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which the stock warrants would appreciate in value, although CV
hoped that Sun would be successful and believed that Sun had the
potential to be successful. Sun obtained an independent
appraisal of the fair market value, as of November 21, 1983, of
the stock warrants. The appraisal estimated the fair market
value of the warrant to purchase series F preferred stock to be
$146,000 and the fair market value of the warrant to purchase
series G preferred stock to be $58,000. The appraisal was made
by the investment banking firms of Robertson, Colman & Stephens
and Alex, Brown & Sons, Inc. and is set forth in a letter dated
March 28, 1984. CV did not acquire Sun stock pursuant to the
warrants, but instead ultimately sold the warrants in 1986 and
1987 to underwriters.
During its 1984 fiscal year, Sun had an unsecured working
line of credit pursuant to which it could borrow up to $8 million
at a rate of interest equal to prime plus .75 percent. Sun also
had a $3 million loan commitment from banks that provided for
interest equal to the prime rate plus 1 percent. The prime rate
in May and June 1983 was 10.5 percent, and, on December 2, 1983,
it was 11 percent.
During its negotiations with CV, Sun tried to obtain $5
million of financing from CV. CV, which had a large cash
reserve, would only agree to loan $2.5 million to Sun; the
financing consisted of the $1.5 million debenture that was
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