SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SUNPHARM CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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/ / Fee paid previously with preliminary materials.
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0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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SUNPHARM CORPORATION
4651 SALISBURY ROAD, SUITE 205
JACKSONVILLE, FLORIDA 32256
May 12, 1997
TO OUR STOCKHOLDERS:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of SunPharm Corporation to be held on Monday, June 23, 1997, at 10:00 a.m.,
local time, at the Company's offices at 4651 Salisbury Road, Suite 205,
Jacksonville, Florida. A Notice of the Annual Meeting, Proxy Statement and
form of proxy are enclosed with this letter.
We encourage you to read the Notice of the Annual Meeting and Proxy
Statement so that you may be informed about the business to come before the
meeting. Your participation in the Company's business is important, regardless
of the number of shares that you hold. To ensure your representation at the
meeting, please promptly sign and return the accompanying proxy card in the
postage-paid envelope.
We look forward to seeing you on June 23, 1997.
Sincerely,
Stefan Borg
PRESIDENT AND CHIEF EXECUTIVE OFFICER
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 23, 1997
To the Stockholders of SunPharm Corporation:
The Annual Meeting of Stockholders (the "Annual Meeting") of SunPharm
Corporation (the "Company") will be held on Monday, June 23, 1997, at 10:00
a.m., local time, at the Company's offices at 4651 Salisbury Road, Suite 205,
Jacksonville, Florida, for the following purposes:
1. To elect nine directors of the Company, each to serve until the
Company's next Annual Meeting of Stockholders or until their respective
successors have been duly elected and qualified;
2. To approve the amendment and restatement of the Company's 1994
Stock Option Plan;
3. To approve the amendment and restatement of the Company's 1995
Nonemployee Directors' Stock Option Plan;
4. To ratify and approve the appointment of Deloitte & Touche LLP
as the Company's independent public accountants for its fiscal year ending
December 31, 1997; and
5. To act upon such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record at the close of business on April 25, 1997
will be entitled to notice of and to vote at the Annual Meeting.
It is important that your shares be represented at the Annual Meeting
regardless of whether you plan to attend. THEREFORE, PLEASE MARK, SIGN AND
DATE THE ENCLOSED PROXY AND RETURN IT IN THE ACCOMPANYING POSTPAID ENVELOPE AS
PROMPTLY AS POSSIBLE. If you are present at the Annual Meeting, and wish to do
so, you may revoke the proxy and vote in person.
By Order of the Board of Directors,
Cecilia Bryant
SECRETARY
Jacksonville, Florida
May 12, 1997
SUNPHARM CORPORATION
4651 SALISBURY ROAD, SUITE 205
JACKSONVILLE, FLORIDA 32256
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PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 23, 1997
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying Proxy is solicited by the Board of Directors of SunPharm
Corporation (the "Company"), to be voted at the Annual Meeting of Stockholders
of the Company to be held on Monday, June 23, 1997 (the "Annual Meeting"), at
10:00 a.m., local time, at the Company's offices at 4651 Salisbury Road, Suite
205, Jacksonville, Florida, for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders, and at any adjournment(s) of the
Annual Meeting. If the accompanying Proxy is properly executed and returned,
the shares it represents will be voted at the Annual Meeting in accordance with
the directions noted thereon or, if no direction is indicated, it will be voted
in favor of the proposals described in this Proxy Statement. In addition, the
Proxy confers discretionary authority to the persons named in the Proxy
authorizing those persons to vote, in their discretion, on any other matters
properly presented at the Annual Meeting. The Board of Directors is not
currently aware of any such other matters.
Each stockholder of the Company has the unconditional right to revoke his
Proxy at any time prior to its exercise, either in person at the Annual Meeting
or by written notice to the Company addressed to Secretary, SunPharm
Corporation, 4651 Salisbury Road, Suite 205, Jacksonville, Florida 32256. No
revocation by written notice will be effective unless such notice has been
received by the Secretary of the Company prior to the day of the Annual Meeting
or by the inspector of election at the Annual Meeting.
The principal executive offices of the Company are located at 4651
Salisbury Road, Suite 205, Jacksonville, Florida 32256. This Proxy Statement
and the accompanying Notice of Annual Meeting of Stockholders and Proxy are
being mailed to the Company's stockholders on or about May 12, 1997.
In addition to the solicitation of proxies by use of this Proxy Statement,
directors, officers and employees of the Company may solicit the return of
proxies by mail, personal interview, telephone or telegraph. Officers and
employees of the Company will not receive additional compensation for their
solicitation efforts, but they will be reimbursed for any out-of-pocket
expenses incurred. Brokerage houses and other custodians, nominees and
fiduciaries will be requested, in connection with the stock registered in their
names, to forward solicitation materials to the beneficial owners of such
stock.
All costs of preparing, printing, assembling and mailing the Notice of
Annual Meeting of Stockholders, this Proxy Statement, the enclosed form of
Proxy and any additional materials, as well as the cost of forwarding
solicitation materials to the beneficial owners of stock and all other costs of
solicitation, will be borne by the Company.
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's stockholders will be asked to
consider and act upon the following matters:
1. The election of nine directors of the Company, each to
serve until the Company's next Annual Meeting of
Stockholders or until their respective successors have been
duly elected and qualified;
2. A proposal to approve the amendment and restatement of the
Company's 1994 Stock Option Plan;
3. A proposal to approve the amendment and restatement of the
Company's 1995 Nonemployee Director Option Plan;
4. A proposal to ratify and approve the appointment of Deloitte &
Touche LLP as the Company's independent public accountants for its
fiscal year ending December 31, 1997; and
5. Such other business as may properly come before the meeting or any
adjournments thereof.
QUORUM AND VOTING
The close of business on April 25, 1997 has been fixed as the record date
(the "Record Date") for the determination of stockholders entitled to vote at
the Annual Meeting and any adjournment(s) thereof. As of the Record Date, the
Company had issued and outstanding 5,537,165 shares of common stock, par value
$.0001 per share (the "Common Stock").
Each stockholder of record of Common Stock will be entitled to one vote
per share on each matter that is called to vote at the Annual Meeting.
The presence, either in person or by proxy, of holders of a majority of
the outstanding shares of Common Stock is necessary to constitute a quorum at
the Annual Meeting. Abstentions and broker non-votes are counted for purposes
of determining whether a quorum is present. A plurality vote is required for
the election of directors. Accordingly, if a quorum is present at the Annual
Meeting, the nine persons receiving the greatest number of votes will be
elected to serve as directors. Withholding authority to vote for a director
nominee and broker non-votes in the election of directors will not affect the
outcome of the election of directors. All other matters to be voted on will be
decided by the vote of the holders of a majority of the shares present or
represented at the Annual Meeting and entitled to vote on such matter. On any
such matter, an abstention will have the same effect as a negative vote but,
because shares held by brokers will not be considered entitled to vote on
matters as to which the brokers withhold authority, a broker non-vote will have
no effect on such vote.
All Proxies that are properly completed, signed and returned prior to the
Annual Meeting will be voted. Any Proxy given by a stockholder may be revoked
at any time before it is exercised by the stockholder (i) filing with the
Secretary of the Company an instrument revoking it, (ii) executing and
returning a Proxy bearing a later date or (iii) attending the Annual Meeting
and expressing a desire to vote his shares of Common Stock in person. Votes
will be counted by Continental Stock Transfer & Trust Company, the Company's
transfer agent and registrar.
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PROPOSAL NUMBER 1:
ELECTION OF DIRECTORS
The Board of Directors has nominated and urges you to vote for the
election of the nine nominees identified below, who have been nominated to
serve as directors for a one-year term or until their successors are duly
elected and qualified. Each of the nominees listed below is a member of the
Company's present Board of Directors. Proxies solicited hereby will be voted
for all of the nominees unless stockholders specify otherwise in their Proxies.
If, at the time of or prior to the Annual Meeting, any of the nominees
should be unable or decline to serve, the discretionary authority provided in
the Proxy may be used to vote for a substitute or substitutes designated by the
Board of Directors. The Board of Directors has no reason to believe that any
substitute nominee or nominees will be required.
NOMINEES FOR ELECTION AS DIRECTORS
The nine nominees for election as directors and certain additional
information with respect to each of them, are as follows:
YEAR FIRST
BECAME A
NAME AGE POSITION WITH THE COMPANY DIRECTOR
---- --- ------------------------- --------
Stefan Borg (1) 43 President and Chief Executive
Officer, Director 1991
Philip R. Tracy (2) 55 Chairman of the Board of Directors 1995
Charles L. Dimmler, III Director 1997
Jerry T. Jackson 56 Director 1996
Robert S. Janicki, M.D. (3)(4) 62 Director, Member of the Scientific
and Clinical Advisory Board 1991
Norman H. Lipoff 60 Director 1996
Jacques F. Rejeange (1)(3) 57 Director 1994
Robert A. Schoellhorn (3)(4) 68 Director 1992
George B. Schwartz 42 Director 1993
_____________
(1) Member of the Nominating Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
(4) Member of the Option Committee
STEFAN BORG
PRESIDENT AND CHIEF EXECUTIVE OFFICER, DIRECTOR
Mr. Borg founded the Company and has been President and Chief Executive
Officer of the Company since its inception and was Chairman of the Board of
Directors of the Company from inception until January 1995. From September
1991 to August 1993, Mr. Borg was a general partner of Batterson, Johnson &
Borg, a venture capital partnership located in Chicago, Illinois. From 1986 to
1990, he was Vice President of Business Development of Houston Biotechnology
Incorporated. From 1984 to 1986, he was Manager of Business Development for
California Biotechnology, Inc. From 1982 to 1984, he was Product Manager for
Bethesda Research Laboratories, Inc., a supplier of genetic engineering tools.
From 1980 to 1982, he was Marketing Manager and head of Boehringer Mannheim
GmbH's subsidiary in Copenhagen, Denmark. Mr. Borg received his M.B.A. in
Marketing from INSEAD in Fontainebleau, France and his M.Sc. degree in
Biochemistry from the University of Copenhagen.
PHILIP R. TRACY
CHAIRMAN OF THE BOARD OF DIRECTORS
Mr. Tracy has been a director of the Company since October 1995 and
Chairman of the Board since May 1996. Mr. Tracy is presently of counsel to
Smith, Anderson, Blount, Dorsett, Mitchell and Jernigan, a law firm in Raleigh,
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North Carolina. From 1989 until its sale to Glaxo Inc. in 1995, Mr. Tracy was
President and Chief Executive Officer of Burroughs Wellcome Co. and a member of
the Board of Directors of Burroughs Wellcome Co. and its parent organizations,
The Wellcome Foundation Limited and Wellcome plc. From 1974 to 1989, Mr. Tracy
held several positions in the legal department of Burroughs Wellcome Co.,
including as Vice President, Secretary and General Counsel from 1981 to 1989.
Prior thereto, he was employed at Steptoe & Johnson and the Federal Bureau of
Investigation. He received a B.A. from the University of Nebraska and his
L.L.B. from George Washington University.
CHARLES L. DIMMLER, III
DIRECTOR
Mr. Dimmler has been a director of the Company since April 1997. Mr.
Dimmler is a principal investment officer of the Cross Atlantic Partners Funds
and an operating officer of Hambro Health International, a private equity
investment and commercial development firm. A General Partner of Hambro
International Equity Partners, Mr. Dimmler joined Hambro America, Inc., an
affiliate of London-based merchant bank Hambros Bank Limited, in 1988. Mr.
Dimmler co-founded Applied Immune Sciences, Inc., which was subsequently
acquired by RPR Gencell in 1992, and operated Metcalf Ross & Company, a company
which he formed to manage and commercialize intellectual property owned by
medical research institutions, from 1985 to 1988. He has business experience
as an operating executive of two Fortune 100 industrial companies, and he
served as an infantry officer in the United States Marine Corps. Mr. Dimmler
earned his undergraduate degree from the University of California at Davis.
JERRY T. JACKSON
DIRECTOR
Mr. Jackson has been a director of the Company since August 1996. From
1965 until his retirement in 1995, Mr. Jackson was employed with Merck & Co.,
Inc. in various senior management positions, including at his retirement
Executive Vice President of Merck's pharmaceutical division. Mr. Jackson
currently serves as a director on the boards of Cortherapeutics, Inc. and
Molecular Biosystems, Inc. and as Chairman of Transcend Therapeutics, Inc.
ROBERT S. JANICKI, M.D.
MEMBER OF THE PHARMACEUTICAL ADVISORY BOARD AND DIRECTOR
Dr. Janicki has been a director of the Company since 1991 and a member of
the Pharmaceutical Advisory Board since 1993. From 1969 until his retirement
as Senior Vice President for Scientific & Medical Affairs in 1990, Dr. Janicki
was employed by Abbott Laboratories. From 1968 to 1969, he was Associate
Medical Director of Union Carbide Corporation's pharmaceutical division, and
from 1966 to 1968, he was Associate Director of Clinical Research for the Dow
Pharmaceutical Division of Dow Chemical Company. Dr. Janicki served as a
director of Cetus Corporation prior to its merger with Chiron Corporation and
currently serves as a director of Afferon Corporation (Wayne, Pennsylvania), a
privately-held pharmaceutical company. He is presently engaged as a consultant
to several health care companies. Dr. Janicki received his M.D. from Temple
University School of Medicine.
NORMAN H. LIPOFF
DIRECTOR
Mr. Lipoff has been a director of the Company since November 1996. Mr.
Lipoff has been a senior member of the law firm of Greenberg, Traurig, Hoffman,
Lipoff, Rosen and Quentel, P.A., Miami, Florida since 1970. Mr. Lipoff is
involved extensively in national and international non-profit organizations,
including serving from 1990 to 1994 as Chairman of the United States Israel
Appeal and serving until 1996 on the Executive and Board of Governors of the
Jewish Agency for Israel. He currently serves as a National Vice-Chairman of
United Jewish Appeal. Mr. Lipoff received his BSBA (in Accounting) and his
J.D. from the University of Florida. Mr. Lipoff also holds an LL.M. (in
Taxation) from New York University and is past Chairman of the Tax Section of
the Florida Bar.
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JACQUES F. REJEANGE
DIRECTOR
Mr. Rejeange has been a director of the Company since June 1994 and was
Chairman of the Board from January 1995 to May 1996. Mr. Rejeange was
President and Chief Executive Officer of Sterling Winthrop, Inc. from January
1994 through January 1995 and President of its pharmaceuticals division from
July 1992 through January 1994. From January 1989 through 1992, Mr. Rejeange
was President and Chief Executive Officer of Sandoz Pharmaceuticals Corporation
U.S.A. Prior to 1989, Mr. Rejeange was employed in various managerial
positions with Sandoz in Europe, Hong Kong and the United States. Mr. Rejeange
is a member of the Board of Trustees of Drew University and a member of the
Board of Directors of the Pharmaceutical Manufacturers Association, and serves
as a director of Hafslund-Nycomed Inc. Mr. Rejeange received his M.B.A. in
1963 from INSEAD in Fontainebleau, France and is a 1962 graduate of the Ecole
Superieure de Commerce de Reims.
ROBERT A. SCHOELLHORN
DIRECTOR
Mr. Schoellhorn has been a director of the Company since 1993. Mr.
Schoellhorn is presently the Chairman and CEO of Marathon Coach, Inc. (Eugene,
Oregon), a privately held company owned by Mr. Schoellhorn and certain members
of his family which manufactures luxury motor coaches. From 1973 until his
retirement in 1990, Mr. Schoellhorn was employed with Abbott Laboratories in
various senior management positions, including Chief Executive Officer since
1979 and Chairman of the Board since 1981. For 26 years prior to joining
Abbott, Mr. Schoellhorn held various management positions with American
Cyanamid Corporation. Mr. Schoellhorn is presently on the board of Cryomedical
Sciences, Inc. (Rockville, Maryland) and Chairman and Chief Executive Officer
of Outdoor Resorts of America, Inc., a developer and operator of luxury
recreational resorts. Mr. Schoellhorn is on the board of First Community Bank
of the Desert, and has previously served on the boards of SCM Corporation,
Pillsbury, ITT and Shell Oil Company. He is a graduate of the Philadelphia
College of Textiles and Science, where he majored in chemistry.
GEORGE B. SCHWARTZ
DIRECTOR
Mr. Schwartz has been a director of the Company since 1993. Mr. Schwartz
is a founder and managing director of Atrium Capital Corporation and the
founder and President of Tioga Capital Corporation, investment firms focusing
on private equity investments. Mr. Schwartz is also a founder and managing
director of Atrium Securities Corporation. From 1987 through 1990, Mr.
Schwartz was a partner of The Airlie Group. From 1985 to 1987, Mr. Schwartz
was a co-founder and General Partner of Caronan Fund I, L.P., a leveraged
buyout fund. From 1978 to 1985, Mr. Schwartz was employed in the Corporate
Finance Department of Drexel Burnham Lambert, Inc., most recently as Senior
Vice President. From 1976 to 1978, Mr. Schwartz was an associate in the
Corporate Finance Department of Kuhn, Loeb & Co. Mr. Schwartz currently serves
as a director of Thompson Hospitality, Inc. and as President of Worldwide Games
Corp. Mr. Schwartz received his M.B.A. from The Amos Tuck School at Dartmouth
College and a B.A. degree from Vanderbilt University.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
ELECTION OF EACH OF THE ABOVE-NAMED NOMINEES.
DIRECTORS' MEETINGS AND COMPENSATION
During 1996, the Board of Directors met six times and took certain
additional actions by unanimous written consent in lieu of meetings. During
1996, no director of the Company attended fewer than 75 percent of the meetings
of the Board of Director.
Each nonemployee director receives $1,500 for each meeting of the Board of
Directors or of a committee of the Board of Directors which is attended in
person, provided that in the event a committee meeting is scheduled in
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conjunction with a Board meeting, only one payment will be received. Payments
for attending any telephonic meetings of the Board of Directors are $750. All
directors receive reimbursement of reasonable expenses incurred in attending
meetings. Officers are elected annually by the Board of Directors and serve at
the discretion of the Board.
In addition, pursuant to the Company's 1995 Nonemployee Directors' Stock
Option Plan, each director who is not an employee of or consultant to the
Company receives an initial stock option to purchase 25,000 shares upon
election to the Board and an annual stock option to purchase 5,000 shares of
the Company's Common Stock, with vesting contingent on providing services over
the following twelve months. The Chairman of the Board receives an additional
option to acquire 10,000 shares each year.
BOARD COMMITTEES
The Company's Board of Directors has an Audit Committee, Compensation
Committee, Option Committee and Nominating Committee. The Audit Committee's
functions include making recommendations concerning the engagement of
independent public accountants, reviewing with the independent public
accountants the plan and results of the auditing engagement, approving
professional services provided by the independent public accountants and
reviewing the adequacy of the Company's internal accounting controls. The
Compensation Committee makes recommendations concerning compensation, including
incentive arrangements, for the Company's officers. The Option Committee
administers the Company's 1994 Stock Option Plan and approves all stock options
awarded under it. The Nominating Committee establishes procedures for the
evaluation and selection of nominees to the Board of Directors, and the
Nominating Committee is also responsible for the smooth and orderly transition
in the Company's management, in the event such a need arises.
During 1996, the Audit Committee, Compensation Committee, Option Committee
and Nominating Committee each met one time. During 1996, no director of the
Company attended fewer than 75 percent of the meetings of committees on which
he served.
PROPOSAL NUMBER 2:
AMENDMENT AND RESTATEMENT OF THE 1994 STOCK OPTION PLAN
GENERAL
On April 25, 1997, the Board, subject to the approval by the stockholders
of the Company, approved the amendment and restatement of the SunPharm
Corporation 1994 Stock Option Plan (as presently in effect, the "Plan" and, as
amended and restated, the "Amended Plan"). The purpose of the Plan is to
promote and advance the interests of the Company by aiding the Company in
attracting and retaining qualified employees and consultants and to further
align the interests of the employees with those of the stockholders through
stock options. A copy of the Amended Plan is included as Exhibit A to this
Proxy Statement and the following summary is qualified in its entirety by
reference to the complete text of Exhibit A.
Options to purchase an aggregate of 350,500 shares may be granted under
the Plan, as presently in effect. Options to purchase a total of 313,380
shares of the Company's Common Stock have been granted under the Plan, leaving
a total of 37,120 shares as to which options may be granted under the Plan as
presently in effect. The number of shares as to which options may be granted
would be increased to 750,000 shares pursuant to the Amended Plan. In
addition, the Amended Plan provides that the maximum number of shares subject
to options which may be issued to any person who is granted an option under the
Amended Plan during any period of three consecutive years is 250,000 shares. No
other changes are proposed to be made to the Plan.
Stockholder approval of the Amended Plan is required for grants of options
under the Plan to remain exempt from a cap on the tax deductibility of the
grants of options by the Company imposed by Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). Section 162(m) of the Code,
added by the Revenue Reconciliation Act of 1993, places a $1 million cap on the
deductible compensation that can be paid to certain executives of publicly-
traded corporations. Amounts that qualify as "performance based" compensation
under Section 162(m)(4)(c) of the
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Code are exempt from the cap and do not count toward the $1 million limit.
Subject to certain conditions (e.g., that the exercise price of such options
is not less than the fair market value of the Common Stock on the date of
grant), options granted under the Plan, which was approved by the Company's
stockholders in 1994, will qualify for Section 162(m) purposes until the Annual
Meeting, and grants of options made prior to the Annual Meeting will remain
Section 162(m) qualified. However, grants of options made after the Annual
Meeting will not qualify unless the stockholders approve the Amended Plan.
SUMMARY OF THE AMENDED PLAN
ELIGIBILITY. The individuals who shall be eligible to receive Incentive
Options and Nonqualified Options (together, the "Options") shall be those key
employees and consultants of the Company as the Compensation Committee of the
Board of Directors or such other committee that the Board of Directors may
designate to administer the Amended Plan (the "Committee") shall determine from
time to time. "Incentive Option" means an Option granted under the Amended
Plan which is designated as an "Incentive Option" and satisfies the
requirements of Section 422 of the Code. "Nonqualified Option" means an Option
granted under the Amended Plan other than an Incentive Option.
ADMINISTRATION. The Amended Plan provides that Committee shall be
constituted in such a manner as to permit the Amended Plan to comply with Rule
16b-3 ("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), with respect to a plan intended to qualify
thereunder as a discretionary plan. All questions of interpretation and
application of the Amended Plan and Options shall be subject to the
determination of the Committee. The Amended Plan shall be administered in such
a manner as to permit the Options granted under it which are designated to be
Incentive Options to qualify as Incentive Options. To comply with Section
162(m) of the Code, it is the Company's intent that the Committee shall be
constituted solely of two or more Directors who are "outside directors" within
the meaning of the Treasury Regulations promulgated under Section 162(m) of the
Code. The Committee has complete authority to construe, interpret and
administer provisions of the Amended Plan, to determine which persons are to be
granted Options, the terms and conditions of Options, and to make all other
determinations necessary or deemed advisable in the administration of the
Amended Plan.
RESERVED SHARES. The total number of shares of Common Stock with respect
to which Options may be granted under the Amended Plan shall be 750,000 shares,
subject to adjustment as provided in the Amended Plan. The shares may be
treasury shares or authorized but unissued shares. The maximum number of
shares subject to Options which may be issued to any person who is granted an
Option under the Amended Plan ("Optionee") during any period of three
consecutive years is 250,000 shares.
TERMS OF OPTIONS. The price at which Common Stock may be purchased under
an Option shall be established by the Committee, provided that the price at
which Common Stock may be purchased under an Option that is intended to qualify
as an Incentive Option not be less than 100% of the fair market value of the
Common Stock on the date the Incentive Option is granted. In the case of any
10% holder of Common Stock, the price at which shares of Common Stock may be
purchased under an Incentive Option shall not be less than 110% of the fair
market value of the Common Stock on the date the Incentive Option is granted.
The expiration date of an Option shall be established by the Committee,
provided that no Incentive Option shall be exercisable after the expiration of
ten years from the date the Incentive Option is granted. In the case of a 10%
holder of Common Stock, no Incentive Option shall be exercisable after the
expiration of five years from the date the Incentive Option is granted. To the
extent that the aggregate fair market value (determined as of the time an
Incentive Option is granted) of the Common Stock with respect to which
Incentive Options first become exercisable by the Optionee during any calendar
year (under the Amended Plan and any other incentive stock option plan(s) of
the Company or any affiliate) exceeds $100,000, the Incentive Options shall be
treated as Nonqualified Options. In making this determination, Incentive
Options shall be taken into account in the order in which they were granted.
EXERCISE OF OPTIONS. Each Option may be exercised from time to time, in
whole or in part, in the manner and subject to the conditions the Committee, in
its sole discretion, may provide in the written option agreement, as long as
the Option is valid and outstanding. The consideration to be paid for the
shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Committee and may consist entirely of (i)
cash, (ii)
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promissory note, (iii) other shares of the Company's capital stock, (iv)
authorization for the Company to retain from the total number of shares as to
which the Option is exercised that number of shares having a fair market value
on the date of exercise equal to the exercise price for the total number of
shares as to which the Option is exercised, (v) delivery of a properly
executed exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company the amount of sale or loan proceeds required
to pay the exercise price or (vi) any combination of the foregoing methods of
payment. The Committee will determine the period over which individual
Options become exercisable.
NON-TRANSFERABILITY AND NO RIGHTS AS STOCKHOLDER. Options shall not be
transferable by the Optionee otherwise than by will or under the laws of
descent and distribution, and shall be exercisable, during the Optionee's
lifetime, only by him. No Optionee shall have any rights as a stockholder with
respect to Common Stock covered by his Option until the date a stock
certificate is issued for the Common Stock.
CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. If the Company shall effect a
subdivision or consolidation of shares or other capital readjustment, the
payment of a stock dividend, or other increase or reduction of the number of
shares of the Stock outstanding, without receiving compensation therefor in
money, services or property, then (i) the number, class, and per share price of
shares of Common Stock subject to outstanding Options shall be appropriately
adjusted in such a manner as to entitle an Optionee to receive upon exercise of
an Option, for the same aggregate cash consideration, the same total number and
class of shares as he would have received had he exercised his Option in full
immediately prior to the event requiring the adjustment; and (ii) the number
and class of shares of Common Stock then reserved for issuance under the
Amended Plan shall be adjusted by substituting for the total number and class
of shares of Common Stock then reserved that number and class of shares of
stock that would have been received by the owner of an equal number of
outstanding shares of each class of Common Stock as the result of the event
requiring the adjustment.
In the event of a merger or consolidation of the Company with or into
another entity or another transaction pursuant to which all or substantially
all of the assets of the Company are conveyed to another entity, each Option
shall be assumed or an equivalent option shall be substituted by such successor
entity or a parent or subsidiary of such successor entity. In the event that
such successor entity does not agree to assume an Option or to substitute an
equivalent option, the Committee shall, in lieu of such assumption or
substitution, provide for the Optionee to have the right to exercise the Option
as to all of the shares subject to the Option, including shares as to which the
Option would not otherwise be exercisable.
AMENDMENT OR TERMINATION OF THE AMENDED PLAN. The Board of Directors of
the Company may amend, terminate or suspend the Amended Plan at any time, in
its sole and absolute discretion; provided, however, that to the extent
required to maintain the status of any Incentive Option under the Code, no
amendment that would (i) change the aggregate number of shares of Common Stock
which may be issued under Incentive Options, (ii) change the class of employees
eligible to receive Incentive Options, or (iii) decrease the exercise price for
Incentive Options below the fair market value of the Common Stock at the time
it is granted, shall be made without the approval of the Company's
stockholders. The Amended Plan will terminate on April 30, 2004, unless
extended or previously terminated.
FEDERAL INCOME TAX CONSEQUENCES OF THE AMENDED PLAN
INCENTIVE STOCK OPTIONS. An employee who has been granted an incentive
stock option will not realize taxable income at the time of the grant or
exercise (but in some circumstances may be subject to an alternative minimum
tax as a result of the exercise) of such option and the Company will not be
entitled to a deduction at either such time. If the employee makes no
disposition of the shares acquired pursuant to an incentive stock option within
two years from the date of the grant of such option, or within one year of the
transfer of such shares to him or her, any gain or loss realized on a
subsequent disposition of such shares will be treated as a long-term capital
gain or loss. Under such circumstances, the Company will not be entitled to
any deduction for federal income tax purposes. If the foregoing holding period
requirements are not satisfied, a portion of any gain in the year of
disposition will be taxable to the employee as ordinary income, and the Company
will be entitled to a corresponding deduction. The Company will not be
entitled to any deduction in connection with any loss to the employee or the
portion of any gain that is taxable to the employee as short-term or long-term
capital gain.
-8-
NON-QUALIFIED STOCK OPTIONS. Non-qualified stock options (options that
are not incentive stock options) will not qualify for special federal income
tax treatment. No tax is imposed on the optionee upon the grant of a non-
qualified stock option. Upon exercise of a non-qualified stock option, the
employee will realize ordinary income in an amount measured by the excess, if
any, of the fair market value of the shares on the date of exercise over the
option exercise price; and the Company will be entitled to a corresponding
deduction, provided the Company withholds income tax with respect to such
amount and provided that such amount is not limited by Section 162(m) of the
Code with respect to options with an exercise price that was less than the fair
market value of the Common Stock on the date of grant. However, if the shares
received upon the exercise of a non-qualified stock option are transferred to
the optionee subject to certain restrictions, then the taxable income realized
by the optionee, unless the optionee elects otherwise, and the Company's tax
deduction (assuming any federal income tax withholding requirements are
satisfied) should be deferred and should be measured based upon the fair market
value of the shares at the time the restrictions lapse. The restrictions
imposed on officers, directors, and 10% stockholders by Section 16(b) of the
Securities Exchange Act of 1934, as amended, is such a restriction during the
period prescribed thereby if other shares have been purchased by such
individual within six months of the exercise of a non-qualified stock option.
Ordinary income realized upon the exercise of a non-qualified stock option is
not an adjustment for alternative minimum tax purposes.
WITHHOLDING. The Company has the right to deduct from any or all awards
any taxes required by law to be withheld and to require any payments necessary
to enable it to satisfy its withholding requirements.
DEDUCTIBILITY. The Amended Plan has been designed to meet the
requirements of Section 162(m) of the Code for stock option plans, including
the requirement that the Amended Plan state the maximum number of shares that
can be issued during a specified period to an individual employee under the
Amended Plan. Thus, the provisions of Section 162(m) should not limit the
Company's ability to deduct all of the compensation income generated in
connection with the exercise of stock options granted under the Amended Plan
except for stock options, if any, with exercise prices less than the fair
market value of the Common Stock on the date of grant.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSAL
NUMBER 2, AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY
INSTRUCTIONS ARE INDICATED THEREON.
PROPOSAL NUMBER 3:
AMENDMENT AND RESTATEMENT OF THE 1995 NONEMPLOYEE
DIRECTORS' STOCK OPTION PLAN
GENERAL
On April 25, 1997, the Board, subject to the approval by the stockholders
of the Company, approved the amendment and restatement of the SunPharm
Corporation 1995 Nonemployee Directors' Stock Option Plan (as presently in
effect, the "Director Plan" and, as amended and restated, the "Amended Director
Plan"). The purpose of the Director Plan is to promote and advance the
interests of the Company by aiding the Company in attracting and retaining
qualified nonemployee directors and to further align the interests of such
directors with those of stockholders through stock options. A copy of the
Amended Director Plan is included as Exhibit B to this Proxy Statement and the
following summary is qualified in its entirety by reference to the complete
text of Exhibit B.
Options to purchase an aggregate of 200,000 shares may be granted under
the Director Plan, as presently in effect. Options to purchase a total of
165,000 shares of the Company's Common Stock have been granted under the
Director Plan, leaving a total of 35,000 shares as to which options may be
granted under the Plan as presently in effect. The number of shares as to
which options may be granted would be increased to 300,000 shares pursuant to
the Amended Director Plan. No other changes are proposed to be made to the
Plan.
-9-
SUMMARY OF THE AMENDED DIRECTOR PLAN
The Amended Director Plan is a "formula" plan for purposes of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, pursuant to
which options for shares of Common Stock are automatically granted to certain
eligible nonemployee directors of the Company as of specified dates. No person
exercises any discretion with respect to persons eligible to receive grants of
options under the Amended Director Plan or the amount of grants thereunder.
The term of the Amended Plan expires on July 10, 2005.
ELIGIBILITY. Persons who are nonemployee and nonconsultant directors of
the Company ("Nonemployee Directors") will be eligible to participate in the
Amended Director Plan. The Company presently has eight such directors. The
Amended Director Plan sets forth various restrictions upon the exercise of
options following the death, disability or termination of services of a
Nonemployee Director.
SHARES SUBJECT TO AMENDED DIRECTOR PLAN. The maximum number of shares of
Common Stock in respect of which options may be granted under the Amended
Director Plan shall be 300,000, an increase of 100,000 shares from the number
presently authorized under the Director Plan, subject to appropriate adjustment
upon a reorganization, stock split, recapitalization or other change in the
Company's capital structure.
OPTION PERIOD. Options granted to Nonemployee Directors under the Amended
Director Plan will be for a term of ten years from the date of grant.
AMENDMENT. The Board in its discretion may terminate the Amended Director
Plan at any time with respect to any shares for which options have not
theretofore been granted. The Board shall have the right to alter or amend the
Amended Director Plan or any part thereof from time to time; provided that no
change in any option theretofore granted may be made which would impair the
rights of the optionee without the consent of such optionee and provided,
further, that the Board may not make any alteration or amendment which would
(i) materially increase the benefits accruing to participants under the Amended
Director Plan, (ii) increase the aggregate number of shares which may be issued
pursuant to the provisions of the Amended Director Plan, (iii) change the class
of individuals eligible to receive options under the Amended Director Plan or
(iv) extend the term of the Amended Director Plan, without the approval of the
stockholders of the Company.
NON-QUALIFIED OPTIONS. Options issued under the Amended Director Plan
constitute non-qualified stock options.
AUTOMATIC GRANT OF OPTIONS. In general, under the Amended Director Plan
each Nonemployee Director who is first elected to the Board is entitled to
receive an option to purchase 25,000 shares of Common Stock on the date on
which he first becomes a Nonemployee Director. Each Nonemployee Director,
regardless of when elected to the Board, is entitled to receive options
annually on the date of his or her reelection to the Board to purchase 5,000
shares of Common Stock. In addition, the Chairman of the Board of Directors is
entitled to receive options annually to purchase an additional 10,000 shares of
Common Stock if the Chairman of the Board is a Nonemployee Director. The
amounts of all such option grants are subject to appropriate adjustment upon a
reorganization, stock split, recapitalization or other change in the Company's
capital structure.
EXERCISABILITY. Options become exercisable in 8.33% installments that
vest at the end of each subsequent month following the first day of the
calendar month coincident with or next following the date of grant until the
option is 100% vested. The exercise price for options may be paid in cash, by
delivery of shares of Common Stock already owned by the optionee with a market
value equal to the exercise price, or in any combination of cash and shares of
Common Stock.
CHANGE IN CONTROL. Upon a change in control of the Company as a result of
a merger, contested election, purchase of 50% or more of the Company's
outstanding Common Stock or other related events described in the Amended
Director Plan, all options outstanding under the Amended Director Plan shall
become fully exercisable.
-10-
OPTION EXERCISE PRICE. The exercise price of options shall be at one
hundred percent (100%) of the fair market value of the Common Stock on the date
of grant. The "fair market value" of a share of Common Stock shall mean, on
any given date, the mean of the high and low sales prices of the Common Stock
on the Nasdaq Stock Market or, if the Common Stock is listed on a national
stock exchange, the mean of the high and low sales prices on the exchange on
such date.
FEDERAL INCOME TAX CONSEQUENCES OF THE AMENDED DIRECTOR PLAN
GENERAL. A Nonemployee Director will not recognize any taxable income at
the time an option is granted. Ordinary income will be recognized by a
Nonemployee Director at the time of exercise in an amount equal to the excess
of the fair market value of the shares of Common Stock received over the option
price for such shares. However, if other shares of Common Stock have been
purchased by a Nonemployee Director within six months of the exercise of an
option, recognition of the income attributable to such exercise may under
certain circumstances be postponed for a period of up to six months from the
date of such purchase of such other shares of Common Stock due to liability to
suit under Section 16(b) of the Exchange Act. If applicable, one effect of
any such postponement would be to measure the amount of the Nonemployee
Director's taxable income by reference to the fair market value of such shares
at the time such liability to suit under Section 16(b) of the Exchange Act no
longer exists (rather than at the earlier date of the exercise of the option).
The Nonemployee Director will generally recognize a capital gain or loss upon a
subsequent sale of the shares of Common Stock.
DEDUCTIBILITY. Upon a Nonemployee Director's exercise of an option
granted under the Amended Director Plan, the Company may claim a deduction for
compensation paid at the same time and in the same amount as ordinary income is
recognized by the Nonemployee Director.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" PROPOSAL
NUMBER 3, AND PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY
INSTRUCTIONS ARE INDICATED THEREON.
PROPOSAL NUMBER 4:
RATIFICATION AND APPROVAL OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of Deloitte & Touche LLP as
the Company's independent public accountants to make an examination of the
accounts of the Company for the fiscal year ending December 31, 1997, subject
to ratification by the Company's stockholders. Representatives of Deloitte &
Touche LLP will be present at the Annual Meeting and will have an opportunity
to make a statement, if they desire to do so. They will also be available to
respond to appropriate questions from stockholders attending the Annual
Meeting.
Stockholder ratification of the selection of Deloitte & Touche LLP as the
Company's independent public accountants is not required by the Company's
Bylaws or otherwise. However, the Board is submitting the selection of
Deloitte & Touche LLP to the stockholders for ratification as a matter of good
corporate practice. If the stockholders fail to ratify the selection, the
Audit Committee and the Board will reconsider whether or not to retain the
firm. Even if the selection is ratified, the Audit Committee and the Board in
their discretion may direct the appointment of different independent public
accountants at any time during the year if they determine that such a change
would be in the best interests of the Company and its stockholders.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
On January 17, 1996, the Company's independent public accountants, Arthur
Andersen LLP in Houston, Texas, was dismissed. On January 18, 1996, the
Company retained Deloitte & Touche LLP in Jacksonville, Florida as its
independent public accountants. The decision to change independent accountants
was recommended by management to the Audit Committee of the Board of Directors
of the Company and approved by the Audit Committee of the Board Directors of
the Company.
-11-
The report of the Company's former independent public accountants on the
financial statements of the Company for the year ended December 31, 1993
contained no adverse opinion or disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope or accounting principles other than the
modification stating the following: The financial statements have been prepared
assuming that the Company will continue as a going concern. The Company has
operated as a development stage enterprise since its inception, devoting
substantially all of its efforts to financial planning, raising capital and
performing research and development. The Company incurred losses since its
inception, has a deficit in stockholders' equity and a working capital deficit.
The Company expects to continue to incur losses in the foreseeable future and
there can be no assurance that the Company will successfully complete the
transition from a development stage company to successful operations. These
factors raise substantial doubt about the ability of the Company to continue as
a going concern. In addition, certain claims have been made against the
Company, and the financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
The former independent public accountants' report on the financial
statements of the Company for the year ended December 31, 1994 contained no
adverse opinion or disclaimer of opinion and was not qualified or modified as
to uncertainty, audit scope or accounting principles other than the explanatory
emphasis-of-a-matter paragraph stating that the Company is a development stage
enterprise with no significant revenues to date and in order to complete the
research and development and other activities necessary to commercialize its
products, additional financing would be required subsequent to December 31,
1995. In addition, the report was modified stating that certain claims had
been made against the Company, the outcome of which was uncertain, and no
provisions for any liabilities that may result related to these claims had been
made in the financial statements.
During the years ended December 31, 1993 and December 31, 1994 and all
subsequent interim periods preceding such dismissal there were no disagreements
with the Company's former independent public accountants on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure which, if not resolved to the satisfaction of the former
independent public accountant, would have caused the former independent public
accountant to make reference to the matter in their report.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
RATIFICATION AND APPROVAL OF DELOITTE & TOUCHE LLP'S APPOINTMENT, AND PROXIES
EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE
INDICATED THEREON.
-12-
EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
Set forth below is certain information concerning the executive officers
of the Company, including the business experience of each during the past five
years.
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
Stefan Borg ........................ 43 President and Chief Executive Officer
Cecilia Bryant...................... 50 Vice President--Legal Affairs and
Secretary
James W. Kesterson, Ph.D., D.V.M. .. 57 Vice President--Product Development
Ronald W. Sanda .................... 54 Vice President--Manufacturing and Operations
J. Michael Schafer ................. 39 Vice President--Business Development
Information regarding the business experience of Mr. Borg is set forth
above under the heading "Nominees for Election as Directors."
JAMES W. KESTERSON, PH.D., D.V.M.
VICE PRESIDENT -- PRODUCT DEVELOPMENT
Dr. Kesterson has been Vice President--Product Development of the Company
since October 1994. Dr. Kesterson was a pharmaceutical industry consultant
from 1991 to 1994. From 1975 to 1991, Dr. Kesterson was employed by Abbott
Laboratories, during the last seven years of which he served as Vice President,
Pharmaceutical Development. From 1971 to 1975, Dr. Kesterson was Supervisor of
Pathology for ICI United States, Inc. Dr. Kesterson received his Ph.D. and his
D.V.M. from Purdue University.
CECILIA BRYANT
VICE PRESIDENT -- LEGAL AFFAIRS AND SECRETARY
Ms. Bryant has been Secretary and Vice President--Legal Affairs of the
Company since September 1996 on a part time basis. Ms. Bryant was an attorney
with the Securities and Exchange Commission from 1973 to 1975 and was in
private practice prior to serving as Special Counsel of Voyager Insurance
Companies from 1978 to 1986, returning thereafter to private practice. She is
a director of SunTrust Bank of North Florida, N.A. and is Chairman of PRIDE
of Florida, Inc. Ms. Bryant served from 1982 to 1989 on the Florida
University System Board of Regents and was its Vice Chairman in 1989. Ms.
Bryant received her law degree from the University of Florida and is a
Certified Life Underwriter (CLU) and Chartered Financial Consultant (ChFC).
RONALD W. SANDA
VICE PRESIDENT--MANUFACTURING AND OPERATIONS
Mr. Sanda has been Vice President--Manufacturing and Operations of the
Company since July 1994. Mr. Sanda was Director, Quality Assurance of Houston
Biotechnology Incorporated from 1988 to 1994. From 1986 to 1988, Mr. Sanda was
Director, Quality Assurance of Biospecific Technologies, Inc. From 1961 to
1986, Mr. Sanda was employed by Ben Venue Laboratories, Inc. in various quality
assurance and GMP compliance functions. Mr. Sanda has a B.S. in Chemistry from
Kent State University.
J. MICHAEL SCHAFER
VICE PRESIDENT--BUSINESS DEVELOPMENT
Mr. Schafer has been Vice President--Business Development of the Company
since October 1996. From 1992 to 1996, Mr. Schafer was a consultant for All-
American Racers, Inc., a private company in Santa Ana, California. At All-
American he was responsible for special projects, strategic planning and
business development. From 1982 to 1992 Mr. Schafer was a general partner of
The Woodlands Venture Partners, L.P., a venture capital fund in The Woodlands,
Texas, where he was responsible for sourcing, screening and negotiating the
fund's investments.
-13-
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning
compensation paid or accrued during the last three years to the Company's
President and Chief Executive Officer and to each of the other executive
officers of the Company, determined as of the end of the last fiscal year,
whose annual compensation exceeded $100,000 (the "Named Executive Officers"):
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
--------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
--------------------------- ---- ------ ----- ------------ ------------
Stefan Borg ..................... 1996 $ 163,125 $ 18,750 -- --
President and Chief 1995 145,280 7,280 -- 12,458(2)
Executive Officer 1994 127,300 35,220(1) -- 12,438(2)
James W. Kesterson .............. 1996 125,625 7,500 -- --
Vice President--Product 1995 120,000 11,000 20,000 3,710(3)
Development 1994 -- -- 38,950 --
Ronald W. Sanda.................. 1996 102,812 7,500 -- --
Vice President-Manufacturing 1995 103,647 1,000 10,000 6,314(3)
and Operations 1994 43,542 -- 38,950 --
- --------------------
(1) Includes $27,720 of a $35,000 bonus which was paid in 1995 for services
performed in 1994.
(2) Reflects amortization of a loan made to Mr. Borg at an annual interest
rate equal to 5.88 percent, which was forgiven by the Company on its due
date (April 1996). See note 2 of the Notes to the Financial Statements
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996.
(3) Relocation expenses.
OPTION GRANTS IN 1996
No options were granted to the President or any of the other Named Executive
Officers during the fiscal year ended December 31, 1996.
OPTION VALUES
The following table provides information concerning the value of
unexercised options held as of December 31, 1996 by the Company's Chief
Executive Officer and its other executive officers named in the Summary
Compensation Table (no options were exercised during such year). The fair
market value of the shares of Common Stock underlying such options was
determined by using the closing bid price of the Company's Common Stock, which
was $5.00 per share as of December 31, 1996.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT DECEMBER 31, 1996 OPTIONS HELD AT DECEMBER 31, 1996
--------------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
Stefan Borg ............. 46,740 -- $ 233,700 $ --
James W. Kesterson....... 12,609 46,341 63,045 231,705
Ronald W. Sanda.......... 12,425 36,525 62,125 182,625
-14-
EMPLOYMENT AGREEMENTS
In April 1993, the Company entered into a three-year employment agreement
with Stefan Borg to serve as the Company's Chief Executive Officer and
President. Pursuant to that agreement, Mr. Borg received a salary at the rate
of $120,000 per annum, and an option to purchase 46,740 shares of Common Stock
at a price of $.32 per share. In June 1994, Mr. Borg's employment agreement
was amended to increase his annual salary to $132,000 and to award Mr. Borg a
cash bonus of $30,000. Effective April 1, 1995, Mr. Borg's annual salary was
increased to $150,000 and the agreement was extended to March 31, 1997,
renewing on a year-to-year basis thereafter. Mr. Borg's employment agreement,
as amended, provides that Mr. Borg will be entitled to continuation of his
salary, payable monthly, for an additional twelve month period in the event of
his termination by the Company without cause prior to April 1, 1998.
The Company has engaged Dr. Bergeron as its Chief Scientific Consultant in
the area of polyamine analogues on an exclusive basis through December 1998, at
a current rate of $98,000 per year. Such agreement may be terminated by the
Company in the event the sponsored research agreement with the University of
Florida terminates.
CERTAIN TRANSACTIONS
The Company loaned Mr. Borg an aggregate of $35,000 during 1992 and 1993,
which amount was forgiven on the due date (April 1, 1996) pursuant to its
terms. On March 31, 1996, the Company loaned Mr. Borg $87,491 at 8% per annum,
which amount is to be repaid on or before March 31, 1998. On April 1, 1997,
the Company loaned Mr. Borg $24,500 at 8% per annum, which amount is to be
repaid on or before June 1, 1997.
The Company entered into 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 Agreements, and has
ongoing royalty obligations under the License Agreements. The Company is a
party to a Sponsored Research Agreement with the Foundation under which the
Company has agreed to fund research at the University of Florida through 1998
at a cost of approximately $875,000 per year.
In November and December 1994 and January 1995, the Company borrowed an
aggregate of $200,000 from Messrs. Rejeange and Schoellhorn, Dr. Janicki and
one other individual who is no longer a director. In consideration for such
loans, the Company issued (i) 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, (ii) 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 (iii) 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 Company repaid such notes from the proceeds of its initial
public offering in January 1995.
On July 19, 1996, the Company issued 159,842 shares of Common Stock and
warrants to purchase 39,960 shares of Common Stock to SunPharm Investors, L.P.
("SunPharm Investors") in consideration for the exercise by SunPharm Investors
of warrants to purchase 159,842 shares of Common Stock and the payment of the
$304,262 exercise price of such warrants. Mr. Schwartz is the President of
Tioga Capital Corporation, which serves as the general partner of SunPharm
Investors.
On March 31, 1997, the Company sold an aggregate of 714,286 units
("Units") each consisting of one share of Common Stock and a warrant to
purchase one share of Common Stock, to Cross Atlantic Partners K/S and Cross
Atlantic Partners II K/S (together, "Cross Atlantic") at a price of $3.50 per
Unit. Mr. Dimmler is an affiliate of Cross Atlantic. In addition, Mr. Dimmler
and members of his family purchased 4,000 Units at the same price.
-15-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information regarding the beneficial
ownership of the Company's Common Stock as of April 25, 1997 by (i) each person
who is known by the Company to own beneficially more than five percent of the
outstanding shares of Common Stock, (ii) each director of the Company, (iii)
the Company's chief executive officer and each of the other Named Executive
Officers and (iv) all directors and executive officers as a group. Except as
described below, each of the persons listed in the table has sole voting and
investment power with respect to the shares listed.
PERCENTAGE
NUMBER OF BENEFICIALLY
NAME SHARES(1) OWNED
- ---- --------- ------------
Cross Atlantic Partners Funds(2) 1,428,572 25.8%
New York Life Insurance Company(3) 1,142,858 20.6%
Stefan Borg(4) 514,140 9.2%
InterSouth Partners III, L.P.(5) 400,000 7.2%
University of Florida Research Foundation,
Inc.(6) 342,760 6.1%
SunPharm Investors, L.P.(7) 307,820 5.4%
Pensionskassen for Vaerkstedfunktionaerer
i Jernet(8) 285,714 5.0%
Apoteksassistenternes Pensionskasse(9) 285,714 5.0%
Philip R. Tracy(10) 37,500 *
Charles L. Dimmler, III(11) 1,438,822 25.9%
Jerry T. Jackson(12) 18,750 *
Robert S. Janicki(13) 177,980 3.2%
Norman H. Lipoff(14) 12,500 *
Jacques F. Rejeange(15) 55,580 *
Robert A. Schoellhorn(16) 143,350 2.5%
George Schwartz(17) 370,538 6.9%
James W. Kesterson(18) 36,890 *
Ronald W. Sanda (19) 30,779 *
All executive officers and directors
as a group (13) persons (4)(10)-(19) 2,853,929 51.4%
- -------------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of April 25, 1997 are
deemed outstanding. Such shares, however, are not deemed outstanding for
the purposes of computing the percentage ownership of each other person.
Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, each stockholder named in the table
has sole voting and investment power with respect to the shares set forth
opposite such stockholder's name.
(2) The business address of the Cross Atlantic Partners Funds is c/o Hambro
Health International, Inc., 650 Madison Avenue, 21st Floor, New York 10022.
Includes warrants to purchase 714,286 shares of Common Stock.
(3) The business address of New York Life Insurance Company is 51 Madison
Avenue, New York, New York 10010. Includes warrants to purchase 571,429
shares of Common Stock.
(4) Mr. Borg's business address is 4651 Salisbury Road, Suite 205,
Jacksonville, Florida 32256. Includes an option to purchase 46,740 shares
of Common Stock.
(5) The business address of InterSouth Partners III, L.P. is 1000 Park Forth
Plaza, Durham, North Carolina 27713. Includes warrants to purchase 200,000
shares of Common Stock.
(6) The business address of the University of Florida Research Foundation, Inc.
is 223 Grinter Hall, Gainsville, Florida 32611. Karen Holbrook, President
of the Foundation, has investment and voting control over such shares.
(7) The business address of SunPharm Investors, L.P. is 140 Greenwich Avenue,
Greenwich, Connecticut 06830. Includes warrants to purchase 147,978 shares
of Common Stock.
(8) The business address of Pensionskassen for Vaerkstedfunktionaerer i Jernet
is 12 Sankt Annae Plads-DK 1250, Copenhagen K, Denmark. Includes warrants
to purchase 142,857 shares of Common Stock.
(9) The business address of Apoteksassistenternes Pensionskasse is Hojbro Plads
6-DK 1200, Copenhagen K, Denmark. Includes warrants to purchase 142,857
shares of Common Stock.
(10) Mr. Tracy's business address is 2500 First Union Capitol Center, Raleigh,
NC 27602. Includes options to purchase 37,500 shares of Common Stock.
-16-
(11) Mr. Dimmler's business address is 650 Madison Avenue, 21st Floor, New York,
New York 10022. Includes (i) 1,160 shares of Common Stock held by Mr.
Dimmler's children, (ii) 1,428,572 shares beneficially owned by the Cross
Atlantic Partners Funds (including warrants to purchase 714,286 shares), of
which Mr. Dimmler is an affiliate, and (iii) options to purchase 6,250
shares of Common Stock.
(12) Mr. Jackson's business address is 24 Arroyo Hondo Vistas, 124 Circle Loop,
Santa Fe, New Mexico 87505. Includes options to purchase 18,750 shares of
Common Stock.
(13) Dr. Janicki's business address is 4651 Salisbury Road, Suite 205,
Jacksonville, Florida 32256. Includes options to purchase 56,130 shares
of Common Stock. Also includes a warrant to purchase 1,000 shares of
Common Stock.
(14) Norman Lipoff's business address is 3 Grove Isle Drive #1009, Miami,
Florida 33133. Includes an option to purchase 12,500 shares of Common
Stock.
(15) Mr. Rejeange's business address is 90 Park Avenue, New York, New York
10016. Includes an option to purchase 30,290 shares of Common Stock.
(16) Mr. Schoellhorn's business address is 91333 Coburg Industrial Way, Coburg,
Oregon 97408. Includes options to purchase 48,950 shares of Common Stock
and warrants to purchase 79,400 shares. All shares and warrants are held
by The Robert A. Schoellhorn Trust dated June 26, 1989, of which Mr.
Schoellhorn serves as Trustee.
(17) Mr. Schwartz' business address is 140 Greenwich Avenue, Greenwich,
Connecticut 06830. Includes options to purchase 10,000 shares of Common
Stock. Also includes options to purchase 52,718 shares of Common Stock
which are held by Gene Salkind, Trustee of the Danielle Schwartz Trust, as
to which Mr. Schwartz disclaims beneficial ownership. Also includes 159,842
shares of Common Stock and warrants to purchase 147,978 shares owned by
SunPharm Investors, L.P., a limited partnership of which Tioga Capital
Corporation is the general partner. Mr. Schwartz is the President of Tioga
Capital Corporation.
(18) Dr. Kesterson's business address is 4651 Salisbury Road, Suite 205,
Jacksonville, Florida 32256. Includes options to purchase 36,890 shares of
Common Stock.
(19) Mr. Sanda's business address is 4651 Salisbury Road, Suite 205,
Jacksonville, Florida 32256. Includes options to purchase 30,779 shares of
Common Stock.
COMPLIANCE WITH SECTION 16(a)
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than 10% of the
Common Stock, to file initial reports of ownership and reports of changes in
ownership (Forms 3, 4, and 5) of Common Stock with the Securities and Exchange
Commission (the "SEC") and The Nasdaq Stock Market. Officers, directors and
greater than 10% stockholders are required by SEC regulation to furnish the
Company with copies of all such forms that they file.
To the Company's knowledge, based solely on the Company's review of the
copies of such reports received by the Company and on written representations
by certain reporting persons that no reports on Form 5 were required, the
Company believes that during the fiscal year ended December 31, 1995, all
Section 16(a) filing requirements applicable to its officers, directors and
10% stockholders were complied with in a timely manner, with the exception of
three late filings on Form 3, by Norman H. Lipoff and Jerry T. Jackson in
connection with their respective elections to the Board of Directors and by
Cecilia Bryant in connection with her election as executive officer, and one
late filing on Form 5 by Jacques F. Rejeange.
PROPOSAL OF STOCKHOLDERS
Any proposal of a stockholder intended to be presented at the next annual
meeting must be received at the Company's principal executive offices no later
than January 15, 1998, if the proposal is to be considered for inclusion in
the Company's Proxy Statement relating to such meeting.
FINANCIAL INFORMATION
A copy of the Company's Annual Report on Form 10-KSB, including any
financial statements and schedules and exhibits thereto, may be obtained
without charge by written request to Stefan Borg, President and Chief Executive
Officer, SunPharm Corporation, 4651 Salisbury Road, Jacksonville, Florida
32256.
By Order of the Board of Directors
Stefan Borg
PRESIDENT AND CHIEF EXECUTIVE OFFICER
May 12, 1997
Jacksonville, Florida
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SUNPHARM CORPORATION
AMENDED AND RESTATED 1994 STOCK OPTION PLAN
SunPharm Corporation, a Delaware corporation (the "Company"), hereby
amends and restates its 1994 Stock Option Plan (this "Plan"), effective as of
April 25, 1997, subject to stockholder approval.
1. PURPOSES OF THE PLAN.
The purposes of this Stock Option Plan are to attract and retain the
best available personnel for positions of substantial responsibility, to
provide additional incentive to Employees and Consultants of the Company and
its Subsidiaries and to promote the success of the Company's business.
Options granted under this Plan may be incentive stock options (as defined
under Section 422 of the Code) or nonqualified stock options, as determined
by the Administrator at the time of grant of an option and subject to the
applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees, as
applicable, that is administering the Plan pursuant to Section 4 of the
Plan.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "COMPANY" means SunPharm Corporation, a Delaware corporation.
(f) "CONSULTANT" means any consultant or advisor to the Company or
any Parent or Subsidiary and any director of the Company whether
compensated for such services or not, provided that if and in the event
the Company registers any class of any equity security pursuant to the
Exchange Act, the term Consultant shall thereafter not include directors
who are not compensated for their services or are paid only a director's
fee by the Company.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE" means the absence of any
interruption or termination of the employment relationship by the Company
or any Subsidiary. Continuous Status as an Employee shall not be
considered interrupted in the case of: (i) any leave of absence approved
by the Board, including sick leave, military leave, or any other personal
leave; provided, however, that for purposes of Incentive Stock Options,
such leave is for a period of not more than ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted
from time to time; or (ii) in the case of transfers between locations of
the Company or between the Company, its Subsidiaries or its successor.
(h) "EMPLOYEE" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The
payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(i) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
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(j) "FAIR MARKET VALUE" means, as of any date, the value of Stock
determined as follows:
(i) If the Stock is listed on any established stock exchange or
a national market system including without limitation the National
Market System of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be
the closing sales price for such stock (or the closing bid, if no sales
were reported, as quoted on such system or exchange or the exchange
with the greatest volume of trading in Stock for the last market
trading day prior to the time of determination) as reported in the Wall
Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Stock is quoted on the NASDAQ System (but not on the
National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean between the high and low asked prices for the
Stock; or
(iii) In the absence of an established market for the Stock, the
Fair Market Value thereof shall be determined in good faith by the
Administrator.
(k) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(l) "NONQUALIFIED STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(m) "OPTION" means a stock option granted pursuant to the Plan.
(n) "OPTIONED STOCK" means the Stock subject to an Option.
(o) "OPTIONEE" means an Employee or Consultant who receives an Option.
(p) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(q) "PLAN" means this 1994 Stock Option Plan.
(r) "SHARE" means a share of the Stock, as adjusted in accordance with
Section 12 of the Plan.
(s) "STOCK" means the Common Stock, par value $.001 per share, of the
Company;
(t) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN.
Subject to the provisions of Section 12 of the Plan, the maximum number of
shares of Stock which may be optioned and sold under the Plan is 750,000 shares.
The shares may be authorized, but unissued, or reacquired Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
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4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) ADMINISTRATION WITH RESPECT TO DIRECTORS AND OFFICERS. With
respect to grants of Options to Employees who are also officers or directors of
the Company, the Plan shall be administered by (A) the Board or (B) a Committee
designated by the Board to administer the Plan, which Committee shall be
constituted in such a manner as to permit the Plan to comply with Rule 16b-3
promulgated under the Exchange Act or any successor thereto ("Rule 16b-3") with
respect to a plan intended to qualify thereunder as a discretionary plan.
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board
may increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder
as a discretionary plan. Notwithstanding the foregoing, the Plan shall not be
administered by the Board if (a) the Company and its officers and directors are
then subject to the requirements of Section 16 of the Exchange Act and (b) the
Board's administration of the Plan would prevent the Plan from complying with
Rule 16b-3.
(ii) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule 16b-3, the
Plan may be administered by different bodies with respect to directors, non-
director officers and Employees who are neither directors nor officers.
(iii) ADMINISTRATION WITH RESPECT TO CONSULTANTS AND OTHER EMPLOYEES.
With respect to grants of Options to Employees or Consultants who are neither
directors nor officers of the Company, the Plan shall be administered by (A)
the Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the legal requirements relating to
the administration of incentive stock option plans, if any, of corporate and
securities laws applicable to the Company and of the Code (the "Applicable
Laws"). Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Stock, in accordance
with Section 2(j) of the Plan;
(ii) to select the officers, Consultants and Employees to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of shares of Stock to be covered by each
such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder (including, but not
limited to, the per share exercise price for the Shares to be issued
pursuant to the exercise of an Option and any restriction or limitation,
or any vesting acceleration or waiver of forfeiture restrictions regarding
any Option or other award and/or the shares of Stock relating thereto,
based in each case on such factors as the Administrator shall determine, in
its sole discretion);
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(vii) to determine whether and under what circumstances an Option may
be bought-out for cash under subsection 9(f);
(viii) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the election
of the participant (including providing for and determining the amount, if
any, of any deemed earnings on any deferred amount during any deferral
period); and
(ix) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Stock covered by such
Option shall have declined since the date the Option was granted.
(c) EFFECT OF COMMITTEE'S DECISION. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options. Neither the Board, the
Committee nor any member thereof shall be liable for any act, omission,
interpretation, construction or determination made in connection with the
Plan in good faith, and the members of the Board and of the Committee shall
be entitled to indemnification and reimbursement by the Company in respect of
any claim, loss, damage or expense (including counsel fees) arising therefrom
to the full extent permitted by law.
5. ELIGIBILITY.
(a) Nonqualified Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonqualified Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair
Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonqualified Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with
respect to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company,
nor shall it interfere in any way with his right or the Company's right to
terminate his employment or consulting relationship at any time, with or
without cause, unless otherwise agreed in writing by the Company and such
Optionee.
(e) The maximum number of shares subject to Options which may be issued
to any Optionee under the Plan during any period of three consecutive years
is 250,000 shares.
6. TERM OF PLAN.
The Plan shall become effective upon its adoption by the Board of
Directors. It shall continue in effect until April 30, 2004 unless extended
by the Board or sooner terminated under Section 14 of the Plan. No grants of
Options will be made pursuant to the Plan after April 30, 2004.
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7. TERM OF OPTION.
The term of each Option shall be the term stated in the Option
Agreement; provided, however, that in the case of an Incentive Stock Option,
the term shall be no more than ten (10) years from the date of grant thereof
or such shorter term as may be provided in the Option Agreement. However, in
the case of an Option granted to an Optionee who, at the time the Option is
granted, owns Stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
In the case of an Incentive Stock Option:
(i) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.
(ii) granted to any Employee not included in clause (i) above, the per
Share exercise price shall be no less than 100% of the Fair Market Value
per Share on the date of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other shares of the Company's capital stock
which (x) in the case of shares of the Company's capital stock acquired upon
exercise of an Option either have been owned by the Optionee for more than
six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which
said Option shall be exercised, (5) authorization for the Company to retain
from the total number of Shares as to which the Option is exercised that
number of Shares having a Fair Market Value on the date of exercise equal to
the exercise price for the total number of Shares as to which the Option is
exercised, (6) delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price, (7) any
combination of the foregoing methods of payment, or (8) such other
consideration and method of payment for the issuance of Shares to the extent
permitted under applicable laws.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the
terms of the Plan. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised, and the Optionee deemed to be
a stockholder of the Shares being purchased upon exercise, when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Board,
consist of any consideration and method of payment allowable under Section
8(b) of the Plan.
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Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) TERMINATION OF EMPLOYMENT. In the event of termination of an
Optionee's relationship as a Consultant (unless such termination is for
purposes of becoming an Employee of the Company) or Continuous Status as an
Employee with the Company (as the case may be), such Optionee may, but only
within ninety (90) days (or such other period of time as is determined by the
Board, with such determination in the case of an Incentive Stock Option being
made at the time of grant of the Option and not exceeding ninety (90) days)
after the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement),
exercise his Option to the extent that Optionee was entitled to exercise it
at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of such termination, or if
Optionee does not exercise such Option to the extent so entitled within the
time specified herein, the Option shall terminate.
(c) DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section
9(b) above, in the event of termination of an Optionee's relationship as a
Consultant or Continuous Status as an Employee as a result of his total and
permanent disability (as defined in Section 22(e)(3) of the Code), Optionee
may, but only within twelve (12) months from the date of such termination
(but in no event later than the expiration date of the term of such Option as
set forth in the Option Agreement), exercise the Option to the extent
otherwise entitled to exercise it at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee, the
Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), by the Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if the Optionee's estate
(or such other person who acquired the right to exercise the Option) does not
exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
(e) RULE 16b-3. Options granted to persons subject to Section 16(b) of
the Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
(f) BUYOUT PROVISIONS. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. NON-TRANSFERABILITY OF OPTIONS.
The Option may not be sold, pledged, assigned, hypothecated, transferred,
or disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Optionee, only by
the Optionee.
11. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS.
At the discretion of the Administrator, Optionees may satisfy withholding
obligations as provided in this paragraph. When an Optionee incurs tax
liability in connection with an Option, which tax liability is subject to tax
withholding under applicable tax laws, and the Optionee is obligated to pay the
Company an amount required to be withheld under applicable tax laws, the
Optionee may satisfy the withholding tax obligation by electing to have the
Company withhold from the Shares to be issued upon exercise of the Option, that
number of Shares having a Fair
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Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option or Right as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of
the Administrator; and
(d) if the Optionee is subject to Rule 16b-3, the election must comply
with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election
is filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
Subject to any required action by the stockholders of the Company, the
number of Shares covered by each outstanding Option, and the number of Shares
which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Stock
(or Common Stock into which the Common Stock may be convertible) resulting from
a stock split, reverse stock split, stock dividend, combination or
reclassification of the Stock, or any other increase or decrease in the number
of issued shares of Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Administrator, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company,
the Board shall notify the Optionee at least fifteen (15) days prior to such
proposed action. To the extent it has not been previously exercised, the
Option will terminate immediately prior to the consummation of such proposed
action. In the event of a merger or consolidation of the Company with or into
another entity or another transaction pursuant to which all or substantially
all of the assets of the Company are conveyed to another entity, the Option
shall be assumed or an equivalent option shall be substituted by such successor
entity or a parent or subsidiary of such successor entity. In the event that
such successor entity does not agree to assume the Option or to substitute an
equivalent option, the Administrator shall, in lieu of such assumption or
substitution, provide for the Optionee to have the right to exercise the Option
as to all of the Optioned Stock, including Shares as to which the Option would
not otherwise be exercisable. If the Administrator makes an Option fully
exercisable in lieu of assumption or substitution in the event of a merger,
consolidation or other transaction covered by this paragraph, the Administrator
shall notify the Optionee that the Option shall be fully exercisable for a
period of fifteen (15) days from the date of such notice, and the Option will
terminate upon the expiration of such period.
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13. TIME OF GRANTING OPTIONS.
The date of grant of an Option shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option, or such
other date as is determined by the Administrator. Notice of the determination
shall be given to each Employee or Consultant to whom an Option is so granted
within a reasonable time after the date of such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the applicable requirements of the NASD or an established stock
exchange), the Company shall obtain stockholder approval of any Plan amendment
in such a manner and to such a degree as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee
and the Board, which agreement must be in writing and signed by the Optionee
and the Company.
15. CONDITIONS UPON ISSUANCE OF SHARES.
Shares shall not be issued pursuant to the exercise of an Option unless
the exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
16. RESERVATION OF SHARES.
The Company, during the term of this Plan, will at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
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17. AGREEMENTS.
Options shall be evidenced by written agreements in such form as the
applicable Administrator shall approve from time to time.
18. INFORMATION TO OPTIONEES.
The Company shall provide to each Optionee, during the period for which
such Optionee has one or more Options outstanding, copies of all annual reports
and other information which are generally provided to all stockholders of the
Company. The Company shall not be required to provide such information to
persons whose duties in connection with the Company assure their access to
equivalent information.
19. GOVERNING LAW; CONSTRUCTION.
All rights and obligations under the Plan shall be governed by, and the
Plan shall be construed in accordance with, the laws of the State of Florida
without regard to the principles of conflicts of laws. Titles and headings to
Sections herein are for purposes of reference only, and shall in no way limit,
define or otherwise affect the meaning or interpretation of any provisions of
the Plan.
20. EFFECTIVE DATE OF AMENDED AND RESTATED PLAN.
The amendment and restatement of this Plan shall become effective, subject
to stockholder approval, on April 25, 1997. The amendment and restatement of
this Plan, and all Options granted pursuant to the amendment and restatement of
this Plan prior to stockholder approval, shall be void and of no further force
and effect unless the amendment and restatement of this Plan shall have been
approved by the requisite vote of the stockholders entitled to vote at a
meeting of the stockholders of the Company called for such purpose prior to
July 30, 1997. In the event such stockholder approval is not obtained, this
Plan shall continue in existence with the terms and conditions in effect prior
to the effective date of the amendment and restatement provided for hereby.
A-9
SUNPHARM CORPORATION
AMENDED AND RESTATED 1995 NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN
SunPharm Corporation, a Delaware corporation (the "Company"), hereby
amends and restates its 1995 Nonemployee Directors' Option Plan (this "Plan"),
effective as of April 25, 1997, subject to stockholder approval.
I. PURPOSE OF THE PLAN
The SUNPHARM CORPORATION 1995 NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN
(the "Plan") is intended to promote the interests of SUNPHARM CORPORATION, a
Delaware corporation (the "Company"), and its stockholders by helping to award
and retain highly-qualified independent directors and allowing them to develop
a sense of proprietorship and personal involvement in the development and
financial success of the Company. Accordingly, the Company shall grant to
directors of the Company who are not employees or consultants of the Company or
any of its subsidiaries ("Nonemployee Directors") the option ("Option") to
purchase shares of the common stock of the Company ("Stock"), as hereinafter
set forth. Options granted under the Plan shall be options which do not
constitute incentive stock options, within the meaning of section 422(b) of the
Internal Revenue Code of 1986, as amended.
II. OPTION AGREEMENTS
Each Option shall be evidenced by a written agreement in the form attached
to the Plan.
III. ELIGIBILITY OF OPTIONEE
Options may be granted only to individuals who are Nonemployee Directors
of the Company. Each Nonemployee Director who is elected to the Board of
Directors of the Company (the "Board") for the first time after the effective
date of the Plan shall receive, as of the date of his or her election and
without the exercise of the discretion of any person or persons, an Option
exercisable for 25,000 shares of Stock (subject to adjustment in the same
manner as provided in Paragraph VII hereof with respect to shares of Stock
subject to Options then outstanding). As of the date of the annual meeting of
the stockholders of the Company in each year that the Plan is in effect as
provided in Paragraph VI hereof, each Nonemployee Director then in office who
is not then entitled to receive an Option pursuant to the preceding sentence
shall receive, without the exercise of the discretion of any person or persons,
an Option exercisable for 5,000 shares of Stock, provided that the Chairman of
the Board of Directors then in office shall receive without the exercise of the
discretion of any person or persons, an Option exercisable for an additional
10,000 shares of Stock if such Chairman of the Board of Directors is a
Nonemployee Director (subject in each case to adjustment in the same manner as
provided in Paragraph VII hereof with respect to shares of Stock subject to
Options then outstanding). If, as of any date that the Plan is in effect,
there are not sufficient shares of Stock available under the Plan to allow for
the grant to each Nonemployee Director of an Option for the number of shares
provided herein, each Nonemployee Director shall receive an Option for his or
her pro-rata share of the total number of shares of Stock then available under
the Plan. All Options granted under the Plan shall be at the Option price set
forth in Paragraph V hereof and shall be subject to adjustment as provided in
Paragraph VII hereof.
IV. SHARES SUBJECT TO THE PLAN
The aggregate number of shares which may be issued under Options granted
under the Plan shall not exceed 300,000 shares of Stock. Such shares may
consist of authorized but unissued shares of Stock or previously issued shares
of Stock acquired by the Company. Any of such shares which remain unissued and
which are not subject to outstanding Options at the termination of the Plan
shall cease to be subject to the Plan, but, until termination of the Plan, the
Company shall at all times make available a sufficient number of shares to meet
the requirements of the Plan. Should
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any Option hereunder expire or terminate prior to its exercise in full, the
shares theretofore subject to such Option which may be issued under the Plan
shall be subject to adjustment in the same manner as provided in Paragraph VII
hereof with respect to shares of Stock subject to Options then outstanding.
Exercise of an Option shall result in a decrease in the number of shares of
Stock which may thereafter be available, both for purposes of the Plan and for
sale to any one individual, by the number of shares as to which the Option is
exercised.
V. OPTION PRICE
The purchase price of Stock issued under each Option shall be the fair
market value of Stock subject to the Option as of the date the Option is
granted. For all purposes under the Plan, the fair market value of a share of
Stock on a particular date shall be equal to the mean of the high and low sales
prices of the Stock (i) reported by the Nasdaq Stock Market on that date or
(ii) if the Stock is listed on a national stock exchange, reported on the stock
exchange composite tape on that date; or, in either case, if no prices are
reported on that date, on the last preceding date on which such prices of the
Stock are so reported. If the Stock is traded over the counter at the time a
determination of its fair market value is required to be made hereunder, its
fair market value shall be deemed to be equal to the average between the
reported high and low or closing bid and asked prices of Stock on the most
recent date on which Stock was publicly traded. In the event Stock is not
publicly traded at the time a determination of its value is required to be made
hereunder, the determination of its fair market value shall be made by the
Board in such manner as it deems appropriate.
VI. TERM OF PLAN
The Plan shall be effective on the date the Plan is approved by the
stockholders of the Company. Except with respect to Options then outstanding,
if not sooner terminated under the provisions of Paragraph VIII, the Plan shall
terminate upon and no further Options shall be granted after the expiration of
ten years from the date the Plan is approved by the stockholders of the
Company.
VII. RECAPITALIZATION OR REORGANIZATION
A. The existence of the Plan and the Options granted hereunder shall not
affect in any way the right or power of the Board or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization,
or other change in the Company's capital structure or its business, any merger
or consolidation of the Company, any issue of debt or equity securities, the
dissolution or liquidation of the Company or any sale, lease, exchange or other
disposition of all or any part of its assets or business or any other corporate
act or proceeding.
B. The shares with respect to which Options may be granted are shares of
Stock as presently constituted, but if, and whenever, prior to the expiration
of an Option theretofore granted, the Company shall effect a subdivision or
consolidation of shares of Stock or the payment of a stock dividend on Stock
without receipt of consideration by the Company, the number of shares of Stock
with respect to which such Option may thereafter be exercised (i) in the event
of an increase in the number of outstanding shares shall be proportionately
increased, and the purchase price per share shall be proportionately reduced,
and (ii) in the event of a reduction in the number of outstanding shares shall
be proportionately reduced, and the purchase price per share shall be
proportionately increased.
C. If the Company recapitalizes, reclassifies its capital stock, or
otherwise changes its capital structure (a "recapitalization"), the number and
class of shares of Stock covered by an Option theretofore granted shall be
adjusted so that such Option shall thereafter cover the number and class of
shares of stock and securities to which the optionee would have been entitled
pursuant to the terms of the recapitalization if, immediately prior to the
recapitalization, the optionee had been the holder of record of the number of
shares of Stock then covered by such Option.
D. Any adjustment provided for in Subparagraph (B) or (C) above shall be
subject to any required stockholder action.
E. Except as hereinbefore expressly provided, the issuance by the
Company of shares of stock of any class or securities convertible into shares
of stock of any class, for cash, property, labor or services, upon direct sale,
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upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, and in any case whether or not for fair value, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number of shares of Stock subject to Options theretofore granted or the
purchase price per share.
VIII. AMENDMENT OR TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with
respect to any shares for which Options have not theretofore been granted. The
Board shall have the right to alter or amend the Plan or any part thereof from
time to time; provided, that no change in any Option theretofore granted may be
made which would impair the rights of the optionee without the consent of such
optionee and provided, further, that the Board may not make any alteration or
amendment which would materially increase the benefits accruing to participants
under the Plan, increase the aggregate number of shares which may be issued
pursuant to the provisions of the Plan, change the class of individuals
eligible to receive Options under the Plan or extend the term of the Plan,
without the approval of the stockholders of the Company.
IX. SECURITIES LAWS
A. The Company shall not be obligated to issue any Stock pursuant to any
Options granted under the Plan at any time when the offering of the shares
covered by such Option have not been registered under the Securities Act of
1933, as amended, and such other state and federal laws, rules or regulations
as the Company deems applicable and, in the opinion of legal counsel for the
Company, there is no exemption from the registration requirements of such laws,
rules or regulations available for the offering and sale of such shares.
B. It is intended that the Plan and any grant of an Option made to a
person subject to Section 16 of the Securities Exchange Act of 1944, as amended
(the "1934 Act"), meet all of the requirements of Rule 16b-3, as currently in
effect or as hereinafter modified or amended ("Rule 16b-3"), promulgated under
the 1934 Act. If any provision of the Plan or any such Option would disqualify
the Plan or such Option under, or would otherwise not comply with, Rule 16b-3,
such provision or Option shall be construed or deemed amended to conform to
Rule 16b-3.
X. EFFECTIVE DATE OF AMENDED AND RESTATED PLAN
The amendment and restatement of this Plan shall become effective, subject
to stockholder approval, on April 25, 1997. The amendment and restatement of
this Plan, and all Options granted pursuant to the amendment and restatement of
this Plan prior to stockholder approval, shall be void and of no further force
and effect unless the amendment and restatement of this Plan shall have been
approved by the requisite vote of the stockholders entitled to vote at a
meeting of the stockholders of the Company called for such purpose prior to
July 30, 1997. In the event such stockholder approval is not obtained, this
Plan shall continue in existence with the terms and conditions in effect prior
to the effective date of the amendment and restatement provided for hereby.
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NONEMPLOYEE DIRECTOR'S STOCK OPTION AGREEMENT
AGREEMENT made as of the _____ day of __________, 19_____, between
SUNPHARM CORPORATION, a Delaware corporation (the "Company"), and
____________________ ("Director").
To carry out the purposes of the SUNPHARM CORPORATION 1995 NONEMPLOYEE
DIRECTORS' STOCK OPTION PLAN (the "Plan"), by affording Director the
opportunity to purchase shares of common stock of the Company ("Stock"), and in
consideration of the mutual agreements and other matters set forth herein and
in the Plan, the Company and Director hereby agree as follows:
1. GRANT OF OPTION. The Company hereby irrevocably grants the Director
the right and option ("Option") to purchase all or any part of an aggregate of
_______ shares of Stock, on the terms and conditions set forth herein and in
the Plan, which Plan is incorporated herein by reference as a part of this
Agreement. This Option shall not be treated as an incentive stock option
within the meaning of section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code").
2. PURCHASE PRICE. The purchase price of Stock purchased pursuant to
the exercise of this Option shall be $________ per share, which has been
determined to be not less than the fair market value of the Stock at the date
of grant of this Option. For all purposes of this Agreement, fair market value
of Stock shall be determined in accordance with the provisions of the Plan.
3. EXERCISE OF OPTION. Subject to the earlier expiration of this Option
as herein provided, this Option may be exercised, by written notice to the
Company at its principal executive offices addressed to the attention of Chief
Executive Officer, at any time and from time to time after the date of grant
hereof, but, except as otherwise provided below, this Option shall not be
exercisable for more than a percentage of the aggregate number of shares
offered by this Option determined by the number of full calendar months from
the first day of the calendar month coincident with or next following the date
of grant hereof to the date of such exercise, in accordance with the following
schedule:
Percentage of Shares
Number of Full Calendar Months That May Be Purchased
- ------------------------------ ---------------------
Less than 1 month 0.00%
1 month but less than 3 months 8.33%
2 months but less than 3 months 16.67%
3 months but less than 4 months 25.00%
4 months but less than 5 months 33.33%
5 months but less than 6 months 41.67%
6 months but less than 7 months 50.00%
7 months but less than 8 months 58.33%
8 months but less than 9 months 66.67%
9 months but less than 10 months 75.00%
10 months but less than 11 months 83.33%
11 months but less than 12 months 91.67%
12 months or more 100.00%
Notwithstanding the foregoing, if (i) the Company shall not be the
surviving entity in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity other than a previously wholly-owned
subsidiary of the Company), (ii) the Company sells, leases or exchanges or
agrees to sell, lease or exchange all or substantially all of its assets to any
other person or entity (other than a wholly-owned subsidiary of the Company),
(iii) the Company is to be dissolved and liquidated, (iv) any person or entity,
including a "group" as contemplated by Section 13(d)(3) of the Securities
Exchange Act of 1934, acquires or gains ownership or control (including,
without limitation, power to vote) of more than 50% of the outstanding shares
of the Company's voting stock (based upon voting power), or (v) as
B-4
a result of or in connection with a contested election of directors, the
persons who were directors of the Company before such election shall cease to
constitute a majority of the Board of Directors of the Company (each such
event is referred to herein as a "Corporate Change"), then effective as of the
earlier of (1) the date of approval by the stockholders of the Company of such
merger, consolidation, reorganization, sale, lease or exchange of assets or
dissolution or such election of directors or (2) the date of such Corporate
Change, this Option shall be exercisable in full.
This Option and all rights granted hereunder are not transferable by
Director other than by will or the laws of descent and distribution or pursuant
to a qualified domestic relations order as defined by the Code or Title 1 of
the Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder, and may be exercised during Director's lifetime only by Director or
Director's guardian or legal representative. This Option may be exercised only
while Director remains a member of the Board of Directors of the Company (the
"Board") and will terminate and cease to be exercisable upon Director's
termination of membership on the Board, except that:
(a) If Director's membership on the Board terminates by reason of
disability, this Option may be exercised in full by Director (or
Director's estate or the person who acquires this Option by will or the
laws of descent and distribution or otherwise by reason of the death of
Director) at any time during the period of one year following such
termination.
(b) If Director dies while a member of the Board, Director's estate,
or the person who acquires this Option by will or the laws of descent and
distribution or otherwise by reason of the death of Director, may exercise
this Option in full at any time during the period of one year following
the date of Director's death.
(c) If Director's membership on the Board terminates for any reason
other than as described in (a) or (b) above, this Option may be exercised
by Director at any time during the period of two years following such
termination, or by Director's estate (or the person who acquires this
Option by will or the laws of descent and distribution or otherwise by
reason of the death of Director) during a period of one year following
Director's death if Director dies during such two year period, but in each
case only as to the number of shares Director was entitled to purchase
hereunder upon exercise of this Option as of the date Director's
membership on the Board so terminates.
This Option shall not be exercisable in any event after the expiration of
ten years from the date of grant hereof. The purchase price of shares as to
which this Option is exercised shall be paid in full at the time of exercise
(A) in cash (including check, bank draft or money order payable to the order of
the Company), (B) by delivering to the Company shares of Stock having a fair
market value equal to the purchase price, or (C) any combination of cash or
Stock. No fraction of a share of Stock shall be issued by the Company upon
exercise of an Option or accepted by the Company in payment of the purchase
price thereof; rather, Director shall provide a cash payment for such amount as
is necessary to effect the issuance and acceptance of only whole shares of
Stock. Unless and until a certificate or certificates representing such shares
shall have been issued by the Company to Director, Director (or the person
permitted to exercise this Option in the event of Director's death) shall not
be or have any of the rights or privileges of a stockholder of the Company with
respect to shares acquirable upon an exercise of this Option.
4. WITHHOLDING OF TAX. To the extent that the exercise of this Option
or the disposition of shares of Stock acquired by exercise of this Option
results in compensation income to Director for federal or state income tax
purposes, Director shall deliver to the Company at the time of such exercise or
disposition such amount of money or shares of Stock as the Company may require
to meet its obligation under applicable tax laws or regulations, and, if
Director fails to do so, the Company is authorized to withhold from any cash or
Stock renumeration then or thereafter payable to Director any tax required to
be withheld by reason of such resulting compensation income. Upon an exercise
of this Option, the Company is further authorized in its discretion to satisfy
any such withholding requirement out of any cash or shares of Stock
distributable to Director upon such exercise.
5. STATUS OF STOCK. The Company intends to register for issuance under
the Securities Act of 1933, as amended (the "Act"), the shares of Stock
acquirable upon exercise of this Option, and to keep such registration
effective throughout the period this Option is exercisable. In the absence of
such effective registration or an available exemption
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from registration under the Act, issuance of shares of Stock acquirable upon
exercise of this Option will be delayed until registration of such shares is
effective or an exemption from registration under the Act is available. The
Company intends to use its best efforts to ensure that no such delay will
occur. In the event exemption from registration under the Act is available
upon an exercise of this Option, Director (or the person permitted to exercise
this Option in the event of Director's death or incapacity), if requested by
the Company to do so, will execute and deliver to the Company in writing an
agreement containing such provisions as the Company may require to assure
compliance with applicable securities laws.
Director agrees that the shares of Stock which Director may acquire by
exercising this Option will not be sold or otherwise disposed of in any manner
which would constitute a violation of any applicable federal or state
securities laws. Director also agrees (i) that the certificates representing
the shares of Stock purchased under this Option may bear such legend or legends
as the Company deems appropriate in order to assure compliance with applicable
securities laws, (ii) that the Company may refuse to register the transfer of
the shares of Stock purchased under this Option on the stock transfer records
of the Company if such proposed transfer would in the opinion of counsel
satisfactory to the Company constitute a violation of any applicable securities
law and (iii) that the Company may give related instructions to its transfer
agent, if any, to stop registration of the transfer of the shares of Stock
purchased under this Option.
6. BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of any successors to the Company and all persons lawfully claiming
under Director.
7. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officer thereunto duly authorized, and Director has executed
this Agreement, all as of the day and year first above written.
SUNPHARM CORPORATION
By:
-----------------------------------
DIRECTOR
By:
-----------------------------------
B-6
SUNPHARM CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
TO BE HELD JUNE 23, 1997
The undersigned hereby appoints Stefan Borg and James W. Kesterson, and each
of them, as proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and vote, as designated on the reverse side, all
of the shares of the common stock of SunPharm Corporation (the "Company") held
of record by the undersigned on April 25, 1997 at the Annual Meeting (the
"Annual Meeting") of Stockholders of the Company to be held on Monday, June 23,
1997, at 10:00 a.m., local time, at the Company's offices at 4651 Salisbury
Road, Suite 205, Jacksonville, Florida, and any adjournment(s) thereof.
(TO BE DATED AND SIGNED ON REVERSE SIDE)
WITHOLD
FOR AUTHORITY
1. To elect nine directors of the Company each to serve / / / /
until the Company's next Annual Meeting of Stockholders
or until their respective successors have been duly
elected and qualified.
[INSTRUCTION: To withhold authority is vote for any individual nominee, write
such name or names in the space provided below.]
Nominees: Stefan Borg
- ----------------------------- Philip R. Tracy
Charles L. Dimmler, III
Jerry T. Jackson
Robert S. Janicki, M.D.
Norman H. Lipoff
Jacques F. Rejeange
Robert A. Schoellhorn
George B. Schwartz
FOR AGAINST ABSTAIN
2. To vote upon a proposal to amend and restate the / / / / / /
SunPharm Corporation 1994 Stock Option Plan;
3. To vote upon a proposal to amend and restate the / / / / / /
SunPharm Corporation 1995 Nonemployee Directors'
Stock Option Plan;
4. To ratify and approve the appointment of Deliotte & / / / / / /
Touche LLP as the Company's independent public
accountants for its fiscal year ending December 31,
1997; and
5. To act upon such other business as may promptly come / / / / / /
before the meeting or any adjournments thereof.
Only stockholders of record at the close of business on April 25,
1997 will be entitled to notice of and to vote at the Annual Meeting.
It is important that your shares be represented at the Annual Meeting
regardless of whether you plan to attend. THEREFORE, PLEASE MARK, DATE AND SIGN
THIS PROXY AND RETURN IT IN THE ACCOMPANYING POSTPAID ENVELOPE AS PROMPTLY AS
POSSIBLE. If you are present at the Annual Meeting, and wish to do so, you may
revoke the Proxy and vote in person.
SIGNATURE DATE SIGNATURE DATE
---------------- ------ ----------------- ------
Signature if held jointly
Note: Please execute this Proxy as your name appears hereon. When shares are
held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as
such. If a corporation, please sign in full corporate name by the
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.