UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED JUNE 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-21022
SHAMAN PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-3095806
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification Number)
213 East Grand Avenue
South San Francisco, California 94080
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: 415-952-7070
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Number of shares of Common Stock, $.001 par value, outstanding as
of June 30, 1996: 13,389,320
<PAGE>
SHAMAN PHARMACEUTICALS, INC.
INDEX FOR FORM 10-Q
June 30, 1996
<TABLE>
<CAPTION>
PAGE
NUMBER
PART I FINANCIAL INFORMATION
<S> <C> <C> <C> <C> <C> <C>
Item 1. Financial Statements and Notes
Condensed Balance Sheets as of June 30, 1996 3
and December 31, 1995
Condensed Statements of Operations for the 4
three and six months ended June 30, 1996 and
June 30, 1995
Condensed Statements of Cash Flows for the 5
three and six months ended June 30, 1996 and
June 30, 1995
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
PART II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults in Senior Securities 14
Item 4. Submission of Matters to a Vote of Security 14
Holders
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements and Notes
<TABLE>
<CAPTION>
SHAMAN PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS
<S> <C> <C> <C> <C> <C> <C>
June 30, December 31,
1996 1995
---------- ----------
(Unaudited) (Note)
ASSETS
Current assets:
Cash and cash equivalents $7,466,159 $9,210,123
Short-term investments 10,526,193 17,454,778
Prepaid expenses and other 1,007,654 858,724
---------- ----------
Total current assets 19,000,006 27,523,625
Property and equipment, net 5,579,990 6,158,056
Other assets 128,080 128,080
---------- ----------
Total assets $24,708,076 $33,809,761
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other
accrued expenses $ 875,970 $ 668,078
Accrued clinical trial costs 731,971 1,016,573
Accrued professional fees 544,480 705,374
Accrued compensation 267,325 383,089
Advances - contract research 1,789,855 789,855
Current installments of long-term
obligations 2,416,027 1,111,128
---------- ----------
Total current liabilities 6,625,628 4,674,097
Long-term obligations, excluding 3,533,668 4,930,263
current installments
Stockholders' equity:
Common stock 13,389 13,258
Additional paid-in capital 88,447,300 88,170,926
Deferred compensation and other
adjustments (98,423) (146,956)
Accumulated deficit (73,813,486) (63,831,827)
---------- ----------
Total stockholders'
equity 14,548,780 24,205,401
---------- ----------
Total liabilities and stockholders'
equity $24,708,076 $33,809,761
=========== ===========
</TABLE>
NOTE: The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to condensed financial statements.
<PAGE>
SHAMAN PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Month Ended
June 30, June 30,
---------------------- --------------------------
1996 1995 1996 1995
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue from
collaborative
agreement $500,001 $1,210,145 $1,000,001 $1,210,145
Operating expenses:
Research and
development 4,672,565 4,415,243 9,470,936 8,296,151
General and
administrative 904,271 991,776 1,772,474 1,869,155
---------- ----------- ----------- ------------
Total operating
expenses 5,576,836 5,407,019 11,243,410 10,165,306
---------- ---------- ----------- ------------
Loss from (5,076,835) (4,196,874) (10,243,409) (8,955,161)
operations
Other income (expense):
Interest income 269,654 441,339 587,758 878,285
Interest expense (163,743) (124,974) (326,008) (286,396)
---------- ---------- ----------- ------------
Net loss $(4,970,924) $(3,880,509) $(9,981,659) $(8,363,272)
========== ========== =========== ============
Net loss per share $ (0.37) $ (0.29) $ (0.75) $ (0.64)
========== ========== =========== ============
Shares used in
calculation of
net loss per
share 13,378,000 13,166,000 13,356,000 13,102,000
========== ========== =========== ============
</TABLE>
See notes to condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
SHAMAN PHARMACEUTICALS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
<S> <C> <C> <C> <C> <C> <C>
------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ----------
Operating activities:
Net loss $(4,970,924) $(3,880,509) $(9,981,659) $(8,363,272)
Adjustments to
reconcile net
loss to net
cash used in
operating activities:
Depreciation
and amortization 633,024 697,149 1,289,613 1,340,020
Changes in operating
assets and liabilities:
Prepaid expenses,
other current assets
and other assets (264,617) 260,672 (148,930) 377,438
Accounts payable,
accrued expenses
and contract
research advances 1,298,935 1,581,500 646,632 355,717
---------- ----------- --------- ----------
Net cash used in
operating activities (3,303,582) (1,341,188) (8,194,34) (6,290,097)
--------- ----------- ----------- -----------
Investing activities:
Purchases of
short-term
investments (4,562,517) (6,510,358) (10,951,386) (10,021,016)
Maturities of
available-
for-sale
investments 7,500,000 9,679,000 17,833,314 18,308,500
Capital
expenditures (243,497) (110,952) (652,290) (142,495)
---------- --------- ---------- -----------
Net cash provided
by investing
activities 2,693,986 3,057,390 6,229,638 8,144,989
Financing activities:
Proceeds from
issuance of
common stock 202,894 165,964 312,438 326,786
Proceeds from
long-term -- -- 600,000 --
obligations
Principal payments on
long-term obligations (505,711) (193,453) (691,696) (402,858)
---------- ---------- ---------- ----------
Net cash provided by
(used in)
financing activities (302,817) (27,489) 220,742 (76,072)
Net increase
(decrease) in cash
and cash equivalents (912,413) 1,688,713 (1,743,964) 1,778,820
Cash and cash
equivalents at
beginning of period 8,378,572 8,866,689 9,210,123 8,776,582
---------- ----------- ----------- -----------
Cash and cash
equivalents at
end of period $7,466,159 $10,555,402 $7,466,159 $10,555,402
=========== ============ ============ ============
</TABLE>
See notes to condensed financial statements.
<PAGE>
SHAMAN PHARMACEUTICALS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
1. Basis of Presentation
Shaman Pharmaceuticals, Inc. ("Shaman" or the "Company") is a mid-stage
pharmaceutical company developing new drugs from tropical plants with a history
of medicinal use. These drugs are expected to provide new medicines with
applications in human health care markets.
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and in accordance with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary for a fair
presentation have been included. The results of operations for the interim
periods shown herein are not necessarily indicative of operating results for the
entire year.
This unaudited financial data should be read in conjunction with the
audited financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, filed with the
Securities and Exchange Commission on April 1, 1996.
Operating expenses for 1995 have been reclassified to conform to 1996
presentation.
<PAGE>
2. Term Loan
The Company's unsecured term loan carried a principal repayment
acceleration provision if the Company did not achieve certain financing or
collaborative objectives by May 15, 1996. The acceleration provisions require
that principal amortization be shortened from 30 months to 24 months and that
monthly repayment begin May 15, 1996 instead of April 30, 1997. As of May 15,
1996, the Company had not achieved the specified milestones. Accordingly, the
Company made three principal payments totaling $312,500 during the quarter and
reclassified $1,250,000 of its term debt to current liabilities at June 30,
1996.
3. Subsequent Event
In July 1996, the Company closed a private placement pursuant to
Regulation S under the Securities Act of 1933, as amended, in which it sold
400,000 shares of Series A Convertible Preferred Stock ("Preferred Stock") at a
price per share of $8.147. The Preferred Stock does not carry a dividend
obligation and is convertible into common stock at the earlier of (a) the
investor's option, (b) immediately following any 60 trading day period in which
the Company's common stock has consistently traded higher than $8.147, or (c)
July 23, 1999. If the Preferred Stock converts prior to July 23, 1999, the
conversion ratio will be one share of common stock for each share of preferred.
If the Preferred Stock converts on July 23, 1999, the conversion rate will be
the higher of $6.00 or a weighted average of the Company's common stock price at
the time of conversion. In either case, appropriate adjustments will be made for
stock dividends, splits or other adjustments.
In addition to the initial sale of Preferred Stock, the Company has the
right, from time to time during the period beginning January 1997 and ending
July 2000, to sell up to 1,200,000 shares of common stock to the investor at a
formula price of 100% or 101% of a multi-day average of the Company's common
stock price at the time of sale. As the Company exercises its rights under the
agreement, the investor has the option to increase the shares purchased by up to
an aggregate of 527,500 shares. The investor also received a six-year warrant to
purchase 550,000 shares of the Company's common stock at a price of $10.184 per
share.
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Overview
During the ten months from inception in May 1989 until March 1990, the
Company was engaged in organizational efforts, including the formation of its
Scientific Strategy Team and hiring of scientific and management personnel. In
March 1990, the Company began focusing its research efforts on the discovery and
development of new classes of pharmaceuticals derived from tropical plants. To
date, Shaman has not sold any products and does not anticipate receiving product
revenue in the near future. The Company has been unprofitable since inception
and expects to continue to incur substantial and increasing losses over the next
several years, due primarily to the expense of preclinical studies, clinical
trials and expansion of its research and development programs. The Company
expects that losses will fluctuate from quarter to quarter and that such
fluctuations could be substantial. As of June 30, 1996, Shaman had an
accumulated deficit of approximately $73.8 million. Shaman has financed its
research and development activities and operations primarily through private
placements of its equity securities, an initial public offering of common stock
in January 1993, a secondary offering completed in December 1993 and, to a
lesser extent, through equipment and leasehold improvement financings and
collaborative agreements.
Shaman centers its research efforts in therapeutic programs in which the
Company believes that its drug discovery approach provides a distinct
competitive advantage over other methodologies. Shaman's ethnobotanical strategy
provides the basis for focusing on therapeutic targets which: (a) have symptoms
that are easily observable and being treated by traditional healers using
plant-based remedies; (b) are best modeled by whole animal testing; (c) have an
underlying pathophysiology which is complicated and characterized by multiple
abnormalities that could lead to the disease state; and (d) have large market
opportunities which are not well managed by available therapies. Diabetes
mellitus, which fits these parameters, is the Company's lead basic research
effort.
In July 1996, the Company closed a private placement pursuant to Regulation
S under the Securities Act of 1933, as amended, in which it sold 400,000 shares
of Series A Convertible Preferred Stock ("Preferred Stock") at a price per share
of $8.147. The Preferred Stock does not carry a dividend obligation and will
convert into common stock by July 23, 1999 at a price per share between $6 and
$8.147, depending on the market value of the Company's common stock during the
period. In addition to the sale of Preferred Stock, the Company has the right,
from time to time during the period beginning January 1997 and ending July 2000,
to sell up to 1,200,000 additional shares of common stock to the investor at a
formula price of 100% or 101% of a multi-day average of the Company's comon
stock price at the time of sale. The investor has the option to increase the
shares purchased by up to an aggregate of 527,500 shares. The investor also
received a six-year warrant to purchase 550,000 shares of the Company's common
stock at a price of $10.184 per share.
<PAGE>
In June 1996, the Company initiated a Phase II study for Provir(TM), an
oral agent for the treatment of secretory diarrhea. Previous Phase I clinical
trials established Provir's safety and preclinical in vivo and in vitro research
showed Provir to be potentially effective as an oral antidiarrheal agent.
In October 1995, the Company announced that Virend(R), a topical agent for
the treatment of herpes, was shown to be efficacious in healing herpes lesions
in a Phase II clinical trial. The study involved 45 patients with AIDS and
recurring genital herpes. Results from the randomized, double-blind,
placebo-controlled study showed that 38% of patients receiving Virend had
lesions that healed completely, compared with 14% in the placebo-controlled
group. Based on these results, the Company is planning to begin a Phase III
study in patients with genital herpes in the latter part of 1996.
The Company has licensed several patents relating to a compound known as
nikkomycin Z for the development of antifungal agents. Shaman initially intends
to develop nikkomycin Z for the treatment of endemic mycoses, systemic fungal
diseases which can be life threatening, especially in immunocompromised
patients. The Company is finalizing its preclinical data package for nikkomycin
Z and intends to begin human clinical trials late in 1996.
In May 1995, Shaman entered into a three-year collaborative agreement with
Ono Pharmaceutical Co., Ltd. ("Ono" or "Ono collaboration") of Osaka, Japan for
the research and development of compounds for the treatment of
non-insulin-dependent diabetes mellitus. Under the terms of the agreement,
Shaman screens diabetes-specific plants in vivo, isolates and identifies active
compounds, and participates in any medicinal chemistry modification. In turn,
Ono provides preclinical and clinical development capabilities through
proprietary in vitro assays and medicinal chemistry efforts. Ono will retain
development and commercialization rights in Japan, South Korea, and Taiwan while
Shaman will retain all other territorial rights. The Company is actively
pursuing an additional partner in its diabetes research and development program.
Results of Operations
Six Months Ended June 30, 1996 and June 30, 1995
The Company recorded revenues of $0.5 million and $1.2 million for the
quarters ended June 30, 1996 and 1995, and $1.0 million and $1.2 million for the
six month periods ended June 30, 1996 and 1995, respectively. The revenues are a
result of ongoing funding for research activities under the Ono collaboration,
including an initial one-time access fee paid during the quarter ended June 30,
1995.
Research and development expenses were $4.7 million and $4.4 million for
the quarters ended June 30, 1996 and 1995, and $9.5 million and $8.3 million for
the six month periods ended June 30, 1996 and 1995, respectively. The increases
are attributable primarily to the Company's preclinical development activities
with respect to nikkomycin Z and expanded research efforts in its diabetes
program, partially offset by reduced spending for Phase II clinical trials which
were completed in October 1995. Research and development expenses are likely to
increase in upcoming quarters as the Company continues its clinical trial
program for various product candidates.
<PAGE>
General and administrative expenses were approximately $0.9 million and
$1.0 million for the quarters ended June 30, 1996 and 1995, and $1.8 million and
$1.9 million for the six month periods ended June 30, 1996 and 1995,
respectively. General and administrative expenses were higher for the comparable
periods in 1995 due primarily to non-recurring bonus and deferred compensation
expenses. General and administrative expenses for the current fiscal periods are
in line with the Company's plan and are not expected to increase substantially
because the Company's expanded clinical activities do not require commensurate
increases in general and administrative support.
Interest income decreased for the quarter ended June 30, 1996, compared
with the quarter ended June 30, 1995, due to lower cash and investment balances
as the Company funds its operations. The increases in interest expense for the
three and six-month periods ending June 30, 1996 over the same periods in 1995
resulted from higher average debt balances in 1996.
Liquidity and Capital Resources
For the quarter ended June 30, 1996, the Company funded its operations
through net maturities in its available-for-sale investment portfolio and
through the annual research funding received from the Ono collaboration.
As of June 30, 1996, the Company's cash, cash equivalents, and investments
totaled approximately $18.0 million, compared with $26.7 million at December 31,
1995, with an average investment maturity of five and a half months and four and
a half months, respectively. The Company invests excess cash according to its
investment policy that provides guidelines with regard to liquidity, type of
investment, credit rating, and concentration limits.
In July 1996, the Company received gross proceeds of $3.3 million for
400,000 shares of Series A Convertible Preferred Stock in connection with the
Company's private placement ("private placement"). The Preferred Stock carries
no dividend requirement. In addition to the initial sale of Preferred Stock, the
Company has the right, from time to time during the period beginning January
1997 and ending July 2000, to sell up to 1,200,000 additional shares of common
stock to the investor at a formula price of 100% or 101% of a multi-day average
of the Company's common stock price at the time of sale. As the Company
exercises its rights under the agreement, the investor has the option to
increase the shares purchased by up to an aggregate of 527,500 shares. The
investor also received a six-year warrant to purchase 550,000 shares of the
Company's Common Stock at a price of $10.184 per share. (Also see Note 3 to
condensed financial statements.)
In October 1995, the Company closed a $2.5 million unsecured term loan to
finance capital asset acquisitions and facilities expansion. Interest on each
advance is charged at the London Interbank Offered Rate (LIBOR) plus 1.5% or
prime plus 0.5%. As of March 31, 1996, the Company had utilized the full $2.5
million available under the loan, with an average interest rate of approximately
7.15% at June 30, 1996. During the quarter ended June 30,1996, the Company made
three principal payments totaling $312,500 in accordance with the accelerated 24
month amortization schedule required by the loan agreement. (See Note 2 to
condensed financial statements.)
<PAGE>
The Company expects to incur substantial additional costs relating to the
continued clinical development of its products, other research and development
programs, preclinical and clinical testing, and regulatory activities. The
Company anticipates that its cash, cash equivalents and investment balances of
approximately $18.0 million at June 30, 1996, the collaborative revenue
committed by Ono, the funding received from the July 1996 sale of preferred
stock and the additional rights to sell common stock through its private
placement will be adequate to fund operations under its current plan through the
third quarter of 1997.
Recognizing the need for additional financing, the Company continues to
actively pursue collaborative partnerships with pharmaceutical companies to
support its research programs. To the extent the Company is successful in
creating such partnerships, cash balances would be enhanced through research
funding and fees, milestone payments and possible equity investments. Additional
potential sources of capital include public and private equity financings,
capital equipment financings, and bank lines of credit. There can be no
assurance that any of these sources of funds will be available to the Company on
acceptable terms, if at all.
Future Outlook
In addition to historical information, this report contains predictions,
estimates and other forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. Actual results could differ materially from any future performance
suggested in this report as a result of the risk factors set forth below and in
the Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996.
<PAGE>
Risk Factors
History of Operating Losses; Products Still in Development; Future
Profitability Uncertain. Shaman's potential products are in research and
development. In order to generate revenues or profits, the Company, alone or
with others, must successfully develop, test, obtain regulatory approval and
market its potential products. No assurance can be given that these product
development efforts will be successful, that required regulatory approvals will
be obtained, or that the products, if developed and introduced, will be
successfully marketed or achieve market acceptance.
Additional Financing Requirements and Uncertain Access to Capital Markets.
The Company has significant long-term capital requirements and, in the event
Shaman receives regulatory approval for any of its products, it will incur
substantial expenditures to develop manufacturing, sales and marketing
capabilities. The Company will need to raise additional funds for these purposes
through additional equity or debt financings, collaborative arrangements with
corporate partners or from other sources. No assurance can be given that such
additional funds will be available to the Company to finance its development on
acceptable terms, if at all.
No Assurance of FDA Approval for Marketing; Government Regulation. The
Company's activities with respect to research, preclinical development, clinical
trials, manufacturing and marketing in the United States and other countries are
subject to extensive regulation by numerous governmental authorities including,
but not limited to, the Food and Drug Administration ("FDA"). The process of
obtaining FDA and other required regulatory approvals is lengthy and requires
the expenditure of substantial resources. Success cannot be assured. In order to
obtain FDA approval, the Company must perform clinical tests to demonstrate to
the FDA's satisfaction that a product is safe and effective for its intended
uses. The Company may encounter problems in clinical trials which could cause
the FDA or the Company to delay or suspend clinical trials. Further, the Company
must demonstrate that it is capable of manufacturing bulk product to the
relevant standards. There can be no assurance that any of the Company's future
studies will demonstrate their intended result, that the Company's products will
not have undesirable side effects that may prevent or limit their commercial
use, or that the FDA will otherwise approve any of the Company's products.
Dependence on Sources of Supply. The Company currently imports all of the
plant materials from which its products are derived from countries in South and
Latin America, Africa and Southeast Asia. To the extent that its products cannot
be economically synthesized or otherwise produced, the Company will continue to
be dependent upon a supply of raw plant material. While Shaman believes it has
good relationships with the local governments and suppliers of these plant
materials, the Company does not have formal agreements in place with all of its
suppliers.
Limited Manufacturing and Marketing Experience and Capacity. The Company
currently produces products only in quantities necessary for clinical trials and
does not have the staff or facilities necessary to manufacture products in
commercial quantities. As a result, the Company must rely on collaborative
partners or third-party manufacturing facilities, which may not be available on
commercially acceptable terms adequate for Shaman's long-term needs. The Company
currently has no marketing or sales staff. To the extent that the Company does
not or is unable to enter into co-promotion agreements or to arrange for third
party distribution of its products, significant additional resources will be
required to develop a marketing and sales force.
<PAGE>
Rapid Technological Change and Substantial Competition. The pharmaceutical
industry is subject to rapid and substantial technological change. Technological
competition from pharmaceutical companies, biotechnology companies and
universities is intense. Many of these entities have significantly greater
research and development capabilities, as well as substantial marketing,
manufacturing, financial and managerial resources, and represent significant
competition for the Company. There can be no assurance that developments by
others will not render the Company's products or technologies noncompetitive or
that the Company will be able to keep pace with technological developments.
Uncertainty Regarding Patents and Proprietary Rights. The Company's
success depends in part on its ability to obtain patent protection for its
products and to preserve its trade secrets. No assurance can be given that the
Company's patent applications will be approved, that any patents will provide
the Company with competitive advantages for its products or that they will not
be successfully challenged or circumvented by the Company's competitors. In
addition, patents do not necessarily prevent others from developing competitive
products. The Company has not conducted an exhaustive patent search and no
assurance can be given that patents do not exist or could not be filed which
would have an adverse effect on the Company's ability to market its products.
Uncertainty of Health Care Reimbursement and Reform. Shaman's ability to
successfully commercialize its products may depend in part on the extent to
which reimbursement for the cost of such products and related treatments will be
available from government health administration authorities, private health
insurers and other organizations. Significant uncertainty exists as to the
pricing, availability of distribution channels and reimbursement status of newly
approved healthcare products.
Possible Volatility of Stock Price. The market price of the Company's
common stock, like the stock prices of many publicly traded biotechnology and
smaller pharmaceutical companies, has been and may continue to be highly
volatile.
Environmental Regulation. In connection with its research and development
activities and its periodic manufacturing of clinical trial materials, the
Company is subject to federal, state and local laws, rules, regulations and
policies governing the use, generation, manufacture, storage, air emission,
effluent discharge, handling and disposal of certain materials and wastes.
Although the Company believes that it has complied with these laws and
regulations in all material respects and has not been required to take any
action to correct any noncompliance, there can be no assurance that the Company
will not be required to incur significant costs to comply with environmental and
health and safety regulations in the future.
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults in Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders of
Shaman Pharmaceuticals, Inc. was held on May 23, 1996.
(b) The following Directors were elected to serve as Class I directors for
two years or until their successors are elected and qualified:
Name Position
Lisa A. Conte Class I Director
John A. Young Class I Director
The following Directors continue to serve their two year terms as
elected at last year's Annual Meeting held on June 9, 1995:
Name Position
G. Kirk Raab Chairman of the Board
Herbert H. McDade, Jr. Class II Director
M. David Titus Class II Director
(c) The matters voted upon at the meeting and voting of the
stockholders with respect thereto are as follows:
(i) The election of Class I directors to hold office for a
term of two years from the Annual Meeting.
Lisa A. Conte:
For: 11,409,234 Withheld: 272,345
John A. Young:
For: 11,404,476 Withheld: 277,103
<PAGE>
(ii) Approval of an Amendment to the Company's 1992 Stock
Option Plan (the "Plan") to:
1) increase the maximum number of shares of the Company's
common stock authorized for issuance under the Plan
by an additional 450,000 shares,
2) increase the limit of the maximum number of shares for
which any individual participant may be granted
stock options by an additional 250,000 shares, and
3) to extend the eligibility provisions of the Plan so that
non-employee Board members, other than those at the time
serving on the Compensation Committee which administers
the Plan, will be eligible to receive option grants under
both the Discretionary Option Grant and Automatic Option
Grant Programs in effect under the Plan.
For: 9,388,673 Against: 2,221,303
Abstain: 71,603
(iii) Ratification of the appointment of Ernst & Young LLP as
the Company's independent auditors for the year ending
December 31, 1996.
For: 11,602,187 Against: 41,406
Abstain: 37,986
Item 5. Other Information
None.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
3.2 Amended and Restated Bylaws, effective
as of May 23, 1996.
4 Certificate of Designation of Preferences
of Series A Preferred Stock of Shaman
Pharmaceuticals, Inc., a Delaware corporation,
as filed with the Delaware Secretary of State
July 24, 1996.
10.49+ Subscription Agreement dated July 25,
1996 between Shaman Pharmaceuticals, Inc.
and Fletcher International Limited.
27 Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter ended
June 30, 1996.
- --------------------------------------
+ Confidential treatment pursuant to Rule 24b-2 under the Securities
Exchange Act of 1934, as amended, has been requested for certain portions
of this agreement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: December 23, 1996
Shaman Pharmaceuticals, Inc.
(Registrant)
/s/ Lisa A. Conte
-----------------------------------
Lisa A. Conte
President and Chief Executive Officer
(principal executive officer)
/s/ Barbara J. Goodrich
-----------------------------------
Barbara J. Goodrich
Vice President and Chief Financial Officer
(principal financial and accounting officer)
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
SHAMAN PHARMACEUTICALS, INC.
(As Amended March 29, 1996)
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of San Carlos, State of California, at such
place as may be fixed from time to time by the Board of Directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1994, shall be held on the first Wednesday in May if not a legal holiday, and,
if a legal holiday, then on the next secular day following, at 9:00 A.M., or
such other date and time as shall be designated from time to time by the Board
of Directors and stated in the notice of the meeting, at which they shall elect
by a plurality vote a board of directors or a class of the board of directors as
provided in the certificate of incorporation, and transact such other business
as may properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
<PAGE>
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president or the chairman of the Board of
Directors and shall be called by the president or secretary at the request in
writing of a majority of the Board of Directors, or at the request in writing of
stockholders owning not less than sixty-six and two-thirds percent (66-2/3%) of
the entire capital stock of the corporation issued and outstanding and entitled
to vote. Such request shall state the purpose or purposes of the proposed
meeting.
Section 6. Written notice of a special meeting stating the place,
date and hour of the meeting and the purpose or purposes for which the meeting
is called, shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
<PAGE>
Section 11. Unless otherwise provided in the certificate of
incorporation, any action required to be taken at any annual or special meeting
of stockholders of the corporation, or any action which may be taken at any
annual or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall not be less than five (5) nor more than nine (9) with the number of
directors presently set at five (5). Thereafter, within the limits above
specified, the number of directors shall be determined by amendment of the
bylaws duly adopted by resolution of the Board of Directors or by the
stockholders at the annual meeting of the stockholders, except as provided in
Section 2 of this Article, and each director elected shall hold office until his
successor is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and new created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected and shall qualify,
unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the corporation shall be managed by or
under the direction of its board of directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these bylaws directed or required
to be exercised or done by the stockholders.
<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 5. The first meeting of each newly elected Board of
Directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the
president on four (4) days' notice to each director by mail or forty-eight (48)
hours' notice to each director either personally or by telegram; special
meetings shall be called by the president or secretary in like manner and on
like notice on the written request of two directors unless the board consists of
only one director, in which case special meetings shall be called by the
president or secretary in like manner and on like notice on the written request
of the sole director.
Section 8. At all meetings of the board four (4) directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum shall not be present
at any meeting of the Board of Directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation of these bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
<PAGE>
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence of disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Section 12. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
<PAGE>
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
Board of Directors and shall be a president and a secretary. The Board of
Directors may elect from among its members a Chairman of the Board and a Vice
Chairman of the Board. The Board of Directors may also choose one or more
vice-presidents, assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a president and a secretary and may
choose a vice president and a treasurer.
Section 3. The Board of Directors may appoint such other officers
and agents as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
Section 4. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall be
present. He shall have and may exercise such powers as are, from time to time,
assigned to him by the Board and as may be provided by law.
Section 7. In the absence of the Chairman of the Board, the Vice
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and of the stockholders at which he shall be present. He shall have
and may exercise such powers as are, from time to time, assigned to him by the
Board and as may be provided by law.
<PAGE>
THE PRESIDENT AND VICE-PRESIDENT
Section 8. The president shall be the chief executive officer of the
corporation; and in the absence of the Chairman and Vice Chairman of the Board
he shall preside at all meetings of the stockholders and the Board of Directors;
he shall have general and active management of the business of the corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect.
Section 9. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the corporation.
Section 10. In the absence of the president or in the event of his
inability or refusal to act, the vice-president, if any, (or in the event there
be more than one vice-president, the vice-presidents in the order designated by
the directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
president. The vice-presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 12. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
<PAGE>
THE TREASURER AND ASSISTANT TREASURERS
Section 13. The treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors.
Section 14. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 15. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 16. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by,
the chairman or vice-chairman of the Board of Directors, or the president or a
vice-president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the corporation, certifying the number of shares owned
by him in the corporation.
Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
<PAGE>
If the corporation shall be authorized to issue more than one class
of stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent
of the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
<PAGE>
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholder or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting: provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside
out of any funds of the corporation available for dividends such sum or sums as
the directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
<PAGE>
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall indemnify its officers, directors,
employees and agents to the full extent permitted by the General Corporation Law
of Delaware.
ARTICLE VIII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new
bylaws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the certificate of
incorporation at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is conferred upon the Board of Directors by the
certificate or incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal bylaws.
<PAGE>
SECRETARY'S CERTIFICATE
I, J. Stephan Dolezalek, Secretary of SHAMAN PHARMACEUTICALS, INC.,
a Delaware corporation (the "Corporation"), do hereby certify that the attached
document is a true and complete copy of the ByLaws of the Corporation as in
effect on the date hereof.
Dated: June 12, 1996
/s/ J. Stephen Dolezalek
---------------------------------
J. Stephan Dolezalek, Secretary
<PAGE>
EXHIBIT 4
CERTIFICATE OF DESIGNATION
OF PREFERENCES OF SERIES A PREFERRED STOCK OF
SHAMAN PHARMACEUTICALS, INC.,
a Delaware Corporation
The undersigned Lisa A. Conte and J. Stephan Dolezalek hereby
certify that:
(i) They are the duly elected and acting President and Chief
Executive Officer and Secretary, respectively, of Shaman Pharmaceuticals, Inc.,
a Delaware corporation (the "Corporation").
(ii) Pursuant to the authority conferred upon the Board of Directors
of the Corporation by paragraph (B) of Article IV of the Corporation's Restated
Certificate of Incorporation (the "Certificate"), the Board of Directors of the
Corporation on July 18, 1996 adopted the following resolutions creating a series
of preferred stock designated as Series A Preferred Stock;
WHEREAS, the Certificate provides for a class of shares known as
Preferred Stock, issuable from time to time in one or more series; and
WHEREAS, the Board of Directors of the Corporation is authorized by
the Certificate to determine the powers, rights, preferences, qualifications,
limitations and restrictions granted to or imposed upon any wholly unissued
series of Preferred Stock, to fix the number of shares constituting any such
series, and to determine the designation thereof, or any of them;
WHEREAS, the Board of Directors of the Corporation desires, pursuant
to its authority as aforesaid, to determine and fix the powers, rights,
preferences, qualifications, limitations and restrictions relating to series of
Preferred Stock and the number of shares constituting, and the designation of,
each such series:
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority
vested in the Board of Directors of the Corporation in accordance with the
provisions of the Certificate, the series of Preferred Stock is hereby created,
and the Board of Directors hereby fixes and determines the designation of, the
number of shares constituting, and the rights, preferences, privileges and
restrictions relating to, such series of Preferred Stock as follows:
1. Designation. The series of preferred stock of the
Corporation shall be designated as "Series A Preferred Stock," $0.001 par
value.
<PAGE>
2. Authorized Number. The number of shares constituting the Series A
Preferred Stock shall be Four Hundred Thousand (400,000) shares. The rights,
preferences, restrictions and other matters relating to the Series A Preferred
Stock set forth below are subject to the issuance of any subsequent series of
preferred stock. The Board of Directors is also authorized to decrease the
number of shares of any series of preferred stock prior or subsequent to the
issue of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be so decreased,
the shares constituting such decrease shall resume the status which they had
prior to the adoption of the resolution originally fixing the number of shares
of such series.
3. Dividend Rights. Subject to the rights of series of Preferred
Stock which may from time to time come into existence, the holders of the Series
A Preferred Stock shall be entitled to receive, when and as declared by the
Board of Directors, out of any assets of the corporation legally available
therefor, such dividends as may be declared from time to time by the Board of
Directors. The Board of Directors shall not pay any dividend to the holders of
the Common Stock unless and until it has paid an equivalent dividend, on a pro
rata per share basis, to the holders of the Series A Preferred Stock.
4. Liquidation Preference.
(A) In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of the Series
A Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Common Stock by reason of their ownership thereof, the amount of
$8.147 (the AOriginal Issue Price@) per share (as adjusted for any stock
dividends, combinations or splits with respect to such shares) plus all accrued
or declared but unpaid dividends on such share for each share of Series A
Preferred Stock then held by such holder. If upon the occurrence of such event,
the assets and funds thus distributed among the holders of the Series A
Preferred Stock shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amount, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Series A Preferred Stock in proportion to the
preferential amount each such holder is otherwise entitled to receive.
(B) After payment to the holders of the Series A Preferred
Stock of the amounts set forth in Section 4(A) above, the entire remaining
assets and funds of the Corporation legally available for distribution, if any,
shall be distributed among the holders of the Common Stock in proportion to the
shares of Common Stock then held by them.
(C) For purposes of this Section 4, (i) any acquisition of the
Corporation by means of merger or other form of corporate reorganization in
which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring corporation
or its subsidiary (other than a mere reincorporation transaction) or (ii) a sale
of all or substantially all of the assets of the Corporation or (iii) any other
transaction or series of related transactions by the Corporation in which in
excess of 50% of the Corporation's voting power is transferred, shall be treated
as a liquidation, dissolution or winding up of the Corporation and shall entitle
the holders of Series A Preferred Stock to receive at the closing in cash,
securities or other property (valued as provided in Section 4(D) below) the
amount as specified in Section 4(A) above.
<PAGE>
(D) Whenever the distribution provided for in this Section 4
shall be payable in securities or property other than cash, the value of such
distribution shall be as follows:
(i) Securities not subject to investment letter or
other similar restrictions on free marketability:
(A) If traded on a securities exchange, the
value shall be deemed to be the average of the closing prices of the
securities on such exchange over the 30-day period ending three (3) days
prior to the closing;
(B) If actively traded over-the-counter, the
value shall be deemed to be the average of the closing bid or sale prices
(whichever are applicable) over the 30-day period ending three (3) days
prior to the closing; and
(C) If there is no active public market, the
value shall be the fair market value thereof, as determined in good faith
by the Board of Directors of the Corporation.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an
affiliate or former affiliate) shall be to make an appropriate discount
from the market value determined as above in (i) (A), (B) or (C) to
reflect the approximate fair market value thereof, as determined in good
faith by the Board of Directors of the Corporation.
(iii) In the event of any bona-fide dispute between the
Corporation and one or more holders of the Series A Preferred Stock as to
any fair market value determination under clauses (i)(C) or (ii) above,
such dispute shall be resolved through binding arbitration under the rules
of the American Arbitration Association, with the arbitration panel
consisting of persons familiar with the valuation of public and private
entities and such panel being advised, as to such valuation issues, by an
investment bank of nationally recognized standing, the costs thereof to be
borne by the non-prevailing party.
5. Redemption. The Series A Preferred Stock is not redeemable.
<PAGE>
6. Conversion. The holders of Series A Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(A) Right to Convert. Each share of Series A Preferred Stock
shall be convertible into one share of Common Stock, as adjusted for any stock
dividends, combinations or splits with respect to such shares, at any time at
the option of the holder, provided, however, that the minimum number of shares
which may be converted at any one time shall be 75,000 shares or such lesser
number of shares as shall be then outstanding.
(B) Automatic Conversion. Each share of Series A Preferred
Stock shall automatically be converted into Common Stock, upon the earlier to
occur of:
(i) immediately in the event that at any time prior to
July 23, 1999, the closing sale price (the AClosing Sale Price@) of the
Corporation's Common Stock (as listed on the Nasdaq National Market) has
for a period of sixty (60) consecutive trading days exceeded the Original
Issue Price, which event shall be disclosed to each holder of the Series A
Preferred Stock by written notification from the Corporation, in which
event each share of Series A Preferred Stock shall automatically be
converted into one (1) share of Common Stock, as appropriately adjusted
for any stock dividends, combinations or splits with respect to such
shares of Common Stock; or
(ii) July 23, 1999, in which event each share of Series
A Preferred Stock shall automatically be converted into the such number of
shares of Common Stock as equals the Original Issue Price divided by the
weighted-average Closing Sale Price for the sixty (60) consecutive trading
days ending two days prior to July 23, 1999, but in no event more than the
Original Issue Price divided by $6.00, in each case as appropriately
adjusted for any stock dividends, combinations or splits with respect to
such shares of Common Stock.
(C) Mechanics of Conversion. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of this Corporation or of any transfer agent for the
Series A Preferred Stock, and shall give written notice by mail, postage
prepaid, or by facsimile, confirmed by mail, to this Corporation at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. This Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of the Series A
Preferred Stock, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
Series A Preferred Stock to be converted, or in the case of automatic conversion
pursuant to Section 6(B), ten (10) days following written notification as
provided in Section 6(B), and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock as of
such date.
<PAGE>
(D) Adjustments to Conversion Ratio for Stock Dividends and
for Combinations or Subdivisions of Common Stock. In the event that this
Corporation at any time or from time to time after the purchase date of the
Series A Preferred shall declare or pay, without consideration, any dividend on
the Common Stock payable in Common Stock or in any right to acquire Common Stock
for no consideration, or shall effect a subdivision of the outstanding shares of
Common Stock into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or in the event the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then the number of
shares of Common Stock into which the Series A Preferred Stock can be converted
shall be proportionately decreased or increased, as appropriate. In the event
that this Corporation shall declare or pay, without consideration, any dividend
on the Common Stock payable in any right to acquire Common Stock for no
consideration then the Corporation shall be deemed to have made a dividend
payable in Common Stock in an amount of shares equal to the maximum number of
shares issuable upon exercise of such rights to acquire Common Stock.
(E) Adjustments for Reclassification and Reorganization. If
the Common Stock issuable upon conversion of the Series A Preferred Stock shall
be changed into the same or a different number of shares of any other class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares provided for in
Section 6(D) above or a merger or other reorganization referred to in Section
4(C) above), the number of shares of such other class or classes of stock into
which the Series A Preferred Stock shall be convertible shall, concurrently with
the effectiveness of such reorganization or reclassification, be proportionately
adjusted so that the Series A Preferred Stock shall be convertible into, in lieu
of the number of shares of Common Stock which the holders would otherwise have
been entitled to receive, a number of shares of such other class or classes of
stock equivalent to the number of shares of Common Stock that would have been
subject to receipt by the holders upon conversion of the Series A Preferred
Stock immediately before that change.
(F) No Impairment. This Corporation will not, by amendment of
its Certificate or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by this Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 6 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock against impairment.
<PAGE>
(G) No Fractional Shares and Certificate as to
Adjustments.
(i) No fractional shares shall be issued upon
conversion of the Series A Preferred Stock, and the number of shares of
Common Stock to be issued shall be rounded to the nearest whole share.
Whether or not fractional shares are issuable upon such conversion shall
be determined on the basis of the total number of Series A Preferred Stock
the holder is at the time converting into Common Stock and the number of
shares of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the number of shares of Common Stock into which the Series
A Preferred Stock can be converted pursuant to this Section 6, this
Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish
to each holder of Series A Preferred Stock a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. This Corporation shall, upon the
written request at any time of any holder of Series A Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting
forth (A) such adjustment and readjustment, (B) the conversion ratio at
the time in effect, and (C) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon
the conversion of the Series A Preferred Stock.
(H) Notices of Record Date. In the event of any taking by this
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
Corporation shall mail to each holder of Series A Preferred Stock, at least
twenty (20) days prior to the date specified therein, a notice specifying the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and the amount and character of such dividend,
distribution or right.
(I) Reservation of Stock Issuable Upon Conversion. This
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the Series A Preferred Stock such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all the then outstanding Series A Preferred Stock,
in addition to such other remedies as shall be available to the holder of such
Series A Preferred Stock, this Corporation will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes.
<PAGE>
(J) Notices. Any notice required by the provisions of this
Section 6 to be given to the holders of Series A Preferred Stock shall be deemed
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of this Corporation.
7. Voting Rights.
(A) Each holder of shares of Series A Preferred Stock shall be
entitled to the number of votes equal to the number of shares of Common Stock
into which such shares of Series A Preferred Stock could then be converted and
shall have voting rights and powers equal to the voting rights and powers of the
Common Stock (except as otherwise expressly provided herein or as required by
law, voting together with the Common Stock as a single class) and shall be
entitled to notice of any stockholders' meeting in accordance with the Bylaws of
the Corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Series A Preferred Stock held by each holder could
be converted) shall be rounded to the nearest whole number (with one-half being
rounded upward). Each holder of Common Stock shall be entitled to one (1) vote
for each share of Common Stock held.
8. Status of Converted or Redeemed Stock. In the event any Series A
Preferred Stock shall be converted pursuant to Section 6 hereof, the shares so
converted shall be promptly canceled after the conversion thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
* * *
RESOLVED FURTHER, that the Chairman of the Board, the Chief
Executive Officer, the President or any Vice President, and the Secretary, the
Chief Financial Officer, the Treasurer, or any Assistant Secretary or Assistant
Treasurer of this Corporation are each authorized to execute, verify, and file a
Certificate of Designation of Preferences in accordance with Delaware law.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this certificate
on July 24, 1996.
/s/ Lisa A. Conte
------------------------------
Lisa A. Conte
President and Chief Executive Officer
/s/ Stephen Dolezalek
-----------------------------
J. Stephan Dolezalek
Secretary
The undersigned certify under penalty of perjury that they have read
the foregoing Certificate of Designation of Preferences and know the contents
thereof, and that the statements therein are true.
Executed at South San Francisco, California, on July 24, 1996.
/s/ Lisa A. Conte
------------------------------
Lisa A. Conte
President and Chief Executive Officer
/s/ Stephen Dolezalek
-----------------------------
J. Stephan Dolezalek
Secretary
<PAGE>
EXHIBIT 10.49
SUBSCRIPTION AGREEMENT
This Subscription Agreement (the "Agreement"), dated July 25, 1996
is entered into by and between Shaman Pharmaceuticals, Inc., a Delaware
corporation ("Shaman"), and Fletcher International Limited, a company organized
under the laws of the Cayman Islands ("Fletcher").
Unless otherwise defined herein, capitalized terms used herein and
not defined herein shall have the meanings given to them in Regulation S
("Regulation S") under the Securities Act of 1933, as amended (the "Securities
Act").
The parties hereto agree as follows:
1. Purchases and Sale. In consideration of and upon the basis
of the representations, warranties and agreements and subject to the terms
and conditions set forth in this Agreement:
a. Series A Preferred Stock. Shaman agrees to sell to
Fletcher, and Fletcher agrees to purchase from Shaman, on the Closing Date
specified in Section 2 hereof, 400,000 newly issued shares of its Series A
Preferred Stock, par value $0.001 per share, of Shaman (the "Preferred
Shares"), at a price per share equal to $8.147. As used herein, the term
"Trading Day" means any day on which Shaman's Common Stock, par value
$0.001 per share (the "Common Stock") is quoted on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") System.
b. Put Options. Fletcher agrees to grant to Shaman on
the Closing Date specified in Section 2 hereof, six put options having
the terms set forth in Annex A hereto (each a "Put Option").
c. Warrant. Shaman agrees to sell to Fletcher, and Fletcher
agrees to purchase from Shaman, on the Closing Date specified in Section 2
hereof, a warrant having the terms set forth in Annex B hereto (the
"Warrant") to purchase an aggregate of 550,000 shares of Common Stock
which, in accordance with the terms and conditions of this Agreement, will
be freely tradable. The shares of Common Stock issuable pursuant to the
Warrant are referred to herein as the "Warrant Shares."
2. Closing. The delivery of the Preferred Shares referred to in
Section 1(a) and the Warrant referred to in Section 1(c) and payment therefor
(the "Closing") shall take place at 3:00 p.m. (New York time) on July 26, 1996,
or at such other date and time as Fletcher and Shaman may agree in writing (such
date and time being referred to herein as the "Closing Date").
<PAGE>
At the Closing, the following deliveries shall be made:
a. Preferred Shares. Shaman shall deliver the
certificate or certificates representing the Preferred Shares referred
to in Section 1(a) to Fletcher, at such address as shall be specified
by Fletcher, duly registered in the name of Fletcher.
b. Warrant. Shaman shall deliver the certificate or
certificates representing the Warrant to Fletcher. Such certificates
shall be substantially in the form attached hereto as Annex B hereto.
c. Officers' Certificate. Shaman shall deliver the
officers' certificate required by Section 7(a).
d. Legal Opinions. The legal opinions required by
Sections 7(b) and 8(b) shall be delivered to Fletcher and Shaman,
respectively.
e. Payment. Payment of the Preferred Stock Purchase
Price shall be made by Fletcher by New York Clearing House (next day)
funds to the following Shaman account (subject to customary settlement
procedures):
Client Account No. 449-15852-14025
Subaccount of Smith Barney Account No. 066-198-038
Chemical Bank (ABA No. 021000128).
The foregoing deliveries shall be deemed to occur simultaneously as
part of a single transaction, and no delivery shall be deemed to have been made
until all such deliveries have been made.
3. Representations and Warranties of Shaman. Shaman hereby repre-
sents and warrants to Fletcher on the date hereof, on the Closing Date, on
the date any Preferred Share is converted (each a "Preferred Share Conversion
Date"), on each Put Option Exercise Date (as defined in Annex A hereto) and
on each Warrant Exercise Date (as defined in Annex B hereto) as follows:
a. Shaman has been duly incorporated and is validly
existing in good standing under the laws of Delaware.
b. This Agreement has been duly authorized, executed and
delivered by Shaman and, when duly authorized, executed and delivered by
Fletcher, will be a valid and binding agreement enforceable against Shaman
in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally
and to general principles of equity.
<PAGE>
c. Shaman has full corporate power and authority
necessary to enter into this Agreement and to perform its obligations
hereunder.
d. No consent, approval, authorization or order of any court,
governmental agency or other body is required for execution by Shaman of
this Agreement or the performance by Shaman of any of its obligations
hereunder.
e. Neither the execution by Shaman of this Agreement nor
the performance by Shaman of any of its obligations hereunder will:
(1) violate, conflict with, result in a breach of, or
constitute a default (or an event which with the giving of notice or
the lapse of time or both would be reasonably likely to constitute a
default) under (A) the Restated Certificate of Incorporation,
by-laws or any other constitutive document of Shaman or any of its
affiliates, (B) any decree, judgment, order, law, treaty, rule,
regulation or determination of which Shaman is aware (after due
inquiry) of any court, governmental agency or body, or arbitrator
having jurisdiction over Shaman or any of its affiliates or any of
their respective properties or assets, (C) the terms of any bond,
debenture, note or any other evidence of indebtedness, or any
agreement, stock option or other similar plan, indenture, lease,
mortgage, deed of trust or other instrument to which Shaman or any
of its affiliates is a party, by which Shaman or any of its
affiliates is bound, or to which any of the properties or assets of
Shaman or any of its affiliates is subject, or (D) the terms of any
"lock-up" or similar provision of any underwriting or similar
agreement to which Shaman or any of its affiliates is a party; or
(2) result in the creation or imposition of any lien,
charge or encumbrance upon (A) any Preferred Share, the Warrant or
any Common Stock or (B) any of the properties or assets of Shaman or
any of its affiliates.
f. When issued to Fletcher against payment therefor in
accordance with the terms of this Agreement, any Preferred Share, any Put
Option or the Warrant, each share of Common Stock:
(1) will have been duly and validly authorized,
duly and validly issued, fully paid and non-assessable;
(2) will be free and clear of any security
interests, liens, claims or other encumbrances; and
(3) will not have been issued or sold in violation of
any preemptive or other similar rights of the holders of any
securities of Shaman.
<PAGE>
g. When any share of Common Stock is issued to Fletcher
pursuant to the terms of this Agreement, any Preferred Share, any Put
Option or the Warrant, the Common Stock will be quoted on NASDAQ or listed
and registered on a national securities exchange (as defined in the United
States Securities Exchange Act of 1934, as amended (the "Exchange Act")).
h. Shaman is a Reporting Issuer within the meaning of
Regulation S.
i. There is no pending or, to the best knowledge of Shaman,
threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over Shaman
or any of its affiliates that would materially affect the execution by
Shaman of, or the performance by Shaman of its obligations under, this
Agreement, provided, however, that the representations and warranties
contained in this Section 3(i) shall not apply to any action, threatened
action, suit, proceeding or investigation initiated by Fletcher and shall
not be required to be given in respect of any Preferred Share Conversion
Date or Warrant Exercise Date.
j. None of Shaman's filings with the United States Securities
and Exchange Commission (the "S.E.C.") under the Securities Act or under
Section 13(a) or 15(d) of the Exchange Act (each, an "SEC Filing"), or
press releases material to the business of Shaman as a whole, contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
k. Since the date of Shaman's most recent SEC Filing, there
has not been, and Shaman is not aware of any development that might result
in, any material adverse change in the condition, financial or otherwise,
or in the business affairs or business prospects of Shaman, whether or not
arising in the ordinary course of business, except as disclosed in such
SEC Filing, provided, however, that the representations and warranties
contained in this Section 3(k) shall not be required to be given in
respect of any Preferred Share Conversion Date or Warrant Exercise Date.
l. The offer and sale of the Preferred Shares, the Common
Stock, the Warrant and the Warrant Shares to Fletcher pursuant to this
Agreement will, subject to compliance by Fletcher with the applicable
representations and warranties contained in Section 4 hereof and with the
applicable covenants and agreements contained in Section 6 hereof, be made
in accordance with the provisions and requirements of Regulation S and any
applicable state law.
m. Neither Shaman nor any of its affiliates nor any person
acting on its or their behalf has engaged or will engage in any Directed
Selling Efforts with respect to the Preferred Shares, the Common Stock,
the Warrant or the Warrant Shares, and all such persons understand and
have complied and will otherwise comply with the requirements of
Regulation S.
<PAGE>
n. The transactions contemplated by this Agreement are not
part of a plan or scheme on the part of Shaman, any of its affiliates or
any person acting on its or their behalf to evade the registration
provisions of the Securities Act.
o. Shaman has not issued, and after the Closing Date will not
issue, any stop transfer order or other order impeding the sale and
delivery of the Preferred Shares, the Common Stock, the Warrant or the
Warrant Shares issuable hereunder except for a stop order restricting the
sale of any of the foregoing securities to any person in the United States
or to or for the account or benefit of any U.S. Person during an
applicable Restricted Period. Notwithstanding the foregoing provision,
Shaman shall place the following legend on the certificate representing
any security issued hereunder prior to the expiration of the Restricted
Period (as defined herein) applicable to such security:
The securities represented by this certificate were issued on July
26, 1996 (the "Original Issue Date") pursuant to the Subscription
Agreement dated July 25, 1996 between Shaman Pharmaceuticals, Inc.
("Shaman") and Fletcher International Limited. The securities
represented by this certificate have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and have
been sold in reliance on the exemption from registration provided by
Regulation S under the Securities Act ("Regulation S"). Prior to the
expiration of a 40-day restricted period beginning on the Original
Issue Date (the "Restricted Period"), the securities represented by
this certificate may not be offered or sold, directly or indirectly,
within the United States (as defined in Regulation S under the Act),
to a U.S. Person (as defined in Regulation S under the Act) or for
the account or benefit of a U.S. Person. Neither Shaman
Pharmaceuticals, Inc. nor its transfer agent shall be obligated to
remove this legend unless it shall have received an opinion of
counsel stating that such removal complies with the requirements of
Regulation S (under the Act).
provided, however, that as used in this Agreement and as reflected in such
legend, the term "Restricted Period," with respect to any security, shall
mean the Restricted Period then applicable to such security pursuant to
Regulation S (or any applicable successor thereto).
p. Neither Shaman nor any of its affiliates has offered to
sell or sold any Common Stock or any securities convertible or
exchangeable into or exercisable for Common Stock in reliance upon
Regulation S at any time during the past 12 months; and there are no
outstanding convertible or exchangeable securities that have been offered
or sold in reliance upon Regulation S, except, in each case the Warrant
and the Preferred Shares sold pursuant hereto.
<PAGE>
q. (i) If, any time after the date hereof, the S.E.C. has
reinterpreted Regulation S or has promulgated, or the United States
Congress has legislated, a successor or revision to Regulation S, and such
reinterpretation, successor provision or revision imposes a Restricted
Period applicable to any security issued or issuable hereunder that is
greater than that in effect on the date of this Agreement, or would
materially impair the ability of Fletcher or any of its affiliates (as
defined in Rule 144(a) under the Securities Act) to offer, sell or
otherwise dispose of any such security pursuant to Regulation S as
contemplated hereby, or requires any such offer, sale or other disposition
to be registered under the Securities Act, then upon the written request
of Fletcher (a "Registration Request"), Shaman shall, as promptly as
practicable thereafter and at its own expense, file a registration
statement (the "Registration Statement") under the Securities Act covering
the sale or resale of all such securities (each a "Covered Security");
provided, however, that in no event shall Shaman be required to file a
Registration Statement or otherwise comply with a Registration Request to
the extent that such reinterpretation, successor provision or revision
imposes limitations on the offer, sale or other disposition of any Covered
Security by Fletcher pursuant to Regulation S solely as a result of
Fletcher's hedging or selling short such Covered Security or engaging in
any other activity the effect of which is to decrease or limit Fletcher's
investment risk with respect to such Covered Security in violation of such
reinterpretation, successor provision or revision. Prior to the
effectiveness of such Registration Statement, Shaman shall not be entitled
to exercise any Put Option under this Agreement. Upon the effectiveness of
such Registration Statement (A) Shaman shall issue such securities to
Fletcher in accordance with the terms hereof, (B) the provisions of
Sections 3(l), (m) and (o), 4(e), (f), (g), (h), (i) and (j), 5(a), (b),
(c) and (d), 6(a) (collectively, the "Specified Provisions"), 7(a) and (b)
(to the extent applicable to the Specified Provisions), 8(b), (c) and (d)
(to the extent applicable to the Specified Provisions) shall thereafter be
of no force and effect with respect to the issuance of such Covered
Securities and (C) the provision that not more than one Put Option shall
be exercisable within any six-month period shall be of no further force
and effect, and with respect to any Put Options outstanding at that time,
not more than one such Put Option shall be exercisable within any 50
Trading Day period and no such Put Option shall be exercisable to the
extent that (i) the number of shares of Common Stock issuable to Fletcher
pursuant to such Put Option plus (ii) the number of shares of Common Stock
issued to Fletcher during the immediately preceding 365 days pursuant to
any Put Option plus (iii) the total number of shares of Common Stock
issuable to Fletcher pursuant to the Preferred Shares (whether or not such
Preferred Shares have been converted) plus (iv) the total number of
Warrant Shares issuable to Fletcher pursuant to the Agreement (whether or
not such Warrant Shares have then been issued), would equal or exceed 10%
of the number of shares of Common Stock outstanding on the relevant Put
Option Exercise Date (including common stock issuable under (iii) or (iv)
above), provided, however, that, if such Registration Statement has not
been declared effective before the 180th day following the date of such
Registration Request, then (X) any Put Options outstanding under this
Agreement shall immediately expire and shall not thereafter be
exercisable, and Fletcher shall have no further liability whatsoever with
respect thereto
<PAGE>
and (Y) Shaman shall use its best efforts to cause such Registration
Statement to become effective as promptly as practicable in respect of
any outstanding portion of the securities the sale or resale of which is
required to be so registered.
(ii) In the case of the registration effected by Shaman
pursuant to this Section 3(q) registration provisions, Shaman will use its
best efforts to: (i) keep such registration effective until the earlier of
(A) the third anniversary of the issuance of each Covered Security, (B)
such date as all of the Covered Securities have been sold by Fletcher or
(C) such time as all of the Covered Securities held by Fletcher can be
sold by Fletcher or any of its affiliates (within the meaning of Rule
144(a) under the Securities Act) within a given three-month period without
compliance with the registration requirements of the Securities Act
pursuant to Rule 144 under the Securities Act ("Rule 144"); (ii) prepare
and file with the S.E.C. such amendments and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement (as so amended and supplemented from time to time,
the "Prospectus") as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all Covered Securities
by Fletcher or any of its affiliates (within the meaning of Rule 144(a)
under the Securities Act); (iii) furnish such number of Prospectuses and
other documents incident thereto, including any amendment of or supplement
to the Prospectus, as Fletcher from time to time may reasonably request;
(iv) cause all Covered Securities that are Common Stock to be listed on
each securities exchange and quoted on each quotation service on which
similar securities issued by Shaman are then listed or quoted; (v) provide
a transfer agent and registrar for all Covered Securities and a CUSIP
number for all Covered Securities; (vi) otherwise use its best efforts to
comply with all applicable rules and regulations of the S.E.C.; and (vii)
file the documents required of Shaman and otherwise use its best efforts
to obtain and maintain requisite blue sky clearance in (A) all
jurisdictions in which any of the Covered Securities are originally sold
and (B) all other states specified in writing by Fletcher, provided as to
clause (B), however, that Shaman shall not be required to qualify to do
business or consent to service of process in any state in which it is not
now so qualified or has not so consented.
(iii) Shaman shall furnish to Fletcher upon request a
reasonable number of copies of a supplement to or an amendment of such
Prospectus as may be necessary in order to facilitate the public sale or
other disposition of all or any of the Covered Securities by Fletcher or
any of its affiliates (within the meaning of Rule 144(a) under the
Securities Act); pursuant to the Registration Statement.
(iv) With a view to making available to Fletcher and its
affiliates (within the meaning of Rule 144(a) under the Securities Act)
the benefits of Rule 144 and Form S-3 under the Securities Act, Shaman
covenants and agrees to: (i) make and keep available adequate current
public information (within the meaning of Rule 144(c)) concerning Shaman,
until the earlier of (A) the third anniversary of the issuance of each
Covered Security of (B) such date as all of the Covered Securities shall
<PAGE>
have been resold by Fletcher or any of its affiliates (within the meaning
of Rule 144(a) under the Securities Act); (ii) maintain its status as a
Reporting Issuer and file with the S.E.C. in a timely manner all reports
and other documents required of Shaman for use of Form S-3; and (iii)
furnish to Fletcher upon request, as long as Fletcher owns any Covered
Securities (A) a written statement by Shaman that it has complied with the
reporting requirements of the Securities Act and the Exchange Act, (B) a
copy of the most recent annual or quarterly report of Shaman, and (C) such
other information as may be reasonably requested in order to avail
Fletcher and its affiliates (within the meaning of Rule 144(a) under the
Securities Act) of Rule 144 or Form S-3 with respect to such Covered
Securities.
(v) Notwithstanding anything else in this Section 3(q), if,
at any time during which a Prospectus is required to be delivered in
connection with the sale of any Covered Securities, Shaman determines in
good faith that a development has occurred or a condition exists as a
result of which the Registration Statement or the Prospectus contains a
material misstatement or omission, Shaman will immediately notify Fletcher
thereof by telephone and in writing. Upon receipt of such notification,
Fletcher and its affiliates (within the meaning of Rule 144(a) under the
Securities Act) will immediately suspend all offers and sales of any
Covered Securities pursuant to the Registration Statement. In such event,
Shaman will amend or supplement the Registration Statement as promptly as
practicable and will take such other steps as may be required to permit
sales of the Covered Securities thereunder by Fletcher and its affiliates
(within the meaning of Rule 144(a) under the Securities Act) in accordance
with applicable federal and state securities laws. Shaman will promptly
notify Fletcher after it has determined in good faith that such sales have
become permissible in such manner and will promptly deliver copies of the
Registration Statement and the Prospectus (as so amended or supplemented)
to Fletcher in accordance with paragraph (ii) of this Section 3(q).
Notwithstanding the foregoing, (A) under no circumstances shall Shaman be
entitled to exercise its right to suspend sales of any Covered Securities
pursuant to the Registration Statement more than two times in any
twelve-month period, (B) the period during which such sales may be
suspended (each a "Blackout Period") shall not exceed thirty days and (C)
no Blackout Period may commence less than 30 days after the end of the
preceding Blackout Period.
Upon the commencement of a Blackout Period pursuant to this
Section 3(q), Fletcher will immediately notify Shaman of any contracts to
sell any Covered Securities (each a "Sales Contract") that Fletcher or any
of its affiliates (within the meaning of Rule 144(a) under the Securities
Act) has entered into prior to the commencement of such Blackout Period
and that would require delivery of such Covered Securities during such
Blackout Period, which notice will contain the aggregate sale price and
volume of Covered Securities pursuant to such Sales Contract. Upon receipt
of such notice, Shaman will immediately notify Fletcher of its election
either (i) to terminate the Blackout Period and, as promptly as
practicable, amend or supplement the Registration Statement or the
Prospectus in order to correct the material misstatement or omission and
<PAGE>
deliver to Fletcher copies of such amended or supplemented Registration
Statement and Prospectus in accordance with paragraph (ii) of this Section
3(q) or (ii) to continue the Blackout Period in accordance with this
paragraph. If Shaman elects to continue the Blackout Period, and Fletcher
or any of its affiliates (within the meaning of Rule 144(a) under the
Securities Act) is therefore unable to consummate the sale of Covered
Securities pursuant to the Sales Contract (such unsold Covered Securities
being hereinafter referred to herein as the "Unsold Securities"), Shaman
will promptly indemnify each Fletcher Indemnified Party (as such term is
defined in Section 11(a) below) against any Proceeding (as such term is
defined in Section 11(a) below) that each Fletcher Indemnified Party may
incur arising out of or in connection with Fletcher's breach or alleged
breach of any such Sales Contract, and Shaman shall reimburse each
Fletcher Indemnified Party for any reasonable costs or expenses (including
reasonable legal fees) incurred by such party in investigating or
defending any such Proceeding (collectively, the "Indemnification
Amount"); provided, however, that each Fletcher Indemnified Party shall
take all actions reasonably necessary or appropriate to mitigate such
Indemnification Amount; and provided further, however, that the
Indemnification Amount shall be reduced by an amount equal to the number
of Unsold Securities multiplied by the difference between (x) the actual
per share price received by Fletcher or any of its affiliates (within the
meaning of Rule 144(a) under the Securities Act) upon the sale of the
Unsold Securities (if such sale occurs within three Trading Days of the
end of the Blackout Period) or the closing sale price of the Common Stock
on NASDAQ or other national securities exchange on which the Common Stock
is then listed on the third Trading Day after the end of the Blackout
Period (if the Unsold Securities are not sold by Fletcher or any of its
affiliates (within the meaning of Rule 144(a) under the Securities Act)
within three Trading Days of the end of the Blackout Period), and (y) the
per share sale price for the Unsold Securities provided in the Sales
Contract.
4. Representations and Warranties of Fletcher. Fletcher
hereby represents and warrants to Shaman as follows:
a. Fletcher has been duly incorporated and is validly
existing in good standing under the laws of the Cayman Islands.
b. This Agreement has been duly authorized, executed and
delivered by Fletcher and, when duly authorized, executed and delivered by
Shaman, will be a valid and binding agreement enforceable against Fletcher
in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights generally
and to general principles of equity.
c. Fletcher understands that no United States federal or
state agency has passed on, reviewed or made any recommendation or
endorsement of the Preferred Shares, the Common Stock, the Warrant or
the Warrant Shares;
<PAGE>
d. In making the decision to purchase the Preferred Shares,
the Common Stock, the Warrant and the Warrant Shares in accordance with
this Agreement, Fletcher has relied solely upon independent investigations
made by it and not upon any representations made by Shaman other than
those made pursuant to this Agreement.
e. Fletcher understands that the Preferred Shares, the Common
Stock, the Warrant and the Warrant Shares have not been and will not be
registered under the Securities Act and may not be reoffered or resold
other than pursuant to such registration or an available exemption
therefrom.
f. Fletcher is not a U.S. Person and is not acquiring the
Preferred Shares, the Common Stock, the Warrant or any Warrant Shares for
the account or benefit of any U.S. Person, and Fletcher is not an
affiliate (within the meaning of Rule 144 under the Securities Act) of
Shaman.
g. At the time the buy orders for the Preferred Shares and the
Warrant (and any Common Stock and Warrant Shares issued during the
applicable Restricted Period) were originated, Fletcher was located
outside the United States.
h. Neither Fletcher nor any of its affiliates nor anyone
acting on its or their behalf has engaged or will engage in any Directed
Selling Efforts with respect to the Preferred Shares, the Common Stock,
the Warrant or any Warrant Shares, and all such persons understand and
have complied and will otherwise comply with the requirements of
Regulation S.
i. Fletcher:
(1) will not, during the Restricted Period applicable to
the Preferred Shares, the Common Stock, the Warrant and the Warrant
Shares, offer or sell any of the foregoing securities (or create or
maintain any derivative position equivalent thereto) in the United
States, to or for the account or benefit of a U.S. Person or other
than in accordance with Regulation S; and
(2) will, after the expiration of the applicable
Restricted Period, offer, sell, pledge or otherwise transfer the
Preferred Shares, the Common Stock, the Warrant or any Warrant
Shares (or create or maintain any derivative position equivalent
thereto) only pursuant to registration under the Securities Act or
an available exemption therefrom and, in any case, in accordance
with applicable state securities laws.
j. Fletcher is purchasing the Preferred Shares, the Warrant
and the Warrant Shares for its own account, for the purpose of investment
and not with a view to a distribution thereof.
<PAGE>
k. The transactions contemplated by this Agreement are not
part of a plan or scheme on the part of Fletcher, any of its affiliates or
any person acting on its or their behalf to evade the registration
requirements of the Securities Act.
5. Covenants of Shaman. Shaman covenants and agrees with
Fletcher as follows:
a. For so long as any Preferred Share is outstanding or any of
the Put Options have not been exercised or any portion of the Warrant
remains outstanding, and in either case for a period of 40 days
thereafter, Shaman will continue to be a Reporting Issuer within the
meaning of Regulation S and will maintain the eligibility of the Common
Stock for quotation on NASDAQ or listing on a national securities exchange
(as defined in the Exchange Act).
b. For so long as any Preferred Share is outstanding or any of
the Put Options have not been exercised or any portion of the Warrant
remains outstanding, and in either case for a period of six months
thereafter, Shaman will not offer or sell any Common Stock or any
securities convertible into or exchangeable into Common Stock in reliance
upon Regulation S.
c. For so long as any Preferred Share is outstanding or any of
the Put Options have not been exercised or any portion of the Warrant
remains outstanding, and in either case for a period of 40 days
thereafter, neither Shaman nor any of its affiliates nor any person acting
on its or their behalf will engage in any Directed Selling Efforts with
respect to the Preferred Shares, the Common Stock, the Warrant or Warrant
Shares.
d. For so long as any Preferred Share is outstanding or any of
the Put Options have not been exercised or any portion of the Warrant
remains outstanding, and in either case for a period of 40 days
thereafter, Shaman will ensure that all applicable Offering Restrictions
with respect to the Preferred Shares, the Common Stock, the Warrant and
the Warrant Shares are thoroughly complied with and satisfied.
e. Beginning on the date hereof and for so long as any
Preferred Share is outstanding or any of the Put Options have not been
exercised or any portion of the Warrant remains outstanding, and in either
case for a period of 40 days thereafter, Shaman will promptly notify
Fletcher if (i) any event shall have occurred as a result of which any SEC
Filing would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, or (ii) there is any public disclosure of material information
regarding Shaman or its financial condition prospects or results of
operation.
f. At any time after the expiration of any Restricted Period
with respect to the Preferred Shares, the Common Stock, the Warrant or any
<PAGE>
Warrant Shares, upon the request of Fletcher accompanied by an opinion of
Rogers & Wells (or such other counsel as shall be reasonably satisfactory
to Shaman and its transfer agent (if any)) to the effect that the removal
of the legend referred to in Section 4(o) would then be permitted under
Regulation S and that the resale of any such securities would not require
registration under the Securities Act, Shaman shall, or shall cause its
transfer agent (if any) to, accept from Fletcher the legended certificates
representing such securities and deliver in their place unlegended
certificates therefor.
g. Shaman will comply with the terms and conditions of the Put
Option and the Warrant as set forth in Annex A and Annex B hereto,
respectively (as duly amended from time to time by the parties hereto),
and when issued, each Preferred Share will be substantially in the form of
Annex C hereto.
h. For so long as any Preferred Share is outstanding or any of
the Put Options have not been exercised or any portion of the Warrant
remains outstanding, Shaman shall at all times reserve and keep available,
free from pre-emptive rights, out of its authorized but unissued Common
Stock, for issuance upon conversion of such Preferred Shares and exercise
of such Put Options and Warrant, the maximum number of shares of Common
Stock then so issuable.
6. Covenants of Fletcher. Fletcher hereby covenants and agrees
with Shaman as follows:
a. During any Restricted Period applicable to the Preferred
Shares, the Common Stock, the Warrant or the Warrant Shares, neither
Fletcher nor any of its affiliates nor any person acting on its or their
behalf will:
(1) offer or sell such Preferred Shares, Common Stock,
Warrant or the Warrant Shares other than in an Offshore Transaction;
(2) engage in any Directed Selling Efforts with
respect to such Preferred Shares, Common Stock, Warrant or
Warrant Shares;
(3) offer or sell such Preferred Shares, Common Stock,
Warrant or Warrant Shares other than: (A) in accordance with Rule
903 or Rule 904 of Regulation S; (B) pursuant to registration under
the Securities Act or (C) pursuant to an available exemption
therefrom; and
(4) offer or sell such Preferred Shares, Common
Stock, Warrant or Warrant Shares to any U.S. Person or for the
account or benefit of any U.S. Person.
<PAGE>
7. Conditions Precedent to Fletcher's Obligations. The
obligations of Fletcher hereunder are subject to the performance by Shaman of
its obligations hereunder and to the satisfaction of the following additional
conditions precedent:
a. The representations and warranties made by Shaman in this
Agreement shall, unless expressly waived in writing by Fletcher, be true
and correct on the date hereof, on the Closing Date, on each Preferred
Share Conversion Date, on each Put Option Exercise Date (as defined in
Annex A hereto) and on each Warrant Exercise Date (as defined in Annex B
hereto), and Fletcher shall have received on each such date a certificate
of the Chief Executive Officer and the Chief Financial Officer of Shaman
dated such date and to such effect.
b. On the Closing Date, on each Preferred Share Conversion
Date, on each Put Option Exercise Date (as defined in Annex A hereto) and
on each Warrant Exercise Date (as defined in Annex B hereto) Shaman shall
have delivered to Fletcher an opinion of its counsel reasonably
satisfactory to Fletcher, dated the date of delivery, confirming in
substance the matters covered in paragraphs (a), (b), (c), (d), (e), (f),
(g), (h) and (i) of Section 3 hereof; provided, however, that no such
opinion delivered in respect of any Preferred Share Conversion Date or
Warrant Exercise Date shall be required to cover the matters set forth in
paragraph (i) of Section 3 hereof.
c. On any Put Option Exercise Date, Fletcher's obligation to
purchase any shares of Common Stock hereunder shall be subject to the
additional condition that during the five (5) Business Days (as defined
below) immediately preceding such Put Option Exercise Date, Shaman shall
not have made any SEC Filing or issued any press release describing and
shall not be aware of any material adverse change, or any development that
might result in any material adverse changes in the condition, financial
or otherwise, or in the business affairs or business prospects of Shaman,
whether or not arising in the ordinary course or business; provided,
however, that if on any Put Option Exercise Date such condition has not
been satisfied, such Put Option Exercise Date and each subsequent Put
Option Exercise Date and the Put Option Termination Date hereunder shall
be postponed by five (5) Business Days for all purposes of this
Subscription Agreement as if such fifth (5th) Business Day had originally
been specified as such Put Option Exercise Date or Put Option Termination
Date, as the case may be; and provided further, however, that if, on such
fifth (5th) Business Day, such condition has not been satisfied, there
shall be no further postponement of such Put Option Exercise Date.
As used herein the term "Business Day" means any day on which banks
in The City of New York are open for business.
8. Conditions Precedent to Shaman's Obligations. The
obligations of Shaman hereunder are subject to the performance by Fletcher of
its obligations hereunder and to the satisfaction of the following additional
conditions precedent:
<PAGE>
a. The representations and warranties made by Fletcher in this
Agreement shall, unless expressly waived in writing by Shaman, be true and
correct as of the date hereof, on the Closing Date, on each Preferred
Share Conversion Date, on each Put Option Exercise Date and on each
Warrant Exercise Date, and Shaman shall have received on each such date a
certificate of the Chief Financial Officer of Fletcher dated such date and
to such effect.
b. On the Closing Date, Fletcher shall have delivered to
Shaman a legal opinion of Rogers & Wells, counsel to Fletcher, dated the
date of delivery stating that:
(i) Fletcher is not a U.S. Person; and
(ii) The offer and sale of the Preferred Shares and the
Warrant by Shaman to Fletcher on the Closing Date does not require
registration under the Securities Act;
c. On each Preferred Share Conversion Date, Fletcher shall
have delivered to Shaman a legal opinion of Rogers & Wells, counsel to
Fletcher, dated the date of delivery, stating that:
(i) Fletcher is not a U.S. Person; and
(ii) the offer and sale of the Common Stock issuable by
Shaman to Fletcher on such date does not require registration under the
Securities Act.
d. On each Warrant Exercise Date, Fletcher shall have
delivered to Shaman a legal opinion of Rogers & Wells, counsel to
Fletcher, dated the date of delivery, stating that:
(i) Fletcher is not a U.S. Person; and
(ii) the offer and sale of the Warrant Shares issuable by
Shaman to Fletcher on such date does not require registration under the
Securities Act.
e. On the date of any transfer by Fletcher of any Preferred
Share or the Warrant or any Common Stock during the applicable Restricted
Period, Fletcher shall have delivered to Shaman or its transfer agent, as
the case may be, a legal opinion of Rogers & Wells, dated the date of such
transfer, stating that such transfer complies with the requirements of
Regulation S.
9. Fees and Expenses. Each of Fletcher and Shaman agrees to
pay its own expenses incident to the performance of its obligations
hereunder, including, but not limited to, the fees, expenses and
disbursements of such party's counsel.
<PAGE>
10. Non-Performance.
a. If, on the Closing Date or any portion of the Warrant
Exercise Date (as defined in Annex B hereto), Shaman shall fail to deliver
the Preferred Shares, Warrant Shares or Common Stock to Fletcher required
to be delivered pursuant to this Agreement for any reason other than the
failure of any condition precedent to Shaman's obligations hereunder or
the failure by Fletcher to comply with its obligations hereunder, then
Shaman shall:
(1) hold Fletcher harmless against any loss, claim or
damage arising from or as a result of such failure by Shaman; and
(2) reimburse Fletcher for all of its out-of-pocket
expenses, including fees and disbursements of its counsel, incurred
by Fletcher in connection with this Agreement and the transactions
contemplated herein;
provided, however, that Shaman shall then be under no further liability to
Fletcher except as provided in this Section 10 and Section 11 hereof.
b. If, on the Closing Date or any Put Option Exercise Date,
Fletcher shall fail to purchase the Preferred Shares, the Warrant or any
Common Stock required to be purchased pursuant to this Agreement for any
reason other than the failure of any condition precedent to Fletcher's
obligations hereunder or the failure by Shaman to comply with its
obligations hereunder, then Fletcher shall:
(1) hold Shaman harmless against any damage arising
from or as a result of such failure by Fletcher;
(2) reimburse Shaman for all of its out-of-pocket
expenses, including fees and disbursements of its counsel, incurred
by Shaman in connection with this Agreement and the transactions
contemplated herein; and
(3) surrender to Shaman for cancellation any
portion of the Warrant not exercised prior to the date of such
default by Fletcher;
provided, however, that Fletcher shall then be under no further liability to
Shaman except as provided in this Section 10 and Section 11 hereof.
11. Indemnification.
a. Indemnification of Fletcher. Shaman hereby agrees to
indemnify Fletcher and each of its officers, directors, employees, agents
and affiliates and each person that controls (within the meaning of
Section 20 of the Securities Exchange Act of 1934, as amended) any of the
foregoing persons (each a "Fletcher Indemnified Party") against any claim,
<PAGE>
demand, action, liability, damages, loss, cost or expense (including,
without limitation, reasonable legal fees) (a "Proceeding"), that it may
incur in connection with any of the transactions contemplated hereby
arising out of or based upon:
(1) any untrue or alleged untrue statement of a material
fact by Shaman or any of its affiliates or any person acting on its
or their behalf or omission or alleged omission by Shaman or any of
its affiliates or any person acting on its or their behalf to state
any material fact necessary in order to make the statements, in the
light of the circumstances under which they were made, not
misleading;
(2) any of the representations or warranties made
by Shaman herein being untrue or incorrect; and
(3) any breach or non-performance by Shaman of any
of its covenants, agreements or obligations under this Agreement;
and Shaman hereby agrees to reimburse each Fletcher Indemnified Party for
any reasonable legal or other expenses incurred by such Fletcher
Indemnified Party in investigating or defending any such Proceeding;
provided, however, that the foregoing indemnity shall not apply to any
Proceeding to the extent that it arises out of or is based upon the gross
negligence of Fletcher in connection therewith.
b. Indemnification of Shaman. Fletcher hereby agrees to
indemnify Shaman and each of its officers, directors, employees, agents
and affiliates and each person that controls (within the meaning of
Section 20 of the Securities Exchange Act of 1934, as amended) any of the
foregoing persons (each a "Shaman Indemnified Party") against any
Proceeding, that it may incur in connection with any of the transactions
contemplated hereby arising out of or based upon:
(1) any untrue or alleged untrue statement of a material
fact by Fletcher or any of its affiliates or any person acting on
its or their behalf or omission or alleged omission by Fletcher or
any of its affiliates or any person acting on its or their behalf to
state any material fact necessary in order to make the statements,
in the light of the circumstances under which they were made, not
misleading;
(2) any of the representations or warranties made
by Fletcher herein being untrue or incorrect; and
(3) any breach or non-performance by Fletcher of
any of its covenants, agreements or obligations under this
Agreement;
<PAGE>
and Fletcher hereby agrees to reimburse each Shaman Indemnified Party for
any reasonable legal or other expenses incurred by such Shaman Indemnified
Party in investigating or defending any such Proceeding;
provided, however, that the foregoing indemnity shall not apply to any
Proceeding to the extent that it arises out of or is based upon the gross
negligence of Shaman in connection therewith.
c. Conduct of Claims.
(1) Whenever a claim for indemnification shall arise
under this Section, the party seeking indemnification (the
"Indemnified Party"), shall notify the party from whom such
indemnification is sought (the "Indemnifying Party") in writing of
the Proceeding and the facts constituting the basis for such claim
in reasonable detail;
(2) Upon delivery of such notice, such Indemnified Party
shall have a duty to take all reasonable steps to mitigate any
losses, liabilities, costs, charges and expenses relating to any
such Proceeding;
(3) Such Indemnifying Party shall have the right to
retain the counsel of its choice in connection with such Proceeding
and to participate at its own expense in the defense of any such
Proceeding; provided, however, that counsel to the Indemnifying
Party shall not (except with the consent of the relevant Indemnified
Party) also be counsel to such Indemnified Party. In no event shall
the Indemnifying Party be liable for fees and expenses of more than
one counsel (in addition any local counsel) separate from its own
counsel for all Indemnified Parties in connection with any one
action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or
circumstances; and
(4) No Indemnifying Party shall, without the prior
written consent to the Indemnified Parties (which consent shall not
be unreasonably withheld), settle or compromise or consent to the
entry of any judgment with respect to any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever in respect of which
indemnification could be sought under this Section unless such
settlement, compromise or consent (A) includes an unconditional
release of each Indemnified Party from all liability arising out of
such litigation, investigation, proceeding or claim and (B) does not
include a statement as to or an admission of fault, culpability or a
failure to act by or on behalf of any Indemnified Party.
12. Survival of the Representations, Warranties, etc. The respective
representations, warranties and agreements made herein by or on behalf of the
<PAGE>
parties hereto shall remain in full force and effect, regardless of any
investigation made by or on behalf of the other party to this Agreement or any
officer, director or employee of, or person controlling or under common control
with, such party and will survive delivery of and payment for the Preferred
Shares, the Warrant and any Common Stock issuable hereunder.
13. Notices. All communications hereunder shall be in writing,
and
a. if sent to Fletcher, shall be delivered by hand, sent
by registered mail or transmitted by telecopy and confirmed to Fletcher
at:
Fletcher International Limited
c/o Midland Bank Trust Corporation (Cayman) Limited
P.O. Box 1109, Mary Street
Grand Cayman, Cayman Islands
British West Indies
Telephone: (809) 949-7755
Facsimile: (809) 949-7634
with a copy to:
Rogers & Wells
200 Park Avenue
New York, NY 10166
Attention: Lucien A. Moolenaar III
Telephone: (212) 878-8000
Facsimile: (212) 878-8375
b. if sent to Shaman, shall be delivered by hand, sent
by registered mail or transmitted by telecopy and confirmed to Shaman
at:
Shaman Pharmaceuticals, Inc.
213 East Grand Avenue
South San Francisco, CA 94080
Attention: President and Chief Executive Officer
Telephone: (415) 952-7070
Telefax number: (415) 873-8367
<PAGE>
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
Attention: J. Stephan Dolezalek
Telephone: (415) 496-2842
Telefax number: (415) 496-2736
14. Miscellaneous.
a. This Agreement may be executed in one or more counterparts
and it is not necessary that signatures of all parties appear on the same
counterpart, but such counterparts together shall constitute but one and
the same agreement.
b. This Agreement shall inure to the benefit of and be binding
upon the parties hereto, their respective successors and, with respect to
Section 11 hereof, their respective officers, directors and affiliates,
and no other person shall have any right or obligation hereunder.
c. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York, and each of
the parties hereto hereby submits to the non-exclusive jurisdiction of any
State or Federal court in the Borough of Manhattan in the City and State
of New York and any court hearing any appeal therefrom, over any suit,
action or proceeding against it arising out of or based upon this
Agreement (a "Related Proceeding"). Each of the parties hereto hereby
waives any objection to any Related Proceeding in such courts whether on
the grounds of venue, residence or domicile or on the ground that the
Related Proceeding has been brought in an inconvenient forum.
d. The provisions of this Agreement are severable, and if any
clause or provision hereof shall be held invalid, illegal or unenforceable
in whole or in part, such invalidity or unenforceability shall not in any
manner affect any other clause or provision of this Agreement.
e. The headings of the sections of this document have been
inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
<PAGE>
15. Time of Essence. Time shall be of the essence in this
Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement, all as of the day and year first above written.
SHAMAN PHARMACEUTICALS, INC.
By: /s/ Lisa A. Conte
Name: Lisa A. Conte
Title: President and CEO
FLETCHER INTERNATIONAL LIMITED
By: /s/ Alphonse Fletcher, Jr.
Name: Alphonse Fletcher, Jr.
Title: CEO
<PAGE>
ANNEX A
TERMS OF PUT OPTIONS
GRANTED BY FLETCHER INTERNATIONAL LIMITED
TO SHAMAN PHARMACEUTICALS, INC.
The Put Options granted by Fletcher International Limited
("Fletcher") to Shaman Pharmaceuticals, Inc. ("Shaman") pursuant to the
Subscription Agreement dated July 25, 1996 between Fletcher and Shaman (the
"Subscription Agreement"), including any additional Put Options granted pursuant
to Paragraph 4 hereof, shall have the terms and conditions set forth below.
This Annex A forms a part of the Subscription Agreement, and the
following terms and conditions are subject to the representations, warranties
and agreements and further provisions contained in the Subscription Agreement.
Unless otherwise defined herein, capitalized terms used herein shall have the
meanings set forth in the Subscription Agreement.
1. Option to Sell
Each of the Put Options granted pursuant to the Subscription
Agreement shall entitle Shaman to sell to Fletcher and obligate Fletcher to
purchase from Shaman, upon the terms and conditions set forth in the
Subscription Agreement and herein, 200,000 newly issued shares of Common Stock,
subject to adjustment as provided in Paragraph 4 hereof (the "Put Option
Amount"), at the price per share (the "Put Option Price") computed as set forth
below.
2. Exercisable by Shaman
The Put Options shall be exercisable only by Shaman and only upon
the terms and conditions and subject to the limitations set forth in the
Subscription Agreement and herein, and the Put Options may not be transferred,
sold, pledged, assigned or otherwise disposed of to any person.
3. Certain Restrictions on Exercise
(a) The Put Options shall be exercisable on any Trading Day (each, a
"Put Option Exercise Date") from but excluding January 27,1997 to and including
July 28, 2000 (the "Put Option Termination Date");
provided, however that, subject to the provisions of Section 3(q) of the
Subscription Agreement, not more than one Put Option shall be exercisable within
any six-month period; and provided further, however, that no Put Option shall be
<PAGE>
exercisable unless Shaman shall have delivered to Fletcher on the relevant Put
Option Exercise Date a certificate of the Chief Executive Officer and Chief
Financial Officer of Shaman, dated such Put Option Exercise Date, confirming
that each of the representations and warranties made by Shaman in the
Subscription Agreement are true and correct as of such Put Option Exercise Date.
Notwithstanding anything to the contrary contained herein or in the Subscription
Agreement, in no event shall any Put Option be exercisable to the extent that
(i) the number of shares of Common Stock issuable to Fletcher pursuant to such
Put Option plus (ii) the number of shares of Common Stock previously issued to
Fletcher pursuant to any Put Option plus (iii) the total number of shares of
Common Stock issuable to Fletcher pursuant to the Preferred Shares (whether or
not such Preferred Shares have then been converted) plus (iv) the total number
of Warrant Shares issuable to Fletcher pursuant to the Agreement (whether or not
such Warrant Shares have then been issued), would equal or exceed 2,677,500
shares.
(b) On any Put Option Settlement Date (as defined below), the Put
Option Price payable by Fletcher shall be (i) 101 percent of the Weighted
Average Price (as hereinafter defined) during the period (the "Original Pricing
Period") from but excluding the second Trading Day after the relevant Put Option
Exercise Date and to and including the * * * Day thereafter, or (ii) if written
notice is given by Fletcher at any time after the fifth day of any Pricing
Period but prior to the end of such Pricing Period, the Weighted Average Price
(as hereinafter defined) during the period (the "Adjusted Pricing Period") from
but excluding the * * * Day prior to such Put Option Exercise Date to and
including such Put Option Exercise Date. "Weighted Average Price" shall mean,
with respect to any specified time period, the arithmetic average of the daily
volume-weighted average sale prices (rounded to the nearest tenth of a cent) of
the Shaman Common Stock on NASDAQ, as reported by Bloomberg L.P., or, if
Bloomberg, L.P. is not then reporting such information, any successor service
mutually agreed upon by Shaman and Fletcher. [* INDICATES THAT MATERIAL HAS BEEN
OMITTED AND CONFIDENTIAL TREATMENT HAS BEEN REQUESTED THEREFOR. ALL SUCH OMITTED
MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION PURSUANT TO RULE 24b-2.]
4. Additional Put Options
Fletcher shall have the right (on the Business Day immediately prior to
each Put Right Closing Date, as defined below) to increase the applicable Put
Option Amount to a maximum of 400,000 shares of Common Stock or to reduce the
applicable Put Option Amount to a minimum of four times the average of the daily
volume of shares of Common Stock traded on the Nasdaq Stock Market during the
applicable Original Pricing Period or Adjusted Pricing Period, as the case may
be. The excess, if any, of the original Put Option Amount over such decreased
Put Option Amount shall be referred to herein as the "Remaining Shares". If
Fletcher does reduce the Put Option Amount in one or more instances, Shaman will
receive that number of additional Put Options on a cumulative basis equal to the
total number of Remaining Shares divided by 200,000, plus an additional Put
Option for any fractional remainder of the Remaining Shares (exercisable only to
the extent of the number of Remaining Shares in such fractional remainder).
<PAGE>
5. Certain Exercise Procedures
On any Put Option Exercise Date, Shaman may exercise a Put Option by
delivering notice thereof to Fletcher in accordance with the Subscription
Agreement. On the second Business Day following (i) the end of the Original
Pricing Period or (ii) the date on which Fletcher exercises its right to
calculate the put option price using the Adjusted Pricing Period, as the case
may be, or such later date as shall be agreed by Shaman and Fletcher (a "Put
Option Settlement Date"), Shaman shall issue to Fletcher the number of shares of
Common Stock equal to the Put Option Amount calculated as provided herein
against payment by Fletcher of the Put Option Price in New York Clearing House
(next day) funds in accordance with the Subscription Agreement.
6. Expiration and Termination
(a) Any Put Option (including any additional Put Options granted
pursuant to Paragraph 4 hereof) that has not been exercised by Shaman in
accordance with the terms of the Subscription Agreement and hereof by 5:00 p.m.
(New York time) on the Put Option Termination Date shall immediately expire and
not thereafter be exercisable, and Fletcher shall have no further obligation
whatsoever with respect to any such Put Option.
<PAGE>
The Warrant represented by this certificate was issued on July 26, 1996
(the "Original Issue Date") pursuant to the Subscription Agreement dated
July 25, 1996 between Shaman Pharmaceuticals, Inc. and Fletcher
International Limited. Neither the Warrant represented by this certificate
nor the securities issuable upon exercise hereof have been registered
under the Securities Act of 1933, as amended (the "Act"). The Warrant
represented hereby has been sold in reliance on the exemption from
registration provided by Regulation S under the Act ("Regulation S").
Prior to the expiration of a 40-day restricted period beginning on the
Original Issue Date (the "Restricted Period"), the Warrant represented by
this certificate may not be exercised, offered or sold, directly or
indirectly, within the United States (as defined in Regulation S under the
Act), to a U.S. Person (as defined in Regulation S under the Act) or for
the account or benefit of a U.S. Person. Neither Shaman Pharmaceuticals,
Inc. nor its transfer agent shall be obligated to remove this legend
unless it shall have received an opinion of counsel stating that such
removal complies with the requirements of Regulation S.
Warrant No. _________________ 550,000 Warrant Shares
WARRANT CERTIFICATE
SHAMAN PHARMACEUTICALS, INC.
This Warrant Certificate certifies that FLETCHER INTERNATIONAL
LIMITED, or registered assigns, is the registered holder of one Warrant (the
"Warrant") expiring on the Termination Date (as defined below) to purchase up to
550,000 shares (the "Warrant Shares") of common stock, par value $.001 per share
(the "Common Stock"), of Shaman Pharmaceuticals, Inc., a Delaware corporation
(the "Issuer"), at the Exercise Price (as defined below).
The Warrant represented hereby was issued on July 26, 1996 (the
"Original Issue Date") pursuant to the Subscription Agreement dated July 25,
1996 (the "Subscription Agreement"), between the Issuer and Fletcher
International Limited ("Fletcher"), and is subject to the terms and conditions
thereof. Unless otherwise defined herein, capitalized terms used herein shall
have the meanings set forth in the Subscription Agreement. A copy of the
Subscription Agreement may be obtained by the registered holder hereof upon
written request to the Issuer.
The Warrant represented hereby may be exercised on any Business Day
(a "Warrant Exercise Date") from but excluding the Original Issue Date to and
including July 25, 2002 (the "Termination Date"). The Warrant entitles the
registered holder hereof to receive from the Issuer upon exercise up to the
number of Warrant Shares set forth on the face hereof upon surrender of this
<PAGE>
Warrant Certificate as provided on the reverse hereof and payment of the
Exercise Price defined below (the "Exercise Price") (plus transfer taxes, if
applicable) to the Issuer in cash or by certified or official bank check.
The Exercise Price per Warrant Share shall be $10.184.
The Warrant represented hereby shall have the following additional
terms:
1. The Warrant represented hereby may be exercised upon surrender of this
Warrant Certificate by the registered holder hereof to the Issuer at
its principal office on any Exercise Date with the Exercise Notice
attached hereto (an "Exercise Notice") duly completed and signed by the
registered holder hereof and upon payment by such holder to the Issuer
of the Exercise Price (plus transfer taxes, if applicable) for the
total number of Warrant Shares in respect of which such Warrant is then
exercised. The Warrant represented hereby shall be exercisable only in
the minimum amount of 30,000 Warrant Shares and integral multiples of
30,000 Warrant Shares in excess thereof (or such lesser amount as shall
constitute the full amount of this Warrant).
2. On the Business Day following an Exercise Date (an "Issue Date") the
Issuer shall issue and cause to be delivered to the registered holder
hereof at such address as such holder shall specify in the Exercise
Notice a certificate or certificates for the number of full Warrant
Shares issuable upon the exercise of such Warrant, registered in such
holder's name, together with cash (if any) as provided in paragraph 4.
Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to
have become a holder of record of such Warrant Shares as of such
Exercise Date.
3. If on such Issue Date the number of Warrant Shares to be delivered
shall be less than the total number of Warrant Shares deliverable
hereunder, there shall be issued to the holder hereof or his assignee
on such Issue Date a new warrant certificate substantially identical to
this Warrant Certificate, except that such new warrant certificate
shall evidence the right to purchase the number of Warrant Shares equal
to (x) the total number of Warrant Shares deliverable hereunder less
(y) the number of Warrant Shares so delivered.
4. The Issuer shall not be required to issue fractional Warrant Shares on
the exercise of the Warrant represented hereby. The number of full
Warrant Shares which shall be issuable upon the exercise of the Warrant
shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of the Warrant so presented. If any
fraction of a Warrant Share would, except for the provisions of this
paragraph 4, be issuable on the exercise of the Warrant, the Issuer
shall pay an amount in cash equal to the closing sale price of the
Common Stock per Warrant Share on the day immediately preceding the
date the Warrant is presented for exercise, multiplied by such fraction.
5. For so long as the Warrant represented hereby has not been exercised in
full, the Issuer shall at all times reserve and keep available, free from
<PAGE>
preemptive rights, out of its authorized but unissued Common Stock, for
issuance upon exercise of the Warrant represented hereby, the maximum
number of Common Stock then so issuable (as adjusted from time to time
pursuant to paragraph 10).
6. By accepting delivery of this Warrant Certificate, the registered holder
hereby covenants and agrees with the Issuer not to exercise or transfer
the Warrant represented hereby except in compliance with the terms of the
Subscription Agreement and this Warrant Certificate.
7. By accepting delivery of this Warrant Certificate, the registered
holder hereof covenants and agrees with the Issuer that no Warrant may
be sold, assigned, conveyanced, pledged, hypothecated or in any other
manner disposed of or transferred unless and until such holder shall
deliver to the Issuer (i) written notice of such transfer and of the
name and address of the transferee has been received by the Issuer;
(ii) a written agreement of the transferee to comply with the terms of
the Subscription Agreement and this Warrant Certificate and (iii) in
the case of a transfer hereof prior to the expiration of the Restricted
Period specified on the first page hereof, an opinion of counsel
stating that such transferee is not a "U.S. Person" as defined in
Regulation S under the Securities Act of 1933, as amended, and that
such transfer is otherwise exempt from any registration requirements.
8. The Issuer will pay all documentary stamp taxes (if any) attributable
to the issuance of Warrant Shares upon the exercise of the Warrant by
the registered holder hereof; provided, however, that the Issuer shall
not be required to pay any tax or taxes which may be payable in respect
of any transfer involved in the registration of the Warrant Certificate
or any certificates for Warrant Shares in a name other than that of the
registered holder of the Warrant Certificate surrendered upon the
exercise of a Warrant, and the Issuer shall not be required to issue or
deliver the Warrant Certificate or certificates for Warrant Shares
unless or until the person or persons requesting the issuance thereof
shall have paid to the Issuer the amount of such tax or shall have
established to the satisfaction of the Issuer that such tax has been
paid.
9. In case this Warrant Certificate shall be mutilated, lost, stolen or
destroyed, the Issuer may in its discretion issue in exchange and
substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate
lost, stolen or destroyed, a new Warrant Certificate of like tenor, but
only upon receipt of evidence reasonably satisfactory to the Issuer of
such loss, theft or destruction of such Warrant Certificate and
indemnity, if requested, satisfactory to it. Applicants for a
substitute Warrant Certificate shall also comply with such other
reasonable regulations and pay such other reasonable charges as the
Issuer may prescribe.
10. The number of Warrant Shares issuable upon the exercise of the Warrant
(the "Exercise Rate") and the terms and conditions of the Warrant are
subject to adjustment by the Issuer, in consultation with the holder
hereof, from time to time as follows:
<PAGE>
a. If the Issuer:
(1) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(2) combines its outstanding shares of Common Stock into a
smaller number of shares; or
(3) issues by reclassification of its Common Stock any shares
of its Capital Stock (as defined below);
then the Exercise Rate in effect immediately prior to such action
shall be adjusted so that the registered holder hereof shall
thereafter be entitled to receive upon exercise the number of shares
of Common Stock or other Capital Stock of the Issuer which such
holder would have owned immediately following such action if such
holder had exercised the Warrant immediately prior to such action.
As used herein the term "Capital Stock" means, with respect to any
corporation, any and all shares, interest, rights to purchase,
warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
Such adjustment shall become effective simultaneously with the
effective date of any subdivision, combination or reclassification.
If, after an adjustment, the registered holder hereof would receive
upon exercise shares of two or more classes of Capital Stock of the
Issuer, the Exercise Rate shall thereafter be subject to adjustment
upon the occurrence of an action taken with respect to each such
class of Capital Stock as is contemplated hereby with respect to the
Common Stock, on terms comparable to those applicable to Common
Stock hereunder.
b. Whenever the Exercise Rate is adjusted, the Issuer shall provide
the notices required by paragraph 12 hereof.
c. If:
(1) the Issuer takes any action that would require an
adjustment in the Exercise Rate pursuant to subparagraph
(a) above; or
(2) there is a liquidation or dissolution of the Issuer;
then the Issuer shall mail to the registered holder hereof a notice
stating the proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution, as the case may be. The Issuer shall
mail the notice at least 15 days before such date.
<PAGE>
d. The Issuer covenants and agrees with the registered holder hereof not to
consolidate or merge with or into, or transfer or lease all or
substantially all its assets to, any person unless, at the option of the
registered holder hereof, either:
(1) on any date prior to the effective date of such consolidation, mer-
ger, transfer or lease(the "Redemption Date"),the Issuer shall have
redeemed the Warrant represented hereby by paying to such holder,
upon surrender of this Warrant Certificate, a price (the Redemption
Price"),agreed in good faith by the Board of Directors of the
Issuer and such holder, representing (x) the fair market value of
the Common Stock that would be issuable upon exercise of the
Warrant as of the Redemption Date; (y) In the event the fair market
value as determined in (x) above is less than $30.00 a share, the
intrinsic time value of the warrant as of the Redemption Date,
such intrinsic value when added to the fair market value shall not
exceed $30.00 per share and (z) such other factors as the
Board of Directors and such holder deem appropriate; provided,
however, that in the event of any bona fide dispute between the
Issuer and such holder as to the computation of such Redemption
Price, such dispute shall be resolved through binding arbitration
under the rules of the American Arbitration Associaton, with the
arbitration panel consisting of persons familiar with the valuation
of derivative securities and such panel being advised, as to such
valuation issues, by an investment bank of nationally recognized
standing, the costs thereof to be borne by the non-prevailing
party; or
(2) (a) such person shall expressly assume in writing all of
the obligations of the Issuer under the Subscription
Agreement and hereunder and deliver notice thereof to
the registered holder hereof; and
(b) upon consummation of such transaction, the Warrant
shall automatically become exercisable for the kind
and amount of securities, cash or other assets that
the registered holder hereof would have owned
immediately after the consolidation, merger, transfer
or lease if such holder had exercised the Warrant
immediately before the effective date of such
transaction.
e. After an adjustment to the Exercise Rate hereunder, any subsequent
event requiring an adjustment hereunder shall cause an adjustment to
the Exercise Rate as so adjusted.
11. Upon the issuance of any stock dividend or distribution of Common Stock
pro rata to all holders of Common Stock, the registered holder hereof on
<PAGE>
the record date for such distribution shall be entitled to receive such
dividend or distribution on the same terms as the holders of Common Stock
upon exercise hereof.
12. Upon any adjustment of the Exercise Rate pursuant to paragraph 10, the
Issuer shall promptly thereafter but in any event within 15 days
following such adjustment (i) cause to be delivered to the registered
holder hereof a certificate of its Chief Financial Officer setting
forth the Exercise Rate after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which
such calculations are based, which certificate shall be conclusive
evidence of the correctness of the matters set forth therein, and (ii)
cause to be delivered to the registered holder hereof at his or her
address appearing on the Warrant Register written notice of such
adjustments by first-class mail, postage prepaid. Where appropriate,
such notice may be given in advance and included as part of the notice
required to be mailed under the other provisions of this paragraph 12.
In case:
a. the Issuer shall authorize the issuance to all holders of shares
of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription
rights or warrants; or
b. of any consolidation or merger to which the Issuer is a party and
for which approval of any shareholders of the Issuer is required,
or of the conveyance or transfer of the properties and assets of
the Issuer substantially as an entirety, or of any
reclassification or change of Common Stock issuable upon exercise
of the 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 of a tender offer or
exchange offer for shares of Common Stock; or
c. of the voluntary or involuntary dissolution, liquidation or
winding up of the Issuer; or
d. the Issuer proposes to take any action which would require an
adjustment of the Exercise Rate pursuant to paragraph 10;
then the Issuer shall cause to be given to the registered holder hereof at
his or her address appearing on the Warrant Register, at least 20 days (or
10 days in any case specified in clauses (a) or (b) above) prior to the
applicable record date hereinafter specified, or promptly in the case of
events for which there is no record date, by first class mail, postage
prepaid, a written notice stating (i) the date as of which the holders of
record of shares of Common Stock to be entitled to receive any such
rights, options, warrants or distribution are to be determined, or (ii)
the initial expiration date set forth in any tender offer or exchange
offer for shares of Common Stock, or (iii) the date on which any such
reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up is expected to become effective or
<PAGE>
consummated, and the date as of which it is expected that holders of
record of shares of Common Stock shall be entitled to exchange such shares
for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up.
13. The Issuer shall serve as warrant agent (the "Warrant Agent") under
this Agreement. The Warrant Agent hereunder shall at all times maintain
a register (the "Warrant Register") of the holders of Warrants. Upon 30
days' notice to the registered holder hereof, the Issuer may appoint a
new Warrant Agent. Such new Warrant Agent shall be a corporation doing
business under the laws of the United States or any state thereof, in
good standing and having a combined capital and surplus of not less
than $50,000,000. The combined capital and surplus of any such new
Warrant Agent shall be deemed to be the combined capital and surplus as
set forth in the most recent annual report of its condition published
by such Warrant Agent prior to its appointment; provided that such
reports are published at least annually pursuant to law or to the
requirements of a federal or state supervising or examining authority.
After acceptance in writing of such appointment by the new Warrant
Agent, it shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the
Warrant Agent, without any further assurance, conveyance, act or deed;
but if for any reason it shall be reasonably necessary or expedient to
execute and deliver any further assurance, conveyance, act or deed, the
same shall be done at the expense of the Issuer and shall be legally
and validly executed and delivered by the Issuer.
Any corporation into which the Issuer or any new Warrant Agent may be
merged or any corporation resulting from any consolidation to which the
Issuer or any new Warrant Agent shall be a party or any corporation to
which the Issuer or any new Warrant Agent transfers substantially all of
its corporate trust or shareholders services business shall be a successor
Warrant Agent under this Agreement without any further act; provided that
such corporation (i) would be eligible for appointment as successor to the
Warrant Agent under the provisions of this paragraph 13 or (ii) is a
wholly owned subsidiary of the Warrant Agent. Any such successor Warrant
Agent shall promptly cause notice of its succession as Warrant Agent to be
mailed (by first class mail, postage prepaid) to the registered holder
hereof at such holder's last address as shown on the Warrant Register.
This Warrant Certificate shall not be valid unless signed by the Issuer.
<PAGE>
IN WITNESS WHEREOF, Shaman Pharmaceuticals, Inc. has caused this Warrant
Certificate to be signed by its duly authorized officer.
Dated: July 26, 1996
SHAMAN PHARMACEUTICALS, INC.
By: /s/ Lisa A. Conte
Name: Lisa A. Conte
Title: President and Chief Executive Officer
<PAGE>
FORM OF EXERCISE NOTICE
(To Be Executed Upon Exercise Of the Warrant)
[DATE]
Shaman Pharmaceuticals, Inc.
213 East Grand Avenue
South San Francisco, CA 94080
Attn: President and Chief Executive Officer
Re: Warrant No.
Ladies and Gentlemen:
The undersigned is the registered holder of the above-referenced
warrant (the "Warrant") issued by Shaman Pharmaceuticals, Inc., evidenced by the
Warrant Certificate attached hereto, and hereby elects to exercise the Warrant
to purchase _____ shares of Warrant Shares (as defined in such Warrant
Certificate) and herewith tenders $______________ [in cash] [by certified or
official bank check to the order of Shaman Pharmaceuticals, Inc.] as payment for
such Warrant Shares in accordance with the terms of such Warrant Certificate.
In accordance with the terms of the attached Warrant Certificate,
the undersigned requests that certificates for such shares be registered in the
name of and delivered to the undersigned at the following address:1
================================
--------------------------------
[If the number of Warrant Shares to be delivered is less than the
total number of Warrant Shares deliverable under the Warrant, insert the
following - The undersigned requests that a new warrant certificate
substantially identical to the attached Warrant Certificate be issued to the
undersigned evidencing the right to purchase the number of Warrant Shares equal
to (x) the total number of Warrant Shares deliverable under the Warrant less (y)
the number of Warrant Shares to be delivered in connection with this exercise.
NAME OF REGISTERED HOLDER [ADDRESS]
[ADDRESS]
[ADDRESS]
[ADDRESS]
By:
--------------------------------
Name:
Title:
1 Prior to the expiration of the Restricted Period (if any) referred to in the
legend appearing on the Warrant Certificate attached hereto, the Warrant Shares
issuable thereunder "shall not be delivered within the United States (as defined
in Regulation S under the Securities Act of 1933, as amended (the "Securities
Act")) unless registered under the Securities Act or pursuant to an available
exemption from such registration.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1.00
<CASH> 7,466
<SECURITIES> 10,526
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,000
<PP&E> 13,596
<DEPRECIATION> (8,016)
<TOTAL-ASSETS> 24,708
<CURRENT-LIABILITIES> 6,626
<BONDS> 3,534
0
0
<COMMON> 13
<OTHER-SE> 14,536
<TOTAL-LIABILITY-AND-EQUITY> 24,708
<SALES> 0
<TOTAL-REVENUES> 500
<CGS> 0
<TOTAL-COSTS> 500
<OTHER-EXPENSES> 5,077
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 164
<INCOME-PRETAX> (4,971)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,971)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,971)
<EPS-PRIMARY> (0.37)
<EPS-DILUTED> 0
</TABLE>
