Document:

Exhibit 10.40

THIS WARRANT HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES
LAWS.  NO SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO,
(ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO
THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, OR (iii) RECEIPT OF A
NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES.

SUNESIS
PHARMACEUTICALS, INC.

WARRANT TO
PURCHASE SHARES

OF SERIES PREFERRED STOCK

THIS CERTIFIES THAT, for
value received, HORIZON TECHNOLOGY FUNDING COMPANY II LLC and its assignees are
entitled to subscribe for and purchase that number of the fully paid and
nonassessable shares of Series Preferred Stock (as adjusted pursuant to
Section 4 hereof, the “Shares”) of SUNESIS PHARMACEUTICALS, INC. a
Delaware corporation (the “Company”), as is determined pursuant to the next
paragraph hereof at the price per share as is determined pursuant to the next
paragraph hereof  (such price and such
other price as shall result, from time to time, from the adjustments specified
in Section 4 hereof is herein referred to as the “Warrant Price”), subject to
the provisions and upon the terms and conditions hereinafter set forth.  As used herein, (a) the term “Series
Preferred” shall mean the Company’s Series C Preferred Stock or, if the Company
completes a Qualified Financing (as defined below) with an effective price per
share (on a common stock equivalent basis) less than $4.80, the type of stock
sold in such Qualified Financing and any stock into or for which such Series
Preferred Stock may hereafter be converted or exchanged, and after the
conversion of the Series Preferred Stock to Common Stock shall mean the Company’s
Common Stock, (b) the term “Date of Grant” shall mean August 25,  2005, and (c) the term “Other Warrants”
shall mean any other warrants issued by the Company in connection with the
transaction with respect to which this Warrant was issued, and any warrant
issued upon transfer or partial exercise of or in lieu of this Warrant.  The term “Warrant” as used herein shall be
deemed to include Other Warrants unless the context clearly requires otherwise.

The Warrant Price shall be the lower of (i) $4.80 and (ii) the lowest
effective price per share (on a common stock equivalent basis and taking into
account any securities issued together with the preferred stock) at which
shares of the Company’s convertible preferred stock are sold in a Qualified
Financing.  A “Qualified Financing” shall
mean the sale, after the Date of Grant and prior to the earlier to occur of (A)
the exercise of this Warrant or (B) a Public Offering, of the convertible
preferred stock of the Company to purchasers which include venture capital
investors in an aggregate cash amount not less than $10,000,000.  The number of shares for which this Warrant
is exercisable shall equal the sum of (a) the nearest whole number determined
by dividing $275,000 by the Warrant Price plus (b) if and only if, the Company
shall have borrowed Loan A (as defined in that certain Venture Loan and
Security Agreement by and among the Company, Horizon Technology Funding 

 

 

Company LLC (“Horizon”) and Oxford Finance Corporation
(“Oxford”) dated on or about the Date of Grant (the “Loan Agreement”)), the
nearest whole number determined by dividing $75,000 by the Warrant Price plus
(c) if and only if, the Company shall have borrowed Loan B (as defined in the
Loan Agreement), the nearest whole number determined by dividing $75,000 by the
Warrant Price  plus (d) if and
only if, the Company shall have borrowed Loan C (as defined in the Loan
Agreement), the nearest whole number determined by dividing $125,000 by the
Warrant Price.

1.     Term.  The purchase right represented by this
Warrant is exercisable, in whole or in part, at any time and from time to time
from the Date of Grant until the tenth (10th) anniversary of the Date of Grant.

2.     Method
of Exercise; Payment; Issuance of New Warrant.  Subject to Section 1 hereof, the
purchase right represented by this Warrant may be exercised by the holder
hereof, in whole or in part and from time to time, at the election of the
holder hereof, by (a) the surrender of this Warrant (with the notice of
exercise substantially in the form attached hereto as Exhibit A-1 duly
completed and executed) at the principal office of the Company and by the
payment to the Company, by certified or bank check, or by wire transfer to an
account designated by the Company (a “Wire Transfer”) of an amount equal to the
then applicable Warrant Price multiplied by the number of Shares then being
purchased; (b) if in connection with a registered public offering of the
Company’s securities, the surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit A-2 duly completed and executed)
at the principal office of the Company together with notice of arrangements
reasonably satisfactory to the Company for payment to the Company either by
certified or bank check or by Wire Transfer from the proceeds of the sale of
shares to be sold by the holder in such public offering of an amount equal to
the then applicable Warrant Price per share multiplied by the number of Shares
then being purchased; or (c) exercise of the “net issuance” right provided
for in Section 10.2 hereof.  The person
or persons in whose name(s) any certificate(s) representing shares of Series
Preferred shall be issuable upon exercise of this Warrant shall be deemed to
have become the holder(s) of record of, and shall be treated for all purposes
as the record holder(s) of, the shares represented thereby (and such shares
shall be deemed to have been issued) immediately prior to the close of business
on the date or dates upon which this Warrant is exercised.  In the event of any exercise of the rights
represented by this Warrant, certificates for the shares of stock so purchased
shall be delivered to the holder hereof as soon as practicable and in any event
within thirty (30) days after such exercise and, unless this Warrant has been
fully exercised or expired, a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as practicable and
in any event within such thirty-day period; provided, however, at such time as
the Company is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended, if requested by the holder of this Warrant, the
Company shall use reasonable efforts to cause its transfer agent to deliver the
certificate representing Shares issued upon exercise of this Warrant to a
broker or other person (as directed by the holder exercising this Warrant)
within the time period required to settle any trade made by the holder after
exercise of this Warrant.

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3.     Stock
Fully Paid; Reservation of Shares. 
All Shares that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance pursuant to the terms and
conditions herein, be fully paid and nonassessable, and free from all
preemptive rights and taxes, liens and charges with respect to the issue
thereof.  During the period within which
the rights represented by this Warrant may be exercised, the Company will at
all times have authorized, and reserved for the purpose of the issue upon
exercise of the purchase rights evidenced by this Warrant, a sufficient number
of shares of its Series Preferred to provide for the exercise of the rights
represented by this Warrant and a sufficient number of shares of its Common
Stock to provide for the conversion of the Series Preferred into Common Stock.

4.     Adjustment
of Warrant Price and Number of Shares. 
The number and kind of securities purchasable upon the exercise of this
Warrant and the Warrant Price shall be subject to adjustment from time to time
upon the occurrence of certain events, as follows:

(a)           Reclassification
or Merger.  In case of any
reclassification or change of securities of the class issuable upon exercise of
this Warrant (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination), or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company
is the acquiring and the surviving corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant), or in case of any sale of all or substantially all of the assets
of the Company, the Company, or such successor or purchasing corporation, as
the case may be, shall duly execute and deliver to the holder of this Warrant a
new Warrant (in form and substance reasonably satisfactory to the  holder of this Warrant), so that the holder
of this Warrant shall have the right to receive upon exercise of this Warrant,
at a total purchase price equal to that payable upon the exercise of the
unexercised portion of this Warrant, and in lieu of the shares of Series Preferred
theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reclassification, change, merger or sale by a holder of the number of shares of
Series Preferred then purchasable under this Warrant.  Any new Warrant shall provide for adjustments
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 4.  The
provisions of this Section 4(a) shall similarly apply to successive
reclassifications, changes, mergers and sales.

(b)           Subdivision
or Combination of Shares.  If the
Company at any time while this Warrant remains outstanding and unexpired shall
subdivide or combine its outstanding shares of Series Preferred, the Warrant
Price shall be proportionately decreased and the number of Shares issuable
hereunder shall be proportionately increased in the case of a subdivision and
the Warrant Price shall be proportionately increased and the number of Shares
issuable hereunder shall be proportionately decreased in the case of a
combination.

(c)           Stock
Dividends and Other Distributions. 
If the Company at any time while this Warrant is outstanding and
unexpired shall (i) pay a dividend with respect to Series Preferred
payable in Series Preferred, then the Warrant Price shall be adjusted, from and
after the date of 

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determination
of shareholders entitled to receive such dividend or distribution, to that
price determined by multiplying the Warrant Price in effect immediately prior
to such date of determination by a fraction (A) the numerator of which
shall be the total number of shares of Series Preferred outstanding immediately
prior to such dividend or distribution, and (B) the denominator of which
shall be the total number of shares of Series Preferred outstanding immediately
after such dividend or distribution; or (ii) make any other distribution
with respect to Series Preferred (except any distribution specifically provided
for in Sections 4(a) and 4(b)), then, in each such case, provision shall
be made by the Company such that the holder of this Warrant shall receive upon
exercise of this Warrant a proportionate share of any such dividend or
distribution as though it were the holder of the Series Preferred (or Common
Stock issuable upon conversion thereof) as of the record date fixed for the
determination of the shareholders of the Company entitled to receive such
dividend or distribution.

(d)           Adjustment
of Number of Shares.  Upon each
adjustment in the Warrant Price, the number of Shares of Series Preferred
purchasable hereunder shall be adjusted, to the nearest whole share, to the
product obtained by multiplying the number of Shares purchasable immediately
prior to such adjustment in the Warrant Price by a fraction, the numerator of
which shall be the Warrant Price immediately prior to such adjustment and the
denominator of which shall be the Warrant Price immediately thereafter.

(e)           Antidilution
Rights.  The other antidilution
rights applicable to the Shares of Series Preferred purchasable hereunder are
set forth in the Company’s Certificate of Incorporation, as amended through the
Date of Grant (the “Charter”).  Such
antidilution rights shall not be restated, amended, modified or waived in any
manner (i) that is adverse to the holder hereof and (ii) that results in
different treatment for the Holder with respect to the Shares than for other
holders of Series Preferred without such Holder’s prior written consent.  The Company shall promptly provide the holder
hereof with any restatement, amendment, modification or waiver of the Charter
promptly after the same has been made.

5.     Notice
of Adjustments.  Whenever the Warrant
Price or the number of Shares purchasable hereunder shall be adjusted pursuant
to Section 4 hereof, the Company shall make a certificate signed by its
chief financial officer setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which
such adjustment was calculated, and the Warrant Price and the number of Shares
purchasable hereunder after giving effect to such adjustment, and shall cause
copies of such certificate to be mailed (without regard to Section 13
hereof, by first class mail, postage prepaid) to the holder of this
Warrant.  In addition, whenever the
conversion price or conversion ratio of the Series Preferred shall be adjusted,
the Company shall make a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
and the conversion price or ratio of the Series Preferred after giving effect
to such adjustment, and shall cause copies of such certificate to be mailed
(without regard to Section 13 hereof, by first class mail, postage
prepaid) to the holder of this Warrant. Whenever the Warrant Price or the
number of Shares purchasable hereunder shall be adjusted pursuant to the
occurrence of 

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a Qualified Financing, the Company shall make a
certificate signed by its chief financial officer setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated, and the Warrant Price and the
number of Shares purchasable hereunder after giving effect to such adjustment,
and shall cause copies of such certificate to be mailed (without regard to
Section 13 hereof, by first class mail, postage prepaid) to the holder of
this Warrant.

6.     Fractional
Shares.  No fractional shares of
Series Preferred will be issued in connection with any exercise hereunder, but
in lieu of such fractional shares the Company shall make a cash payment
therefor based on the fair market value of the Series Preferred on the date of
exercise as reasonably determined in good faith by the Company’s Board of
Directors.

7.     Compliance
with Act; Disposition of Warrant or Shares of Series Preferred.

(a)           Compliance
with Act.  The holder of this
Warrant, by acceptance hereof, agrees that this Warrant, and the shares of
Series Preferred to be issued upon exercise hereof and any Common Stock issued
upon conversion thereof are being acquired for investment and that such holder
will not offer, sell or otherwise dispose of this Warrant, or any shares of
Series Preferred to be issued upon exercise hereof or any Common Stock issued
upon conversion thereof except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended (the “Act”) or any
applicable state securities laws.  Upon
exercise of this Warrant, unless the Shares being acquired are registered under
the Act and any applicable state securities laws or an exemption from such
registration is available, the holder hereof shall confirm in writing that the
shares of Series Preferred so purchased (and any shares of Common Stock issued
upon conversion thereof) are being acquired for investment and not with a view
toward distribution or resale in violation of the Act and shall confirm such
other matters related thereto as may be reasonably requested by the
Company.  This Warrant and all shares of
Series Preferred issued upon exercise of this Warrant and all shares of Common
Stock issued upon conversion thereof (unless registered under the Act and any
applicable state securities laws) shall be stamped or imprinted with a legend
in substantially the following form:

“THE SECURITIES EVIDENCED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS.  NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED,
OR (iii) RECEIPT OF A NO-ACTION LETTER FROM THE APPROPRIATE GOVERNMENTAL
AUTHORITIES.”

Said legend shall be removed by the Company, upon the request of a
holder, at such time as the restrictions on the transfer of the applicable
security shall have terminated.  In
addition, in connection with the issuance of this Warrant, the holder
specifically represents to the Company by acceptance of this Warrant as
follows:

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(1)           The
holder is aware of the Company’s business affairs and financial condition, and
has acquired information about the Company sufficient to reach an informed and
knowledgeable decision to acquire this Warrant. 
The holder is acquiring this Warrant for its own account for investment
purposes only and not with a view to, or for the resale in connection with, any
“distribution” thereof in violation of the Act.

(2)           The
holder understands that this Warrant has not been registered under the Act in
reliance upon a specific exemption therefrom, which exemption depends upon,
among other things, the bona fide nature of the holder’s investment intent as
expressed herein.

(3)           The
holder further understands that this Warrant must be held indefinitely unless
subsequently registered under the Act and qualified under any applicable state
securities laws, or unless exemptions from registration and qualification are
otherwise available.  The holder is aware
of the provisions of Rule 144, promulgated under the Act.

(4)           The
holder is an “accredited investor” as such term is defined in Rule 501 of
Regulation D promulgated under the Act.

(b)           Disposition
of Warrant or Shares.    This Warrant
and any shares of Series Preferred acquired pursuant to the exercise or
conversion of this Warrant may be transferred only pursuant to a registration
statement filed under the Securities Act of 1933, as amended, or an exemption
from such registration.  Subject to such
restrictions, the Company shall transfer this Warrant from time to time upon
the books to be maintained by the Company for that purpose, upon surrender
thereof for transfer properly endorsed or accompanied by appropriate
instructions for transfer and such other documents as may be reasonably
required by the Company, including, if required by the Company, an opinion of
counsel to the effect that such transfer is exempt from the registration
requirements of the Securities Act of 1933, as amended, to establish that such
transfer is being made in accordance with the terms hereof, and a new Warrant
shall be issued to the transferee and the surrendered Warrant shall be
cancelled by the Company.  Each
certificate representing this Warrant or the shares of Series Preferred thus
transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a
legend as to the applicable restrictions on transferability in order to ensure
compliance with such laws, unless such legend is not required in order to
ensure compliance with such laws.  The
Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.

(c)           Applicability
of Restrictions.  Neither any
restrictions of any legend described in this Warrant nor the requirements of
Section 7(b) above shall apply to any transfer of, or grant of a security
interest in, this Warrant (or the Series Preferred or Common Stock obtainable
upon exercise thereof) or any part hereof (i) to a partner of the holder
if the holder is a partnership or to a member of the holder if the holder is a
limited liability company, (ii) to a partnership of which the holder is a
partner or to a limited liability company of which the holder is a member, or
(iii) to any affiliate of the holder if the holder is a corporation; provided,
however, in any such transfer, if applicable, the transferee shall on
the Company’s request agree in writing to be bound by the terms of this Warrant
as if an original holder hereof.

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8.     Rights
as Shareholders; Information.  No
holder of this Warrant, as such, shall be entitled to vote or receive dividends
or be deemed the holder of Series Preferred or any other securities of the
Company which may at any time be issuable upon the exercise hereof for any
purpose, nor shall anything contained herein be construed to confer upon the
holder of this Warrant, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until
this Warrant shall have been exercised and the Shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.  Notwithstanding the foregoing, the Company
will transmit to the holder of this Warrant such information, documents and
reports as are generally distributed to the holders of any class or series of
the securities of the Company concurrently with the distribution thereof to the
shareholders.

9.             Registration
Rights.  The Holder shall become a
party to the Eighth Amended and Restated Investor Rights Agreement, dated as of
August 30, 2004 and as amended through the Date of Grant (the “Investor Rights
Agreement), by and among the Company and the other parties listed on the
signature pages thereto.  The Common
Stock of the Company obtained upon conversion of the Series Preferred shall be “Registrable
Securities” under the Investor Rights Agreement.

10.   Additional
Rights.

10.1         Acquisition
Transactions.  The Company shall
provide the holder of this Warrant with at least twenty (20) days’ written
notice prior to closing thereof of the terms and conditions of any of the
following transactions (to the extent the Company has notice thereof):
(i) the sale, lease, exchange, conveyance or other disposition of all or
substantially all of the Company’s property or business, or (ii) its
merger into or consolidation with any other corporation (other than a
wholly-owned subsidiary of the Company), or any transaction (including a merger
or other reorganization) or series of related transactions, in which more than
50% of the voting power of the Company is disposed of.

10.2         Right to Convert
Warrant into Stock:  Net Issuance.

(a)           Right
to Convert.  In addition to and
without limiting the rights of the holder under the terms of this Warrant, the
holder shall have the right to convert this Warrant or any portion thereof (the
“Conversion Right”) into shares of Series Preferred as provided in this Section
10.2 at any time or from time to time during the term of this Warrant.  Upon exercise of the Conversion Right with
respect to a particular number of shares subject to this Warrant (the “Converted
Warrant Shares”), the Company shall deliver to the holder (without payment by
the holder of any exercise price or any cash or other consideration) that
number of shares of fully paid and nonassessable Series Preferred as is
determined according to the following formula:

X =   B - A  

Y

Where:      X =                                                                    the
number of shares of Series Preferred that shall be issued to holder

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Y =                                                                  the
fair market value of one share of Series Preferred

A =                                                                the
aggregate Warrant Price of the specified number of Converted Warrant Shares
immediately prior to the exercise of the Conversion Right (i.e.,
the number of Converted Warrant Shares multiplied by
the Warrant Price)

B =                                                                  the
aggregate fair market value of the specified number of Converted Warrant Shares
(i.e., the number of Converted Warrant
Shares multiplied by the fair market value of
one Converted Warrant Share)

No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to
the holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined).  For purposes of Section 10 of this
Warrant, shares issued pursuant to the Conversion Right shall be treated as if
they were issued upon the exercise of this Warrant.

(b)           Method
of Exercise.  The Conversion Right
may be exercised by the holder by the surrender of this Warrant at the
principal office of the Company together with a written statement (which may be
in the form of Exhibit A-1 or Exhibit A-2 hereto) specifying that the
holder thereby intends to exercise the Conversion Right and indicating the
number of shares subject to this Warrant which are being surrendered (referred
to in Section 10.2(a) hereof as the Converted Warrant Shares) in exercise
of the Conversion Right.  Such conversion
shall be effective upon receipt by the Company of this Warrant together with
the aforesaid written statement, or on such later date as is specified therein
(the “Conversion Date”), and, at the election of the holder hereof, may be made
contingent upon the closing of the sale of the Company’s Common Stock to the
public in a public offering pursuant to a Registration Statement under the Act
(a “Public Offering”).  Certificates for
the shares issuable upon exercise of the Conversion Right and, if applicable, a
new warrant evidencing the balance of the shares remaining subject to this
Warrant, shall be issued as of the Conversion Date and shall be delivered to
the holder within thirty (30) days following the Conversion Date.

(c)           Determination
of Fair Market Value.  For purposes
of this Section 10.2, “fair market value” of a share of Series Preferred
(or Common Stock if the Series Preferred has been automatically converted into
Common Stock) as of a particular date (the “Determination Date”) shall mean:

(i)    If the
Conversion Right is exercised in connection with and contingent upon a Public
Offering, and if the Company’s Registration Statement relating to such Public
Offering (“Registration Statement”) has been declared effective by the
Securities and Exchange Commission, then the initial “Price to Public”
specified in the final prospectus with respect to such offering.

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(ii)   If the
Conversion Right is not exercised in connection with and contingent upon a
Public Offering, then as follows:

(A)          If traded on a securities exchange,
the fair market value of the Common Stock shall be deemed to be the average of
the closing prices of the Common Stock on such exchange over the five trading
days immediately prior to the Determination Date, and the fair market value of
the Series Preferred shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into which each share
of Series Preferred is then convertible;

(B)           If traded on the Nasdaq Stock Market
or other over-the-counter system, the fair market value of the Common Stock
shall be deemed to be the average of the closing bid prices of the Common Stock
over the five trading days immediately prior to the Determination Date, and the
fair market value of the Series Preferred shall be deemed to be such fair
market value of the Common Stock multiplied by the number of shares of Common
Stock into which each share of Series Preferred is then convertible; and

(C)           If there is no public market for the
Common Stock, then fair market value shall be determined by the Board of
Directors of the Company in good faith.

In making a determination
under clauses (A) or (B) above, if on the Determination Date, five trading days
had not passed since the closing of the Company’s Public Offering, then the
fair market value of the Common Stock shall be the average closing prices or
closing bid prices, as applicable, for the shorter period beginning on and
including the date of the Public Offering and ending on the trading day prior
to the Determination Date (or if such period includes only one trading day the
closing price or closing bid price, as applicable, for such trading day).  If closing prices or closing bid prices are
no longer reported by a securities exchange or other trading system, the
closing price or closing bid price shall be that which is reported by such
securities exchange or other trading system at 4:00 p.m. New York City time on
the applicable trading day.

10.3         Exercise Prior to
Expiration.  To the extent this
Warrant is not previously exercised as to all of the Shares subject hereto, and
if the fair market value of one share of the Series Preferred is greater than
the Warrant Price then in effect, this Warrant shall be deemed automatically
exercised pursuant to Section 10.2 above (even if not surrendered)
immediately before its expiration.  For
purposes of such automatic exercise, the fair market value of one share of the
Series Preferred upon such expiration shall be determined pursuant to
Section 10.2(c).  To the extent this
Warrant or any portion thereof is deemed automatically exercised pursuant to
this Section 10.3, the Company agrees to promptly notify the holder hereof
of the number of Shares, if any, the holder hereof is to receive by reason of
such automatic exercise.

11.   Representations
and Warranties.  The Company
represents and warrants to the holder of this Warrant as follows:

(a)           This
Warrant has been duly authorized and executed by the Company and is a valid and
binding obligation of the Company enforceable in accordance with its terms,
subject to 

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laws of
general application relating to bankruptcy, insolvency and the relief of
debtors and the rules of law or principles at equity governing specific
performance, injunctive relief and other equitable remedies.

(b)           The
Shares have been duly authorized and reserved for issuance by the Company and,
when issued in accordance with the terms hereof, will be validly issued, fully
paid and nonassessable and free from preemptive rights.

(c)           The
rights, preferences, privileges and restrictions granted to or imposed upon the
Series Preferred and the holders thereof are as set forth in the Charter, and
on the Date of Grant, each share of the Series Preferred represented by this
Warrant is convertible into one share of Common Stock.

(d)           The
shares of Common Stock issuable upon conversion of the Shares have been duly
authorized and reserved for issuance by the Company and, when issued in
accordance with the terms of the Charter will be validly issued, fully paid and
nonassessable.

(e)           The
execution and delivery of this Warrant are not, and the issuance of the Shares
upon exercise of this Warrant in accordance with the terms hereof will not be,
inconsistent with the Company’s Charter or by-laws, do not and will not
contravene any law, governmental rule or regulation, judgment or order
applicable to the Company, and do not and will not conflict with or contravene
any provision of, or constitute a default under, any indenture, mortgage,
contract or other instrument of which the Company is a party or by which it is
bound or require the consent or approval of, the giving of notice to, the
registration or filing with or the taking of any action in respect of or by,
any Federal, state or local government authority or agency or other person,
except for the filing of notices pursuant to federal and state securities laws,
which filings will be effected by the time required thereby.

(f)            There
are no actions, suits, audits, investigations or proceedings pending or, to the
knowledge of the Company, threatened against the Company in any court or before
any governmental commission, board or authority which, if adversely determined,
could have a material adverse effect on the ability of the Company to perform
its obligations under this Warrant.

(g)           The
number of shares of Common Stock of the Company outstanding on the date hereof,
on a fully diluted basis (assuming the conversion of all outstanding
convertible securities and the exercise of all outstanding options and
warrants), does not exceed 54,000,000 shares.

12.   Modification
and Waiver.  This Warrant and any
provision hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of the same
is sought.

13.   Notices.  Any notice, request, communication or other
document required or permitted to be given or delivered to the holder hereof or
the Company shall be delivered, or shall be sent by certified or registered
mail, postage prepaid, to each such holder at its address as shown on the books

10

 

of the Company or to the Company at the address
indicated therefor on the signature page of this Warrant.

14.   Binding
Effect on Successors.  This Warrant
shall be binding upon any corporation succeeding the Company by merger,
consolidation or acquisition of all or substantially all of the Company’s
assets, and all of the obligations of the Company relating to the Series
Preferred issuable upon the exercise or conversion of this Warrant shall
survive the exercise, conversion and termination of this Warrant and all of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof.

15.   Lost
Warrants or Stock Certificates.  The
Company covenants to the holder hereof that, upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant or any stock certificate and, in the case of any
such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon surrender
and cancellation of such Warrant or stock certificate, the Company will make
and deliver a new Warrant or stock certificate, of like tenor, in lieu of the
lost, stolen, destroyed or mutilated Warrant or stock certificate.

16.   Descriptive
Headings.  The descriptive headings
of the various Sections of this Warrant are inserted for convenience only and
do not constitute a part of this Warrant. 
The language in this Warrant shall be construed as to its fair meaning
without regard to which party drafted this Warrant.

17.   Governing
Law.  This Warrant shall be construed
and enforced in accordance with, and the rights of the parties shall be
governed by, the laws of the State of Delaware.

18.   Survival
of Representations, Warranties and Agreements.  All representations and warranties of the
Company and the holder hereof contained herein shall survive the Date of Grant,
the exercise or conversion of this Warrant (or any part hereof) or the
termination or expiration of rights hereunder. 
All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.

19.   Remedies.  In case any one or more of the covenants and
agreements contained in this Warrant shall have been breached, the holders
hereof (in the case of a breach by the Company), or the Company (in the case of
a breach by a holder), may proceed to protect and enforce their or its rights
either by suit in equity and/or by action at law, including, but not limited
to, an action for damages as a result of any such breach and/or an action for
specific performance of any such covenant or agreement contained in this
Warrant.

20.   No
Impairment of Rights.  The Company
will not, by amendment of its Charter or through any other means, avoid or seek
to avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the holder of this Warrant against impairment.

11

 

21.   Severability.  The invalidity or unenforceability of any
provision of this Warrant in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction, or affect any other
provision of this Warrant, which shall remain in full force and effect.

22.   Recovery
of Litigation Costs.  If any legal
action or other proceeding is brought for the enforcement of this Warrant, or
because of an alleged dispute, breach, default, or misrepresentation in
connection with any of the provisions of this Warrant, the successful or
prevailing party or parties shall be entitled to recover reasonable attorneys’ fees
and other costs incurred in that action or proceeding, in addition to any other
relief to which it or they may be entitled.

23.   Entire
Agreement; Modification.  This
Warrant constitutes the entire agreement between the parties pertaining to the
subject matter contained in it and supersedes all prior and contemporaneous
agreements, representations, and undertakings of the parties, whether oral or
written, with respect to such subject matter.

12

 

The Company has caused this Warrant to be duly executed and delivered
as of the Date of Grant specified above.

 

	
   

  	
  SUNESIS PHARMACEUTICALS, INC.

  
	
   

  	
  By:

  	
  /s/ Eric Bjerkholt

  
	
   

  	
  Name:

  	
   Eric Bjerkholt

  
	
   

  	
  Title:

  	
  Senior Vice President,
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  341 Oyster Point
  Boulevard

  
	
   

  	
   

  	
  South San Francisco, CA
  94080

  
	
   

  	
   

  	
   

  
				

13

 

EXHIBIT A-1

NOTICE OF EXERCISE

To:          SUNESIS PHARMACEUTICALS, INC. (the “Company”)

1.             The undersigned hereby:

o                                    elects
to purchase________ shares of [Series Preferred Stock] [Common Stock] of the
Company pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price of such shares in full, or

o                                    elects
to exercise its net issuance rights pursuant to Section 10.2 of the
attached Warrant with respect to________Shares of [Series Preferred Stock]
[Common Stock].

2.             Please issue a
certificate or certificates representing ________ shares in the name of the
undersigned or in such other name or names as are specified below:

 

	
   

  
	
  (Name)

   

  
	
   

  
	
  (Address)

  

3.             The undersigned
represents that the aforesaid shares are being acquired for the account of the
undersigned for investment and not with a view to, or for resale in connection
with, the distribution thereof and that the undersigned has no present
intention of distributing or reselling such shares, all except as in compliance
with applicable securities laws.

 

	
   

  	
   

  
	
   

  	
  (Signature)

  

                                

(Date)

 

 

EXHIBIT A-2

NOTICE OF EXERCISE

To:          SUNESIS PHARMACEUTICALS, INC. (the “Company”)

1.             Contingent upon and
effective immediately prior to the closing (the “Closing”) of the Company’s
public offering contemplated by the Registration Statement on Form S___,
filed________, 200__, the undersigned hereby:

o            elects to purchase________shares of
[Series Preferred Stock] [Common Stock] of the Company (or such lesser number
of shares as may be sold on behalf of the undersigned at the Closing) pursuant
to the terms of the attached Warrant, or

o            elects to exercise its net issuance
rights pursuant to Section 10.2 of the attached Warrant with respect
to________Shares of [Series Preferred Stock] [Common Stock].

2.             Please deliver to
the custodian for the selling shareholders a stock certificate representing
such________shares.

3.             The undersigned has instructed the
custodian for the selling shareholders to deliver to the Company $________or,
if less, the net proceeds due the undersigned from the sale of shares in the
aforesaid public offering.  If such net
proceeds are less than the purchase price for such shares, the undersigned
agrees to deliver the difference to the Company prior to the Closing.

 

	
   

  	
   

  
	
   

  	
  (Signature)

  

                                                

(Date)Exhibit 10.41

THIS WARRANT HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES
LAWS.  NO SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO,
(ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO
THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, OR (iii) RECEIPT OF A
NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES.

 

	
   

  	
  SUNESIS PHARMACEUTICALS, INC.

  	
   

  

WARRANT TO
PURCHASE SHARES

OF SERIES PREFERRED STOCK

THIS CERTIFIES THAT, for
value received, HORIZON TECHNOLOGY FUNDING COMPANY III LLC and its assignees
are entitled to subscribe for and purchase that number of the fully paid and
nonassessable shares of Series Preferred Stock (as adjusted pursuant to
Section 4 hereof, the “Shares”) of SUNESIS PHARMACEUTICALS, INC. a
Delaware corporation (the “Company”), as is determined pursuant to the next
paragraph hereof at the price per share as is determined pursuant to the next
paragraph hereof  (such price and such
other price as shall result, from time to time, from the adjustments specified
in Section 4 hereof is herein referred to as the “Warrant Price”), subject to
the provisions and upon the terms and conditions hereinafter set forth.  As used herein, (a) the term “Series
Preferred” shall mean the Company’s Series C Preferred Stock or, if the Company
completes a Qualified Financing (as defined below) with an effective price per
share (on a common stock equivalent basis) less than $4.80, the type of stock
sold in such Qualified Financing and any stock into or for which such Series
Preferred Stock may hereafter be converted or exchanged, and after the
conversion of the Series Preferred Stock to Common Stock shall mean the Company’s
Common Stock, (b) the term “Date of Grant” shall mean August 25,  2005, and (c) the term “Other Warrants”
shall mean any other warrants issued by the Company in connection with the
transaction with respect to which this Warrant was issued, and any warrant
issued upon transfer or partial exercise of or in lieu of this Warrant.  The term “Warrant” as used herein shall be
deemed to include Other Warrants unless the context clearly requires otherwise.

                The Warrant Price
shall be the lower of (i) $4.80 and (ii) the lowest effective price per share
(on a common stock equivalent basis and taking into account any securities
issued together with the preferred stock) at which shares of the Company’s
convertible preferred stock are sold in a Qualified Financing.  A “Qualified Financing” shall mean the sale,
after the Date of Grant and prior to the earlier to occur of (A) the exercise
of this Warrant or (B) a Public Offering, of the convertible preferred stock of
the Company to purchasers which include venture capital investors in an aggregate
cash amount not less than $10,000,000.  The
number of shares for which this Warrant is exercisable shall equal the sum of
(a) the nearest whole number determined by dividing $275,000 by the Warrant
Price plus (b) if and only if, the Company shall have borrowed Loan A (as
defined in that certain Venture Loan and Security Agreement by and among the
Company, Horizon Technology Funding 

 

 

Company LLC (“Horizon”) and Oxford Finance Corporation
(“Oxford”) dated on or about the Date of Grant (the “Loan Agreement”)), the
nearest whole number determined by dividing $75,000 by the Warrant Price plus
(c) if and only if, the Company shall have borrowed Loan B (as defined in the
Loan Agreement), the nearest whole number determined by dividing $75,000 by the
Warrant Price  plus (d) if and
only if, the Company shall have borrowed Loan C (as defined in the Loan
Agreement), the nearest whole number determined by dividing $125,000 by the
Warrant Price.

1.     Term.  The purchase right represented by this
Warrant is exercisable, in whole or in part, at any time and from time to time
from the Date of Grant until the tenth (10th) anniversary of the Date of Grant.

2.     Method
of Exercise; Payment; Issuance of New Warrant.  Subject to Section 1 hereof, the
purchase right represented by this Warrant may be exercised by the holder
hereof, in whole or in part and from time to time, at the election of the
holder hereof, by (a) the surrender of this Warrant (with the notice of
exercise substantially in the form attached hereto as Exhibit A-1 duly
completed and executed) at the principal office of the Company and by the
payment to the Company, by certified or bank check, or by wire transfer to an
account designated by the Company (a “Wire Transfer”) of an amount equal to the
then applicable Warrant Price multiplied by the number of Shares then being
purchased; (b) if in connection with a registered public offering of the
Company’s securities, the surrender of this Warrant (with the notice of
exercise form attached hereto as Exhibit A-2 duly completed and executed)
at the principal office of the Company together with notice of arrangements
reasonably satisfactory to the Company for payment to the Company either by
certified or bank check or by Wire Transfer from the proceeds of the sale of
shares to be sold by the holder in such public offering of an amount equal to
the then applicable Warrant Price per share multiplied by the number of Shares
then being purchased; or (c) exercise of the “net issuance” right provided
for in Section 10.2 hereof.  The person
or persons in whose name(s) any certificate(s) representing shares of Series
Preferred shall be issuable upon exercise of this Warrant shall be deemed to
have become the holder(s) of record of, and shall be treated for all purposes
as the record holder(s) of, the shares represented thereby (and such shares
shall be deemed to have been issued) immediately prior to the close of business
on the date or dates upon which this Warrant is exercised.  In the event of any exercise of the rights
represented by this Warrant, certificates for the shares of stock so purchased
shall be delivered to the holder hereof as soon as practicable and in any event
within thirty (30) days after such exercise and, unless this Warrant has been
fully exercised or expired, a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as practicable and
in any event within such thirty-day period; provided, however, at such time as
the Company is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended, if requested by the holder of this Warrant, the
Company shall use reasonable efforts to cause its transfer agent to deliver the
certificate representing Shares issued upon exercise of this Warrant to a
broker or other person (as directed by the holder exercising this Warrant)
within the time period required to settle any trade made by the holder after
exercise of this Warrant.

2

 

3.     Stock
Fully Paid; Reservation of Shares. 
All Shares that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance pursuant to the terms and
conditions herein, be fully paid and nonassessable, and free from all
preemptive rights and taxes, liens and charges with respect to the issue
thereof.  During the period within which
the rights represented by this Warrant may be exercised, the Company will at
all times have authorized, and reserved for the purpose of the issue upon
exercise of the purchase rights evidenced by this Warrant, a sufficient number
of shares of its Series Preferred to provide for the exercise of the rights
represented by this Warrant and a sufficient number of shares of its Common
Stock to provide for the conversion of the Series Preferred into Common Stock.

4.     Adjustment
of Warrant Price and Number of Shares. 
The number and kind of securities purchasable upon the exercise of this
Warrant and the Warrant Price shall be subject to adjustment from time to time
upon the occurrence of certain events, as follows:

(a)           Reclassification
or Merger.  In case of any
reclassification or change of securities of the class issuable upon exercise of
this Warrant (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination), or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company
is the acquiring and the surviving corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant), or in case of any sale of all or substantially all of the assets
of the Company, the Company, or such successor or purchasing corporation, as
the case may be, shall duly execute and deliver to the holder of this Warrant a
new Warrant (in form and substance reasonably satisfactory to the  holder of this Warrant), so that the holder
of this Warrant shall have the right to receive upon exercise of this Warrant,
at a total purchase price equal to that payable upon the exercise of the
unexercised portion of this Warrant, and in lieu of the shares of Series
Preferred theretofore issuable upon exercise of this Warrant, the kind and
amount of shares of stock, other securities, money and property receivable upon
such reclassification, change, merger or sale by a holder of the number of
shares of Series Preferred then purchasable under this Warrant.  Any new Warrant shall provide for adjustments
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 4.  The
provisions of this Section 4(a) shall similarly apply to successive
reclassifications, changes, mergers and sales.

(b)           Subdivision
or Combination of Shares.  If the
Company at any time while this Warrant remains outstanding and unexpired shall
subdivide or combine its outstanding shares of Series Preferred, the Warrant
Price shall be proportionately decreased and the number of Shares issuable
hereunder shall be proportionately increased in the case of a subdivision and
the Warrant Price shall be proportionately increased and the number of Shares
issuable hereunder shall be proportionately decreased in the case of a
combination.

(c)           Stock
Dividends and Other Distributions. 
If the Company at any time while this Warrant is outstanding and
unexpired shall (i) pay a dividend with respect to Series Preferred
payable in Series Preferred, then the Warrant Price shall be adjusted, from and
after the date of 

3

 

determination
of shareholders entitled to receive such dividend or distribution, to that
price determined by multiplying the Warrant Price in effect immediately prior
to such date of determination by a fraction (A) the numerator of which
shall be the total number of shares of Series Preferred outstanding immediately
prior to such dividend or distribution, and (B) the denominator of which
shall be the total number of shares of Series Preferred outstanding immediately
after such dividend or distribution; or (ii) make any other distribution
with respect to Series Preferred (except any distribution specifically provided
for in Sections 4(a) and 4(b)), then, in each such case, provision shall
be made by the Company such that the holder of this Warrant shall receive upon
exercise of this Warrant a proportionate share of any such dividend or
distribution as though it were the holder of the Series Preferred (or Common
Stock issuable upon conversion thereof) as of the record date fixed for the
determination of the shareholders of the Company entitled to receive such
dividend or distribution.

(d)           Adjustment
of Number of Shares.  Upon each
adjustment in the Warrant Price, the number of Shares of Series Preferred
purchasable hereunder shall be adjusted, to the nearest whole share, to the
product obtained by multiplying the number of Shares purchasable immediately
prior to such adjustment in the Warrant Price by a fraction, the numerator of
which shall be the Warrant Price immediately prior to such adjustment and the
denominator of which shall be the Warrant Price immediately thereafter.

(e)           Antidilution
Rights.  The other antidilution rights
applicable to the Shares of Series Preferred purchasable hereunder are set
forth in the Company’s Certificate of Incorporation, as amended through the
Date of Grant (the “Charter”).  Such
antidilution rights shall not be restated, amended, modified or waived in any
manner (i) that is adverse to the holder hereof and (ii) that results in
different treatment for the Holder with respect to the Shares than for other
holders of Series Preferred without such Holder’s prior written consent.  The Company shall promptly provide the holder
hereof with any restatement, amendment, modification or waiver of the Charter
promptly after the same has been made.

5.     Notice
of Adjustments.  Whenever the Warrant
Price or the number of Shares purchasable hereunder shall be adjusted pursuant
to Section 4 hereof, the Company shall make a certificate signed by its
chief financial officer setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which
such adjustment was calculated, and the Warrant Price and the number of Shares
purchasable hereunder after giving effect to such adjustment, and shall cause
copies of such certificate to be mailed (without regard to Section 13
hereof, by first class mail, postage prepaid) to the holder of this
Warrant.  In addition, whenever the
conversion price or conversion ratio of the Series Preferred shall be adjusted,
the Company shall make a certificate signed by its chief financial officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
and the conversion price or ratio of the Series Preferred after giving effect
to such adjustment, and shall cause copies of such certificate to be mailed
(without regard to Section 13 hereof, by first class mail, postage
prepaid) to the holder of this Warrant. Whenever the Warrant Price or the
number of Shares purchasable hereunder shall be adjusted pursuant to the
occurrence of 

4

 

a Qualified Financing, the Company shall make a
certificate signed by its chief financial officer setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated, and the Warrant Price and the
number of Shares purchasable hereunder after giving effect to such adjustment,
and shall cause copies of such certificate to be mailed (without regard to
Section 13 hereof, by first class mail, postage prepaid) to the holder of
this Warrant.

6.     Fractional
Shares.  No fractional shares of
Series Preferred will be issued in connection with any exercise hereunder, but
in lieu of such fractional shares the Company shall make a cash payment
therefor based on the fair market value of the Series Preferred on the date of
exercise as reasonably determined in good faith by the Company’s Board of
Directors.

7.     Compliance
with Act; Disposition of Warrant or Shares of Series Preferred.

(a)           Compliance
with Act.  The holder of this
Warrant, by acceptance hereof, agrees that this Warrant, and the shares of
Series Preferred to be issued upon exercise hereof and any Common Stock issued
upon conversion thereof are being acquired for investment and that such holder
will not offer, sell or otherwise dispose of this Warrant, or any shares of
Series Preferred to be issued upon exercise hereof or any Common Stock issued
upon conversion thereof except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended (the “Act”) or any
applicable state securities laws.  Upon
exercise of this Warrant, unless the Shares being acquired are registered under
the Act and any applicable state securities laws or an exemption from such
registration is available, the holder hereof shall confirm in writing that the
shares of Series Preferred so purchased (and any shares of Common Stock issued
upon conversion thereof) are being acquired for investment and not with a view
toward distribution or resale in violation of the Act and shall confirm such
other matters related thereto as may be reasonably requested by the
Company.  This Warrant and all shares of
Series Preferred issued upon exercise of this Warrant and all shares of Common
Stock issued upon conversion thereof (unless registered under the Act and any
applicable state securities laws) shall be stamped or imprinted with a legend
in substantially the following form:

“THE SECURITIES EVIDENCED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. 
NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL OR
OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS
NOT REQUIRED, OR (iii) RECEIPT OF A NO-ACTION LETTER FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITIES.”

Said legend shall be removed by the Company, upon the request of a
holder, at such time as the restrictions on the transfer of the applicable
security shall have terminated.  In
addition, in connection with the issuance of this Warrant, the holder
specifically represents to the Company by acceptance of this Warrant as
follows:

5

 

(1)           The
holder is aware of the Company’s business affairs and financial condition, and
has acquired information about the Company sufficient to reach an informed and
knowledgeable decision to acquire this Warrant. 
The holder is acquiring this Warrant for its own account for investment
purposes only and not with a view to, or for the resale in connection with, any
“distribution” thereof in violation of the Act.

(2)           The
holder understands that this Warrant has not been registered under the Act in
reliance upon a specific exemption therefrom, which exemption depends upon,
among other things, the bona fide nature of the holder’s investment intent as
expressed herein.

(3)           The
holder further understands that this Warrant must be held indefinitely unless
subsequently registered under the Act and qualified under any applicable state
securities laws, or unless exemptions from registration and qualification are
otherwise available.  The holder is aware
of the provisions of Rule 144, promulgated under the Act.

(4)           The
holder is an “accredited investor” as such term is defined in Rule 501 of
Regulation D promulgated under the Act.

(b)           Disposition
of Warrant or Shares.    This Warrant
and any shares of Series Preferred acquired pursuant to the exercise or
conversion of this Warrant may be transferred only pursuant to a registration
statement filed under the Securities Act of 1933, as amended, or an exemption
from such registration.  Subject to such
restrictions, the Company shall transfer this Warrant from time to time upon
the books to be maintained by the Company for that purpose, upon surrender
thereof for transfer properly endorsed or accompanied by appropriate
instructions for transfer and such other documents as may be reasonably
required by the Company, including, if required by the Company, an opinion of
counsel to the effect that such transfer is exempt from the registration
requirements of the Securities Act of 1933, as amended, to establish that such
transfer is being made in accordance with the terms hereof, and a new Warrant
shall be issued to the transferee and the surrendered Warrant shall be
cancelled by the Company.  Each
certificate representing this Warrant or the shares of Series Preferred thus
transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a
legend as to the applicable restrictions on transferability in order to ensure
compliance with such laws, unless such legend is not required in order to
ensure compliance with such laws.  The
Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.

(c)           Applicability
of Restrictions.  Neither any
restrictions of any legend described in this Warrant nor the requirements of
Section 7(b) above shall apply to any transfer of, or grant of a security
interest in, this Warrant (or the Series Preferred or Common Stock obtainable
upon exercise thereof) or any part hereof (i) to a partner of the holder
if the holder is a partnership or to a member of the holder if the holder is a
limited liability company, (ii) to a partnership of which the holder is a
partner or to a limited liability company of which the holder is a member, or
(iii) to any affiliate of the holder if the holder is a corporation; provided,
however, in any such transfer, if applicable, the transferee shall on
the Company’s request agree in writing to be bound by the terms of this Warrant
as if an original holder hereof.

6

 

8.     Rights
as Shareholders; Information.  No
holder of this Warrant, as such, shall be entitled to vote or receive dividends
or be deemed the holder of Series Preferred or any other securities of the
Company which may at any time be issuable upon the exercise hereof for any
purpose, nor shall anything contained herein be construed to confer upon the
holder of this Warrant, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until
this Warrant shall have been exercised and the Shares purchasable upon the
exercise hereof shall have become deliverable, as provided herein.  Notwithstanding the foregoing, the Company
will transmit to the holder of this Warrant such information, documents and
reports as are generally distributed to the holders of any class or series of
the securities of the Company concurrently with the distribution thereof to the
shareholders.

9.             Registration
Rights.  The Holder shall become a
party to the Eighth Amended and Restated Investor Rights Agreement, dated as of
August 30, 2004 and as amended through the Date of Grant (the “Investor Rights
Agreement), by and among the Company and the other parties listed on the
signature pages thereto.  The Common
Stock of the Company obtained upon conversion of the Series Preferred shall be “Registrable
Securities” under the Investor Rights Agreement.

10.   Additional
Rights.

10.1         Acquisition
Transactions.  The Company shall
provide the holder of this Warrant with at least twenty (20) days’ written
notice prior to closing thereof of the terms and conditions of any of the
following transactions (to the extent the Company has notice thereof):
(i) the sale, lease, exchange, conveyance or other disposition of all or
substantially all of the Company’s property or business, or (ii) its
merger into or consolidation with any other corporation (other than a
wholly-owned subsidiary of the Company), or any transaction (including a merger
or other reorganization) or series of related transactions, in which more than
50% of the voting power of the Company is disposed of.

10.2         Right to Convert
Warrant into Stock:  Net Issuance.

(a)           Right
to Convert.  In addition to and
without limiting the rights of the holder under the terms of this Warrant, the
holder shall have the right to convert this Warrant or any portion thereof (the
“Conversion Right”) into shares of Series Preferred as provided in this Section
10.2 at any time or from time to time during the term of this Warrant.  Upon exercise of the Conversion Right with
respect to a particular number of shares subject to this Warrant (the “Converted
Warrant Shares”), the Company shall deliver to the holder (without payment by
the holder of any exercise price or any cash or other consideration) that
number of shares of fully paid and nonassessable Series Preferred as is
determined according to the following formula:

X =   B - A  

Y

Where:   X =                                                                             the
number of shares of Series Preferred that shall be issued to holder

7

 

Y =                                                                  the
fair market value of one share of Series Preferred

A =                                                                the
aggregate Warrant Price of the specified number of Converted Warrant Shares
immediately prior to the exercise of the Conversion Right (i.e.,
the number of Converted Warrant Shares multiplied by
the Warrant Price)

B =                                                                  the
aggregate fair market value of the specified number of Converted Warrant Shares
(i.e., the number of Converted Warrant
Shares multiplied by the fair market value of
one Converted Warrant Share)

No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to
the holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined).  For purposes of Section 10 of this
Warrant, shares issued pursuant to the Conversion Right shall be treated as if
they were issued upon the exercise of this Warrant.

(b)           Method
of Exercise.  The Conversion Right
may be exercised by the holder by the surrender of this Warrant at the
principal office of the Company together with a written statement (which may be
in the form of Exhibit A-1 or Exhibit A-2 hereto) specifying that the
holder thereby intends to exercise the Conversion Right and indicating the
number of shares subject to this Warrant which are being surrendered (referred
to in Section 10.2(a) hereof as the Converted Warrant Shares) in exercise
of the Conversion Right.  Such conversion
shall be effective upon receipt by the Company of this Warrant together with
the aforesaid written statement, or on such later date as is specified therein
(the “Conversion Date”), and, at the election of the holder hereof, may be made
contingent upon the closing of the sale of the Company’s Common Stock to the
public in a public offering pursuant to a Registration Statement under the Act
(a “Public Offering”).  Certificates for
the shares issuable upon exercise of the Conversion Right and, if applicable, a
new warrant evidencing the balance of the shares remaining subject to this
Warrant, shall be issued as of the Conversion Date and shall be delivered to
the holder within thirty (30) days following the Conversion Date.

(c)           Determination
of Fair Market Value.  For purposes
of this Section 10.2, “fair market value” of a share of Series Preferred
(or Common Stock if the Series Preferred has been automatically converted into
Common Stock) as of a particular date (the “Determination Date”) shall mean:

(i)            If
the Conversion Right is exercised in connection with and contingent upon a
Public Offering, and if the Company’s Registration Statement relating to such
Public Offering (“Registration Statement”) has been declared effective by the
Securities and Exchange Commission, then the initial “Price to Public”
specified in the final prospectus with respect to such offering.

8

 

(ii)           If
the Conversion Right is not exercised in connection with and contingent upon a
Public Offering, then as follows:

(A)          If traded on a securities exchange,
the fair market value of the Common Stock shall be deemed to be the average of
the closing prices of the Common Stock on such exchange over the five trading
days immediately prior to the Determination Date, and the fair market value of
the Series Preferred shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into which each share
of Series Preferred is then convertible;

(B)           If traded on the Nasdaq Stock Market
or other over-the-counter system, the fair market value of the Common Stock
shall be deemed to be the average of the closing bid prices of the Common Stock
over the five trading days immediately prior to the Determination Date, and the
fair market value of the Series Preferred shall be deemed to be such fair
market value of the Common Stock multiplied by the number of shares of Common
Stock into which each share of Series Preferred is then convertible; and

(C)           If there is no public market for the
Common Stock, then fair market value shall be determined by the Board of
Directors of the Company in good faith.

In making a determination
under clauses (A) or (B) above, if on the Determination Date, five trading days
had not passed since the closing of the Company’s Public Offering, then the
fair market value of the Common Stock shall be the average closing prices or
closing bid prices, as applicable, for the shorter period beginning on and
including the date of the Public Offering and ending on the trading day prior
to the Determination Date (or if such period includes only one trading day the
closing price or closing bid price, as applicable, for such trading day).  If closing prices or closing bid prices are
no longer reported by a securities exchange or other trading system, the
closing price or closing bid price shall be that which is reported by such
securities exchange or other trading system at 4:00 p.m. New York City time on
the applicable trading day.

10.3         Exercise Prior to
Expiration.  To the extent this
Warrant is not previously exercised as to all of the Shares subject hereto, and
if the fair market value of one share of the Series Preferred is greater than
the Warrant Price then in effect, this Warrant shall be deemed automatically
exercised pursuant to Section 10.2 above (even if not surrendered)
immediately before its expiration.  For
purposes of such automatic exercise, the fair market value of one share of the
Series Preferred upon such expiration shall be determined pursuant to
Section 10.2(c).  To the extent this
Warrant or any portion thereof is deemed automatically exercised pursuant to
this Section 10.3, the Company agrees to promptly notify the holder hereof
of the number of Shares, if any, the holder hereof is to receive by reason of
such automatic exercise.

11.   Representations
and Warranties.  The Company
represents and warrants to the holder of this Warrant as follows:

(a)           This
Warrant has been duly authorized and executed by the Company and is a valid and
binding obligation of the Company enforceable in accordance with its terms,
subject to 

9

 

laws of
general application relating to bankruptcy, insolvency and the relief of
debtors and the rules of law or principles at equity governing specific
performance, injunctive relief and other equitable remedies.

(b)           The
Shares have been duly authorized and reserved for issuance by the Company and,
when issued in accordance with the terms hereof, will be validly issued, fully
paid and nonassessable and free from preemptive rights.

(c)           The
rights, preferences, privileges and restrictions granted to or imposed upon the
Series Preferred and the holders thereof are as set forth in the Charter, and
on the Date of Grant, each share of the Series Preferred represented by this
Warrant is convertible into one share of Common Stock.

(d)           The
shares of Common Stock issuable upon conversion of the Shares have been duly
authorized and reserved for issuance by the Company and, when issued in
accordance with the terms of the Charter will be validly issued, fully paid and
nonassessable.

(e)           The
execution and delivery of this Warrant are not, and the issuance of the Shares
upon exercise of this Warrant in accordance with the terms hereof will not be,
inconsistent with the Company’s Charter or by-laws, do not and will not
contravene any law, governmental rule or regulation, judgment or order
applicable to the Company, and do not and will not conflict with or contravene
any provision of, or constitute a default under, any indenture, mortgage,
contract or other instrument of which the Company is a party or by which it is
bound or require the consent or approval of, the giving of notice to, the
registration or filing with or the taking of any action in respect of or by,
any Federal, state or local government authority or agency or other person,
except for the filing of notices pursuant to federal and state securities laws,
which filings will be effected by the time required thereby.

(f)            There
are no actions, suits, audits, investigations or proceedings pending or, to the
knowledge of the Company, threatened against the Company in any court or before
any governmental commission, board or authority which, if adversely determined,
could have a material adverse effect on the ability of the Company to perform
its obligations under this Warrant.

(g)           The
number of shares of Common Stock of the Company outstanding on the date hereof,
on a fully diluted basis (assuming the conversion of all outstanding
convertible securities and the exercise of all outstanding options and
warrants), does not exceed 54,000,000 shares.

12.   Modification
and Waiver.  This Warrant and any
provision hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of the same
is sought.

13.   Notices.  Any notice, request, communication or other
document required or permitted to be given or delivered to the holder hereof or
the Company shall be delivered, or shall be sent by certified or registered
mail, postage prepaid, to each such holder at its address as shown on the books

10

 

of the Company or to the Company at the address
indicated therefor on the signature page of this Warrant.

14.   Binding
Effect on Successors.  This Warrant
shall be binding upon any corporation succeeding the Company by merger,
consolidation or acquisition of all or substantially all of the Company’s
assets, and all of the obligations of the Company relating to the Series
Preferred issuable upon the exercise or conversion of this Warrant shall
survive the exercise, conversion and termination of this Warrant and all of the
covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof.

15.   Lost
Warrants or Stock Certificates.  The
Company covenants to the holder hereof that, upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant or any stock certificate and, in the case of any
such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant or stock certificate, the Company
will make and deliver a new Warrant or stock certificate, of like tenor, in
lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate.

16.   Descriptive
Headings.  The descriptive headings
of the various Sections of this Warrant are inserted for convenience only and
do not constitute a part of this Warrant. 
The language in this Warrant shall be construed as to its fair meaning
without regard to which party drafted this Warrant.

17.   Governing
Law.  This Warrant shall be construed
and enforced in accordance with, and the rights of the parties shall be
governed by, the laws of the State of Delaware.

18.   Survival
of Representations, Warranties and Agreements.  All representations and warranties of the
Company and the holder hereof contained herein shall survive the Date of Grant,
the exercise or conversion of this Warrant (or any part hereof) or the
termination or expiration of rights hereunder. 
All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.

19.   Remedies.  In case any one or more of the covenants and
agreements contained in this Warrant shall have been breached, the holders
hereof (in the case of a breach by the Company), or the Company (in the case of
a breach by a holder), may proceed to protect and enforce their or its rights
either by suit in equity and/or by action at law, including, but not limited to,
an action for damages as a result of any such breach and/or an action for
specific performance of any such covenant or agreement contained in this
Warrant.

20.   No
Impairment of Rights.  The Company
will not, by amendment of its Charter or through any other means, avoid or seek
to avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the holder of this Warrant against impairment.

 

11

 

21.   Severability.  The invalidity or unenforceability of any
provision of this Warrant in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction, or affect any other
provision of this Warrant, which shall remain in full force and effect.

22.   Recovery
of Litigation Costs.  If any legal
action or other proceeding is brought for the enforcement of this Warrant, or
because of an alleged dispute, breach, default, or misrepresentation in
connection with any of the provisions of this Warrant, the successful or
prevailing party or parties shall be entitled to recover reasonable attorneys’
fees and other costs incurred in that action or proceeding, in addition to any
other relief to which it or they may be entitled.

23.   Entire
Agreement; Modification.  This
Warrant constitutes the entire agreement between the parties pertaining to the
subject matter contained in it and supersedes all prior and contemporaneous
agreements, representations, and undertakings of the parties, whether oral or
written, with respect to such subject matter.

12

 

The Company has caused this Warrant to be duly executed and delivered
as of the Date of Grant specified above.

 

	
   

  	
   

  	
  SUNESIS PHARMACEUTICALS, INC.

  
	
   

  	
  By:

  	
  /s/ Eric Bjerkholt

  
	
   

  	
  Name:

  	
  Eric Bjerkholt

  
	
   

  	
  Title:

  	
  Senior Vice President,
  Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
  341 Oyster Point
  Boulevard

  
	
   

  	
   

  	
   

  	
  South San Francisco, CA
  94080

  

 

13

 

EXHIBIT A-1

NOTICE OF EXERCISE

To:          SUNESIS PHARMACEUTICALS, INC. (the “Company”)

1.             The undersigned hereby:

o                                    elects
to purchase________ shares of [Series Preferred Stock] [Common Stock] of the
Company pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price of such shares in full, or

o                                    elects
to exercise its net issuance rights pursuant to Section 10.2 of the
attached Warrant with respect to________Shares of [Series Preferred Stock]
[Common Stock].

2.             Please issue a
certificate or certificates representing ________ shares in the name of the
undersigned or in such other name or names as are specified below:

 

	
   

  
	
  (Name)

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
  (Address)

  

3.             The
undersigned represents that the aforesaid shares are being acquired for the
account of the undersigned for investment and not with a view to, or for resale
in connection with, the distribution thereof and that the undersigned has no
present intention of distributing or reselling such shares, all except as in
compliance with applicable securities laws.

 

 

	
   

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Date)

  	
   

  	
   

  

14

 

EXHIBIT A-2

NOTICE OF EXERCISE

To:          SUNESIS PHARMACEUTICALS, INC. (the “Company”)

1.             Contingent upon and
effective immediately prior to the closing (the “Closing”) of the Company’s
public offering contemplated by the Registration Statement on Form S___,
filed________, 200__, the undersigned hereby:

o            elects to purchase________shares of
[Series Preferred Stock] [Common Stock] of the Company (or such lesser number
of shares as may be sold on behalf of the undersigned at the Closing) pursuant
to the terms of the attached Warrant, or

o            elects to exercise its net issuance
rights pursuant to Section 10.2 of the attached Warrant with respect
to________Shares of [Series Preferred Stock] [Common Stock].

2.             Please deliver to
the custodian for the selling shareholders a stock certificate representing
such________shares.

3.             The undersigned has instructed the
custodian for the selling shareholders to deliver to the Company $________or,
if less, the net proceeds due the undersigned from the sale of shares in the
aforesaid public offering.  If such net
proceeds are less than the purchase price for such shares, the undersigned
agrees to deliver the difference to the Company prior to the Closing.

 

 

	
   

  	
   

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Date)

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