,851
---------- ---------- ------------
---------- ---------- ------------
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
SUNPHARM CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The balance sheet at March 31, 1997 and the related statements of
operations for the three month periods ended March 31, 1997 and 1996 and the
period from inception (May 3, 1990) through March 31, 1997 and statements of
cash flows for the three month periods ended March 31, 1997 and 1996 and the
period from inception (May 3, 1990) through March 31, 1997 are unaudited. These
interim financial statements should be read in conjunction with the December 31,
1996 financial statements and related footnotes included in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1996. The unaudited
interim financial statements reflect all adjustments which are, in the opinion
of management, necessary for a fair statement of results for the interim periods
presented and all such adjustments are of a normal recurring nature. Interim
results are not necessarily indicative of results for a full year.
NET LOSS PER SHARE
Net loss per share is computed based on the weighted average shares of
common stock outstanding for the period.
PATENT COSTS
The Company reimburses the University of Florida Research Foundation, Inc.
(UFRI) for direct expenses relating to the Company's patents. Patent costs
consist of legal fees and other direct costs incurred in obtaining patents.
These costs are charged to research and development expense or general and
administrative expense when incurred.
RESEARCH AND DEVELOPMENT
Sponsored research revenue is recognized as revenue when the payments are
earned or received and the research has been performed. Research and
development expenses are charged to operations when incurred. Research and
development expenses include, among other things, consulting fees and cost
reimbursements to UFRI.
NEW ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").
SFAS 128 simplifies the standards for computing earnings per share previously
found in Accounting Principles Board Opinion No. 15, "Earnings Per Share" ("APB
15"), and makes them comparable to international earnings per share standards.
It replaces the presentation of primary earnings per share (EPS) with a
presentation of basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures. Basic EPS excludes dilution and is computed by dividing
income available to
-7-
<PAGE>
SUNPHARM CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or otherwise resulted in issuance of
common stock that then shared in earnings, similar to fully diluted EPS as
computed by APB 15.
The accounting and disclosure requirements of SFAS 128 are required for
the Company's year ending December 31, 1997; however; its impact on operating
results when initially adopted is expected to be immaterial.
2. SALE OF UNITS
On March 28, 1997, the Company completed the private placement of 1,828,286
units ("Units") pursuant to Rule 506 under and Section 4(2) of the Securities
Act of 1933 for $3.50 per Unit. Each Unit consists of one share of the
Company's common stock and one redeemable Common Stock Purchase Warrant
("Warrant"). The Warrants included in these units expire five years from the
date of issuance. In case of a "cashless exercise," the Warrants shall have an
exercise price of $4.00 per share plus forty percent of the difference between
the current trading price of the Company's common stock and $4.00; in all other
cases, the Warrants shall have an exercise price of $4.00 per share plus thirty
percent of the difference between the current trading price of the Company's
common stock and $4.00. The Warrants are subject to redemption at the exercise
price by the Company, provided the Company's common stock closes at a price of
$16.00, $20.00, $24.00, or $28.00 per share for twenty consecutive days during
the second, third, fourth or fifth years, respectively, of the term of the
Warrant. Proceeds from the private placement were $6,116,500, net of placement
agent and other offering costs of $282,500.
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
OVERVIEW
Since its inception in May 1990, SunPharm has devoted substantially all of
its efforts and resources to research and development conducted on its own
behalf and through collaborations with clinical institutions. The Company's
drug development strategy emphasizes conducting most of its research and
clinical activities at the University of Florida. Consequently, the Company
believes that its research and development expenditures have been lower than
other comparable development stage pharmaceutical companies. The Company has
incurred cumulative net losses of $12,517,172 from its inception through March
31, 1997. The Company expects to incur additional significant operating losses
for at least the next several years principally as a result of its continuing
anticipated research and development and clinical trial expenditures.
RESULTS OF OPERATIONS
The Company did not receive any licensing or milestone payments during the
three months ended March 31, 1996 and 1997.
The Company's research and development expenses increased $201,000 from
$338,000 for the three months ended March 31, 1996 to $539,000 for the
comparable 1997 period. These expenses consisted of research and development
expenses incurred by Dr. Bergeron at the University of Florida, human clinical
trials and patent license fees paid to the University of Florida. The Company
expects its research and development expenses to increase moderately during 1997
and 1998 reflecting anticipated increased costs related to ongoing research,
preclinical studies and human clinical trials.
General and administrative expenses increased from $333,000 for the three
months ended March 31, 1996 to $406,000 for the comparable period in 1997. This
increase is primarily due to increased payroll. The Company expects general and
administrative expenses to increase throughout 1997 and into 1998 reflecting
anticipated additions of management.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily
through collaborative research and sublicense agreements with its strategic
alliance partners and the issuance of debt and equity securities. Through
December 31, 1996 the Company had received $2,885,000 of cumulative sponsored
research and sublicensing revenues and approximately $11,266,000 in net proceeds
from equity offerings and exercise of stock warrants, including net proceeds of
approximately $7,200,000 related to the initial public offering in January of
1995.
On March 28, 1997, the Company completed the private placement of 1,828,286
units ("Units") pursuant to Rule 506 under and Section 4(2) of the Securities
Act of 1933 for $3.50 per Unit. Each Unit consists of one share of the
Company's common stock and one redeemable Common Stock Purchase Warrant
("Warrant"). The Warrants included in these units expire five years from the
date of issuance. In case of a "cashless exercise," the Warrants shall have an
exercise price of $4.00 per share plus forty percent of the difference between
the current trading price of the Company's common stock and $4.00; in all other
cases, the Warrants shall have an exercise price of $4.00 per share plus thirty
percent of the difference between the current trading price of the Company's
common stock and $4.00. The Warrants are subject to redemption at the exercise
price by the Company, provided the Company's common stock closes at a price
-9-
<PAGE>
of $16.00, $20.00, $24.00, or $28.00 per share for twenty consecutive days
during the second, third, fourth or fifth years, respectively, of the term of
the Warrant. Proceeds from the private placement were $6,116,500, net of
placement agent and other offering costs of $282,500.
During the three months ended March 31, 1997, the net cash used in
operating activities was $339,000. During the comparable period in 1996, cash
used in operating activities was $509,000. The decrease is attributable to the
receipt of $500,000 from Warner-Lambert in January 1997. This receipt was
offset by increased operating expenses.
At March 31, 1997, the Company had cash and cash equivalents of $6,677,000
and net working capital of approximately $6,552,000. The increase in these
amounts as compared to March 31, 1996 is attributable to the private placement
of Units discussed above and the private placement of common stock and warrants
in 1996. The Company expects the current available resources to be able to fund
research and development as well as operations into 1998.
The Company expects to incur substantial additional research and
development expenses, including expenses associated with preclinical studies,
clinical trials and manufacturing. The Company intends to use a portion of its
cash resources together with funds from its existing collaborative arrangements
with Warner-Lambert and Nippon Kayaku for these purposes; however, the Company's
rights to receive payments from Warner-Lambert and Nippon Kayaku are dependent
upon the achievement of certain milestones by Warner-Lambert and Nippon Kayaku,
respectively, and are not within the control of the Company. No assurance can
be made that such milestones will be achieved or that such payments will be
received by the Company. The Company intends to obtain additional funds for
research and development through new collaborative arrangements with corporate
partners, additional financings, and from other sources; however, there can be
no assurance that the Company will be able to obtain necessary financing when
required or what the terms of any financing, if obtained, might be.
Accordingly, there can be no assurance of the Company's future success. In
addition, the Company's future success is affected by the progress of the
Company's research and development, the scope and results of preclinical studies
and clinical trials, the cost and timing of regulatory approvals, the rate of
technological advances, determinations as to the commercial potential of the
Company's products under development, the status of competitive products, the
establishment of manufacturing capacity or third-party manufacturing
arrangements, its reliance on research institutions and corporate partners, the
uncertainty of health care reform and the competitive environment in which the
Company operates. The Company's existing capital resources will not be
sufficient to fund the Company's operations to the point of introduction of a
commercially successful product, if and when that time should arrive. No
assurance can be given that additional funds will be available on acceptable
terms, if at all.
The Company has incurred losses since inception and, therefore, has not
been subject to federal income taxes. As of December 31, 1996, the Company had
net operating loss ("NOL") and tax credit carryforwards for income tax purposes
of $9,553,000 and $338,000, respectively, which may be available to reduce
future taxable income and future tax liabilities. These carryforwards begin to
expire in 2008. The Tax Reform Act of 1986 provides for an annual limitation on
the use of NOL and credit carryforwards (following certain ownership changes)
that could significantly limit the Company's ability to utilize these
carryforwards. The Company has made no determination concerning whether there
has been such a cumulative change in ownership. It is possible that such a
change in ownership occurred following the completion of the Offering and
exercise of the Representative's over-allotment option or as a result of the
Company's 1996 or 1997 private placements. Accordingly, the Company's ability
to utilize the aforementioned carryforwards to reduce future taxable income and
tax liabilities may be limited. Additionally, because United States tax laws
limit the time during which these carryforwards may be applied against future
taxes, the Company may not be able to take full advantage of these attributes
for federal income tax purposes.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
On March 28, 1997, the Company completed the private placement of 1,828,286
units ("Units") pursuant to Rule 506 under and Section 4(2) of the Securities
Act of 1933 for $3.50 per Unit. Each Unit consists of one share of the
Company's common stock and one redeemable Common Stock Purchase Warrant
("Warrant"). The Warrants included in these units expire five years from the
date of issuance. In case of a "cashless exercise," the Warrants shall have an
exercise price of $4.00 per share plus forty percent of the difference between
the current trading price of the Company's common stock and $4.00; in all other
cases, the Warrants shall have an exercise price of $4.00 per share plus thirty
percent of the difference between the current trading price of the Company's
common stock and $4.00. The Warrants are subject to redemption at the exercise
price by the Company, provided the Company's common stock closes at a price of
$16.00, $20.00, $24.00, or $28.00 per share for twenty consecutive days during
the second, third, fourth or fifth years, respectively, of the term of the
Warrant. Proceeds from the private placement were $6,116,500, net of placement
agent and other offering costs of $282,500.
The purchasers in the private placement consisted of a limited number of
institutional investors and other accredited investors. Ocean Capital Services,
Inc. received a fee of $250,000 and warrants to purchase 71,429 shares of common
stock for services rendered in connection with the private placement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Number Exhibit
------ -------
4.1 Unit Purchase Agreement, dated as of March 28,
1997, among the Company and the several Purchasers
named therein.
4.2 Warrant Agreement, dated as of March 28, 1997,
among the Company and the several Purchasers named
therein.
11.1 Statement of computation of net loss per share
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended March
31, 1997.
-11-
<PAGE>
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.
SUNPHARM CORPORATION
Date: May 14, 1997 By: /s/ Stefan Borg
------------------------------------------
President and Chief Executive Officer
(Principal Executive, Financial and
Accounting Officer)
-12-
<PAGE>
EXHIBIT 11.1
SUNPHARM CORPORATION
CALCULATION OF LOSS PER SHARE
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997
Weighted Average Shares Outstanding:
# Days
Total Shares Outstanding
- ------------ -----------
3,708,879 x 87 = 322,672,473
5,537,165 x 3 = 16,611,495
--------- -----------
90 339,283,968 DIVIDED BY 90 = 3,769,822
FOR THE THREE MONTHS ENDED MARCH 31, 1996
Weighted Average Shares Outstanding:
# Days
Total Shares Outstanding
- ------------ -----------
2,884,535 x 91 = 262,492,685 DIVIDED BY 91 = 2,884,535
-13-
<PAGE>
EXHIBIT 4.1
- -------------------------------------------------------------------------------
UNIT PURCHASE AGREEMENT
- -------------------------------------------------------------------------------
SUNPHARM CORPORATION
1,828,286 Units
Each Unit Consisting of One Share of Common Stock
and
One Warrant to Purchase One Share of Common Stock
$3.50 per Unit
- -------------------------------------------------------------------------------
Dated as of March 28, 1997
- -------------------------------------------------------------------------------
<PAGE>
UNIT PURCHASE AGREEMENT
THIS UNIT PURCHASE AGREEMENT (this "Agreement"), dated as of this 28th day
of March, 1997, by and among SunPharm Corporation, a Delaware corporation (the
"Company"), and the Persons listed on SCHEDULE A hereto (individually, a
"Purchaser" and, collectively, the "Purchasers").
WHEREAS, the Company desires to issue and sell to the Purchasers, and the
Purchasers desire to acquire on the terms and subject to the conditions set
forth herein, an aggregate of 1,828,286 units (the "Units");
WHEREAS, each Unit consists of (i) one share of the Company's Common Stock,
$.0001 par value (the "Common Stock") and (ii) one warrant to purchase one
share of Common Stock;
NOW, therefore, in consideration of the premises and the mutual covenants
contained in this Agreement, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS. As used in this Agreement, references to
either gender shall include the other gender, and the following terms shall have
the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Affiliate" shall have the meaning given to such term in Rule 12b-2 of
the Rules and Regulations under the Exchange Act.
"Agreement" means this Unit Purchase Agreement, as amended, modified
or supplemented from time to time.
"Business Day" means any day on which commercial banks are not
authorized or required by law to close in New York, New York.
"Commission" means the United States Securities and Exchange
Commission, or any other agency successor thereto.
"Common Stock" shall mean the Common Stock, par value $.0001 per
share, of the
<PAGE>
Company, and shall include any stock into which such Common Stock shall
have been changed or any stock resulting from any reclassification of
such Common Stock and all other stock of any class or classes (however
designated) of the Company the holders of which have the right, without
limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference.
"Company" means and shall include SunPharm Corporation, a Delaware
corporation, and its successors and permitted assigns.
"Current Market Price Per Share" of the Common Stock on any date
shall mean the average of the daily closing prices per share of Common
Stock for the 20 consecutive Trading Days immediately prior to such date;
PROVIDED that in the event that the current market price per share of
Common Stock is determined during a period following the announcement by
the Company of (A) a dividend or distribution on the Common Stock payable
in shares of Common Stock or securities convertible into shares of Common
Stock or (B) any subdivision, combination or reclassification of the
Common Stock and prior to the expiration of 20 Trading Days after the
ex-dividend date for such dividend or distribution, or the record date
for such subdivision, combination or reclassification, then, and in each
such case, the Current Market Price Per Share shall be appropriately
adjusted to reflect ex-dividend trading or such subdivision, combination
or reclassification. The closing price for each day shall be (i) if the
Common Stock is then quoted on the Nasdaq National Market, the Nasdaq
SmallCap Market or another primary national securities exchange, the
closing bid price of the Common Stock as reported by the Nasdaq National
Market, the Nasdaq SmallCap Market or such primary national securities
exchange (as the case may be), (ii) if the Common Stock is not then
traded on the Nasdaq National Market, the Nasdaq SmallCap Market nor on a
national securities exchange, the closing bid price in the
over-the-counter market as reported by the National Association of
Securities Dealers' Automated Quotation System or, if not so reported,
the price as reported by the National Quotation Bureau, Inc., or any
organization performing a similar function or (iii) if no such prices are
then furnished, the fair market value of a share of Common Stock as
reasonably determined by the Board of Directors of the Issuer and
reasonably acceptable to the holders of a majority of the Warrants.
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"Exchange Act" means the Securities Exchange Act of 1934 or any
successor Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Person" means an individual, corporation, partnership, association,
joint venture, trust, or unincorporated organization, or a government or
any agency or political subdivision thereof.
"Purchaser" has the meaning specified in the introduction to this
Agreement, and its successors and permitted assigns.
"Recapitalization Event" means any stock dividend, stock split,
combination, reorganization, recapitalization, reclassification,
consolidation, merger or similar event involving a change in the Company's
corporate structure.
"Registrable Shares" means (i) the Shares, (ii) the Warrant Shares and
(iii) any other shares of Common Stock issued to the Purchasers in respect
of the foregoing Shares because of any Recapitalization Event.
"Securities Act" means the Securities Act of 1933 or any successor
Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Shares" means the shares of Common Stock included in the Units issued
pursuant to this Agreement.
"Trading Day" means a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open
for the transaction of business or, if the Common Stock is not listed or
admitted to trading on any national securities exchange, a Business Day.
"Units" has the meaning specified in the recitals to this Agreement;
individually, a "Unit".
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"Warrants" shall mean the stock purchase warrants issued pursuant to
the Warrant Agreement entitling the record holders thereof to purchase from
the Company an aggregate of 1,828,286 shares of Common Stock, subject to
adjustment as provided in the Warrant Agreement; individually, a "Warrant".
"Warrant Agreement" shall mean the Warrant Agreement in the form of
EXHIBIT A hereto (including the exhibits thereto), pursuant to which the
Warrants shall be issued and shall be exercisable at the Exercise Price (as
defined therein) at any time after the Closing Date and before 5:00 P.M.,
New York time, on the Expiration Date (as defined therein), as amended,
modified or supplemented from time to time.
"Warrant Shares" shall mean the shares of Common Stock issued or
issuable upon exercise or conversion of the Warrants, as the number of such
shares may be adjusted from time to time pursuant to the Warrant Agreement
and the provisions of the Company's Certificate of Incorporation.
ARTICLE II
PURCHASE AND SALE OF THE UNITS
SECTION 2.01 AUTHORIZATION OF THE UNITS. The Company has authorized the
issuance and sale of 1,828,286 Units, each Unit consisting of (i) one share of
Common Stock and (ii) one Warrant.
SECTION 2.02 CLOSING. Subject to the terms and conditions set forth in
this Agreement, and in reliance on the representations and warranties set forth
in this Agreement, the Company agrees to issue and sell to the Purchasers at the
Closing and the Purchasers, severally but not jointly, agree to purchase from
the Company, that number of Units set forth opposite their respective names on
SCHEDULE A under the caption "Number of Units Purchased at Closing" at a
purchase price per Unit of Three Dollars and Fifty Cents ($3.50). The aggregate
purchase price of the Units being acquired by each Purchaser is set forth
opposite such Purchaser's name on SCHEDULE A. The closing of the purchase and
sale of the Units (the "Closing") shall take place at the offices of Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C. at 5:00 p.m. on March 28, 1997 (the
"Closing Date") or at such time and date thereafter as the Purchasers and the
Company may agree. At the Closing, the Company will deliver to each Purchaser
(i) certificates for the number of shares of Common Stock included in the Units
being purchased by such Purchaser registered in such Purchaser's name (or its
nominee) and (ii) certificates for the number of Warrants included in the Units
being purchased by such Purchaser registered in such Purchaser's name (or its
nominee), against delivery of a check or checks payable to the order of the
Company, or a transfer of funds to the account of the Company
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by wire transfer, representing the purchase price set forth opposite each such
Purchaser's name on SCHEDULE A.
ARTICLE III
COMPANY REPRESENTATIONS AND WARRANTIES
In order to induce the Purchasers to enter into this Agreement and to
consummate the transactions contemplated hereby, the Company hereby represents
and warrants to the Purchasers as follows:
SECTION 3.01. ORGANIZATION AND GOOD STANDING. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has the requisite corporate power and
authority to own and operate its properties and assets and to carry on its
business as currently conducted. The Company is qualified to do business in the
State of Florida. The Company is not qualified to do business as a foreign
corporation in any other jurisdiction and such qualification is not now
required, except to the extent that the failure to so qualify would not have a
material adverse effect on the Company's business as currently conducted.
SECTION 3.02. CORPORATE POWER AND AUTHORIZATION. The Company has the
corporate power and authority to execute and deliver this Agreement and the
Warrant Agreement, to issue and sell the Shares and Warrants hereunder, to
issue and deliver the Warrant Shares issuable upon exercise or conversion of
the Warrants, and to perform its obligations under the terms of this
Agreement and the Warrant Agreement. All corporate action on the part of the
Company, its directors and stockholders necessary for the authorization,
execution, delivery and performance by the Company of this Agreement and the
Warrant Agreement and the authorization, sale, issuance and delivery of the
Shares and Warrants (and the Warrant Shares issuable upon exercise or
conversion of the Warrants) has been taken or will be taken prior to Closing.
This Agreement and the Warrant Agreement each constitutes the valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency
or other laws relating to or affecting creditors' rights generally and by
general equitable principles. The Shares and the Warrants have been duly
authorized and, when issued in compliance with the provisions of this
Agreement, will be validly issued, fully paid and nonassessable; the Warrant
Shares issuable upon exercise or conversion of the Warrants have been duly
and validly authorized and reserved for issuance and, when issued in
compliance with the provisions of this Agreement and the Warrant Agreement,
will be validly issued, fully paid and nonassessable; and the Shares,
Warrants and Warrant Shares, when issued and delivered, will be free of any
liens or encumbrances created by the Company; PROVIDED, HOWEVER, that the
Shares, Warrants and Warrant
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Shares may be subject to restrictions on transfer under state or federal
securities laws as set forth herein.
SECTION 3.03. CAPITALIZATION. The authorized capital stock of the Company
consists of 27,500,000 shares, divided into 25,000,000 shares of Common Stock,
par value $0.0001 per share, of which 3,708,879 shares are issued and
outstanding, and 2,500,000 shares of Preferred Stock, par value $0.001 per share
("Preferred Stock"), none of which is or will be issued or outstanding prior to
the Closing. All of the outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable. The Company
has reserved (i) up to 1,828,286 shares of Common Stock for issuance upon
exercise or conversion of the Warrants, (ii) up to 1,384,696 shares of Common
Stock for issuance upon exercise of outstanding options and (iii) up to
2,177,540 shares of Common Stock for issuance upon exercise of outstanding
warrants other than the Warrants. SCHEDULE 3.03 sets forth the outstanding
capitalization of the Company as of the date hereof, including the material
terms (expiration date, exercise price, etc.) of such outstanding options and
warrants and, except for such outstanding options and warrants, there are no
other options, warrants or other rights outstanding to purchase or acquire, or
any securities convertible into, nor has the Company agreed to issue or reissue,
other than pursuant to this Agreement, any of the Company's authorized and
unissued capital stock. There are no agreements or understandings that affect
or relate to the voting or giving of written consent with respect to any of the
Company's outstanding securities. There are no preemptive rights with respect
to the issuance or sale of the Company's capital stock and there are no
restrictions on the transfer of the Company's capital stock other than those
arising from federal and state securities laws.
SECTION 3.04. SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed
with the Commission all forms, reports and documents required to be filed by it
pursuant to the Exchange Act, all of which, when filed, complied in all material
respects with all applicable requirements of the Exchange Act. The Purchasers
have been provided true and correct copies (not including exhibits) of the
Company's (i) Annual Report on Form 10-KSB for the fiscal year ended December
31, 1995 as filed with the Commission, (ii) Quarterly Reports on Form 10-QSB for
the quarters ended March 31, 1996, June 30, 1996 and September 30, 1996, in each
case as filed with the Commission, and (iii) proxy statements relating to all
meetings of its stockholders (whether annual or special) since December 31, 1996
and prior to the date hereof (collectively, the "Company's SEC Reports"). As of
their respective dates, the Company's SEC Reports (not including any exhibits
and schedules thereto and documents incorporated by reference therein) did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
audited financial statements and unaudited interim financial statements of the
Company included in the Company's SEC Reports or incorporated by reference
therein were
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prepared in accordance with generally accepted accounting principles ("GAAP")
(subject, in the case of such unaudited financial statements, to the absence
of complete footnotes) applied on a consistent basis (except as indicated
therein or in the notes thereto) and fairly present in all material respects
the financial position of the Company at the dates thereof and the results of
its operations and cash flows for the periods then ended (subject in the case
of the unaudited interim financial statements, to normal year-end audit
adjustments).
SECTION 3.05. ABSENCE OF CERTAIN DEVELOPMENTS. Since September 30, 1996,
there has been no change in the assets, liabilities, condition (financial or
otherwise), operating results, business or prospects of the Company from that
reflected in the Company's SEC Reports, except changes in the ordinary course of
business that have not been, individually or in the aggregate, materially
adverse to the assets, properties, condition (financial or otherwise), operating
results, business or prospects of the Company. Since September 30, 1996, the
Company has not (i) directly or indirectly declared or paid any dividend or
ordered or made any other distribution on account of any shares of any class of
the capital stock of the Company, (ii) directly or indirectly redeemed,
purchased or otherwise acquired any such shares or agreed to do so or set aside
any sum or property for any such purpose, (iii) made any capital expenditures
exceeding $100,000, or (iv) incurred any indebtedness exceeding $100,000.
SECTION 3.06. COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any provision of its Certificate of Incorporation or
By-Laws or of any material mortgage, indenture, contract, agreement, instrument,
judgment or decree to which the Company is a party or by which it is bound. The
execution, delivery and performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby will not result in any
violation of or conflict with the Company's Certificate of Incorporation or
By-Laws, and will not result in any violation of or conflict with, or constitute
a default under, any material mortgage, indenture, contract, agreement,
instrument, judgment or decree to which the Company is a party or by which it is
bound or in the creation of any material mortgage, pledge, lien, encumbrance or
charge upon any of the properties or assets of the Company.
SECTION 3.07. REGISTRATION RIGHTS. Except as set forth in SCHEDULE 3.07
hereto, and the provisions of Article VII of this Agreement, the Company is not
under any contractual obligation to register under the Securities Act any of its
currently outstanding securities or any of its securities which may hereafter be
issued.
SECTION 3.08. GOVERNMENTAL CONSENT. No consent, approval or authorization
of or registration, qualification, designation, declaration or filing with any
governmental authority on the part of the Company is required in connection with
the valid execution, delivery and performance
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of this Agreement or the Warrant Agreement, the offer, sale or issuance of
the Shares, the Warrants and the Warrant Shares or the consummation of any
other transaction contemplated hereby, except for filings that may be
required to comply with applicable federal and state securities laws.
SECTION 3.09. OFFERING. Subject to the accuracy of the representations of
the Purchasers in Article IV, the offer, sale and issuance of the Shares and the
Warrants as contemplated by this Agreement, and the issuance of the Warrant
Shares issued upon exercise or conversion of the Warrants, will constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act.
SECTION 3.10. SUBSIDIARIES. The Company has no subsidiaries and does not
otherwise own or control, directly or indirectly, any equity interest in any
corporation, association, partnership or business entity, nor has the Company
made any commitment or subscribed for the purchase of any such equity interest.
SECTION 3.11. ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not
have any liability or obligation, absolute or contingent, that is not reflected
in the financial statements included in the Company's SEC Reports, other than
obligations and liabilities which taken individually or in the aggregate would
not have a material adverse effect on the Company's assets, liabilities,
condition (financial or otherwise), operating results, business or prospects.
SECTION 3.12. TAXES. The Company has filed all tax returns and reports
required by law to be filed, and has paid all taxes, assessments and other
governmental charges that are due and payable, except for those matters
reasonably being contested by the Company and those matters which, individually
and in the aggregate, would not have a material adverse effect on the Company's
assets, liabilities, condition (financial or otherwise), operating results,
business or prospects. The charges, accruals and reserves on the books of the
Company in respect of taxes are considered adequate by the Company, and the
Company knows of no assessment for additional taxes or any basis therefor.
SECTION 3.13. TITLE TO PROPERTIES: LIENS AND ENCUMBRANCES. The Company has
good title to all properties and assets which it owns or purports to own, both
real and personal, tangible and intangible, reflected on the balance sheet
included in the financial statements included in the Company's SEC Reports or
acquired after the date thereof (except inventory or other personal property
disposed of in the ordinary course of business subsequent to the date thereof),
and such properties and assets are not subject to any mortgage, pledge, lien,
security interest, encumbrance or charge other than (i) liens for current taxes
not yet due and payable, (ii) liens and encumbrances that do not materially
detract from the value of the property subject thereto or materially impair the
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operations of the Company, or (iii) liens securing obligations reflected in
such financial statements. With respect to properties or assets it leases,
the Company is in compliance with such leases (except for such defaults or
breaches that would not have a material adverse affect on the Company) and
holds valid leasehold interests free of any liens, claims or encumbrances
except for those described in subsections (i) through (iii) hereof.
SECTION 3.14. LITIGATION. ETC. There are no actions, suits, proceedings
or investigations (i) pending or, to the Company's knowledge, threatened against
the Company or which otherwise involve the Company's business or operations, or
(ii) to the Company's knowledge, pending or threatened against any of its
officers, directors or principal stockholders in their capacities as officers,
directors or stockholders.
SECTION 3.15. EMPLOYEES. To the Company's knowledge, no employee of the
Company is in violation of any term of any employment contract or any other
contract or agreement between such employee and the Company. None of the
employees of the Company is represented by any labor union, and there is no
strike or other labor dispute pending or, to the knowledge of the Company,
threatened, with respect to the Company.
SECTION 3.16. COMPLIANCE WITH LAW. The Company is conducting its business
and operations in material compliance with all governmental rules and
regulations applicable thereto, including without limitation those relating to
occupational safety, environmental, health and employment practices, and is not
in violation or default in any material respect under any statute, law,
ordinance, rule, regulation, judgment, order, decree, concession, grant,
franchise, license or other governmental authorization or approval applicable to
it or any of its properties.
SECTION 3.17. PERMITS. The Company has all permits, licenses, orders and
approvals of any federal, state, local or foreign governmental or regulatory
body (collectively, the "Permits") that are material to or necessary in the
conduct of its business as now conducted; all such Permits are in full force and
effect; no violations have been recorded in respect of any such Permits; and no
proceeding is pending or, to the knowledge of the Company, threatened to revoke
or limit any such Permits.
SECTION 3.18. BROKERS OR FINDERS. The Company has not retained any
investment banker, broker or finder in connection with the transactions
contemplated by this Agreement, and there are no brokerage commissions, finder's
fees or similar items of compensation payable in connection therewith based on
any arrangement or agreement made by or on behalf of the Company.
SECTION 3.19. DISCLOSURE. This Agreement, including the schedules hereto,
was prepared
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in good faith by the Company and does not contain any untrue statement of a
material fact or omit a material fact necessary to make the statements
therein not misleading.
SECTION 3.20. INTELLECTUAL PROPERTY. The Company owns or possesses the
requisite licenses or rights to all trademarks, service marks, service names,
trade names, patents and patent applications, copyrights and other rights
(collectively the "Intangibles") described as owned or licensed by the Company
in the SEC Reports. There is no claim, action or proceeding by any person
pending or, to the Company's knowledge, threatened which pertains to or
challenges the validity, enforceability or exclusive right of the Company with
respect to any Intangibles used in the conduct of the Company's business except
as described in the SEC Reports. To the Company's knowledge, the Company's
current products, services and processes do not infringe on any Intangibles held
by any third party. Except as set forth in the agreements disclosed in the SEC
Reports, the Company is not under any obligation to pay royalties or fees of any
kind whatsoever to any third party with respect to technology it has developed,
uses, employs or intends to use or employ.
SECTION 3.21. MATERIAL CONTRACTS. All contracts, agreements (including
license agreements and any other agreements relative to the Company's
technology), leases or other commitments, written or oral, absolute or
contingent, to which the Company is a party are filed or incorporated by
reference as exhibits to the Company's SEC Reports, other than (i) contracts
entered into in the ordinary course of business, requiring the expenditure by
the Company or the payment to the Company of no more than $100,000 and (ii)
contracts terminable by the Company on no more than 30 days' notice without
material cost or liability to the Company. Each such material contract
(including, without limitation, contracts between the Company and each of (i)
the University of Florida Research Foundation, (ii) Warner-Lambert Co. and (iii)
Raymond Bergeron) is valid and in full force and effect, and no event of default
(or event or circumstance which, with the lapse of time or giving of notice, or
both, would constitute an event of default) exists under any such material
contract. The Company is not in breach of any of the material provisions of any
such material contract and, to the Company's knowledge, no other party to any
such material contract is in breach of any of the material provisions thereof.
SECTION 3.22. INTERESTED PARTY TRANSACTIONS. The Company is not a
guarantor or indemnitor of any indebtedness of any other person, firm or
corporation. Except as set forth in SCHEDULE 3.22 hereto, no stockholder,
executive officer or director of the Company, nor any immediate family member of
such person, is a party to any transaction with the Company which is or would be
required to disclose in the Company's SEC Reports pursuant to Item 404 of
Regulation S-K of the rules and regulations under the Securities Act and the
Exchange Act.
SECTION 3.23. BOOKS AND RECORDS. The minute books of the Company reflect,
in all
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material respects, all meetings and other corporate actions of the
stockholders and Board of Directors (and any committees thereof) of the
Company.
SECTION 3.24. ERISA. Each employee benefit plan (within the meaning of
Section 3(3) the Employment Retirement Income Security Act of 1974, as amended
("ERISA")) which is subject to ERISA and/or the Internal Revenue Code of 1986,
as amended (the "Code") conforms to, and its operation and administration are in
compliance with, all applicable requirements of ERISA and/or the Code, as
applicable. There are no actions, suits or claims pending (other than routine
claims for benefits) or threatened against any employee plan or against the
assets of any employee plan. Each "Employee Welfare Benefit Plan" (as defined
in Section 3(1) of ERISA) covering any present or former employee of the Company
subject to the requirements of COBRA has complied with all requirements for
continuation coverage under group health benefit plans under COBRA and there are
no claims against the Company for a failure or alleged failure to comply with
the COBRA continuation requirements. The Company does not and has not ever
contributed to a "multiemployer plan" (as defined in Section 3(37) of ERISA) and
no amount is due or owing on account of any withdrawal therefrom.
Notwithstanding anything else set forth herein, the Company has incurred no
liability with respect to any such plan under ERISA (including, without
limitation Title I or Title IV of ERISA, other than liability for premiums due
to the Pension Benefit Guaranty Corporation), the Code or other applicable law,
which has not been satisfied in full, and no event has occurred, and there
exists no condition or set of circumstances which could result in the imposition
of any liability under ERISA (including, without limitation Title I or Title IV
of ERISA), the Code or other applicable law with respect to any such plan.
ARTICLE IV
PURCHASER REPRESENTATIONS AND WARRANTIES
SECTION 4.01 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each
Purchaser represents and warrants to the Company as follows:
(a) INVESTMENT INTENT. Such Purchaser is acquiring the Units, the
Shares, the Warrants and the Warrant Shares for its own account for the purpose
of investment and not with a view to, or for sale in connection with, the
distribution thereof, and that it has no present intention of distributing or
selling such Units, Shares, Warrants or Warrant Shares.
(b) TRANSFER RESTRICTIONS. Such Purchaser understands that the
Units, the Shares, Warrants and Warrant Shares have not been registered under
the Securities Act, or the securities laws of any state or other jurisdiction,
and hereby agrees not to make any sale, transfer or other disposition
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of the same in the absence of (i) an effective registration statement
covering such securities under the Securities Act and any securities laws of
any applicable state or other jurisdiction or (ii) an applicable exemption
from registration under the Securities Act (including, without limitation,
pursuant to Rule 144 under the Securities Act) and other applicable
securities laws.
(c) OPPORTUNITY TO INVESTIGATE. Such Purchaser (i) has had the
opportunity to ask questions concerning the Company (including, without
limitation, the Company's prior financings) and all such questions posed have
been answered to such Purchaser's satisfaction; (ii) has been given the
opportunity to obtain any additional information it deems necessary to verify
the accuracy of any information obtained concerning the Company; and (iii) has
such knowledge and experience in financial and business matters that it is able
to evaluate the merits and risks of purchasing the Shares and the Warrants and
to make an informed investment decision relating thereto.
(d) ACCREDITED INVESTOR. Such Purchaser is an "accredited investor"
as such term is defined in Regulation D under the Securities Act.
(e) ORGANIZATION AND GOOD STANDING. If such Purchaser is not an
individual, such Purchaser is duly organized, validly existing and in good
standing under the laws of the State or country of its formation.
(f) POWER AND AUTHORIZATION. If such Purchaser is not an individual,
such Purchaser has the power and authority to enter into this Agreement and the
Warrant Agreement, and the execution, delivery and performance by such Purchaser
of this Agreement and the Warrant Agreement have been duly authorized by all
necessary corporate or partnership action. This Agreement and the Warrant
Agreement each constitutes the valid and binding obligation of such Purchaser,
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency or other laws relating to or affecting
creditors' rights generally and by general equitable principles.
(g) BROKERS OR FINDERS. There are, and there will be, no brokerage
commissions, finder's fees or similar items of compensation payable by the
Company in connection with any broker's or finder's arrangement or agreement
made by or on behalf of such Purchaser, and such Purchaser hereby indemnifies
the Company against the same.
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ARTICLE V
CONDITIONS TO CLOSINGS
SECTION 5.01. CONDITIONS TO THE PURCHASERS' OBLIGATIONS. Each Purchaser's
obligation to purchase and pay for the Units to be purchased by it at the
Closing is subject to the complete satisfaction by the Company, on or before
such Closing, of the following conditions:
(a) OPINION OF COMPANY'S COUNSEL. The Purchasers shall have received from
counsel for the Company, an opinion, dated the date of the Closing Date, in the
form set forth in EXHIBIT B hereto with respect to the Closing.
(b) REPRESENTATIONS AND WARRANTIES; OFFICER'S CERTIFICATE. The Company's
representations and warranties contained in Article III shall be true and
correct on and as of the date of the Closing with the same effect as if made on
and as of the date of the Closing. All agreements and conditions to be
performed or satisfied by the Company hereunder on or before the date of the
Closing shall have been duly performed or satisfied. The Company shall have
delivered to the Purchasers a certificate, dated the date of the Closing and
signed by the President of the Company, to such effect.
(c) CONSENTS AND APPROVALS. The Company shall have delivered to the
Purchasers a certificate, dated the date of the Closing and signed by the
President of the Company, listing any consents, waivers, approvals,
authorizations, registrations, filings and notifications (including without
limitation those of the character referred to in Section 3.08) which are
necessary, to which shall be attached evidence, satisfactory to the Purchasers,
that the same have been obtained or made and are in full force and effect, or
stating that none is necessary.
(d) CHARTER OF THE COMPANY. The Purchasers shall have received a copy of
the Company's Certificate of Incorporation thereof, certified as of a recent
date by the Delaware Secretary of State.
(e) CLOSING DOCUMENTS. The Purchasers shall have received (i) a copy of
the Warrant Agreement, duly executed by the Company, (ii) certificates
representing the Shares and the Warrants, registered in the names of the
Purchasers, (iii) the Company's audited financial statements for the year ending
December 31, 1996 and report thereon from Deloitte & Touche LLP, which shall be
in form and substance to the reasonable satisfaction of the Purchasers and (iv)
such certificates as to the good standing of the Company and certificates of
officers of the Company as counsel to the
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Purchasers may reasonably request.
(f) STATUS OF PRIOR OFFERING. The Purchasers shall have received a copy
of correspondence from the Company to the participants in the Company's 1996
private placement of units (consisting of one share of common stock and one
warrant) at $5.50, which correspondence shall, among other things, (i) inform
such participants of the transactions contemplated by this Agreement and (ii)
offer to modify certain terms and conditions applicable to such private
placement of units, and the Purchasers shall be reasonably satisfied that such
correspondence has been sent to such participants.
(g) SUFFICIENCY OF PROCEEDS. The Purchasers shall be satisfied that the
net proceeds from the issuance and sale of the units will be sufficient to fund
the Company's product and corporate development for a period of not less than 24
months following the Closing.
(h) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings and
all documents incident to the transactions contemplated by this Agreement and
the other agreements contemplated hereby shall be satisfactory in form and
substance to the Purchasers and their counsel, and the Purchasers and the
counsel shall have received copies of all documents and records relating
thereto.
(i) OTHER PURCHASERS. Each other Purchaser purchasing more than 15,000
Units shall have tendered the purchase price and accepted delivery of the Units
to be issued to them at the Closing as set forth in SCHEDULE A.
(j) PAYMENT OF FEES AND DISBURSEMENTS OF PURCHASERS. The costs, fees and
expenses of counsel to the Purchasers identified in Section 9.14 shall have been
paid in full.
(k) BOARD OF DIRECTORS. Upon the Closing, the Company shall have caused
to be appointed or elected to the Company's Board of Directors a designated
representative of the Cross Atlantic Partners Funds.
(l) ESOP POOL. The Proxy Statement for the 1997 Company's Annual Meeting
of Stockholders shall contain a proposal (the "Proposal") to stockholders to
increase the Company's ESOP Pool by an additional 300,000 options for Common
Stock, and such Proposal shall be recommended for approval to the Company's
stockholders by the Company's Board of Directors.
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SECTION 5.02. CONDITIONS TO THE COMPANY'S OBLIGATIONS. The Company's
obligation to issue the Units to the Purchasers at the Closing is subject to the
satisfaction of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
each Purchaser contained in Article IV shall be true, correct and complete in
all material respects on and as of the date of the Closing with the same force
and effect as if they had been made on and as of the date of the Closing.
(b) PAYMENT OF PURCHASE PRICE. Each Purchaser shall have delivered to the
Company and the Company shall have received payment in full of the purchase
price relating to the number of Units to be purchased by such Purchaser at the
Closing.
(c) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings and
all documents incident to the transactions contemplated by this Agreement and
the other agreements contemplated hereby shall be satisfactory in form and
substance to the Company and its counsel, and the Company and its counsel shall
have received copies of all documents and records relating thereto.
ARTICLE VI
COVENANTS OF THE COMPANY
SECTION 6.01 AFFIRMATIVE COVENANTS. The Company covenants and agrees
that, from the date of the Closing and thereafter so long as Fifteen Percent
(15%) of the number of Warrants originally issued shall remain outstanding, it
shall, unless it has received the prior written consent or written waiver of at
least 66-2/3% of the holders of such outstanding Warrants, perform and observe
the following covenants and provisions, and shall cause each Subsidiary, if and
when such Subsidiary exists, to perform and observe the following covenants and
provisions as applicable to such Subsidiary:
(a) FINANCIAL STATEMENTS; OTHER REPORTS. The Company and each Subsidiary
will maintain proper books of account and records in accordance with GAAP
applied on a consistent basis, and will deliver to each Purchaser (or Affiliate
transferee thereof) owning at least fifty thousand Shares and/or Warrant Shares
(each, a "Rights Holder"):
(i) as soon as available and in any event within forty-five
(45) days after the end of each of the first three quarters of each fiscal
year of the Company, a copy of the
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Company's quarterly Report on Form 10-Q or Form 10-QSB, prepared in
accordance with GAAP consistently applied (subject to year-end audit
adjustments), and duly certified by the Chief Financial Officer of the
Company;
(ii) as soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Company, a copy of Company's
Annual report on Form 10-K or Form 10-KSB, prepared in accordance with
GAAP consistently applied, together with the annual audit report for such
year by one of the "big six" independent public accountants of recognized
standing;
(iii) promptly after sending, making available, or filing the
same, such other reports and financial statements as the Company shall send
or make available to the stockholders of the Company; and
(iv) in the event that the Company ceases to become subject to the
provisions of Section 13 or 15(d) of the Exchange Act, all reports and
other documents that would be required to be filed by the Company under the
Securities Act and the Exchange Act if the Company were then subject to the
provisions of Section 13 or 15(d) of the Exchange Act, at the times and in
the manner that such reports and documents would be required to be so
filed.
Neither the foregoing provisions of this Section 6.01(a) nor any other
provision of this Agreement shall be in limitation of any rights which a
Purchaser may have with respect to the books and records of the Company and its
Subsidiaries, or to inspect their properties or discuss their affairs, finances
and accounts, under the laws of the jurisdictions in which they are
incorporated.
(b) BOARD OBSERVATION; INSPECTION. Each Rights Holder and such agents,
advisors and counsel as such Rights Holder may designate, may, at its expense,
(i) attend and observe each meeting (whether physical or telephonic) of the
Company's Board of Directors or any committee thereof (and with respect to which
the Company covenants and agrees to provide each Rights Holder with reasonable
advance notice) or (ii) visit and inspect any of the properties of the Company
and each Subsidiary, examine the books of account of the Company and each
Subsidiary, take extracts therefrom and discuss the affairs, finances and
accounts of the Company and each Subsidiary with its officers and employees and
public accountants (and by this provision the Company and each Subsidiary hereby
authorizes said accountants to discuss with such Rights Holder and such persons
its finances and accounts), at reasonable times and with reasonable prior notice
during normal business hours. All such visits and inspections shall be
conducted in a manner which will not unreasonably interfere with the normal
business operations of the Company and each Subsidiary.
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(c) PRESERVATION OF CORPORATE EXISTENCE. The Company and each Subsidiary
will preserve and maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and remain
qualified, as a foreign corporation in each jurisdiction in which such
qualification is necessary or desirable in view of its business and operations
or the ownership of its properties. The Company and each Subsidiary shall
preserve and maintain all licenses and other rights to use patents, processes,
licenses, trademarks, trade names, inventions, copyrights and other Intangibles
owned or possessed by it and necessary to the conduct of its business.
(d) COMPLIANCE WITH LAWS. The Company will comply, and cause each of its
Subsidiaries to comply, with all applicable laws, rules, regulations and orders
of any governmental authority, noncompliance with which could materially
adversely affect its business or condition, financial or otherwise.
(e) BOARD OF DIRECTORS. The Company shall cause to be appointed or
elected to the Company's Board of Directors (i) upon the Closing, a designated
representative of the Cross Atlantic Partners Funds and (ii) within 60 days
following the Closing, an additional person recommended by the Purchasers and
agreed to by a majority of the Company's Board of Directors. Such two new Board
members shall, immediately upon their appointment or election to the Board,
qualify for stock options and other compensation or incentives afforded to other
members of the Board of Directors. The Company shall at all times maintain
provisions in its By-laws or certificate of incorporation indemnifying all
directors against liability and providing for the advancement of expenses to the
maximum extent permitted under the laws of the jurisdiction of its
incorporation.
(f) AVAILABILITY OF COMMON STOCK. The Company shall, from time to time,
in accordance with the laws of the state of its incorporation and the Warrant
Agreement, increase the authorized amount of Common Stock if at any time the
number of shares of Common Stock remaining unissued and available for issuance
shall be insufficient to permit the exercise or conversion of all the then
outstanding Warrants Shares.
(g) USE OF PROCEEDS. The Company shall use the net proceeds from
the issuance and sale of the Units solely to fund product and corporate
development.
(h) CERTAIN PATENT MATTERS. The Company represents that
certain of its intellectual property is licensed to it by the University
of Florida Research Foundation (the "UFRF"). The Company hereby agrees
to increase its level of review and participation in the prosecution of
the patent rights licensed to it by the UFRF, and to take any and all
actions necessary to insure that the patent rights of UFRF licensed to
the Company are properly protected and licensable to the
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Company in a manner consistent with, and in furtherance of, its
contractual rights and obligations with UFRF. In addition, the Company
agrees to comply with its royalty and other contractual obligations to
UFRF in order to maintain its rights to the intellectual property
licensed by UFRF, in each case to the extent it is commercially
reasonable for the Company to do so.
SECTION 6.02 NEGATIVE COVENANTS. Without limiting any other covenants or
provisions hereof, the Company covenants and agrees that it will comply with and
observe the following negative covenants and provisions, and will cause each
Subsidiary to comply with and observe such of the following covenants and
provisions as are applicable to such Subsidiary, if and when such Subsidiary
exists, and will not without the written consent or written waiver of the
holders of at least 66-2/3% of the holders of such Warrants, do any of the
actions set forth in the following covenants and provisions:
(a) The Company will not, by amendment of its Certificate of
Incorporation or through any consolidation, merger, reorganization, transfer
of assets, 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 the Warrant Agreement or the Warrant Certificates. Without limiting
the generality of the foregoing, the Company (i) will not permit the par
value or the determined or stated value of any shares of the Company's Common
Stock receivable upon the exercise of the Warrants to exceed the amount
payable therefor upon such exercise, (ii) 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 the Company's Common Stock,
upon the exercise or conversion of the Warrants from time to time
outstanding, including, without limitation, amending its Certificate of
Incorporation to reduce or eliminate the par value of the Common Stock and
(iii) will not take any action which results in an adjustment in the number
of Warrant Shares obtainable upon the exercise of any Warrants if the total
number of shares of the Company's Common Stock (or other securities) issuable
after such action upon the exercise or conversion of all of the
then-outstanding Warrants would exceed the total number of shares of the
Company's Common Stock (or other securities) then authorized by the Company's
Certificate of Incorporation and available for purpose of issuance upon such
exercise.
(b) The Company shall not extend the maturity date of any of the
1,265,000 warrants issued in the Company's initial public offering without
the prior written consent of holders of at least 50% of the total of the
outstanding Shares and the Warrant Shares and, if such consent is granted,
any such extension of such maturity date shall be for a period not to exceed
180 days; PROVIDED that (i) any such extension shall have been approved by a
majority vote of the Board of Directors, (ii) any such extension of such
maturity date shall be for a period not to exceed 180 days and (iii)
notwithstanding the foregoing, in no event shall the maturity date of such
warrants be extended on more than one occasion; PROVIDED FURTHER that the
Company's obligations under this Section 6.02(b)
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shall terminate when less than Fifteen Percent (15%) of the number of
Warrants originally issued remain outstanding.
ARTICLE VII
REGISTRATION RIGHTS
SECTION 7.01. REGISTRATION FOR RESALE. On or prior to the first
anniversary of the date of this Agreement, the Company shall have filed with the
Commission, and shall have used its best efforts to cause the Commission to have
declared effective, a "shelf" registration statement on Form S-3 (or any other
form of registration statement on which it may file for registration under the
Securities Act) pursuant to Rule 415 (or similar rule that may be adopted by the
Commission) for the resale of the Registrable Shares (the "Registration
Statement"); provided that in the event that the Company is not then eligible to
utilize a Form S-3 registration statement, the Company's obligations under this
Section 7.01 shall instead require the filing of a registration statement on
Form S-1 or Form S-2. The Company agrees to use its best efforts to keep the
Registration Statement effective until the earliest to occur of (i) 5 years from
the date of this Agreement, (ii) the sale of all Registrable Shares pursuant to
such Registration Statement or (iii) the date when all Registrable Shares become
freely transferable without registration. The Company also agrees that it shall
(i) prepare and file such post-effective amendments to the Registration
Statement and/or such additional Registration Statements as may be necessary to
ensure that at all times there shall be registered with the Commission for
resale by the sellers of Registrable Shares from time to time as provided in
this Section 7.01 sufficient shares of Common Stock to account for all Warrant
Shares and (ii) cause such post-effective amendments to the Registration
Statement and/or such additional Registration Statements to be declared
effective by the Commission prior to the issuance of any Warrant Shares covered
thereby.
SECTION 7.02. REGISTRATION PROCEDURES. In connection with the Company's
requirement to use its best efforts to effect the registration of any
Registrable Shares under the Securities Act, the Company will, as expeditiously
as possible:
(a) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
the period specified herein and comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Shares covered by such
registration statement in accordance with the sellers' intended method of
disposition set forth in such registration statement for such period;
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(b) furnish to each seller of Registrable Shares such number of
copies of the registration statement and each such amendment and supplement
thereto (in each case including all exhibits) and the prospectus included
therein (including each preliminary prospectus) as such persons reasonably may
request in order to facilitate the public sale or other disposition of the
Registrable Shares covered by such registration statement;
(c) use its best efforts to register or qualify the Registrable
Shares covered by such registration statement under the securities or "blue sky"
laws of such jurisdictions as the sellers of Registrable Shares reasonably shall
request, PROVIDED, HOWEVER, that the Company shall not for any such purpose be
required to qualify generally to transact business as a foreign corporation in
any jurisdiction where it is not so qualified or to consent to general service
of process in any such jurisdiction, unless the Company is already subject to
service in such jurisdiction;
(d) use its best efforts to list the Registrable Shares covered by
such registration statement with any securities exchange on which the Common
Stock of the Company is then listed;
(e) comply with all applicable rules and regulations under the
Securities Act and Exchange Act;
(f) immediately notify each seller of Registrable Shares under such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
of which the Company has knowledge as a result of which the prospectus contained
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing, and promptly prepare and furnish to such seller
a reasonable number of copies of a prospectus supplemented or amended so that,
as thereafter delivered to the purchasers of such Registrable Shares, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing;
(g) make available for inspection by each seller of Registrable
Shares, and any attorney, accountant or other agent retained by such seller
reasonable access to all financial and other records, pertinent corporate
documents and properties of the Company, as such parties may reasonably request,
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such seller, attorney, accountant or
agent in connection with such registration statement;
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(h) cooperate with the selling holders of Registrable Shares to
facilitate the timely preparation and delivery of certificates representing
Registrable Shares to be sold, such certificates to be in such denominations and
registered in such names as such holders or the managing underwriter may request
at least two business days prior to any sale of Registrable Shares; and
(i) permit any holder of Registrable Shares which holder, in the sole
and exclusive judgment, exercised in good faith, of such holder, might be deemed
to be a controlling person of the Company, to participate in good faith in the
preparation of such registration or comparable statement and to require the
insertion therein of material, furnished to the Company in writing, which in the
reasonable judgment of such holder and its counsel should be included.
In connection with each registration hereunder, the sellers of
Registrable Shares will furnish to the Company in writing such information
requested by the Company with respect to themselves and the proposed
distribution by them as shall be necessary in order to assure compliance with
Federal and applicable state securities laws; and such sellers shall provide the
Company with appropriate representations with respect to the accuracy of such
information.
SECTION 7.03. EXPENSES. All expenses incurred in complying with Sections
7.01 and 7.02, including, without limitation, all registration and filing fees,
printing expenses, fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses (including counsel fees) incurred
in connection with complying with state securities or "blue sky" laws, fees of
the National Association of Securities Dealers, Inc., transfer taxes, fees of
transfer agents and registrars, and reasonable fees and disbursements of one
counsel selected by a majority in interest of the sellers of Registrable Shares,
shall be paid by the Company.
SECTION 7.04. INDEMNIFICATION AND CONTRIBUTION.
(a) In the event of a registration of any of the Registrable Shares
under the Securities Act pursuant to this Article VII, the Company will
indemnify and hold harmless each holder of Registrable Shares, its officers,
directors and partners, and each other person, if any, who controls such holder
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such holder, officer, director, partner
or controlling person may become subject under the Securities Act or otherwise,
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 prospectus, offering
circular or other document incident to such registration (including any related
notification, registration statement under which such Registrable Shares were
registered under the Securities Act pursuant to Section 7.01, any preliminary
prospectus or final prospectus contained therein, or any amendment or
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supplement thereof), (ii) any blue sky application or other document executed
by the Company specifically for that purpose or based upon written
information furnished by the Company filed in any state or other jurisdiction
in order to qualify any or all of the Registrable Shares under the securities
laws thereof (any such application, document or information herein called a
"Blue Sky Application"), (iii) any omission or alleged omission to state in
any such registration statement, prospectus, amendment or supplement or in
any Blue Sky Applications executed or filed by the Company, a material fact
required to be stated therein or necessary to make the statements therein not
misleading, (iv) any violation by the Company or its agents of the Securities
Act or any rule or regulation promulgated under the Securities Act applicable
to the Company or its agents and relating to action or inaction required of
the Company in connection with such registration, or (v) any failure to
register or qualify the Registrable Shares in any state where the Company or
its agents has affirmatively undertaken or agreed in writing that the Company
will undertake such registration or qualification (provided that in such
instance the Company shall not be so liable if it has used its best efforts
to so register or qualify the Registrable Shares) and will reimburse each
such seller, and such officer, director and partner, and each such
controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action, promptly after being so incurred, PROVIDED,
HOWEVER, that the Company will not be liable in any such case if and to the
extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission so made in conformity with written information furnished by
any such holder or any such controlling person in writing specifically for
use in such registration statement or prospectus.
(b) In the event of a registration of any of the Registrable Shares
under the Securities Act pursuant to this Article VII, each seller of such
Registrable Shares thereunder, severally and not jointly, will indemnify and
hold harmless the Company, each person, if any, who controls the Company within
the meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each other seller of
Registrable Shares against all losses, claims, damages or liabilities, joint or
several, to which the Company or such officer, director or other seller may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any prospectus offering circular or other document incident to
such registration (including any related notification, registration statement
under which such Registrable Shares were registered under the Securities Act
pursuant to Section 7.01, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof), or any Blue Sky
Application or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse the Company and
each such officer, director and other seller for any legal or other expenses
reasonably incurred
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by them in connection with investigating or defending any such loss, claim,
damage, liability or action, promptly after being so incurred, PROVIDED,
HOWEVER, that such seller will be liable hereunder in any such case if and
only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in reliance upon and in conformity with
information pertaining to such seller, as such, furnished in writing to the
Company by such seller specifically for use in such registration statement or
prospectus; and PROVIDED, FURTHER, HOWEVER, that the liability of each seller
hereunder shall be limited to the proportion of any such loss, claim, damage,
liability or expense which is equal to the proportion that the public
offering price of the securities sold by such seller under such registration
statement bears to the total public offering price of all securities sold
thereunder, but not in any event to exceed the proceeds received by such
seller from the sale of Registrable Shares covered by such registration
statement.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section and shall only relieve
it from any liability which it may have to such indemnified party under this
Section if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, PROVIDED,
HOWEVER, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or
that the interests of the indemnified party reasonably may be deemed to conflict
with the interests of the indemnifying party, the indemnified party shall have
the right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred. No indemnifying party,
in the defense of any such claim or action, shall, except with the consent of
each indemnified party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified
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party of a release from all liability in respect to such claim or action.
Each indemnified party shall furnish such information regarding itself or the
claim in question as an indemnifying party may reasonably request in writing
and as shall be reasonably required in connection with defense of such claim
and litigation resulting therefrom.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) the Company,
any holder of Registrable Shares exercising rights under this Agreement, or any
controlling person of any such holder, makes a claim for indemnification
pursuant to this Section but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of the Company, any such
selling holder or any such controlling person in circumstances for which
indemnification is provided under this Section; then, and in each such case, the
Company and such holder will contribute to the aggregate losses, claims, damages
or liabilities to which they may be subject (after contribution from others) in
such proportion so that such holder is responsible for the portion represented
by the percentage that the public offering price of its Registrable Shares
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, and the Company is
responsible for the remaining portion; PROVIDED, HOWEVER, that, in any such
case, (A) no such holder of Registrable Shares will be required to contribute
any amount in excess of the proceeds received from the sale of all such
Registrable Shares offered by it pursuant to such registration statement; and
(B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
(e) The indemnities and obligations provided in this Section shall
survive the transfer of any Registrable Shares by such holder.
ARTICLE VIII
LIMITATIONS AND RESTRICTIONS
SECTION 8.01. RESTRICTIONS ON SALES BY PURCHASERS. Each Purchaser agrees
that until the first anniversary of the Closing hereunder, it will not, nor will
it permit any of its Affiliates to sell or propose to sell any Shares purchased
at the Closing except as follows:
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(a) A Purchaser may transfer Shares to any of its Affiliates;
(b) A Purchaser may sell its Shares pursuant to a tender offer or exchange
offer for all outstanding shares of the Company's Common Stock approved by the
Company's Board of Directors;
(c) A Purchaser may (i) if such Purchaser is a partnership, distribute
Shares to the partners of such partnership, (ii) transfer Shares to such
Purchaser's children and/or grandchildren and/or such Purchaser's spouse's
children and/or grandchildren, whether biological or adopted (collectively, such
Purchaser's "descendants"), (iii) transfer Shares to the trustee or trustees of
a trust revocable solely by such Purchaser, (iv) transfer Shares to the trustee
or trustees of an irrevocable trust the sole beneficiaries of which are such
Purchaser, his spouse and/or his descendants, (v) transfer Shares to a guardian
or conservator, or (vi) transfer any such shares in the event of death to such
Purchaser's heirs or the beneficiaries or the legal representative of his
estate; and
(d) A Purchaser may sell all or any part of the Shares owned by Purchaser
or its Affiliates pursuant to the registration rights provisions contained in
Article VII.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be addressed to the
receiving party's address set forth below or to such other address as a party
may designate by notice hereunder, and shall be either (i) delivered by hand,
(ii) made by telecopy or facsimile transmission (receipt confirmed) or
(iii) sent by international overnight or express courier.
If to the Company: SunPharm Corporation
4651 Salisbury Road
Jacksonville, FL 33256
Attn: President
FAX: (904) 296-6202
with a copy to: Cecilia Bryant
1400 Prudential Drive, Suite 7
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Jacksonville, FL 32207
FAX: (904) 398-5477
If to a Purchaser: at its address on Schedule A hereto
with a copy to: Mintz Levin Cohn Ferris Glovsky and
Popeo, P.C.
One Financial Center
Boston, MA 02111
Attn: Lewis J. Geffen, Esq.
FAX: (617) 542-2241
All notices, requests, consents and other communications hereunder shall be
deemed to have been given either (i) if by hand, at the time of the delivery
thereof to the receiving party at the address of such party set forth above,
(ii) if made by telecopy or facsimile transmission, at the time that receipt
thereof has been acknowledged by electronic confirmation or otherwise, or
(iii) if sent by overnight or express courier, on the Business Day following the
day such notice is delivered to the courier service.
SECTION 9.02. LEGENDS. Each Purchaser acknowledges that, until registered
under the Securities Act and any applicable state securities laws or transferred
pursuant to the provisions of Rule 144 promulgated under the Securities Act
("Rule 144"), each certificate representing a Share or Warrant, whether upon
initial issuance or upon any transfer thereof, shall bear a legend (and the
Company and its transfer agent shall make a notation on its books of transfer to
such effect), prominently stamped or printed thereon, in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES
LAWS OF ANY APPLICABLE STATE OR OTHER JURISDICTION, HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE AND MAY NOT BE
SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SECURITIES
UNDER THE ACT AND ANY SECURITIES LAWS OF ANY APPLICABLE STATE OR OTHER
JURISDICTION, (2) AN EXEMPTION FROM REGISTRATION , PURSUANT TO RULE 144
UNDER THE ACT OR (3) A WRITTEN OPINION IN FORM AND SUBSTANCE SATISFACTORY
TO THE COMPANY TO THE EFFECT THAT
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REGISTRATION IS NOT REQUIRED PURSUANT TO SOME OTHER APPLICABLE EXEMPTION
FROM REGISTRATION UNDER THE ACT OR UNDER OTHER APPLICABLE SECURITIES
LAWS."
SECTION 9.03. ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding between the parties hereto with respect to the
provisions hereof and supersedes all prior oral or written agreements and
understandings relating to the provisions hereof, and no other statement,
representation, warranty, covenant or agreement of any kind not expressly set
forth in this Agreement shall affect, or be used to interpret, change or
restrict, the express terms and provisions of this Agreement.
SECTION 9.04. MODIFICATIONS AND AMENDMENTS. The terms and provisions of
this Agreement may be modified or amended only by written agreement executed by
the Company and the holders of not less than a majority of the outstanding
Shares and Warrants.
SECTION 9.05. WAIVERS AND CONSENTS. Except as otherwise expressly
provided herein, the terms and provisions of this Agreement may be waived, or
consent for the departure therefrom granted, only by written document executed
by the Company and the holders of not less than a majority of the outstanding
Shares and Warrants. No such waiver or consent shall be deemed to be or shall
constitute a waiver or consent with respect to any other terms or provisions of
this Agreement, whether or not similar. Each such waiver or consent shall be
effective only in the specific instance and for the purpose for which it was
given, and shall not constitute a continuing waiver or consent.
SECTION 9.06. ASSIGNMENT. The rights and obligations under this Agreement
may not be assigned by either party hereto without the prior written consent of
the other party (which consent shall not be unreasonably withheld), except that
a Purchaser without the consent of the Company may assign this Agreement or any
of its rights or obligations (i) to an Affiliate of the Purchaser or to an
entity with which the Purchaser shall merge or consolidate or to which the
Purchaser shall sell or assign all or substantially all of its assets or (ii) in
compliance with the provisions of Section 4.01(b) or Section 8.01.
SECTION 9.07. BENEFIT. All statements, representations, warranties,
covenants and agreements in this Agreement shall be binding on the parties
hereto and shall inure to the benefit of the respective successors and permitted
assigns of each party hereto. Nothing in this Agreement shall be construed to
create any rights or obligations except among the parties hereto, and no person
or entity shall be regarded as a third-party beneficiary of this Agreement,
except for the persons entitled to indemnification pursuant to the provisions of
Article VII.
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SECTION 9.08. GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with and
governed by the law of the State of Delaware, without giving effect to the
conflict of law principles thereof.
SECTION 9.09. SEVERABILITY. In the event that any court of competent
jurisdiction shall determine that any provision, or any portion thereof,
contained in this Agreement shall be unenforceable in any respect, then such
provision shall be deemed limited to the extent that such court deems it
enforceable, and as so limited shall remain in full force and effect. In the
event that such court shall deem any such provision, or portion thereof, wholly
unenforceable, the remaining provisions of this Agreement shall nevertheless
remain in full force and effect.
SECTION 9.10. INTERPRETATION. The parties hereto acknowledge and agree
that: (i) each party and its counsel reviewed and negotiated the terms and
provisions of this Agreement and have contributed to its revision; (ii) the rule
of construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement;
and (iii) the terms and provisions of this Agreement shall be construed fairly
as to all parties hereto and not in favor of or against any party, regardless of
which party was generally responsible for the preparation of this Agreement.
SECTION 9.11. HEADINGS AND CAPTIONS. The headings and captions of the
various subdivisions of this Agreement are for convenience of reference only and
shall in no way modify, or affect the meaning or construction of any of the
terms or provisions hereof.
SECTION 9.12. ENFORCEMENT. Each of the parties hereto acknowledges and
agrees that the rights acquired by each party hereunder are unique and that
irreparable damage would occur in the event that any of the provisions of this
Agreement to be performed by the other party were not performed in accordance
with their specific terms or were otherwise breached. Accordingly, in addition
to any other remedy to which the parties hereto are entitled at law or in
equity, each party hereto shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement by the other party.
SECTION 9.13. NO WAIVER OF RIGHTS, POWERS AND REMEDIES. No failure or
delay by a party hereto in exercising any right, power or remedy under this
Agreement, and no course of dealing between the parties hereto, shall operate as
a waiver of any such right, power or remedy of the party. No single or partial
exercise of any right, power or remedy under this Agreement by a party hereto,
nor any abandonment or discontinuance of steps to enforce any such right, power
or remedy, shall preclude such party from any other or further exercise thereof
or the exercise of any other right, power or remedy hereunder. The election of
any remedy by a party hereto shall not
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constitute a waiver of the right of such party to pursue other available
remedies. No notice to or demand on a party not expressly required under
this Agreement shall entitle the party receiving such notice or demand to
any other or further notice or demand in similar or other circumstances
or constitute a waiver of the rights of the party giving such notice or
demand to any other or further action in any circumstances without such
notice or demand.
SECTION 9.14. EXPENSES. Each of the parties hereto shall pay its own fees
and expenses in connection with this Agreement and the transactions contemplated
hereby whether or not the transactions contemplated hereby are consummated,
except that (i) the Company shall pay the reasonable fees and expenses for (A)
one legal counsel for the Purchasers, not to exceed $25,000 and (B) one patent
counsel for the Purchasers, not to exceed $7,500 and (ii) in the event that the
Closing does not occur through no fault of the Purchasers after execution of
this Agreement, the Company shall be responsible for the reasonable and
documented out of pocket expenses of the Purchasers, such expenses not to exceed
$30,000.
SECTION 9.15 CONFIDENTIALITY. Each of the Purchasers, on the one hand,
and the Company, on the other hand, acknowledge and agree that any
information or data it has acquired from the other, not otherwise properly in
the public domain, was received in confidence. Each such party agrees not to
divulge, communicate or disclose, or use to the detriment of the disclosing
party or for the benefit of any other person or persons, or misuse in any
way, any confidential information of the disclosing party concerning the
subject matter hereof; PROVIDED that (i) the foregoing obligation with
respect to the disclosure and use of such information shall not apply to any
information which such party can demonstrate (A) was at the time of
disclosure to such party or thereafter, but prior to its disclosure by such
party to any third party, through no fault of such party, publicly available
(other than as a result of disclosure by such party), (B) has been disclosed
to such party on a non-confidential basis from a source other than any other
party which, to such party's knowledge, was not prohibited from disclosing
such information to such party by a legal, contractual, fiduciary or other
obligation, (C) has been independently developed by the such party without
the violation of any of my obligations under this Agreement or (D) is
required to be disclosed by applicable law (including, without limitation,
the federal securities laws), rule, regulation or regulatory body (including,
without limitation, the National Association of Insurance Commissioners) and
(ii) such party may, if required by subpoena or valid legal process, disclose
any such information, but only to the extent so required and only after using
its best efforts to give the other party or parties (as the case may be)
prior notice of such required disclosure in order to afford such party or
parties an opportunity to obtain an injunction, a protective order or other
relief.
SECTION 9.16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by different parties hereto on separate counterparts, each of
which shall be deemed
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an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed by their duly authorized representatives,
as of the date first written above.
SUNPHARM CORPORATION
By:
--------------------------------
Name:
Title:
Counterpart Signature Pages Begin on Next Page
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COUNTERPART SIGNATURE PAGE FOR PURCHASERS
The undersigned hereby agrees to become a party to that certain Unit
Purchase Agreement dated as of March 28, 1997 (the "Agreement") among SunPharm
Corporation (the "Company") and others and that certain Warrant Agreement dated
as of March 28, 1997 (the "Warrant Agreement") among the Company and others.
From and after the undersigned's execution and delivery and the Company's
acceptance of this Counterpart Signature Page, the undersigned shall be a party
to the Agreement and the Warrant Agreement, and the Units (including the Shares
and the Warrants) purchased by the undersigned shall be deemed to be "Units" for
all purposes of the Agreement and the Warrants purchased by the undersigned
shall be deemed to be "Warrants" for all purposes of the Warrant Agreement.
--------------------------------------------
Printed Name of Purchaser
--------------------------------------------
Signature of Purchaser
Investment Amount:
------------------------
Number of Units:
---------------------------
By:
----------------------------------------
Title:
-------------------------------------
Address:
-----------------------------------
-----------------------------------
-----------------------------------
Date:
--------------------------------------
31
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Agreed and accepted to as to
Units at $3.50 per Unit:
- --------
SUNPHARM CORPORATION
By:
------------------------
Title:
------------------------
Date:
------------------------
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SCHEDULE A
NUMBER OF AGGREGATE
PURCHASER UNITS PURCHASED PURCHASE PRICE
- --------- --------------- --------------
Cross Atlantic Partners K/S 450,000 $1,575,000
c/o Hambro Health International, Inc.
650 Madison Avenue, 21(st) Floor
New York, NY 10022
Cross Atlantic Partners II K/S 264,286 $925,000
c/o Hambro Health International, Inc.
650 Madison Avenue, 21(st) Floor
New York, NY 10022
New York Life Insurance Company 571,429 $2,000,000
51 Madison Avenue
New York, NY 10010
Attn: Investment Department
Private Finance Group, Room 206
FAX: (212) 447-4122
with a copy (excluding periodic
financial statements) to:
Attn: Office of General Counsel
Investment Section, Room 1104
FAX: (212) 576-8340
InterSouth Partners III, L.P. 200,000 $700,000
1000 Park Forth Plaza
Durham, NC 27713
Pensionskassen for Vaerksteds- 142,857 $500,000
funktionaerer i Jernet
12 Sankt Annae Plads - DK 1250
Copenhagen K - Denmark
Apoteksassistenternes 142,857 $500,000
Pensionskasse
Hojbro Plads 6 - DK 1200
Copenhagen K - Denmark
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Pensionskassen for Apotekere 4,285 $15,000
og Farmaceuter
Hojbro Plads 6 - DK 1200
Copenhagen K - Denmark
Mr. Louis Perlman 14,286 $50,000
650 Madison Avenue, 21(st) Floor
New York, NY 10022
William Bruce and Madeleine Rudin Johnson 14,286 $50,000
(JTWROS)
1085 Park Avenue, Apt. 15A
New York, NY 10128
Cecilia Bryant 12,000 $42,000
1400 Prudential Drive, Suite 7
Jacksonville, FL 32207
Dr. Richard L. Lipsey 5,714 $20,000
1400 Prudential Drive, Suite 7
Jacksonville, FL 32207
Harvey Rubin, Ph.D., M.D. 2,286 $8,000
536 Johnson Pavilion
Philadelphia, PA 19104
Charles L. Dimmler III and Irma L. Dimmler 2,400 $8,400
(JTWROS)
c/o Hambro Health International, Inc.
650 Madison Avenue, 21(st) Floor
New York, NY 10022
Charles L. Dimmler IV 800 $2,800
c/o Hambro Health International, Inc.
650 Madison Avenue, 21(st) Floor
New York, NY 10022
Erika Ines Dimmler 800 $2,800
c/o Hambro Health International, Inc.
650 Madison Avenue, 21(st) Floor
New York, NY 10022
---------- ----------
TOTAL 1,828,286 $6,399,000
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SCHEDULE 3.07
Registration Rights
Registration rights have been granted by the Company pursuant to the following
agreements:
4.2 -- Revised Form of Warrant Agreement relating to Redeemable Common Stock
Purchase Warrants (Exhibit 4.2 to Amendment No. 3 to the Company's
Registration Statement on Form SB-2) (Registration No. 33-85416-A).
4.4 -- Investment Agreement between the Registration and SunPharm Investors,
L.P., dated January 11, 1993, relating to the Registrant's 9.5%
Extendable Notes and Warrants (Exhibit 4.4 to the Company's
Registration Statement on Form SB-2) (Registration No. 33-85416-A).
4.5 -- Revised form of Unit Purchase Option issued to Royce Investment Group,
Inc. (Exhibit 4.5 to Amendment No. 3 to the Company's Registration
Statement on Form SB-2) (Registration No. 33-85416-A).
10.10 -- Form of Bridge Warrant Certificate (Exhibit 10.10 to the Company's
Registration Statement on Form SB-2) (Registration No. 33-85416-A).
10.11 -- Form of Subscription Agreement for Bridge Financing (Exhibit 10.13 to
the Company's Registration Statement on Form SB-2) (Registration No.
33-854160-A).
10.12 -- Second Amended and Restated Registration Rights Agreement (Exhibit
10.14 to the Company's Registration Statement on Form SB-2)
(Registration No. 33-85416-A).
10.14 -- First Amendment to Second Amended and Restated Registration Rights
Agreement (Exhibit 10.16 to Amendment No. 1 to the Company's
Registration Statement on Form SB-2) (Registration No. 33-385416-A).
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SCHEDULE 3.22
Related Party Transactions
Stefan Borg, founder of the Company was issued 467,400 shares of Common
Stock in October 1991, in connection with the initial formation of the Company.
No cash consideration was paid for such shares. Mr. Borg has also been awarded
an option to acquire an additional 46,740 shares of Common Stock at $.32 per
share, all of which are now vested based upon achievement of certain performance
milestones. The Company also loaned Mr. Borg an aggregate of $35,000 during
1992 and 1993, which amount will be forgiven if Mr. Borg is engaged as President
of the Company on the due date (April 1, 1996). [In 1995 the Company loaned Mr.
Borg $10,000, which will be repaid in 1996.] In 1997, the Company loaned Mr.
Borg $84,000, which will be repaid in 1998.
The Company entered into the License Agreements with the University of
Florida Research Foundation, Inc. in December 1991 and October 1995. The
Company has issued the Foundation a total of 342,760 shares of Common Stock in
partial consideration for the rights granted under the License Agreement and has
ongoing royalty obligations under the License Agreement. The Company also
entered into a Corporate Research Agreement with the Foundation under which the
Company has agreed to fund research at the University of Florida at an annual
cost of approximately $408,450 in 1992 and $625,000 per year from 1993 through
1996.
Dr. Janicki, a director of the Company, purchased 116,850 shares of Common
Stock of the Company in December 1991 at $.0064 per share, in connection with
his election to the board of directors and his agreement to provide scientific
consulting services to the Company during 1992. Dr. Janicki was also issued a
stock option for 10,388 shares of Common Stock in exchange for the extension of
his consulting agreement for 1993, exercisable at $.32 per share. In August
1992, Dr. Janicki loaned the Company $150,000 for working capital. In December
1992, Dr. Janicki purchased 2,500 shares of Series B Preferred Stock (which were
converted into 4,000 shares of Common Stock upon the completion of the Company's
January 1995 initial public offering) by forgiveness of $12,500 in outstanding
principal of the note for such loan and the remaining balance was repaid in
January 1993. Dr. Janicki also received an option to purchase 23,370 shares of
Common Stock of the Company at $.32 per share as consideration for loaning the
Company such funds. An additional option for the purchase of 77,900 shares of
Common Stock at $.32 per share was issued to Dr. Janicki pursuant to his
consulting agreement with the Company as a result of his efforts in assisting in
securing the Company's strategic alliance with Nippon Kayaku. The shares vest
and become exercisable proportionately based upon the total amount potentially
payable under the Nippon Kayaku agreement that has actually been received by the
Company from Nippon Kayaku
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or upon the expiration of ten years, if not previously vested. At December
31, 1995, a total of 3,895 shares may be exercised. Dr. Janicki has assigned
his rights to exercise and acquire 15,580 of the shares subject to this
option to Mr. Schoellhorn (7,790 shares) and one other person (7,790 shares)
for their assistance in completing this transaction.
Mr. Schoellhorn, a director of the Company, purchased 10,000 shares of
Series B Preferred Stock (converted into 16,000 shares of Common Stock upon
completion of the Company's initial public offering) in October 1992 when he was
elected to the Board of Directors. In connection with such election and
purchase, the Company entered into a consulting agreement with Mr. Schoellhorn
to provide financial and business advice to the Company in exchange for an
option to acquire 31,160 shares of Common Stock at a purchase price of $.32 per
share. The Company also issued Mr. Schoellhorn a stock purchase warrant to
acquire 77,900 shares of Common Stock at a price of $1.93 per share in
connection with his election to the Board of Directors in October 1, 992.
George Schwartz, a director of the Company, is President of Tioga Capital
Corporation, general partner of SunPharm, Investors, L.P., a limited partnership
formed in January 1993, which purchased approximately $500,000 of the 9.5%
Extendable Notes (the "9.5% Notes") and warrants to purchase 281,882 shares of
Common Stock at a weighted average price of $2.50 per share (the "Tioga
Warrants") issued by the Company. In connection with such offering, Mr.
Schwartz was issued an option to acquire an aggregate of 28,579 shares of Common
Stock at $.32 per share and options for 11,115 shares were distributed to his
associates at Tioga Capital Corporation. In addition, Tioga Capital Corporation
was issued an option to acquire 11,685 shares of Common Stock of SunPharm at
$.32 per share as consideration for Mr. Schwartz serving or the Board of
Directors of the Company. Finally, Mr. Schwartz was issued options in August
1993 to acquire an additional 3,593 shares of Common Stock, exercisable at $.32
per share, for services in connection with assisting the Company in obtaining
capital. The Company repaid the 9.5% Notes in January 1995 from the proceeds of
its initial public offering.
In August 1994, the Company elected Craig Siegler as a director of the
Company, and engaged him as a consultant to provide management, marketing,
economic and strategic planning services during a two-year period. Mr. Siegler
is compensated under such consulting agreement at a rate of $7,500 per month,
and by the issuance of a stock appreciation right for 150,000 Common Stock
equivalents, exercisable (commencing in 1996 with respect to 50% and 1997 with
respect to the remainder) in an amount equal to the excess of the fair market
value of the Company's Common Stock on the date of exercise over $7.00 per
share. Such stock appreciation right terminates on January 1,2000. As
consideration for his serving on the Board and for a loan made to the Company,
Mr. Siegler was granted five-year stock purchase warrants for 225,500 shares of
Common Stock of the Company, such warrants befog exercisable at a price of $5.50
per share.
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In November and December 1994 and January 1995, the Company borrowed an
aggregate of $200,000 from Messrs. Rejeange, Schoellhorn, Dr. Janicki and one
other individual who is no longer a director. In consideration for such loans,
the Company issued a note in the principal amount of $100,000, together with a
warrant to purchase 10,000 shares of Common Stock at an exercise price of $7.00
per share, to Mr. Rejeange, a note in the principal amount of $15,000, together
with a warrant to purchase 1,500 shares of Common Stock at an exercise price of
$7.00 per share, to Mr. Schoellhorn, and a note in the principal amount of
$10,000 together with a warrant to purchase 1,000 shares of Common Stock at an
exercise price of $7.00 per share, to Dr. Janicki. The warrants are not
exercisable until January 20, 1997. The Company repaid such notes from the
proceeds of its initial public offering.
In addition, in September 1993, each of the non-employee directors of the
Company (Dr. Janicki and Messrs. Schoellhorn and Schwartz) was issued an option
for 7,790 shares at an exercise price of $.32 per share, vesting over twelve
months from issuance, and Mr. Rejeange was issued an option in June 1994 to
purchase 15,580 shares at $1.61 per share, vesting over twenty-four months from
issuance, is exchange for services as a Board member. Upon his appointment as
Chairman of the Board of Directors, Mr. Rejeange was granted an option to
purchase 10,000 shares of the Company's Common Stock at a purchase price of
$7.25 per share. The option will expire in ten years and was fully vested upon
its issuance.
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EXHIBIT 4.2
WARRANT AGREEMENT
THIS WARRANT AGREEMENT dated as of March 28, 1997 (as amended,
supplemented or modified from time to time, the "WARRANT AGREEMENT") by and
among SUNPHARM CORPORATION, a Delaware corporation (the "ISSUER"), and THE
PURCHASERS EXECUTING A COUNTERPART SIGNATURE PAGE HERETO (individually, a
"PURCHASER" and, collectively, the "PURCHASERS").
W I T N E S S E T H:
WHEREAS, pursuant to a Unit Purchase Agreement dated as of the date
hereof (as the same may be amended, supplemented or otherwise modified from time
to time, the "PURCHASE AGREEMENT") by and among the Issuer and the Purchasers,
the Issuer has issued to the Purchasers units (the "UNITS"), each Unit
consisting of one share of Common Stock (as defined below) and one of the
Warrants hereinafter described;
NOW, THEREFORE, in consideration of the premises the parties hereto
agree as follows:
Section 1. Definitions. (a) As used in this Warrant Agreement, unless
otherwise defined herein, terms defined in the Purchaser Agreement shall have
such defined meanings when used herein and the following terms shall have the
following meanings, unless the context otherwise requires:
"AFFILIATE" shall have the meaning given to such term in Rule 12b-2 of
the Rules and Regulations under the Exchange Act.
"CALCULATED DIFFERENCE" as of any date of determination shall mean,
with respect to any conversion or exercise of a Warrant, an amount equal to the
difference between (i) the Current Market Price Per Share as of such date and
(ii) $4.00.
"CLOSING DATE" shall have the meaning given such term in the Purchase
Agreement.
"COMMISSION" shall mean the Securities and Exchange Commission or any
entity succeeding to any or all of its functions under the Securities Act and
the Exchange Act.
"COMMON STOCK" shall mean the Common Stock, par value $.0001 per
share, of the Issuer, and shall include any stock into which such Common Stock
shall have been changed or any stock resulting from any reclassification of such
Common Stock and all other stock of any class or classes (however designated) of
the Issuer the registered holders of which have the right, without limitation as
to amount, either to all or to a share of the balance of current dividends and
liquidating dividends after the payment of dividends and distributions on any
shares entitled to preference.
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"CONVERSION DATE" has the meaning given such term in Section 6(b).
"CURRENT MARKET PRICE PER SHARE" of the Common Stock on any date shall
mean the average of the daily closing prices per share of Common Stock for the
20 consecutive Trading Days immediately prior to such date; PROVIDED that in the
event that the current market price per share of Common Stock is determined
during a period following the announcement by the Company of (A) a dividend or
distribution on the Common Stock payable in shares of Common Stock or securities
convertible into shares of Common Stock or (B) any subdivision, combination or
reclassification of the Common Stock and prior to the expiration of 20 Trading
Days after the ex-dividend date for such dividend or distribution, or the record
date for such subdivision, combination or reclassification, then, and in each
such case, the Current Market Price Per Share shall be appropriately adjusted to
reflect ex-dividend trading or such subdivision, combination or
reclassification. The closing price for each day shall be (i) if the Common
Stock is then quoted on the Nasdaq National Market, the Nasdaq Small Cap Market
or another primary national securities exchange, the closing bid price of the
Common Stock as reported by the Nasdaq National Market, the Nasdaq Small Cap
Market or such primary national securities exchange (as the case may be), (ii)
if the Common Stock is not then traded on the Nasdaq National Market, the Nasdaq
Small Cap Market nor on a national securities exchange, the closing bid price in
the over-the-counter market as reported by the National Association of
Securities Dealers' Automated Quotation System or, if not so reported, the price
as reported by the National Quotation Bureau, Inc., or any organization
performing a similar function or (iii) if no such prices are then furnished, the
fair market value of a share of Common Stock as reasonably determined by the
Board of Directors of the Issuer and reasonably acceptable to the holders of a
majority of the Warrants.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute.
"EXERCISE PRICE" shall mean the exercise price of a Warrant, which
shall be equal to the sum of (i) $4.00, PLUS (ii) an amount equal to the product
of (A) 0.40, in the case of any conversion of a Warrant pursuant to Section 6(b)
or, 0.30, in the case of any other exercise of a Warrant pursuant to this
Warrant Agreement, TIMES (B) the Calculated Difference as of the date of the
notice of conversion or exercise of such Warrant; PROVIDED that in no event
shall the Exercise Price be less than $4.00.
"EXPIRATION DATE" shall mean March 28, 2002.
"NON-PUBLIC WARRANT SHARES" shall mean Warrant Shares that have not
been sold to the public and bear the legend set forth in subsection 14(b).
"NON-SURVIVING COMBINATION" shall mean any merger, consolidation or
other business combination by the Issuer with one or more Persons in which the
Issuer is not the survivor, or a sale of all or substantially all of the assets
of the Issuer to one or more such other Persons.
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"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any successor federal statute and the rules and regulations of the Commission
thereunder, all as the same may be in effect from time to time.
"TRADING DAY" means a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, a Business Day.
"WARRANT CERTIFICATE" shall mean a certificate evidencing one or more
Warrants, substantially in the form of Exhibit A attached hereto, with such
changes therein as may be required to reflect any adjustments made pursuant to
Section 12.
"WARRANT HOLDERS" shall mean the Purchasers or any Affiliates thereof
and such other Persons to whom Purchasers or an Affiliate thereof transfers
Warrants in compliance with the terms of this Warrant Agreement.
"WARRANT OFFICE" shall mean the office or agency of the Issuer at
which the Warrant Register shall be maintained and where the Warrants may be
presented for exercise, exchange, substitution and transfer, which office or
agency will be the office of the Issuer at 4651 Salisbury Road, Jacksonville, FL
33256, which office or agency may be changed by the Issuer pursuant to notice in
writing to the Persons named in the Warrant Register as the holders of the
Warrants.
"WARRANT REGISTER" shall mean the register, substantially in the form
of Exhibit B attached hereto, maintained by the Issuer at the Warrant Office.
"WARRANT SHARES" shall mean the shares of Common Stock issued or
issuable upon exercise of the Warrants as the number of such shares may be
adjusted from time to time pursuant to Section 12 and the provisions of the
Issuer's Articles of Incorporation.
"WARRANTS" shall mean the stock purchase warrants issued pursuant to
this Warrant Agreement entitling the record holders thereof to purchase from the
Issuer at the Warrant Office an aggregate of 1,828,286 shares of Common Stock,
subject to adjustment as provided in Section 12, at the Exercise Price at any
time after the Closing Date and before 5:00 P.M., New York time, on the
Expiration Date; individually, a "Warrant."
(b) For all purposes of this Warrant Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(i) "Herein", "hereof" and "hereunder" and other words of similar
import refer to this Warrant Agreement as a whole and not to any particular
Section or other subdivision;
(ii) Any uses of the masculine, feminine or neuter gender shall also
be deemed to include any other gender as appropriate;
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(iii) The exhibits and schedules to this Warrant Agreement shall
be deemed an integral part of this Warrant Agreement;
(iv) Except as specifically set forth in such representation, each of
the representations and warranties of the Issuer in Section 3 hereof is
separate and is not limited, qualified or modified by the existence,
wording or satisfaction of any other representation of the Issuer in
Section 3 or otherwise;
(v) All references herein (in covenants or otherwise) to any
action(s) which are to be taken (or which are prohibited from being taken)
by any Person, the Issuer or any Subsidiary shall apply to such Person, the
Issuer or such Subsidiary, as the case may be, whether such action is taken
directly or indirectly; and
(vi) All references herein to actions by the Issuer or any Subsidiary
(including, without limitation, actions denoted by terms such as "create",
"sell", "transfer" or "dispose of") mean such action whether voluntary or
involuntary, by operation of law or otherwise.
Section 2. ISSUANCE OF WARRANTS. The Issuer hereby agrees to issue and
deliver to the Purchasers or, at the option of a Purchaser, an Affiliate
thereof, on the Closing Date, the Warrants and one or more Warrant Certificates
evidencing the Warrants. No payment shall be required from any Purchaser or its
Affiliate in consideration of its receipt of the Warrants.
Section 3. REPRESENTATIONS AND WARRANTIES. The Issuer hereby
represents and warrants to the Purchasers, for the benefit of the Purchasers
and any other Warrant Holder, as follows:
(a) The Issuer is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, has the corporate power
and authority to conduct its business as presently conducted and as intended to
be conducted, has the corporate power and authority to execute and deliver this
Warrant Agreement and the Warrant Certificates, to issue the Warrants and to
perform its obligations under this Warrant Agreement and the Warrant
Certificates, has the corporate power and authority and legal right to own and
lease its properties and is duly qualified and in good standing as a foreign
corporation in each jurisdiction in which it owns or leases real property or in
which the conduct of its business requires such qualification, except where
failure to be so qualified could not be reasonably expected to have a material
adverse effect on the business, properties, financial condition or results of
operations of the Issuer and its Subsidiaries taken as a whole.
(b) The execution, delivery and performance by the Issuer of this Warrant
Agreement and the Warrant Certificates, the issuance of the Warrants and the
issuance of the Warrant Shares upon the exercise of the Warrants have been duly
authorized by all necessary corporate action and do not and will not violate, or
result in a breach of, or constitute a default under, or require any consent
under, or result in the creation of any lien, charge or encumbrance upon the
assets of the Issuer pursuant to, any law, statute, ordinance, rule, regulation,
order or decree of any court, governmental body or regulatory authority or
administrative agency having jurisdiction over the Issuer or its
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Subsidiaries or the Issuer's Articles of Incorporation or any contract,
mortgage, loan agreement, note, lease or other instrument binding upon the
Issuer or its Subsidiaries or by which their properties are bound.
(c) This Warrant Agreement has been duly executed and delivered by the
Issuer and constitutes a legal, valid, binding and enforceable obligation of the
Issuer. When the Warrants and Warrant Certificates have been issued as
contemplated hereby, (i) the Warrants and the Warrant Certificates will
constitute legal, valid, binding and enforceable obligations of the Issuer and
(ii) the Warrant Shares, when issued upon exercise of the Warrants in accordance
with the terms hereof will be duly authorized, validly issued, fully paid and
nonassessable shares of the Common Stock with no personal liability attaching to
the ownership thereof.
Section 4. REGISTRATION, TRANSFER AND EXCHANGE OF CERTIFICATES.
(a) The Issuer shall maintain, at the Warrant Office, the Warrant Register
for registration of the Warrants and Warrant Certificates and transfers thereof.
On the Closing Date, the Issuer shall register the Warrants and Warrant
Certificates in the Warrant Register in the name of the Warrant Holders. The
Issuer may deem and treat the registered holders of the Warrant Certificates as
the absolute owners thereof and the Warrants represented thereby
(notwithstanding any notation of ownership or other writing on the Warrant
Certificates made by any person) for the purpose of any exercise thereof or any
distribution to the holders thereof, and for all other purposes, and the Issuer
shall not be affected by any notice to the contrary.
(b) Subject to Section 14, the Issuer shall register the transfer of any
outstanding Warrants in the Warrant Register upon surrender of the Warrant
Certificates evidencing such Warrants to the Issuer at the Warrant Office,
accompanied (if so required by it) by a written instrument or instruments of
transfer in form satisfactory to it, duly executed by the registered holder or
holders thereof or by the duly appointed legal representative thereof. Upon any
such registration of transfer, new Warrant Certificates evidencing such
transferred Warrants shall be issued to the transferee and the surrendered
Warrant Certificates shall be canceled. If less than all the Warrants evidenced
by Warrant Certificates surrendered for transfer are to be transferred, new
Warrant Certificates shall be issued to the holder surrendering such Warrant
Certificates evidencing such remaining number of Warrants.
(c) Warrant Certificates may be exchanged at the option of the holders
thereof, when surrendered to the Issuer at the Warrant Office, for another
Warrant Certificate or other Warrant Certificates of like tenor and representing
in the aggregate a like number of Warrants. Warrant Certificates surrendered
for exchange shall be canceled.
(d) No charge shall be made for any such transfer or exchange except for
any tax or other governmental charge imposed in connection therewith. Except as
provided in subsection 14(b) each
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Warrant Certificate issued upon transfer or exchange shall bear the legend set
forth in subsection 14(b) if the Warrant Certificate presented for transfer or
exchange bore such legend.
Section 5. MUTILATED OR MISSING WARRANT CERTIFICATES. If any Warrant
Certificate shall be mutilated, lost, stolen or destroyed, the Issuer shall
issue, in exchange and substitution for and upon cancellation of the mutilated
Warrant Certificate, or in lieu of and substitution for the Warrant Certificate
lost, stolen or destroyed, a new Warrant Certificate of like tenor and
representing an equivalent number of Warrants, but only upon receipt of evidence
satisfactory to the Issuer of such loss, theft or destruction of such Warrant
Certificate. No service charge shall be made for any such substitution, but all
stamp, tax and other governmental duties that may be imposed in relation thereto
shall be borne by the holder of such Warrant Certificate. Each Warrant
Certificate issued in any such substitution shall bear the legend set forth in
subsection 14(b) if the Warrant Certificate for which such substitution was made
bore such legend.
Section 6. DURATION AND EXERCISE OF WARRANTS.
(a) The Warrants evidenced by a Warrant Certificate shall be exercisable
in whole or in part by the registered holder thereof on any Business Day after
the Closing Date and on or before 5:00 P.M., New York time, on the Expiration
Date.
(b) Subject to the provisions of this Warrant Agreement, the Warrants
evidenced by a Warrant Certificate may be exercised by the registered holder
thereof by the surrender of the Warrant Certificate evidencing the Warrants to
be exercised, with the form of election to purchase on the reverse thereof or
attached thereto duly completed and signed, to the Issuer at the Warrant Office,
and upon payment of the aggregate Exercise Price for the number of Warrant
Shares in respect of which such Warrants are being exercised in lawful money of
the United States of America and/or by surrender to the Issuer of shares of
Common Stock then owned by the Warrant Holder and valued for purposes hereof at
their Current Market Price Per Share at the time of exercise. In lieu of
exercising Warrants pursuant to the immediately preceding sentence, the Warrant
Holder shall have the right to require the Issuer to convert the Warrants, in
whole or in part and at any time or times (the "Conversion Right"), into Warrant
Shares, by surrendering to the Issuer the Warrant Certificate evidencing the
Warrants to be converted, accompanied by the form of conversion notice on the
reverse thereof or attached thereto which has been duly completed and signed.
Upon exercise of the Conversion Right, the Issuer shall deliver to the Warrant
Holder (WITHOUT payment by the Warrant Holder of any Exercise Price) that number
of Warrant Shares which is equal to the quotient obtained by dividing (x) the
value of the number of Warrants being converted at the time the Conversion Right
is exercised (determined by subtracting the aggregate Exercise Price for all
such Warrants immediately prior to the exercise of the Conversion Right from the
aggregate current market price (determined on the basis of the Current Market
Price Per Share on the date (the "CONVERSION DATE") that the Issuer receives the
Warrant Certificate evidencing the Warrants to be converted accompanied by the
form of conversion notice on the reverse thereof or attached thereto which has
been duly completed and signed) of that number of Warrant Shares purchasable
upon exercise of such Warrants on the Conversion Date (taking into account all
applicable adjustments pursuant to Section 12) by (y) the Current Market Price
Per Share on the Conversion Date. Any references in this Warrant
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Agreement to the "exercise" of any Warrants, and the use of the term "exercise"
herein, shall be deemed to include (without limitation) any exercise of the
Conversion Right. Any exercise of a Warrant hereunder may be made subject to
the satisfaction of one or more conditions (including, without limitation, the
consummation of a sale of the capital stock of the Issuer or a merger or other
business combination involving the Issuer) which are set forth in a writing
which is made a part of or is appended to the aforementioned form of election
to purchase or conversion notice (as the case may be) by the Warrant Holder.
(c) Upon exercise of any Warrants hereunder, the Issuer shall issue and
cause to be delivered to or upon the written order of the registered holders of
such Warrants and in such name or names as such registered holders may
designate, a certificate for the Warrant Share or Warrant Shares issued upon
such exercise of such Warrants. Any Persons so designated to be named therein
shall be deemed to have become holders of record of such Warrant Share or
Warrant Shares as of the date of exercise of such Warrants.
(d) If less than all of the Warrants evidenced by a Warrant Certificate
are exercised at any time, a new Warrant Certificate or Certificates shall be
issued for the remaining number of Warrants evidenced by such Warrant
Certificate. Each new Warrant Certificate so issued shall bear the legend set
forth in subsection 14(b) if the Warrant Certificate presented in connection
with partial exercise thereof bore such legend unless the transfer restrictions
referred to in such legend are no longer applicable pursuant to subsection
14(d). All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled.
Section 7. NO FRACTIONAL SHARES. The Issuer shall not be required to
issue fractional shares of Common Stock upon exercise of the Warrants but shall
pay for any such fraction of a share an amount in cash equal to the then Current
Market Price Per Share of one share of Common Stock multiplied by such fraction.
Section 8. PAYMENT OF TAXES. The Issuer will pay all taxes
attributable to the initial issuance of Warrant Shares upon the exercise of the
Warrants, PROVIDED that the Issuer shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issue of any Warrant
Certificate or any certificate for Warrant Shares in a name other than that of
the registered holder of a Warrant Certificate surrendered upon the exercise of
a Warrant, and the Issuer shall not be required to issue or deliver such
certificate unless or until the person or persons requesting the issuance
thereof shall have paid to the Issuer the amount of such tax or shall have
established to the satisfaction of the Issuer that such tax has been paid.
Section 9. STOCKHOLDER RIGHTS.
(a) Nothing contained in this Warrant Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the right
to vote or to consent or to receive notice as a stockholder in respect of the
meetings of stockholders or the election of directors of the Issuer or any other
matter, or any rights whatsoever as a stockholder of the Issuer.
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(b) Nothing contained in this Warrant Agreement or in any of the Warrant
Certificates shall be construed as imposing any obligation on the registered
holders thereof to purchase any securities or as imposing any liabilities on
such holders as stockholders of the Issuer, whether such obligation or
liabilities are asserted by the Issuer or by creditors of the Issuer.
Section 10. RESERVATION AND ISSUANCE OF SHARES; CERTAIN CORPORATE ACTIONS.
(a) The Issuer will at all times have authorized, and reserve and keep
available, free from preemptive rights, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon the exercise of the
Warrants, the number of shares of Common Stock deliverable upon exercise of all
outstanding Warrants.
(b) The Issuer covenants that all Warrant Shares will, upon issuance in
accordance with the terms of this Warrant Agreement and the Issuer's Certificate
of Incorporation, be fully paid and nonassessable and free from all taxes
(except as otherwise contemplated in Section 8 hereof) with respect to the
issuance thereof and from all liens, charges and security interests (other than
any created by or on behalf of any Warrant Holder).
(c) The Issuer will not, by amendment of its Certificate of Incorporation
or through any consolidation, merger, reorganization, transfer of assets,
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 Warrant
Agreement or the Warrant Certificates. Without limiting the generality of the
foregoing, the Issuer (a) will not permit the par value or the determined or
stated value of any shares of the Issuer's Common Stock receivable upon the
exercise of the Warrants to exceed the amount payable therefor upon such
exercise, (b) will take all such action as may be necessary or appropriate in
order that the Issuer may validly and legally issue fully paid and nonassessable
shares of the Issuer's Common Stock, upon the exercise of the Warrants from time
to time outstanding, including, without limitation, amending its Certificate of
Incorporation to reduce or eliminate the par value of the Common Stock and (c)
will not take any action which results in an adjustment in the number of Warrant
Shares obtainable upon the exercise of any Warrants if the total number of
shares of the Issuer's Common Stock (or other securities) issuable after such
action upon the exercise of all of the then-outstanding Warrants would exceed
the total number of shares of the Issuer's Common Stock (or other securities)
then authorized by the Issuer's Articles of Incorporation and available for
purpose of issuance upon such exercise.
(d) The Issuer agrees that it will not enter into an agreement providing
for a Non-Surviving Combination or effect any such Non-Surviving Combination
unless the party to such transaction that is the surviving entity thereof or the
purchaser or purchasers of substantially all of the assets of the Issuer (the
"Survivor") (i) shall be obligated to distribute or pay to each Warrant Holder,
upon payment of the Exercise Price prior to the Expiration Date, the number of
shares of stock or other securities or other property (including any cash) of
the Survivor that would have been distributable or payable on account of the
Warrant Shares if such Warrant Holder's Warrants had been exercised immediately
prior to such Non-Surviving Combination (or, if applicable, the record date
therefor), as such number of shares or other securities or other property may
thereafter be
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adjusted pursuant to Section 12 of this Warrant Agreement and (ii) shall assume
by written instrument all of the obligations of the Issuer under this Warrant
Agreement.
Section 11. OBTAINING OF GOVERNMENTAL APPROVALS AND STOCK EXCHANGE
LISTINGS. Subject to the provisions of Article VII of the Purchase Agreement,
the Issuer will, at its own expense, from time to time take all action which may
be necessary to obtain and keep effective any and all permits, consents and
approvals of governmental agencies and authorities which are or become requisite
in connection with the issuance, sale, transfer and delivery of the Warrant
Certificates and the exercise of the Warrants and the issuance, sale, transfer
and delivery of the Warrant Shares and all action which may be necessary so that
such Warrant Shares, immediately upon their issuance upon the exercise of
Warrants will be listed on each securities exchange, if any, on which the Common
Stock is then listed.
Section 12. ADJUSTMENT OF NUMBER OF WARRANT SHARES PURCHASABLE.
(a) The number of shares of Common Stock purchasable upon the exercise of
each Warrant is subject to adjustment from time to time upon the occurrence of
any of the events enumerated in this Section 12 at any time or from time to time
after the date hereof and prior to the Expiration Date.
(b) If the Issuer shall (i) declare a dividend on the Common Stock in
shares of its capital stock (whether shares of Common Stock or of capital stock
of any other class), (ii) split or subdivide the outstanding Common Stock or
(iii) combine the outstanding Common Stock into a smaller number of shares, each
Warrant outstanding at the time of the record date for such dividend or of the
effective date of such split, subdivision or combination shall thereafter
entitle the holder of such Warrant to receive the aggregate number and kind of
shares which, if such Warrant had been exercised immediately prior to such time,
such holder would have owned or have become entitled to receive by virtue of
such dividend, subdivision or combination. Such adjustment shall be made
successively whenever any event listed above shall occur and, if a dividend
which is declared is not paid, each Warrant outstanding shall again entitle the
holder thereof to receive the number of shares of Common Stock as would have
been the case had such dividend not been declared. If at any time, as a result
of an adjustment made pursuant to this subsection 12(b), the holder of any
Warrant thereafter exercised shall become entitled to receive any shares of
capital stock of the Issuer other than shares of Common Stock, thereafter the
number of such other shares so receivable upon exercise of any Warrant shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant Shares
contained in this Section 12, and the provisions of this Warrant Agreement with
respect to the Warrant Shares shall apply on like terms to such other shares.
(c) In case the Issuer shall make a distribution to all holders of Common
Stock (including any such distribution made in connection with a consolidation
or merger in which the issuer is the continuing corporation) of evidences of its
indebtedness, cash or other assets, each Warrant outstanding on the date of such
distribution shall thereafter entitle the holder of such Warrant to receive a
number of shares of Common Stock equal to the product of (i) the number of
shares of
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Common Stock to which the holder of such Warrant was entitled immediately prior
to such date of distribution and (ii) a fraction of which the numerator shall be
the then Current Market Price Per Share of Common Stock on such date and of
which the denominator shall be the then Current Market Price Per Share of Common
Stock on such date less the fair market value, as reasonably determined by the
Board of Directors of the Issuer and reasonably acceptable to the holders of a
majority of the Warrants of the portion of the assets or evidences of
indebtedness, or the portion of the cash, so to be distributed applicable to one
share of then-outstanding Common Stock. Such adjustment shall be made
successively whenever a date for such distribution is fixed (which date of
distribution shall be the record date for such distribution if a record date
therefor is fixed) and, if such distribution is not so made, each Warrant
outstanding shall again entitle the holder thereof to receive the number of
shares of Common Stock as would have been the case had such date of distribtion
not been fixed.
(d) In the event of any capital reorganization of the Issuer, or of any
reclassification of the Common Stock (other than a subdivision or combination of
outstanding shares of Common Stock), or in case of the consolidation of the
Issuer with or the merger of the Issuer with or into any other corporation or of
the sale of the properties and assets of the Issuer as, or substantially as, an
entirety to any other corporation, each Warrant shall after such capital
reorganization, reclassification of Common Stock, consolidation, merger or sale
be exercisable upon the terms and conditions specified in this Warrant
Agreement, for the number of shares of stock or other securities or assets to
which a holder of the number of Warrant Shares purchasable (at the time of such
capital reorganization, reclassification of Common Stock, consolidation, merger
or sale) upon exercise of such Warrant would have been entitled upon such
capital reorganization, reclassification of Common Stock, consolidation, merger
or sale; and in any such case, if necessary, the provisions set forth in this
Section 12 with respect to the rights thereafter of the holders of the Warrants
shall be appropriately adjusted so as to be applicable, as nearly as may
reasonably be, to any shares of stock or other securities or assets thereafter
deliverable on the exercise of the Warrants.
(e) If any event occurs, as to which, in the good faith opinion of the
Board of Directors of the Issuer, the other provisions of this Section 12 are
not strictly applicable or (if strictly applicable) would not fairly protect the
purchase rights of the Warrants in accordance with the essential intent and
principles of such provisions, then the Board of Directors shall make an
adjustment in the application of such provisions, in accordance with such
essential intent and principles, so as to protect such purchase rights as
aforesaid, but in no event shall any such adjustment have the effect of
decreasing the number of shares of Common Stock purchasable upon the exercise of
each Warrant from that which would otherwise be determined pursuant to this
Section 12.
(f) No adjustment in the number of Warrant Shares purchasable shall be
required unless such adjustment would require an increase or decrease in the
aggregate number of Warrant Shares purchasable of at least 1%, PROVIDED that any
adjustments which by reason of this subsection 12(g) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 12 shall be made to the nearest cent or to
the nearest hundredth of a share, as the case may be.
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(g) Irrespective of any adjustments in the number or kind of shares
purchasable upon the exercise of the Warrant, Warrant Certificates theretofore
or thereafter issued may continue to express the same number and kind of shares
as are stated on the Warrant Certificates initially issuable pursuant to this
Warrant Agreement.
(h) If any question shall at any time arise with respect to the number of
Warrant Shares purchasable following any adjustment pursuant to this Section 12,
such question shall be determined by agreement between the holders of a majority
of the Warrants and the Issuer or, in the absence of such an agreement, by an
independent investment banking firm or an independent appraiser engaged by the
Issuer (in either case the cost of which engagement will be borne by the Issuer)
and reasonably acceptable to the Issuer and the holders of a majority of
Warrants and such determination shall be binding upon the Issuer and the holders
of the Warrants.
(i) Anything in this Section 12 to the contrary notwithstanding:
(1) the Issuer shall be entitled to make such increases in the number
of Warrant Shares purchasable upon the exercise of each Warrant, in
addition to those adjustments required by this Section 12, as it in its
sole discretion shall determine to be advisable in order that any
consolidation or subdivision of the Common Stock, or any issuance wholly
for cash or any shares of Common Stock at less than the Current Market
Price Per share, or any issuance wholly for cash or shares of Common Stock
or securities which by their terms are convertible into or exchangeable for
shares of Common Stock or any stock dividend, or any issuance of rights,
options or warrants referred to hereinabove in this Section 12, hereinafter
made by the Issuer to the holders of its Common Stock shall not be taxable
to them; and
(2) no adjustment in the number of Warrant Shares purchasable shall
be required in the event the Issuer pays a cash dividend to holders of
Common Stock; PROVIDED that the Issuer also pays a cash dividend to all
holders of Warrants which dividend shall be calculated as if the Warrants
had been exercised.
Section 13. NOTICES TO WARRANT HOLDERS; NOTICES OF ISSUANCES AND DIVIDENDS.
(a) Upon any adjustment of the number of Warrant Shares purchasable upon
exercise of a Warrant pursuant to Section 12, the Issuer shall promptly but in
any event within 20 days thereafter, cause to be delivered (i) by hand, (ii) by
telecopy or facsimile transmission (receipt confirmed), or (iii) by
international overnight or express courier, to each of the registered holders of
the Warrants at its address appearing on the Warrant Register, a certificate
signed by its chairman, president or chief financial officer setting forth the
number of Warrant Shares purchasable upon exercise of a Warrant as so adjusted
and describing in reasonable detail the facts accounting for such adjustment and
the method of calculation used. Where appropriate, such certificate may be
given in advance and included as a part of the notice required to be mailed
under the other provisions of this Section 13.
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(b) The Issuer shall deliver to each of the registered holders of the
Warrants at its address appearing on the Warrant Register, copies of all
information provided to holders of Common Stock concurrently with the delivery
thereof to such holders of Common Stock.
Section 14. RESTRICTIONS ON TRANSFER.
(a) Each Purchaser and its Affiliates who are issued Warrants pursuant to
this Agreement (i) represents that it is acquiring the Warrants for its own
account for investment and not with a view to any distribution or public
offering within the meaning of the Securities Act, except in any case pursuant
to the registration of such Warrants or Warrant Shares under the Securities Act
or pursuant to a valid exemption from such registration requirement, (ii)
acknowledges that the Warrants and the Warrant Shares issuable upon exercise
thereof have not been registered under the Securities Act and (iii) agrees that
it will not sell or otherwise transfer any of its Warrants or Warrant Shares
except upon the terms and conditions specified herein and that it will cause any
transferee thereof to agree to take and hold the same subject to the terms and
conditions specified herein, PROVIDED that the Warrant Holders may sell the
Warrants or the Warrant Shares purchased upon exercise of the Warrants in one or
more private transactions not requiring registration under the Securities Act.
(b) Except as provided in subsection 14(d) hereof each Warrant Certificate
and each certificate for the Warrant Shares issued to a Purchaser or an
Affiliate thereof or to a subsequent transferee thereof pursuant to subsection
14(c) shall include a legend in substantially the following form (with such
changes therein as may be appropriate to reflect whether such legend refers to
Warrants or Warrant Shares), PROVIDED that such legend shall not be required if
such transfer is being made in connection with a sale which is exempt from
registration pursuant to Rule 144 under the Securities Act or if the opinion of
counsel referred to in subsection 14(c) is to the further effect that neither
such legend nor the restrictions on transfer in this Section 14 are required in
order to ensure compliance with the Securities Act:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS
OF ANY APPLICABLE STATE OR OTHER JURISDICTION, HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE AND MAY NOT BE SOLD, MORTGAGED,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF (1) AN
EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SECURITIES UNDER THE ACT AND ANY
SECURITIES LAWS OF ANY APPLICABLE STATE OR OTHER JURISDICTION, (2) AN EXEMPTION
FROM REGISTRATION PURSUANT TO RULE 144 UNDER THE ACT OR (3) A WRITTEN OPINION IN
FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION
IS NOT REQUIRED PURSUANT TO SOME OTHER APPLICABLE EXEMPTION FROM REGISTRATION
UNDER THE ACT OR UNDER OTHER APPLICABLE SECURITIES LAWS."
(c) Prior to any assignment, transfer or sale of any Warrant or any
Warrant Shares (other than a transfer between a Purchaser and/or its
Affiliates), the holder thereof shall give written notice
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to the Issuer of such holder's intention to effect such assignment, transfer or
sale, which notice shall set forth the date of such proposed assignment,
transfer or sale and the identity of the proposed transferee. Each holder
wishing to effect such a transfer of any Warrant or Warrant Shares shall also
furnish to the Issuer an agreement by the transferee thereof that it is taking
and holding the same subject to the terms and conditions specified herein and,
unless such transfer is being made pursuant to Rule 144 under the Securities
Act, a written opinion of counsel in form and substance reasonably satisfactory
to the Issuer to the effect that the proposed transfer may be effected without
registration under the Securities Act.
(d) The restrictions set forth in this Section 14 shall terminate and
cease to be effective with respect to any Warrants or Warrant Shares which are
registered under the Securities Act or upon receipt by the Issuer of an opinion
of counsel, in form reasonably satisfactory to the Issuer, to the effect that
compliance with such restrictions is not necessary in order to comply with the
Securities Act with respect to the transfer of the Warrants and the Warrant
Shares; PROVIDED, HOWEVER, that after two (2) years from the date of issuance of
any Warrants, such restrictions will automatically terminate (without the
necessity of any opinion of counsel) as to such Warrants and as to any Warrant
Shares issued in respect of such Warrants upon exercise of the Conversion Right
set forth in subsection 6(b) above. Whenever such restrictions shall so
terminate the holder of such Warrants and/or Warrant Shares shall be entitled to
receive from the Issuer, without expense (other than transfer taxes, if any),
Warrant Certificates or certificates for such Warrant Shares not bearing the
legend set forth in subsection 14(b) at which time the Issuer will rescind any
transfer restrictions relating thereto.
(e) With a view to making available to holders of the Warrants the
benefits of certain rules and regulations of the Securities and Exchange
Commission (including, without limitation, Rules 144 and 144A under the
Securities Act) which may permit the sale of Warrants and Warrant Shares to the
public or certain other institutions without registration, the Issuer agrees to
take any and all such actions as may be required of it to make available to such
holders such benefits, including without limitation, to:
(i) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act or any
successor provision thereto from and after the date the Issuer first
becomes subject to the provisions of Section 13 or 15(d) of the Exchange
Act;
(ii) file with the Commission in a timely manner all reports and other
documents required of the Issuer under the Securities Act and the Exchange
Act from and after the date the Issuer first becomes subject to the
provisions of Section 13 or 15(d) of the Exchange Act; and
(iii) so long as a Purchaser or an Affiliate thereof owns any
Warrants or Warrant Shares, furnish to such Purchaser forthwith upon
request a written statement by the Issuer as to its compliance with the
reporting requirements of Rule 144 or any successor provision thereto, and
of the Securities Act and the Exchange Act, a copy of the most recent
annual or
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quarterly report of the Issuer filed with the Commission, in each case from and
after the date the Issuer first becomes subject to the provisions of Section
13 or 15(d) of the Exchange Act, and such other reports and documents of the
Issuer and other information in the possession of or reasonably obtainable by
the Issuer as such Purchaser and its Affiliates and subsequent holders of the
Warrants may reasonably request in availing itself of any rule or regulation of
the Commission allowing such Purchaser and its Affiliates and subsequent holders
of the Warrants to sell any such securities without registration.
Section 15. REDEMPTION.
(a) On not less than thirty (30) days prior written notice (a "REDEMPTION
NOTICE") given at any time commencing after the first anniversary of the date of
this Agreement and during the time the Warrants are outstanding, the Warrants
may be redeemed, in whole, but not in part, at the option of the Company, at a
redemption price of $.01 per Warrant (the "REDEMPTION PRICE"); PROVIDED that the
daily closing bid price per share of Common Stock (determined by reference to
the appropriate source as referenced in the definition of "Current Market Value
Per Shares" contained herein) for at least the twenty (20) consecutive Trading
Days ending on the fifth business day prior to the date of such Redemption
Notice shall exceed (i) during the period commencing on the first anniversary of
the date of this Agreement and ending on the date prior to the second
anniversary of the date of this Agreement, $16 per share, (ii) during the period
commencing on the second anniversary of the date of this Agreement and ending on
the date prior to the third anniversary of the date of this Agreement, $20 per
share, (iii) during the period commencing on the third anniversary of the date
of this Agreement and ending on the date prior to the fourth anniversary of the
date of this Agreement, $24 per share and (iv) during the period commencing on
the fourth anniversary of the date of this Agreement and ending on the
Expiration Date, $28 per share (each such amount being a "Target Price"), in
each case subject to adjustment as set forth in Section 15(f) below.
(b) In the event the conditions set forth in Section 15(a) are met, and
the Company shall desire to exercise its right to redeem the Warrants, it shall
deliver (i) by hand, (ii) by telecopy or facsimile transmission (receipt
confirmed), or (iii) by international overnight or express courier, a notice of
redemption to each of the holders of the Warrants to be redeemed, not later
than the thirtieth day before the date fixed for redemption, at their last
address as shall appear on the Warrant Register. Any Redemption Notice
delivered in the manner provided herein shall be conclusively presumed to have
been duly given whether or not the Warrant Holder receives such notice, absent
fraud.
(c) The Redemption Notice shall specify the (i) the Redemption Price, (ii)
the date fixed for redemption, (iii) the place where the Warrant Certificates
shall be delivered and the Redemption Price paid and (iv) that the right to
exercise the Warrant shall terminate at 5:00 P.M. (New York time) on the
business day immediately preceding the date fixed for redemption. The date
fixed for the redemption of the Warrants shall be the "REDEMPTION DATE". No
failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity of the proceedings for such redemption except as to a
holder (a) to whom notice was not mailed or (b) whose notice was defective. An
affidavit of the Secretary or an Assistant Secretary of the Company that a
Redemption
-14-
<PAGE>
Notice has been mailed shall, in the absence of fraud, be prima facie evidence
of the facts stated therein.
(d) Any right to exercise a Warrant shall terminate at 5:00 P.M. (New York
time) on the business day immediately preceding the Redemption Date. On and
after the Redemption Date, holders of the Warrants called for redemption shall
have no further rights except to receive, upon surrender of the Warrant, the
Redemption Price.
(e) From and after the Redemption Date, the Company shall, at the place
specified in the Redemption Notice, upon presentation and surrender to the
Company by or on behalf of the holder thereof of one or more Warrants to be
redeemed, deliver or cause to be delivered to or upon the written order of such
holder a sum in cash equal to the Redemption Price of each such Warrant. From
and after the Redemption Date and upon the deposit or setting aside by the
Company of a sum sufficient to redeem all the Warrants called for redemption,
such Warrants shall expire and become void and all rights hereunder and under
the Warrant Certificates, except the right to receive payment of the Redemption
Price, shall cease.
(f) If the shares of the Company's Common Stock are subdivided or combined
into a greater or smaller number of shares of Common Stock or if there is stock
dividend to holders of Common Stock, the applicable Target Price shall be
proportionally adjusted by the ratio which the total number of shares of Common
Stock outstanding immediately prior to such event bears to the total number of
shares of Common Stock to be outstanding immediately after such event.
Section 16. AMENDMENTS AND WAIVERS. Any provision of this Warrant
Agreement may be amended, supplemented, waived, discharged or terminated by a
written instrument signed by the Issuer and the holders of not less than a
majority of the outstanding Warrants (or in the case of Section 14, the holders
of a majority of the aggregate outstanding Warrants and Non-Public Warrant
Shares, voting as a single group), PROVIDED that (i) this Agreement may not be
amended, supplemented or waived so as to increase the Exercise Price, reduce the
Redemption Price, reduce the number of Warrant Shares issuable upon exercise of
any Warrants, alter the period during which any Warrants may be exercised
(except to provide for a later Expiration Date) or redeemed, in each case
without the consent of the holders of all outstanding Warrants and (ii) this
Section 16 may not be amended or supplemented without the consent of the holders
of all outstanding Warrants and Non-Public Warrant Shares, voting as a single
group, and no waiver of the requirements of this Section 16 shall be binding
upon any such holder without its consent.
Section 17. SPECIFIC PERFORMANCE. The parties agree that irreparable
damage will result in the event that the obligations of the Issuer under this
Warrant Agreement are not specifically enforced, and that any damages available
at law for a breach of any such obligations would be inadequate. Therefore, the
holders of the Warrants and/or Non-Public Warrant Shares shall have the right to
specific performance by the Issuer of the provisions of this Warrant Agreement,
and appropriate injunctive relief may be applied for and granted in connection
therewith. The Issuer hereby irrevocably waives, to the extent that it may do
so under applicable law, any defense based on the adequacy of a remedy at law
which may be asserted as a bar to the remedy of specific
-15-
<PAGE>
performance in any action brought against the Issuer for specific performance of
this Warrant Agreement by the holders of the Warrants and/or Non-Public Warrant
Shares. Such remedies and all other remedies provided for in this Warrant
Agreement shall, however, be cumulative and not exclusive and shall be in
addition to any other remedies which may be available under this Warrant
Agreement.
Section 18. NOTICES.
(a) Any notice or demand to be given or made by the Warrant Holders or the
holders of Warrant Shares to or on the Issuer pursuant to this Warrant Agreement
shall be sufficiently given or made if (i) delivered by hand, (ii) sent by
telecopy or facsimile transmission (receipt confirmed), or (iii) delivered by
international overnight or express courier, addressed to the Issuer at the
Warrant Office.
(b) Any notice to be given by the Issuer to the Warrant Holders or the
holders of Warrant Shares shall be sufficiently given or made if (i) delivered
by hand, (ii) sent by telecopy or facsimile transmission (receipt confirmed), or
(iii) delivered by international overnight or express courier, addressed to such
holder as such holder's name and address shall appear on the Warrant Register or
the Common Stock registry of the Issuer, as the case may be.
Section 19. BINDING EFFECT. This Warrant Agreement shall be binding
upon and inure to the sole and exclusive benefit of the Issuer, its successors
and assigns, the Purchasers, Affiliates of the Purchasers and the registered
holders from time to time of the Warrants and the Warrant Shares.
Section 20. CONTINUED VALIDITY. A holder of Warrant Shares shall
continue to be entitled with respect to such Warrant Shares to all rights and
subject to all obligations to which it would have been entitled or subject as a
Warrant Holder under Sections 14 through 23 of this Warrant Agreement. The
Issuer will, at the time of each exercise of any Warrant, in whole or in part,
upon the request of the holder of the Warrant Shares issued upon such exercise
thereof, acknowledge in writing, in form reasonably satisfactory to such holder,
its continuing obligation to afford to such holder all such rights, PROVIDED,
HOWEVER, that if such holder shall fail to make any such request, such failure
shall not affect the continuing obligation of the Issuer to afford to such
holder all such rights.
Section 21. COUNTERPARTS. This Warrant Agreement may be executed in one
or more separate counterparts and all of said counterparts taken together shall
be deemed to constitute one and the same instrument.
Section 22. DELAWARE LAW. THIS WARRANT AGREEMENT AND EACH WARRANT
CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF DELAWARE.
Section 23. BENEFITS OF THIS WARRANT AGREEMENT. Nothing in this Warrant
Agreement shall be construed to give to any Person other than the Issuer and the
registered holders of the Warrants and the Warrant Shares any legal or equitable
right, remedy or claim under this Warrant Agreement.
-16-
<PAGE>
Section 24. VOTING AND CONSENTS TO BE ON A FULLY CONVERTED BASIS.
Wherever this Warrant Agreement calls for the written consent or vote of any
combinations of the holders of the Warrants and the Warrant Shares, voting as a
single group, the Warrants shall be counted as if they had been exercised for
Common Stock.
Section 25. ENTIRE AGREEMENT. This Warrant Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior negotiations, understandings and agreements
between such parties in respect of such subject matter.
[Remainder of page intentionally left blank]
-17-
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Warrant Agreement to
be duly executed and delivered by their proper and duly authorized officers, as
of the date and year first above written.
SUNPHARM CORPORATION
By:_____________________________________
Name:___________________________________
Title:__________________________________
Counterpart Signature Pages Begin on Next Page
-18-
<PAGE>
COUNTERPART SIGNATURE PAGE FOR PURCHASERS
The undersigned hereby agrees to become a party to that certain Unit
Purchase Agreement dated as of March 28, 1997 (the "Agreement") among SunPharm
Corporation (the "Company") and others and that certain Warrant Agreement dated
as of March 28, 1997 (the "Warrant Agreement") among the Company and others.
From and after the undersigned's execution and delivery and the Company's
acceptance of this Counterpart Signature Page, the undersigned shall be a party
to the Agreement and the Warrant Agreement, and the Units (including the Shares
and the Warrants) purchased by the undersigned shall be deemed to be "Units" for
all purposes of the Agreement and the Warrants purchased by the undersigned
shall be deemed to be "Warrants" for all purposes of the Warrant Agreement .
Printed Name of Purchaser
________________________________________
Signature of Purchaser
________________________________________
Investment Amount:______________________
Number of Units:________________________
By:_____________________________________
Title:__________________________________
Address:________________________________
Date:___________________________________
Agreed and accepted to as to_________ Units at $3.50 per Unit:
SUNPHARM CORPORATION
By:__________________________________
Title:_______________________________
Date:________________________________
-19-
<PAGE>
Exhibit A
WARRANT AGREEMENT
WARRANT CERTIFICATE
THE WARRANTS AND SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAW AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR LAW. THE WARRANTS
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN EXCHANGE RIGHTS MORE
FULLY SET FORTH IN THE WARRANT AGREEMENT REFERRED TO BELOW.
EXERCISABLE ONLY ON OR BEFORE
March 28, 2002
Warrant Certificate
This Warrant Certificate certifies that ____________________________, or
registered assigns, is the registered holder of ________________ Warrants (the
"Warrants") to purchase Common Stock of SUNPHARM CORPORATION, a Delaware
corporation (the "Issuer"). Each Warrant entitles the holder, but only subject
to the conditions set forth herein and in the Warrant Agreement referred to
below, to purchase from the Issuer before 5:00 P.M., New York time, on March 28,
2002 (the "Expiration Date"), one (1) fully paid and nonassessable share of the
Common Stock of the Issuer (the "Warrant Shares") at the exercise price set
forth in the Warrant Agreement (the "Exercise Price"), payable in lawful money
of the United States of America, upon surrender of this Warrant Certificate,
execution of the annexed Form of Election to Purchase and payment of the
Exercise Price at the office of the Issuer at 4561 Salisbury Road, Jacksonville,
FL 33256 or such other address as the Issuer may specify in writing to the
registered holder of the Warrants evidenced hereby (the "Warrant Office"). In
lieu of exercising Warrants pursuant to the immediately preceding sentence, the
Warrant holder shall have the right to require the Issuer to convert the
Warrants, in whole or in part and at any time or times, into Warrant Shares, by
surrendering to the Issuer the Warrant Certificate evidencing the Warrants to be
converted, accompanied by the annexed Form of Notice of Conversion which has
been duly completed and signed. The Exercise Price and number of Warrant Shares
purchasable upon exercise of the Warrants are subject to adjustment prior to the
Expiration Date as set forth in the Warrant Agreement.
-20-
<PAGE>
No Warrant may be exercised after 5:00 P.M., New York time, on the
Expiration Date and (except as otherwise provided in the Warrant Agreement) all
rights of the registered holders of the Warrants shall cease after 5:00 P.M.,
New York time, on the Expiration Date.
The Issuer may redeem the Warrants, on the terms and subject to the
conditions set forth in the Warrant Agreement.
The Issuer may deem and treat the registered holders of the Warrants
evidenced hereby as the absolute owners thereof (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof and of any distribution to the holders hereof and for all other
purposes, and the Issuer shall not be affected by any notice to the contrary.
Warrant Certificates, when surrendered at the office of the Issuer at the
above-mentioned address by the registered holder hereof in person or by a legal
representative duly authorized in writing, may be exchanged, in the manner and
subject to the limitations provided in the Warrant Agreement, but without
payment of any service charge, for another Warrant Certificate or Warrant
Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentment for registration of transfer of this Warrant
Certificate at the office of the Issuer at the above-mentioned address, a new
Warrant Certificate or Warrant Certificates of like tenor and evidencing in the
aggregate a like number of Warrants shall be issued in exchange for this Warrant
Certificate to the transferee(s) and, if less than all the Warrants evidenced
hereby are to be transferred, to the registered holder hereof, subject to the
limitations provided in the Warrant Agreement, without charge except for any tax
or other governmental charge imposed in connection therewith.
This Warrant Certificate is one of the Warrant Certificates referred to in
the Warrant Agreement, dated as of March 28, 1997, between the Issuer and the
Purchasers signatory thereto. Said Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Issuer and the holders.
IN WITNESS WHEREOF the Issuer has caused this Warrant Certificate to be
signed by its duly authorized officer.
SUNPHARM CORPORATION
By:_________________________________________
Name:_______________________________________
Title:______________________________________
-21-
<PAGE>
ANNEX to Form
of Warrant
CERTIFICATE
FORM OF ELECTION TO PURCHASE
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ______ Warrant Shares* and
herewith tenders payment for such Warrant Shares to the order of the Issuer in
the amount of $__________ in accordance with the terms hereof. The undersigned
requests that a certificate for such Warrant Shares be registered in the name of
___________________________________________________ whose address is
_____________________________________________________ and that such certificate
be delivered to _________________ whose address is
____________________________________. If said number of Warrant Shares is less
than all of the Warrant Shares purchasable hereunder, the undersigned requests
that a new Warrant Certificate representing the remaining balance of the Warrant
Shares be registered in the name of ____________________________ whose address
is __________________________________________________ and that such Warrant
Certificate be delivered to __________________________________ whose address is
___________________________________________________.
Signature:
________________________________
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate.)
Date: __________
* Consisting of:
_____ shares of Common Stock
-22-
<PAGE>
ANNEX to Form
of Warrant
CERTIFICATE
FORM OF NOTICE OF CONVERSION
(To be executed upon conversion of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to convert Warrants represented hereby
into ____ Warrant Shares* in accordance with the terms hereof. The undersigned
requests that a certificate for such Warrant Shares be registered in the name of
________________________________________________ whose address is
______________________________________________________________ and that such
certificate be delivered to ____________________________ whose address is
__________________________________________________. If said number of Warrant
Shares is less than all of the Warrant Shares obtainable hereunder, the
undersigned requests that a new Warrant Certificate representing the remaining
balance of the Warrant Shares be registered in the name of
____________________________________ whose address is ______________
__________________________________________ and that such Warrant Certificate be
delivered to ____________________________________ whose address is
__________________________________________________.
Signature:
________________________________
(Signature must conform in all respects to name of holder as specified on the
face of the Warrant Certificate.)
Date: __________
* Consisting of:
____ shares of Common Stock
-23-
<PAGE>
EXHIBIT B to
WARRANT AGREEMENT
WARRANT REGISTER
Warrant Original Number of Number of Names and
Certificate Warrants and Warrant Warrants Addresses of
Number Shares Expired Warrant Holders
- ------ ------ ------- ---------------
-24-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS INCLUDED IN THE REGISTRANT'S QUARTERLY REPORT ON FORM 10-QSB FOR THE
QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,677,133
<SECURITIES> 1,197,343
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,993,125
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,103,490
<CURRENT-LIABILITIES> 1,441,470
<BONDS> 0
0
0
<COMMON> 554
<OTHER-SE> 6,661,466
<TOTAL-LIABILITY-AND-EQUITY> 8,103,490
<SALES> 0
<TOTAL-REVENUES> 3,144,799
<CGS> 0
<TOTAL-COSTS> 15,661,971
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 165,851
<INCOME-PRETAX> (12,517,172)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,517,172)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
</TABLE>
