<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Shaman Pharmaceuticals, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Shaman Pharmaceuticals, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
SHAMAN PHARMACEUTICALS, INC.
213 EAST GRAND AVENUE
SOUTH SAN FRANCISCO, CALIFORNIA 94080
APRIL 25, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
("Annual Meeting") of Shaman Pharmaceuticals, Inc. (the "Company"), which will
be held at 9:00 A.M. Pacific Time on Thursday, May 22, 1997, at The Embassy
Suites (formerly The Crown Sterling Suites), 250 Gateway Boulevard, South San
Francisco, California 94080.
At the Annual Meeting, you will be asked to consider and vote upon the
following proposals:
(i) to elect three Class II directors to serve on the Board of
Directors for two years or until their successors are duly elected and
qualified;
(ii) to approve the amendment and restatement of the Company's
Restated Certificate of Incorporation to increase the number of authorized
shares of common stock thereunder from 25,000,000 shares to 40,000,000
shares;
(iii) to approve a series of amendments to the Company's 1992 Stock
Option Plan (the "Plan"), including (1) an increase in the maximum number
of shares of the Company's common stock authorized for issuance under the
Plan by an additional 700,000 shares and (2) an increase in the maximum
number of shares for which options may be granted to any one individual
from 500,000 shares to 750,000 shares;
(iv) to ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the year ending December 31, 1997; and
(v) to transact such other business as may properly come before the
Annual Meeting and any adjournment or postponement thereof.
The enclosed Proxy Statement more fully describes the details of the
business to be conducted at the Annual Meeting.
After careful consideration, the Company's Board of Directors has
unanimously approved the proposals and recommends that you vote IN FAVOR OF each
such proposal.
After reading the Proxy Statement, please mark, date, sign and return the
enclosed proxy card in the accompanying reply envelope no later than May 12,
1997. If you decide to attend the Annual Meeting, please notify the Secretary of
the Company that you wish to vote in person and your proxy will not be voted.
YOUR SHARES CANNOT BE VOTED UNLESS YOU MARK, DATE, SIGN AND RETURN THE ENCLOSED
PROXY OR ATTEND THE ANNUAL MEETING AND VOTE IN PERSON.
A copy of the Company's 1996 Annual Report to Stockholders is also
enclosed.
We look forward to seeing you at the Annual Meeting.
Sincerely,
Lisa A. Conte
President and Chief Executive Officer
IMPORTANT
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE
ACCOMPANYING POSTAGE-PAID RETURN ENVELOPE SO THAT, IF YOU ARE UNABLE TO ATTEND
THE ANNUAL MEETING, YOUR SHARES MAY BE VOTED.
<PAGE> 3
SHAMAN PHARMACEUTICALS, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 1997
------------------------
TO THE STOCKHOLDERS OF SHAMAN PHARMACEUTICALS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of Shaman Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), will be held at 9:00 A.M. Pacific Time on Thursday, May 22, 1997, at
The Embassy Suites (formerly The Crown Sterling Suites), 250 Gateway Boulevard,
South San Francisco, California 94080 for the following purposes:
1. To elect three Class II directors to serve on the Board of Directors for
two years or until their successors are duly elected and qualified. The
three nominees are G. Kirk Raab, Herbert H. McDade, Jr. and M. David
Titus;
2. To approve the amendment and restatement of the Company's Restated
Certificate of Incorporation to increase the number of authorized shares
of common stock thereunder from 25,000,000 shares to 40,000,000 shares;
3. To approve a series of amendments to the Company's 1992 Stock Option
Plan (the "Plan") including (i) an increase in the maximum number of
shares of the Company's common stock authorized for issuance under the
Plan by an additional 700,000 shares and (ii) an increase in the maximum
number of shares for which options may be granted to any one individual
from 500,000 shares to 750,000 shares;
4. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the year ending December 31, 1997; and
5. To transact such other business as may properly come before the Annual
Meeting and any adjournment or adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The record date for determining those stockholders entitled to notice of,
and to vote at, the Annual Meeting and any adjournment thereof is March 24,
1997. A list of the stockholders entitled to vote at the Annual Meeting will be
available for inspection at the Company's offices, 213 East Grand Avenue, South
San Francisco, California 94080, for at least 10 days prior to the Annual
Meeting.
All stockholders are cordially invited to attend the Annual Meeting.
However, to assure your representation at the meeting, please carefully read the
accompanying Proxy Statement, which describes the matters to be voted upon at
the Annual Meeting, and mark, date, sign and return the enclosed proxy card in
the reply envelope provided. Should you receive more than one proxy because your
shares are registered in different names and addresses, each proxy should be
returned to ensure that all your shares will be voted. If you attend the Annual
Meeting and vote by ballot, your proxy vote will be revoked automatically and
only your vote at the Annual Meeting will be counted. The prompt return of your
proxy card will assist us in preparing for the Annual Meeting.
Sincerely,
Lisa A. Conte
President and Chief Executive Officer
South San Francisco, California
April 25, 1997
YOUR VOTE IS VERY IMPORTANT. PLEASE READ THE ATTACHED PROXY STATEMENT CAREFULLY.
IF YOU DO NOT EXPECT TO ATTEND IN PERSON, PLEASE COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE.
<PAGE> 4
SHAMAN PHARMACEUTICALS, INC.
213 EAST GRAND AVENUE
SOUTH SAN FRANCISCO, CALIFORNIA 94080
------------------------
PROXY STATEMENT
------------------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 22, 1997
GENERAL INFORMATION FOR STOCKHOLDERS
The enclosed proxy ("Proxy") is solicited on behalf of the Board of
Directors (the "Board") of Shaman Pharmaceuticals, Inc., a Delaware corporation
(the "Company"), for use at the 1997 Annual Meeting of Stockholders (the "Annual
Meeting") to be held at 9:00 A.M. Pacific Time on Thursday, May 22, 1997, at The
Embassy Suites (formerly The Crown Sterling Suites), 250 Gateway Boulevard,
South San Francisco, California 94080, and at any adjournment thereof.
This Proxy Statement and the accompanying form of Proxy are to be first
mailed to the stockholders entitled to vote at the Annual Meeting on or about
April 25, 1997.
RECORD DATE AND VOTING
Stockholders of record at the close of business on March 24, 1997 are
entitled to notice of, and to vote at, the Annual Meeting. As of the close of
business on such date, there were 15,921,417 shares of the Company's common
stock, par value $0.001 per share (the "Common Stock"), outstanding and entitled
to vote, held by 733 stockholders of record. Also, 400,000* shares of the
Company's Series A Preferred Stock (the "Preferred Stock") were outstanding and
entitled to vote, and held by one stockholder of record. Each holder of Common
Stock is entitled to one vote for each share of Common Stock held by such
stockholder as of the record date. Each stockholder holding Preferred Stock as
of the record date is also entitled to one vote for each share of Common Stock
into which such Preferred Stock is convertible as of the record date. As of the
record date, one share of Preferred Stock was currently convertible into one
share of Common Stock. If a choice as to the matters coming before the Annual
Meeting has been specified by a stockholder on the Proxy, the shares will be
voted accordingly. If no choice is specified, the shares will be voted IN FAVOR
OF the approval of the proposals described in the Notice of Annual Meeting and
in this Proxy Statement. Abstentions and broker non-votes (i.e., the submission
of a Proxy by a broker or nominee specifically indicating the lack of
discretionary authority to vote on the matter) are counted for purposes of
determining the presence or absence of a quorum for the transaction of business.
Abstentions will be counted towards the tabulation of votes cast on proposals
presented to the stockholders and will have the same effect as negative votes,
whereas broker non-votes will not be counted for purposes of determining whether
a proposal has been approved or not.
Any stockholder or stockholder's representative who, because of a
disability, may need special assistance or accommodation to allow him or her to
participate at the Annual Meeting may request reasonable assistance or
accommodation from the Company by contacting Investor Relations in writing at
213 East Grand Avenue, South San Francisco, California 94080 or by telephone at
(415) 952-7070. To provide the Company sufficient time to arrange for reasonable
assistance, please submit such requests by May 12, 1997.
REVOCABILITY OF PROXIES
Any stockholder giving a Proxy pursuant to this solicitation may revoke it
at any time prior to its exercise by filing with the Secretary of the Company at
its principal executive offices at 213 East Grand Avenue, South
- ---------------
* Currently convertible into an aggregate of 400,000 shares of Common
Stock.
<PAGE> 5
San Francisco, California 94080, a written notice of such revocation or a duly
executed Proxy bearing a later date, or by attending the Annual Meeting and
voting in person.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of the Notice of Annual Meeting,
this Proxy Statement, the Proxy and any additional solicitation materials
furnished to stockholders. Copies of solicitation materials will be furnished to
brokerage houses, fiduciaries and custodians holding shares in their names that
are beneficially owned by others so that they may forward this solicitation
material to such beneficial owners. The Company has engaged Corporate Investor
Communications, Inc. ("CIC") to provide routine advice and services for Proxy
solicitation. CIC will receive approximately $5,000 from the Company for such
advice and services, plus reimbursement of costs incurred in forwarding the
solicitation materials to the beneficial owners of Common Stock. To assure that
a quorum will be present in person or by proxy at the Annual Meeting, it may be
necessary for CIC, certain officers, directors, employees or other agents of the
Company to solicit proxies by telephone, facsimile or other means or in person.
Except with respect to CIC, the Company will not compensate such individuals for
any such services. Except as described above, the Company does not presently
intend to solicit proxies other than by mail.
IMPORTANT
Please mark, date, sign and return the enclosed Proxy in the accompanying
postage-prepaid, return envelope no later than May 12, 1997 so that, if you are
unable to attend the Annual Meeting, your shares may be voted.
The Company's Annual Report to Stockholders for the year ended December 31,
1996 (the "Annual Report") has been mailed concurrently with the mailing of the
Notice of Annual Meeting and Proxy Statement to all stockholders entitled to
notice of and to vote at the Annual Meeting. The Annual Report is not considered
proxy soliciting material nor is it incorporated into this Proxy Statement.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL ONE -- ELECTION OF DIRECTORS
The Board is divided into two classes, designated Class I and Class II,
each serving a term of two years, with such terms staggered so that only one
class of directors is elected at each annual meeting of stockholders of the
Company. At the Annual Meeting, three Class II directors will be elected to
serve for two years or until their successors shall have been duly elected and
qualified or until their death, resignation or removal. The Board has selected
three nominees, each of whom is a current director of the Company. Each person
nominated for election has agreed to serve if elected, and management has no
reason to believe that any nominee will be unavailable to serve. Unless
otherwise instructed, the Proxy holders will vote the Proxies received by them
IN FAVOR OF the nominees named below. The three candidates receiving the highest
number of affirmative votes of the shares entitled to vote at the Annual Meeting
will be elected. If any nominee is unable to or declines to serve as a director,
the Proxies may be voted for a substitute nominee designated by the current
Board. As of the date of this Proxy Statement, the Board is not aware of any
nominee who is unable or will decline to serve as a director.
The Board recommends that the stockholders vote IN FAVOR OF the election of
each of the following nominees to serve as directors of the Company until the
1999 annual meeting of stockholders or until their successors have been duly
elected and qualified or until their death, resignation or removal.
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<PAGE> 6
INFORMATION WITH RESPECT TO DIRECTORS
Set forth below is information regarding the nominees.
<TABLE>
<CAPTION>
NAME OF NOMINEES POSITION(S) WITH THE COMPANY AGE DIRECTOR SINCE
- ----------------------- ---------------------------------------- --- --------------
<S> <C> <C> <C>
G. Kirk Raab Chairman of the Board 61 1992
Herbert H. McDade, Jr. Director 70 1991
M. David Titus Director 39 1990
</TABLE>
Set forth below is information regarding the continuing directors
<TABLE>
<CAPTION>
NAME OF DIRECTOR POSITION(S) WITH THE COMPANY AGE DIRECTOR SINCE
- ----------------------- ---------------------------------------- --- --------------
<S> <C> <C> <C>
Lisa A. Conte Director, President, Chief Executive 38 1989
Officer and Chief Financial Officer
John A. Young Director 64 1993
</TABLE>
BUSINESS EXPERIENCE OF DIRECTOR NOMINEES FOR TERM ENDING UPON THE 1999 ANNUAL
MEETING OF STOCKHOLDERS
G. KIRK RAAB became a director of the Company in January 1992 and Chairman
of the Board in August 1995. Mr. Raab was President, Chief Executive Officer and
a director of Genentech, Inc. ("Genentech") from February 1990 to July 1995 and
President, Chief Operating Officer and a director from February 1985 to January
1990. Before joining Genentech, Mr. Raab was associated with Abbott
Laboratories, serving as President, Chief Operating Officer and director. Mr.
Raab earned a B.A. from Colgate University, where he currently serves as a
trustee. Mr. Raab is also Chairman of the Board of Connective Therapeutics, Inc.
and a director of Applied Imaging Corp. as well as chairman of the board and
director of several privately held biotechnology companies.
HERBERT H. MCDADE, JR. became a director of the Company in October 1991. He
has served as Chairman of the Board and Chief Executive Officer of Chemex
Pharmaceuticals, Inc. ("Chemex") since February 1989 and as Chief Executive
Officer from February 1989 through January 1996, when Chemex merged with Access
Pharmaceutical Corporation ("Access") and the combined entity changed its name
to Access. From October 1986 to January 1988, Mr. McDade was Chairman, President
and Chief Executive Officer of Armour Pharmaceuticals, Inc., after previously
serving as President, International Health Care Division of the Revlon Health
Care Group. Mr. McDade holds a B.S. in Biology from the University of Notre Dame
and a B.P.H. in Theology and Philosophy from Laval University. He is Chairman of
the Board of Access and a director of Cytrx, Inc., Discovery Ltd. and several
privately held companies.
M. DAVID TITUS became a director of the Company in April 1990. Mr. Titus is
currently Managing Director of Windward Ventures, a venture capital consulting
and investment firm, which he founded in 1993. From May 1986 to December 1992,
he served in various capacities at Technology Funding Inc., a venture capital
firm, including Group Vice President, Technology Funding, Inc., and General
Partner of Technology Funding Limited. Prior to joining Technology Funding, Inc.
in May 1986, Mr. Titus was a founder and Senior Vice President of the Technology
Division of Silicon Valley Bank. Mr. Titus earned a B.A. in Economics from the
University of California, Santa Barbara. He is a director of several privately
held companies.
BUSINESS EXPERIENCE OF CONTINUING DIRECTORS FOR TERM ENDING UPON THE 1998 ANNUAL
MEETING OF STOCKHOLDERS
LISA A. CONTE founded the Company in May 1989 and currently serves as the
Company's President, Chief Executive Officer, Chief Financial Officer and as
Director. From 1987 to 1989, Ms. Conte was Vice President at Technology Funding
Inc., a venture capital firm, where she was responsible for the analysis and
management of healthcare industry investments. From 1985 to 1987, she conducted
risk and strategy audits for venture capital portfolio companies at Strategic
Decisions Group, a management consulting firm. Ms. Conte received an A.B. in
Biochemistry from Dartmouth College, an M.S. in Physiology/Pharmacology from the
University of California, San Diego and an M.B.A. from The Amos Tuck School,
Dartmouth College.
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<PAGE> 7
JOHN A. YOUNG became a director of the Company in September 1993. From 1978
until October 1992, he served as President and Chief Executive Officer of the
Hewlett-Packard Company, an international manufacturer of measurement and
computation products and systems, which he joined in 1958. Mr. Young is now
retired. He received a B.S. in Electrical Engineering from Oregon State
University and an M.B.A. from Stanford University. Mr. Young is Chairman of the
Board of Directors of Novell, Inc. and a director of Wells Fargo & Company,
Chevron Corporation, SmithKline Beecham plc, Affymetrix, Inc., Lucent
Technologies, Inc. and several privately held companies.
NUMBER OF DIRECTORS; RELATIONSHIPS
The Company's Bylaws authorize the Board to fix the number of directors
serving on the Board, provided that such number shall not be less than five nor
more than nine. Since May 1996, the number of directors has been fixed at five.
All directors hold office until the second annual meeting of stockholders
following the annual meeting of stockholders at which such director was elected,
or until their successors have been duly elected and qualified. Officers are
appointed to serve at the discretion of the Board.
There are no family relationships among executive officers or directors of
the Company.
BOARD MEETINGS AND COMMITTEES
The Board held nine meetings during the 1996 fiscal year and acted by
written consent on one occasion. Each of the five directors participated in or
attended at least 75% of the aggregate of (i) the total number of meetings of
the Board of Directors and (ii) the total number of meetings held by all
committees of the Board on which he served during the past fiscal year.
The Board has an Audit Committee and a Compensation Committee, but not a
standing Nominating Committee. The Audit Committee is primarily responsible for
annually recommending independent auditors for appointment by the Board, for
reviewing the services performed by the Company's independent auditors and
reviewing reports submitted by the independent auditors. The Audit Committee
includes two directors, Messrs. Titus and Young. The Audit Committee held one
meeting during the 1996 fiscal year, at which Messrs. Titus and Young were both
in attendance.
The Compensation Committee, which is comprised of Messrs. McDade, Titus and
Young, reviews and approves the Company's general compensation policies and
practices, sets compensation levels for the Company's executive officers and
administers the Company's 1992 Stock Option Plan (the "Plan") and other employee
benefits programs. During the 1996 fiscal year, the Compensation Committee met
six times. Mr. Titus attended all six such meetings and Messrs. McDade and Young
each attended five of the six meetings during the 1996 fiscal year.
DIRECTOR COMPENSATION
Each non-employee Board member receives an annual retainer fee of $5,000
provided the non-employee Board member attends at least 75% of the Board
meetings. In addition, non-employee Board members are reimbursed for reasonable
expenses incurred in connection with their attendance at such meetings.
Under the Automatic Option Grant Program in effect under the Plan, each
individual who first becomes a nonemployee Board member, whether through
appointment by the Board or upon election by the stockholders, will
automatically receive, at the time of such initial appointment or election, an
option grant for 20,000 shares of Common Stock, provided such individual has not
previously been in the Company's employ. In addition, on the date of each Annual
Meeting of Stockholders, each individual who is to continue to serve as a
non-employee Board member will receive an automatic option grant for that number
of shares of Common Stock determined by dividing $50,000 by the average closing
selling price per share of Common Stock for the 30 trading days immediately
preceding the date of such Annual Meeting, but in no event shall such grant be
more than 7,500 shares nor fewer than 5,000 shares per non-employee Board
member, provided such individual has been a Board member for at least six
months. Each granted option will have an exercise price per share equal to the
fair market value per share of Common Stock on the grant date and will have a
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<PAGE> 8
maximum term of 10 years measured from such grant date. The option will become
exercisable for the option shares in a series of 24 successive equal monthly
installments upon the optionee's completion of each month of Board service over
the 24-month period measured from the grant date. The option will, however,
become immediately exercisable for all the option shares upon certain changes in
control or ownership of the Company. For further information concerning the
Automatic Option Grant Program, see "Proposal Two -- Approval of Amendments to
1992 Stock Option Plan; Automatic Option Grant Program."
Messrs. McDade, Raab, Titus and Young each received, on May 23, 1996, the
date of the 1996 Annual Meeting of Stockholders, an option grant for 6,782
shares of Common Stock under the Automatic Option Grant Program with an exercise
price per share of $8.125, the fair market value per share of Common Stock on
that date.
In August 1995, the Company entered into a consulting arrangement (the
"Consulting Arrangement") with Mr. Raab, Chairman of the Board. As consideration
for the special consulting services Mr. Raab performs under the Consulting
Arrangement, Mr. Raab is paid an annual consulting fee of $100,000. In addition,
he was granted an option for 200,000 shares of Common Stock on August 21, 1995
with an exercise price per share of $5.50, the fair market value per share of
Common Stock on that date. The option was granted under the Discretionary Option
Grant Program in effect under the Plan, and the option will become exercisable
in a series of 48 successive equal monthly installments following the August 21,
1995 grant date as Mr. Raab continues to render services to the Company pursuant
to his Consulting Arrangement. The option will, however, become immediately
exercisable for all the option shares upon certain changes in control or
ownership of the Company. In addition, in connection with his services as a
director and as Chairman of the Board, Mr. Raab receives an annual retainer fee
of $55,000, payable after each Annual Meeting of Stockholders so long as Mr.
Raab continues to render services to the Company as Chairman of the Board.
No other compensation was paid or accrued for directors of the Company in
respect of their 1996 services as directors of or consultants to the Company.
PROPOSAL TWO -- APPROVAL OF AN
AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION
The present capital structure of the Company authorizes 25,000,000 shares
of Common Stock, par value $0.001, 600,000 shares of undesignated preferred
stock, par value $0.001 ("Undesignated Preferred Stock"). Additionally, 400,000
shares are designated as Series A Preferred Stock, all of which are issued and
outstanding. The Board believes this capital structure is inadequate for the
present and future needs of the Company. Therefore the Board has unanimously
approved the amendment and restatement of the Company's Restated Certificate of
Incorporation to increase the number of shares of Common Stock authorized for
issuance by Article IV of the Restated Certificate of Incorporation from
25,000,000 shares to 40,000,000 shares. The Board believes this capital
structure more appropriately reflects the present and future needs of the
Company and recommends that the Company's stockholders approve such amendment
and restatement. The Undesignated Preferred Stock may be issued from time to
time in one or more series with such rights, preferences and privileges,
including dividend rates, conversion and redemption prices, and voting rights,
as may be determined by the Board. On March 24, 1997, 15,921,417 shares of
Common Stock were outstanding. On March 24, 1997, approximately 19,463,803
shares of Common Stock would be outstanding on a fully diluted basis, which
assumes the conversion of the outstanding shares of the Company's Series A
Preferred Stock and exercise of all outstanding warrants and options.
PURPOSE OF AUTHORIZING ADDITIONAL COMMON STOCK
The authorization of an additional 15,000,000 shares of Common Stock would
give the Board the express authority, without further action of the
stockholders, to issue such shares of Common Stock from time to time as the
Board deems necessary. The Board believes it is necessary to have the ability to
issue such additional shares of Common Stock for general corporate purposes. The
time frame necessary to achieve market success for any individual product in the
biotechnology industry is lengthy. Consequently, the Company will expend
substantial funds on research and development, expanding manufacturing capacity,
preclinical and clinical
5
<PAGE> 9
testing of its products and manufacturing and marketing of its products prior to
commercialization. The Company plans to fund such development activities through
several different means including equity financings. Other potential uses of the
additional authorized shares of Common Stock may include acquisition
transactions, stock dividends or distributions, and having Common Stock
available for any future designation and issuance of preferred stock convertible
into Common Stock. The additional Common Stock would be available for issuance
by the Board without future action by the stockholders, unless such action were
specifically required by applicable law or rules of any stock exchange or
quotation system on which the Company's securities may then be listed.
The proposed increase in the authorized number of shares of Common Stock
could have a number of effects on the Company's stockholders depending upon the
exact nature and circumstances of any actual issuances of authorized but
unissued shares. The increase could have an anti-takeover effect, in that
additional shares could be issued (within the limits imposed by applicable law)
in one or more transactions that could make a change in control or takeover of
the Company more difficult. For example, additional shares could be issued by
the Company so as to dilute the stock ownership or voting rights of persons
seeking to obtain control of the Company. Similarly, the issuance of additional
shares to certain persons allied with the Company's management could have the
effect of making it more difficult to remove the Company's current management by
diluting the stock ownership or voting rights of persons seeking to cause such
removal.
In addition, an issuance of additional shares by the Company could have an
effect on the potential realizable value of a stockholder's investment. In the
absence of a proportionate increase in the Company's earnings and book value, an
increase in the aggregate number of outstanding shares of the Company caused by
the issuance of the additional shares would dilute the earnings per share and
book value per share of all outstanding shares of the Company's capital stock.
If such factors were reflected in the price per share of Common Stock, the
potential realizable value of a stockholder's investment could be adversely
affected.
VOTE REQUIRED FOR STOCKHOLDER APPROVAL
The affirmative vote of a majority of all shares of the Company's Common
Stock, including all shares of Series A Preferred Stock on an as converted
basis, outstanding at the time of voting is required for approval of the
amendment and restatement of the Restated Certificate of Incorporation of Shaman
Pharmaceuticals, Inc. to increase the number of authorized shares of Common
Stock issuable thereunder from 25,000,000 shares to 40,000,000 shares.
The Board of Directors recommends that the stockholders vote IN FAVOR OF
the amendment and restatement of the Company's Restated Certificate of
Incorporation.
PROPOSAL THREE -- APPROVAL OF
AMENDMENTS TO 1992 STOCK OPTION PLAN
INTRODUCTION
The stockholders are being asked to vote on a proposal to approve a series
of amendments to the Company's 1992 Stock Option Plan (the "Plan") that the
Board adopted on February 14, 1997, subject to stockholder approval at the
Annual Meeting. The amendments will effect the following principal changes to
the existing provisions of the Plan:
A. Increase the maximum number of shares of the Company's Common Stock
authorized for issuance under the Plan by an additional 700,000 shares,
B. Increase the limit on the maximum number of shares of the Company's
Common Stock for which any one individual may be granted stock options and
separately exercisable stock appreciation rights under the Plan from
500,000 shares to 750,000 shares,
C. Render non-employee Board members who are serving as Plan
Administrator eligible to receive option grants under the Discretionary
Option Grant Program in effect under the Plan,
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<PAGE> 10
D. Allow unvested shares issued under the Plan and subsequently
repurchased by the Company at the option exercise price paid per share to
be available for reissuance,
E. Remove certain restrictions on the eligibility of non-employee
Board members to serve as Plan Administrator, and
F. Effect a series of additional changes to the provisions of the Plan
(including the stockholder approval requirements, the transferability of
non-statutory stock options and the elimination of the six (6)-month
holding period requirement as a condition to the exercise of stock
appreciation rights) in order to take advantage of the recent amendments to
Rule 16b-3 of the Securities and Exchange Commission which exempts certain
officer and director transactions under the Plan from the short-swing
liability provisions of the Federal securities laws.
The proposed share increase will assure that a sufficient reserve of Common
Stock is available under the Plan to attract and retain the services of
employees, which is essential to the Company's long-term growth and success. The
increase in the maximum number of shares for which any one individual may be
granted stock options and separately exercisable stock appreciation rights will
allow the Plan Administrator more flexibility in utilizing stock options to
provide equity incentives to the Company's senior management while assuring that
any compensation deemed paid by the Company in connection with the exercise of
those options will qualify as performance-based compensation which is not
subject to the $1 million dollar limitation on the tax deductibility of
executive compensation per covered individual imposed under Internal Revenue
Code Section 162(m). The remaining amendments will provide the Company with more
opportunities to make equity incentives available to the non-employee Board
members as an inducement for their continued service and to facilitate plan
administration by eliminating a number of limitations and restrictions
previously incorporated into the Plan to comply with the applicable requirements
of SEC Rule 16b-3 prior to its recent amendment.
The affirmative vote of the holders of a majority of the Common Stock,
including all shares of Series A Preferred Stock on an as converted basis,
present in person or represented by Proxy at the Annual Meeting and entitled to
vote on this Proposal is required for approval of the proposed amendments to the
Plan.
The Plan was originally adopted by the Board of Directors on December 30,
1992 and became effective on January 26, 1993 as the successor to the 1990 Stock
Option Plan (the "Predecessor Plan"). All outstanding options under the
Predecessor Plan were incorporated into the Plan at that time, and no further
option grants are to be made under the Predecessor Plan.
The principal terms and provisions of the Plan as modified by the recent
amendments are summarized below. The summary is not, however, intended to be a
complete description of all the terms of the Plan. A copy of the Plan will be
furnished without charge to any stockholder upon written request to the
attention of the Company's Investor Relations Department at 213 East Grand
Avenue, South San Francisco, California 94080.
DESCRIPTION OF THE PLAN
Structure. The Plan is divided into two separate equity incentive programs:
(i) a Discretionary Option Grant Program under which key employees, non-employee
Board members and consultants may be granted options to purchase shares of
Common Stock and (ii) an Automatic Option Grant Program under which eligible
non-employee Board members will automatically receive option grants at
designated intervals over their period of Board service.
Options granted under the Discretionary Option Grant Program may be either
incentive stock options designed to meet the requirements of Section 422 of the
Internal Revenue Code or non-statutory options not intended to satisfy such
requirements. All grants under the Automatic Option Grant Program will be non-
statutory options.
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<PAGE> 11
Administration. The Discretionary Option Grant Program is administered by
the Compensation Committee of the Board (the "Compensation Committee" or the
"Plan Administrator"). Compensation Committee members are appointed by the Board
and may be removed by the Board at any time.
The Compensation Committee as Plan Administrator has full authority,
subject to the provisions of the Plan, to determine the eligible individuals who
are to receive option grants and/or stock appreciation rights under the Plan,
the type of option (incentive stock option or non-qualified stock option) or
stock appreciation right (tandem or limited) to be granted, the number of shares
to be covered by each granted option or right, the date or dates on which the
option or right is to become exercisable and the maximum term for which the
option or right is to remain outstanding.
All grants under the Automatic Option Grant Program will be made in strict
compliance with the express provisions of that program, and no administrative
discretion will be exercised by the Plan Administrator.
Eligibility. Key employees (including officers), non-employee Board
members, and consultants in the service of the Company are eligible to receive
option grants under the Discretionary Option Grant Program. Non-employee Board
members are also eligible to participate in the Automatic Option Grant Program.
As of March 24, 1997, approximately 88 employees (including six executive
officers) and four non-employee Board members were eligible to participate in
the Discretionary Option Grant Program, and the four non-employee Board members
were also eligible to participate in the Automatic Option Grant Program. At the
Annual Meeting, all continuing nonemployee Board members will receive an option
grant under the Automatic Option Grant Program.
Securities Subject to the Plan. The maximum number of shares of Common
Stock issuable over the term of the Plan may not exceed 3,716,660 shares,
including the 700,000-share increase for which stockholder approval is sought as
part of this Proposal. The issuable shares may be made available either from the
authorized but unissued shares of Common Stock or from shares of Common Stock
repurchased by the Company, including shares purchased on the open market.
As of March 24, 1997, approximately 516,842 shares of Common Stock had been
issued under the Plan, 2,500,681 shares of Common Stock were subject to
outstanding options and 699,137 shares of Common Stock were available for future
option grants, including the 700,000-share increase for which stockholder
approval is sought as part of this Proposal.
In no event may any one individual participating in the Plan be granted
stock options or separately exercisable stock appreciation rights for more than
750,000 shares of Common Stock over the remaining term of such Plan, subject to
adjustment from time to time in the event of certain changes to the Company's
capital structure. For purposes of this limitation, any stock options or stock
appreciation rights granted prior to December 31, 1993 will not be taken into
account.
Stockholder approval of this Proposal will also constitute approval of the
45,000-share option grant made to Lisa A. Conte, the Company's Chief Executive
Officer, on January 30, 1997 with an exercise price of $5.0156 per share. The
option grant caused the total number of shares of the Company's Common Stock for
which Ms. Conte had been granted options under the Plan after December 31, 1993
to exceed the 500,000-share per participant limitation in effect at that time.
Accordingly, the option is not to become exercisable for any of the 45,000
option shares unless the proposed 250,000-share increase in the maximum number
of shares for which any one participant may be granted stock options under the
Plan is approved by the stockholders as part of this Proposal. If such approval
is obtained, the option will become exercisable in a series of installments over
her period of service with the Company as follows: (i) 4,500 option shares in a
series of 12 successive equal monthly installments, with the first such
installment to become exercisable on January 30, 1999, (ii) an additional 6,750
the option shares in a series of 12 subsequent successive equal monthly
installments, with the first such installment to become exercisable on January
30, 2000, (iii) an additional 11,250 option shares in a series of 12 subsequent
successive equal monthly installments, with the first such installment to become
exercisable on January 30, 2001 and (iv) the remaining 22,500 option shares in a
series of 12 subsequent successive equal monthly installments, with the first
such installment to become exercisable on January 30, 2002.
8
<PAGE> 12
Should an option expire or terminate for any reason prior to exercise in
full (including options cancelled in accordance with the cancellation-regrant
provisions described in the "Discretionary Option Grant Program -- Cancellation
and Regrant of Options" section below), the shares subject to the portion of the
option not so exercised will be available for subsequent grant under the Plan.
In addition, unvested shares issued under the Plan and subsequently repurchased
by the Company at the option exercise price paid per share will be added back to
the share reserve and will accordingly be available for subsequent issuance
under the Plan. However, shares subject to any option surrendered or cancelled
in accordance with the stock appreciation right provisions of the Plan or shares
reacquired by the Company pursuant to its repurchase rights under the Plan will
not be available for subsequent grants.
DISCRETIONARY OPTION GRANT PROGRAM
Price and Exercisability. The option exercise price per share for incentive
stock option grants may not be less than the fair market value of the Common
Stock on the grant date. The exercise price per share for non-statutory option
grants may be less than, equal to or greater than such fair market value.
Options granted under the Discretionary Option Grant Program may either become
exercisable in periodic installments over the optionee's period of service or
may be immediately exercisable for all of the option shares, with such shares
subject to repurchase by the Company, at the exercise price paid per share, in
the event the optionee leaves the Company's service prior to vesting in those
shares. No granted option will have a term in excess of 10 years.
The exercise price may be paid in cash or in shares of Common Stock.
Options may also be exercised through a same-day sale program, pursuant to which
a designated brokerage firm effects the immediate sale of the shares purchased
under the option and pays over to the Company, out of the sale proceeds
available on the settlement date, sufficient funds to cover the exercise price
for the purchased shares plus all applicable withholding taxes. The Plan
Administrator may also assist any optionee (including an officer) in the
exercise of his or her outstanding options by (a) authorizing a Company loan to
the optionee or (b) permitting the optionee to pay the exercise price in
installments over a period of years. The terms and conditions of any such loan
or installment payment will be established by the Plan Administrator in its sole
discretion, but in no event may the maximum credit extended to the optionee
exceed the aggregate exercise price payable for the purchased shares, plus any
federal or state income or employment taxes incurred in connection with the
purchase.
Valuation. For purposes of establishing the exercise price and for all
other valuation purposes under the Plan, the fair market value per share of
Common Stock on any relevant date will be deemed equal to the closing selling
price per share on that date, as such price is reported on the Nasdaq National
Market. The closing price of the Common Stock on March 24, 1997 was $5.125 per
share.
Termination of Service. Any option held by the optionee at the time of
cessation of service will not remain exercisable beyond the limited post-service
period designated by the Plan Administrator at the time of the option grant.
Under no circumstances, however, may any option be exercised after the specified
expiration date of the option term. Each such option will normally, during such
limited period, be exercisable only to the extent of the number of shares of
Common Stock for which the option is exercisable at the time of the optionee's
cessation of service. The optionee will be deemed to continue in service for so
long as such individual performs services for the Company (or any parent or
subsidiary corporation), whether as an employee, a non-employee member of the
Board or an independent consultant or advisor.
The Plan Administrator has complete discretion to extend the period
following the optionee's cessation of service during which his or her
outstanding options may be exercised and/or to accelerate the exercisability or
vesting of such options in whole or in part. Such discretion may be exercised at
any time while the options remain outstanding, whether before or after the
optionee's actual cessation of service.
Stockholder Rights. No optionee is to have any stockholder rights with
respect to the option shares until the optionee has exercised the option and
paid the exercise price for the purchased shares. Options are generally not
assignable or transferable other than by will or the laws of inheritance and,
during the optionee's lifetime, the option may be exercised only by such
optionee. However, the Plan Administrator may allow non-
9
<PAGE> 13
statutory options to be transferred or assigned during the optionee's lifetime
to one or more members of the optionee's immediate family or to a trust
established exclusively for one or more such family members, to the extent such
transfer or assignment is in furtherance of the optionee's estate plan.
Repurchase Rights. The shares of Common Stock acquired upon the exercise of
one or more options may be subject to repurchase by the Company, at the original
exercise price paid per share, upon the optionee's cessation of service prior to
vesting in those shares. The Plan Administrator has complete discretion in
establishing the vesting schedule to be in effect for any such unvested shares
and may cancel the Company's outstanding repurchase rights with respect to those
shares at any time, thereby accelerating the vesting of the shares subject to
the cancelled rights.
Acceleration of Options. In the event of any of the following
stockholder-approved transactions to which the Company is a party (a "Corporate
Transaction"):
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the state of the Company's incorporation;
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Company in complete liquidation or dissolution of
the Company; or
(iii) a reverse merger in which the Company is the surviving entity
but in which securities possessing more than 50% of the total combined
voting power of the Company's outstanding securities are transferred to a
person or persons different from those who held such securities immediately
prior to such merger;
each outstanding option will automatically accelerate so that each option will,
immediately prior to the specified effective date for a Corporate Transaction,
become fully exercisable with respect to the total number of shares of Common
Stock at that time subject to such option and may be exercised for all or any
portion of such shares as fully-vested shares. However, an outstanding option
will not so accelerate if and to the extent: (1) the option is to be assumed by
the successor corporation (or its parent corporation) in such Corporate
Transaction or (2) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of grant.
Immediately following the consummation of a Corporate Transaction, all
outstanding options under the Plan will terminate and cease to be exercisable,
except to the extent assumed by the successor corporation.
The Company's outstanding repurchase rights under the Plan will also
terminate, and the shares subject to such repurchase rights will become fully
vested, upon a Corporate Transaction, except to the extent (i) one or more of
such repurchase rights are to be assigned to the successor corporation (or its
parent company) or (ii) such accelerated vesting is precluded by other
limitations imposed by the Plan Administrator at the time the repurchase rights
are issued.
The Compensation Committee will have full power and authority, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to provide for the automatic acceleration of one or more
outstanding options under the Discretionary Option Grant Program in the event of
a Change in Control (as described below) so that each such option will,
immediately prior to such Change in Control, become exercisable for all the
shares of Common Stock at that time subject to that option and may be exercised
for all or any portion of those shares as fully-vested shares. The Plan
Administrator will also have complete discretion in establishing the specific
terms and conditions upon which one or more of the Company's outstanding
repurchase rights under the Plan are to terminate in connection with a Change in
Control.
For all purposes under the Plan, a "Change in Control" will be deemed to
occur if:
(i) any person or related group of persons (other than the Company or
a person that directly or indirectly controls, is controlled by, or is
under common control with, the Company) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) of securities possessing more than 50% of
the total combined voting power of the
10
<PAGE> 14
Company's outstanding securities pursuant to a tender or exchange offer
made directly to the Company's stockholders; or
(ii) the composition of the Board changes over a period of 24
consecutive months or less such that a majority of the Board members cease,
by reason of one or more contested elections for Board membership, to be
comprised of individuals who either (A) have been Board members
continuously since the beginning of such period or (B) have been elected or
nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in
office at the time such election or nomination was approved by the Board.
Upon a Change in Control, all outstanding options will remain exercisable
until the expiration or sooner termination of the option term specified in the
instrument evidencing the option.
The acceleration of options in the event of a Corporate Transaction or
Change in Control may be seen as an anti-takeover provision and may have the
effect of discouraging a merger proposal, a takeover attempt or other efforts to
gain control of the Company.
Cancellation and Regrant of Options. The Plan Administrator has the
authority to effect the cancellation of any or all options outstanding under the
Plan and to grant in substitution therefor new options covering the same or
different numbers of shares of Common Stock but with an exercise price per share
based upon the fair market value of the Common Stock on the new grant date.
Stock Appreciation Rights. The Plan Administrator is authorized to issue
two types of stock appreciation rights in connection with option grants made
under the Discretionary Option Grant Program:
TANDEM STOCK APPRECIATION RIGHTS provide the holders with the right to
surrender their options for an appreciation distribution from the Company
equal in amount to the excess of (a) the fair market value of the vested
shares of Common Stock subject to the surrendered option over (b) the
aggregate exercise price payable for such shares. Such appreciation
distribution may, at the discretion of the Plan Administrator, be made in
cash or in shares of Common Stock.
LIMITED STOCK APPRECIATION RIGHTS may be provided to one or more
officers of the Company as part of their option grants. Any option with
such a limited stock appreciation right will automatically be cancelled
upon the successful completion of a hostile tender offer for more than 50%
of the Company's outstanding voting securities. In return for the cancelled
option, the officer will be entitled to a cash distribution from the
Company in an amount per cancelled option share equal to the excess of (a)
the highest price per share of Common Stock paid in connection with the
tender offer over (b) the exercise price payable for such share.
Outstanding stock appreciation rights granted before January 26, 1993 to
certain officers and directors of the Company under the Predecessor Plan and
incorporated into the Plan allow such individuals to surrender the underlying
options to the Company for a cash distribution, calculated in the manner
indicated above, in the event a hostile tender offer for 25% or more of the
Company's outstanding voting securities is successfully completed or a change in
the majority of the Board of Directors is effected through one or more proxy
contests.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, each non-employee Board member
will automatically be granted, upon his or her initial election or appointment
to the Board, a stock option to purchase 20,000 shares of Common Stock, provided
such individual has not previously been in the Company's employ. In addition, on
the date of each Annual Stockholders' Meeting, each individual who is to
continue to serve as a non-employee Board member will automatically be granted a
stock option to purchase that number of shares of Common Stock determined by
dividing $50,000 by the average closing selling price of the Common Stock for
the 30 trading days immediately preceding the date of such Annual Meeting, but
in no event shall such grant be more than 7,500 shares nor fewer than 5,000
shares. However, no non-employee Board member will be eligible to receive such
an automatic grant unless he or she has served on the Board for at least six
months.
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<PAGE> 15
Stockholder approval of this Proposal will also constitute pre-approval of each
option granted on or after the date of the Annual Meeting pursuant to the
provisions of the Automatic Option Grant Program summarized below and the
subsequent exercise of that option in accordance with those provisions.
The option exercise price per share for each automatic grant will be equal
to the fair market value per share of Common Stock on the grant date and will be
payable in cash or shares of Common Stock. The options may also be exercised
through a same-day sale program, pursuant to which a designated brokerage firm
effects the immediate sale of the shares purchased under the option and pays
over to the Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the exercise price for the purchased shares.
Each automatic option grant will have a maximum term of 10 years and will
become exercisable for the option shares in a series of 24 successive equal
monthly installments over the optionee's period of continued Board service,
measured from the grant date. However, the option will become immediately
exercisable for all of the option shares upon a Corporate Transaction or Change
in Control. Each automatic option grant will be automatically cancelled upon the
successful completion of a hostile tender offer for more than 50% of the
Company's outstanding voting securities. In return, the optionee will be
entitled to a cash distribution from the Company in an amount per cancelled
option share equal to the excess of (a) the highest price per share of Common
Stock paid in connection with the tender offer over (b) the exercise price
payable for such share. Stockholder approval of this Proposal will constitute
approval of each option granted with such an automatic cancellation provision
right on or after the date of the Annual Meeting and the subsequent cancellation
of that option in accordance with such provision. No additional approval of the
Plan Administrator or the Board will be required at the time of the actual
option cancellation and cash distribution.
All automatic option grants held by the non-employee Board member at the
time of his or her cessation of Board service will remain exercisable for a
period of six months for any or all shares for which those options are
exercisable at the time of such cessation of Board service. However, should the
optionee die while holding one or more options, then those options will remain
exercisable for a 12-month period following the date of the optionee's death and
may be exercised, for any or all shares for which those options are exercisable
at the time of the optionee's cessation of Board service, by the personal
representative of the optionee's estate or by the persons to whom the options
are transferred by the optionee's will or by the laws of inheritance. In no
event may any such option be exercised after the expiration date of the 10-year
option term.
GENERAL PROVISIONS
Amendment and Termination of the Plan. The Board of Directors may amend or
modify the Plan in any or all respects whatsoever. However, no such amendment
may adversely affect the rights of outstanding option holders without their
consent. In addition, certain amendments may require stockholder approval
pursuant to applicable law or regulation.
The Board of Directors may terminate the Plan at any time, and the Plan
will in all events terminate not later than December 31, 2002. Any options
outstanding at the time of such plan termination will continue to remain
outstanding and exercisable in accordance with the terms and provisions of the
instruments evidencing those grants. The Plan will, however, automatically
terminate on the date all shares available for issuance are issued as vested
shares or cancelled pursuant to the exercise, surrender or cash-out of
outstanding options under the Plan.
Tax Withholding. The Compensation Committee may, in its discretion and upon
such terms and conditions as it may deem appropriate, provide one or more option
holders under the Discretionary Option Grant Program with the election to have
the Company withhold, from the shares of Common Stock otherwise issuable upon
the exercise of their options, a portion of those shares with an aggregate fair
market value equal to the designated percentage (up to 100% as specified by the
option holder) of the federal, state and local income tax liability and federal
employment tax liability incurred by such option holder in connection with the
exercise of such option. Any election so made will be subject to the approval of
the Compensation Committee, and no shares will actually be withheld in
satisfaction of such taxes except to the extent approved by the
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<PAGE> 16
Compensation Committee. One or more option holders may also be granted the
alternative right, subject to Committee approval, to deliver previously-issued
shares of Common Stock in satisfaction of such tax liability.
Changes in Capitalization. In the event any change is made to the Common
Stock issuable under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares, or other change in
corporate structure effected without the Company's receipt of consideration,
appropriate adjustments will be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the number and/or class of securities
and price per share in effect under each outstanding option (including all
option grants incorporated from the Predecessor Plan), (iii) the maximum number
and/or class of securities for which any one individual may be granted stock
options and separately exercisable stock appreciation rights under the Plan
after December 31, 1993 and (iv) the number and/or class of securities for which
automatic option grants are subsequently to be made to each newly-elected or
continuing non-employee Board member.
Each outstanding option which is assumed or is otherwise to continue in
effect after a Corporate Transaction will be appropriately adjusted to apply and
pertain to the number and class of securities which would have been issued, in
connection with such Corporate Transaction, to the holder of such option had the
option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments will also be made to the exercise price payable per
share and to the number and class of securities subsequently available for
issuance under the Plan on both an aggregate and per participant basis.
Option grants under the Plan will not affect the right of the Company to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
Excess Grants. The Plan permits the grant of options to purchase shares of
Common Stock in excess of the number of shares then available for issuance under
the Plan. Any options so granted cannot be exercised prior to stockholder
approval of an amendment sufficiently increasing the number of shares available
for issuance under the Plan.
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<PAGE> 17
OPTION GRANTS
The table below shows, as to each of the executive officers named in the
Summary Compensation Table below and the various other indicated persons and
groups, the following information with respect to stock option grants effected
during the period from January 1, 1996 through March 24, 1997: (i) the number of
shares of Common Stock subject to options granted under the Plan during that
period; and (ii) the weighted average exercise price payable per share under
such options.
<TABLE>
<CAPTION>
OPTIONS GRANTED WEIGHTED AVERAGE
NAME AND POSITION (NUMBER OF SHARES) EXERCISE PRICE($)
--------------------------------------------- ------------------ -----------------
<S> <C> <C>
Lisa A. Conte 400,000* $5.49
President, Chief Executive Officer and
Chief Financial Officer
Barbara Evans Goodrich 52,500 $6.42
Former Vice President and Chief Financial
Officer
Gerald M. Reaven, M.D. 5,000 $5.88
Senior Vice President, Research
Atul S. Khandwala, Ph.D. 125,000 $6.84
Senior Vice President, Development
Steven R. King, Ph.D. 55,000 $6.78
Senior Vice President, Ethnobotany and
Conservation
All executive officers as a group (10 792,500 $6.15
persons)
All directors who are not executive officers
as a group (5 persons) 127,128 $5.68
All employees (111 persons) and consultants
as a group, excluding executive officers 535,028 $6.05
</TABLE>
- ------------
* Forty-five thousand (45,000) shares are subject to stockholder approval of
this Proposal Three.
FEDERAL TAX CONSEQUENCES
Options granted under the Plan may be either incentive stock options which
satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
federal income tax treatment for the two types of options differs as described
below.
Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. However, the difference between the fair market
value of the purchased shares and the exercise price is generally included as
alternative minimum taxable income for purposes of the alternative minimum tax.
The optionee will recognize taxable income in the year in which the purchased
shares are sold or otherwise made the subject of disposition. For federal tax
purposes, dispositions are divided into two categories: (i) qualifying and (ii)
disqualifying. The optionee will make a qualifying disposition of the purchased
shares if the sale or other disposition of such shares is made after the
optionee has held the shares for more than two years after the grant date of the
option and more than one year after the exercise date. If the optionee fails to
satisfy either of these two minimum holding periods prior to the sale or other
disposition of the purchased shares, then a disqualifying disposition will
result.
Upon a qualifying disposition of the shares, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares over (ii)
the exercise price paid for such shares. If there is a disqualifying disposition
of the shares, then the excess of (a) the fair market value of those shares on
the exercise date over (b) the exercise price paid for the shares will be
taxable as ordinary income. Any additional gain recognized upon the disposition
will be a capital gain.
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<PAGE> 18
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the exercise date over (ii) the exercise price
paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
Special provisions of the Internal Revenue Code apply to the acquisition of
unvested shares of Common Stock under a non-statutory option. These special
provisions may be summarized as follows:
(i) If the shares acquired upon exercise of the non-statutory option
are subject to repurchase by the Company at the original exercise price in
the event of the optionee's termination of service prior to vesting in such
shares, then the optionee will not recognize any taxable income at the time
of exercise but will have to report as ordinary income, as and when the
Company's repurchase right lapses, an amount equal to the excess of (A) the
fair market value of the shares on the date the Company's repurchase right
lapses with respect to those shares over (B) the exercise price paid for
the shares.
(ii) The optionee may, however, elect under Section 83(b) of the
Internal Revenue Code to include as ordinary income in the year of exercise
of the non-statutory option an amount equal to the excess of (A) the fair
market value of the purchased shares on the exercise date (determined as if
the shares were not subject to the Company's repurchase right) over (B) the
exercise price paid for such shares. If the Section 83(b) election is made,
the optionee will not recognize any additional income as and when the
Company's repurchase right lapses.
The Company will be entitled to a business expense deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-statutory option. The deduction will in general be allowed for the
taxable year of the Company in which such ordinary income is recognized by the
optionee.
Deductibility of Executive Compensation. The Company anticipates that any
compensation deemed paid by it in connection with disqualifying dispositions of
incentive stock option shares or exercises of non-statutory options granted with
an exercise price equal to the fair market value of the option shares will
qualify as performance-based compensation for purposes of Code Section 162(m)
and will not have to be taken into account for purposes of the $1 million
limitation per covered individual on the deductibility of the compensation paid
to certain executive officers of the Company.
Stock Appreciation Rights. An optionee who is granted a stock appreciation
right will recognize ordinary income in the year of exercise equal to the amount
of the appreciation distribution. The Company will be entitled to a business
expense deduction equal to the appreciation distribution for the taxable year of
the Company in which the ordinary income is recognized by the optionee.
Parachute Payments. If the exercisability of an option or stock
appreciation right is accelerated as a result of a change of control, all or a
portion of the value of the option or stock appreciation right at that time may
be a parachute payment for purposes of the excess parachute provisions of the
Internal Revenue Code. Those provisions generally provide that if parachute
payments equal or exceed three times an employee's average compensation for the
five tax years preceding the change of control, the Company loses its deduction
and the recipient is subject to a 20% excise tax for the amount of the parachute
payments in excess of one times such average compensation.
Note Forgiveness. If any promissory note delivered in payment of shares
acquired under the Plan is forgiven in whole or in part, the amount of such
forgiveness will be reportable by the participant as ordinary compensation
income. The Company will be entitled to a business expense deduction equal to
the amount of ordinary income recognized by the participant in connection with
the acquisition of the shares and any note forgiveness. The deduction will be
allowed for the taxable year of the Company in which the ordinary income is
recognized by the participant.
15
<PAGE> 19
ACCOUNTING TREATMENT
Option grants or stock issuances to employees and members of the Board of
Directors with exercise or issue prices less than the fair market value of the
shares on the grant or issue date will result in compensation expense to the
Company's earnings equal to the difference between the exercise or issue price
and the fair market value of the shares on the grant or issue date. Such charge
will be expensed by the Company over the period benefitted (usually the vesting
period of the option). Option grants or stock issuances to employees and members
of the Board of Directors with exercise or issue prices not less than the fair
market value of the shares on the grant or issue date will not result in any
direct charge to the Company's earnings. However, the fair value of those
options is required to be disclosed in the notes to the Company's financial
statements, and the Company must also disclose, in pro-forma disclosures in the
Company's financial statements, the impact those options would have upon the
Company's reported earnings were the value of those options at the time of grant
treated as compensation expense. Whether or not granted at a discount, the
number of outstanding options may be a factor in determining the Company's
earnings per share on a fully-diluted basis.
Option grants or stock issuances to non-employees result in compensation
expense to the Company's earnings equal to the fair value of the options or
shares granted as of the grant or issue date. Such charge is also expensed over
the period benefitted (usually the vesting period for options).
Should one or more optionees be granted stock appreciation rights which
have no conditions upon exercisability other than a service or employment
requirement, then such rights will result in compensation expense to be charged
against the Company's earnings. Accordingly, at the end of each fiscal quarter,
the amount (if any) by which the fair market value of the shares of Common Stock
subject to such outstanding stock appreciation rights has increased from prior
quarter-end will be accrued as compensation expense, to the extent such fair
market value is in excess of the aggregate exercise price in effect for such
rights.
NEW PLAN BENEFITS
No stock option grants or direct stock issuances have been made to date
under the Plan on the basis of the 700,000-share increase for which stockholder
approval is sought under this Proposal Three, except 863 of the shares subject
to option grants made on March 12, 1997 were based on such increase. No
executive officer received any options granted on the basis of such increase.
However, as indicated above, the option grant for 45,000 shares made to Ms.
Conte on January 30, 1997 is contingent upon stockholder approval of the
250,000-share increase to the maximum number of shares for which any one
participant may be granted stock options and separately exercisable stock
appreciation rights under the Plan after December 31, 1993.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the stockholders vote FOR the
approval of the amendments to the Plan as described in this Proposal Three. If
such stockholder approval is not obtained, then any options granted on the basis
of the 700,000-share increase which forms part of this Proposal will terminate
without becoming exercisable for any of the shares of Common Stock subject to
those options, and no further option grants or stock issuances will be made on
the basis of such share increase. The 250,000-share increase to the limitation
on the maximum number of shares for which any one participant may be granted
stock options and separately exercisable stock appreciation rights under the
Plan after December 31, 1993 will not be implemented, and the January 30, 1997
option grant for 45,000 shares made to Ms. Conte on the basis of that increase
will terminate without ever becoming exercisable for those shares. In addition,
non-employee Board members will not be eligible to participate in the
Discretionary Option Grant Program while serving as the Plan Administrator, and
any unvested shares repurchased by the Company at the option exercise price paid
per share will not be added back to the share reserve for reissuance. However,
the Plan will continue to remain in effect, and option grants may continue to be
made pursuant to the provisions of the Plan in effect prior to the amendments
summarized in this Proposal, until the available reserve of Common Stock as last
approved by the stockholders has been issued.
The Board believes that the amendments to the Plan are essential to the
Company's efforts in attracting and retaining the services of highly qualified
individuals who can contribute significantly to the Company's financial success.
ACCORDINGLY, THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE
APPROVAL OF THE AMENDMENTS TO THE PLAN.
16
<PAGE> 20
PROPOSAL FOUR -- RATIFICATION OF SELECTION
OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board has appointed the
firm of Ernst & Young LLP, independent auditors, to audit the financial
statements of the Company for the year ending December 31, 1997, and is asking
the stockholders to ratify this appointment.
In the event the stockholders fail to ratify the appointment, the Board
will reconsider its selection. Even if the selection is ratified, the Board in
its discretion may direct the appointment of a different independent auditing
firm at any time during the year if the Board feels that such a change would be
in the best interests of the Company and its stockholders. The affirmative vote
of the holders of a majority of the Common Stock, including all shares of
preferred stock on an as converted basis, present or represented by Proxy at the
Annual Meeting and entitled to vote is required to ratify the selection of Ernst
& Young LLP.
Ernst & Young LLP has audited the Company's financial statements annually
since November 1992. A representative of Ernst & Young LLP is expected to be
present at the Annual Meeting to respond to appropriate questions, and will be
given the opportunity to make a statement if he or she so desires.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE
RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP TO SERVE AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 1997.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
DIRECTORS AND EXECUTIVE OFFICERS
Certain information about the Company's executive officers, as of March 24,
1997, is set forth below (information concerning the Class I and Class II
directors, including Lisa A. Conte, the Company's President, Chief Executive
Officer and Chief Financial Officer, is contained in Proposal One above):
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ----------------------------------------------------
<S> <C> <C>
Atul S. Khandwala, Ph.D. 54 Senior Vice President, Development
Steven R. King, Ph.D 39 Senior Vice President, Ethnobotany and Conservation
Gerald M. Reaven, M.D. 68 Senior Vice President, Research
Jacqueline Cossmon 41 Vice President, Corporate Communications
Gina D. Morhun 31 Vice President, Human Resources
</TABLE>
ATUL S. KHANDWALA, PH.D. joined Shaman in March 1996 as Senior Vice
President, Development from Block Drug Company, where he served as Vice
President for Ethical Product Development since August 1995. Prior to joining
Block Drug Company, from 1986 to August 1995, Dr. Khandwala held various
positions, most recently Executive Vice President, with Chemex Pharmaceuticals,
Inc. From 1976 to 1986, Dr. Khandwala held various positions with Revlon Health
Care Group Research and Development Division. Dr. Khandwala received a B.Sc. in
Chemistry from Gujarat University in India and a Ph.D. in Pharmaceutical
Chemistry from the University of Wisconsin.
STEVEN R. KING, PH.D. joined Shaman in March 1990. He currently serves as
Senior Vice President, Ethnobotany and Conservation. He is responsible for
coordinating the Company's Scientific Strategy Team. From 1989 to 1990, Dr. King
was the chief botanist for Latin America at Arlington, Virginia's Nature
Conservancy. He worked in 1988 as Research Associate for the Committee on
Managing Global Genetic Resources at the National Academy of Sciences, and was a
Doctoral Fellow from 1983 to 1988 at The New York Botanical Garden's Institute
of Economic Botany. Dr. King received a B.A. in Human Ecology from the College
of the Atlantic and M.S. and Ph.D. degrees in Biology from City University of
New York.
GERALD M. REAVEN, M.D. joined Shaman as a consultant in February 1995 and
became an employee in July 1995. He currently serves as Senior Vice President,
Research. Dr. Reaven came to Shaman from the Stanford University School of
Medicine where he served as a faculty member since 1960 and a Professor of
Medicine since 1970. Over the last 20 years, Dr. Reaven served as head of the
Division of Endocrinology and Metabolic Diseases, Division of Gerontology and
director of the General Clinical Research Center. Most
17
<PAGE> 21
recently, Dr. Reaven served as head of the Division of Endocrinology,
Gerontology and Metabolism at Stanford University School of Medicine, and
director of the Geriatric Research, Education and Clinical Center, at the Palo
Alto Veterans Affairs Medical Center. Dr. Reaven received his A.B., B.S. and
M.D. from the University of Chicago.
JACQUELINE COSSMON joined the Company in May 1996 as Vice President,
Corporate Communications. From February 1996 to May 1996, she acted as an
investor relations consultant to Shaman. From January 1994 to December 1995, Ms.
Cossmon was Director of Corporate Communications at Applied Immune Sciences, a
Santa Clara, California based biotechnology company. From February 1986 to
January 1994, Ms. Cossmon held various positions at Applied Biosystems, Inc., a
market leader in the development and delivery of biotechnology equipment,
including National Sales Manager for biochemical and bioseparation products,
National Accounts Manager and Director of Corporate Communications. Ms. Cossmon
received a B.S. in Nutritional Science from Northern Arizona University and an
M.B.A. from Santa Clara University.
GINA D. MORHUN joined Shaman in November 1994 and currently serves as Vice
President, Human Resources. Ms. Morhun is responsible for Shaman's human
resource functions. Prior to joining the Company, she served as Human Resource
Manager at Abaxis, Inc. of Sunnyvale, California from April to November, 1994,
and as Manager of Compensation and Benefits at ASK Computers, Inc. of Santa
Clara, California from November 1992 to April 1994. From June 1987 to November
1992, Ms. Morhun served as Senior Technical Analyst, Actuarial Consultant and
Underwriter of three large international firms: Alexander & Alexander Consulting
Group, The Wyatt Company, and Metropolitan Life Insurance Company. Ms. Morhun
received a B.A. in Statistics from the University of California at Davis.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
As members of the Compensation Committee of the Board, it is our duty to
exercise the power and authority of the Board of Directors with respect to the
compensation levels to be in effect for the Company's executive officers. As
such, it is our responsibility to set the base salary of certain executive
officers and to administer the Company's 1992 Stock Option Plan under which
grants may be made to such officers and other key employees. In addition, we
approved special bonus awards for two executive officers for the 1996 fiscal
year.
For 1996, we established the compensation payable to Lisa A. Conte,
President and Chief Executive Officer, the Company's highest-paid executive
officer, and the Company's four other most highly-paid executive officers. Ms.
Conte reported to us the performance evaluations of each executive officer,
including herself, and the factors to be considered in setting their
compensation. We endorse those factors and include them as part of our report.
GENERAL COMPENSATION POLICY. Under our supervision, the Company has
developed a compensation policy that is designed to attract and retain qualified
key executives critical to the Company's success and to provide such executives
with performance-based incentives tied to corporate milestones. It is our
objective to have a substantial portion of each officer's compensation
contingent upon the Company's performance as well as upon the individual's
contribution to the success of the Company as measured by personal performance.
Accordingly, each executive officer's compensation package is normally comprised
of two elements: (i) base salary, which reflects individual performance and is
commensurate with salaries for comparable positions in other biotechnology
companies given the level of seniority and skills possessed by such officer, and
(ii) long-term, stock-based incentive awards, which strengthen the mutuality of
interests between the executive officers and the Company's stockholders and
which may be tied to the Company's achievement of certain pre-established goals.
GUIDELINES. Because the Company is in the pre-product commercialization
stage, the use of traditional performance standards (such as profitability and
return on equity) is not appropriate in evaluating the performance of its
executive officers. In particular, the unique nature of the biotechnology
industry, the relatively short period of time during which the Company's stock
has been publicly traded, the performance of the stock during this period, and
the absence of product revenues have made it impossible to tie performance
18
<PAGE> 22
objectives to standard financial considerations. The primary guidelines which we
did consider in establishing the components of each executive officer's
compensation package for 1996 are summarized below. However, we may in our
discretion apply entirely different guidelines, particularly different measures
of performance, in setting executive compensation for future fiscal years.
BASE SALARY. Base compensation is initially established through negotiation
between the Company and the executive at the time the executive is hired, and it
is subject to periodic review or reconsideration, usually on an annual basis.
When establishing or reviewing the level of base compensation for each executive
officer, we consider numerous factors, including the qualifications of the
executive and his or her level of relevant experience, strategic goals for which
the executive has responsibility, specific accomplishments of the executive
during the last fiscal year and the compensation levels in effect at companies
in the Company's industry which compete with the Company for business and
executive talent.
For comparative compensation purposes, we have selected a peer group of
companies within the industry and estimated the salary levels in effect for
similar positions at those companies. We also relied on specific compensation
surveys, making our decisions as to the appropriate market level of base salary
for each executive officer on the basis of our understanding of the salary
levels in effect for similar positions at various peer group companies. In
selecting the peer group companies, we focused primarily on whether those
companies were actually competitive with the Company in seeking executive
talent, whether those companies had a management style and corporate culture
similar to the Company's and whether similar positions existed within their
corporate structure. For this reason, only 25 of the peer group companies
surveyed for comparative compensation purposes were also included in the
Hambrecht & Quist Biotechnology Index which the Company has chosen as the
industry index for purposes of the Company Stock Price Performance graph which
follows this report.
Base salaries are reviewed annually, and adjustments to each executive
officer's base salary are made to reflect individual performance and salary
increases effected by the peer group companies. A major objective, accordingly,
is to have base salary levels commensurate with those of comparable positions
with the peer group companies, given the level of seniority and skills possessed
by the executive officer in question and our assessment of such executive's
performance over the year.
We estimate (on the basis of 1996 surveys of executive compensation) that
the base salary levels in effect for the Company's executive officers for the
1996 fiscal year ranged from the 45th percentile to the 90th percentile of the
base salary levels in effect for executive officers in comparable positions with
peer group companies.
INCENTIVE COMPENSATION. The Committee awarded two cash bonuses for the 1996
fiscal year in recognition of the unique contributions made by one executive
officer with respect to attainment of certain milestones.
STOCK-BASED INCENTIVE COMPENSATION. In addition to establishing and
reviewing the base salary levels in effect for the executive officers, we also
have discretionary authority to award equity incentives in the form of stock
option grants to the executive officers as a way to more closely align the
interests of management with those of the Company's stockholders and to reward
officers for achieving certain defined personal and corporate performance
targets. Factors which we consider in determining whether to grant options and
the number of shares underlying each such grant include the executive's position
in the Company, his or her performance and responsibilities, the extent to which
he or she already holds an equity interest in the Company and the equity
incentives granted to employees with similar responsibilities at other
biotechnology companies. We have also established general guidelines for
maintaining the unvested option holdings of each executive officer at a targeted
level based upon his or her position with the Company, and option grants are
periodically made to maintain the targeted levels. These factors, however, are
used only as guidelines, and the relative weight given to each factor varies
from individual to individual as we deem appropriate under the circumstances.
For 1996, we approved total stock option grants under the Plan for 847,928
shares. Each of the named executive officers of the Company received option
grants in calendar 1996. Each grant allows the executive
19
<PAGE> 23
officer to acquire shares of the Company's Common Stock at a fixed price per
share (the market price on the grant date) over a specified period of time (up
to 10 years). The options vest in periodic installments over four or eight year
periods, contingent upon the executive officer's continued employment with the
Company. However, in order to provide specific performance incentives to the
officers holding the options with the eight-year vesting schedule, we structured
those options so that they would vest on accelerated basis if certain product
milestones and Common Stock market price objectives are achieved. In all cases,
the options will provide a return to the executive officer only if he or she
remains with the Company and then only if the market price of the underlying
shares appreciates over the option term.
CEO COMPENSATION. The annual base salary of Lisa A. Conte, the Company's
President and Chief Executive Officer, was increased from $247,644 to $286,190
during the 1996 fiscal year based on our performance review of Ms. Conte for
1996. In setting Ms. Conte's compensation, we considered the level of experience
and unique qualifications Ms. Conte has brought to Shaman as Chief Executive
Officer, the Company's goals for which Ms. Conte had responsibility and the
degree to which she helped the Company attain those goals. Among the Company's
accomplishments during 1996 which we felt Ms. Conte helped the Company achieve
were the continued clinical development of the Company's two products in human
trials, as well as the expansion of the Company's focus in the field of
metabolic diseases, namely diabetes. Accordingly, Ms. Conte's base salary was
raised by an amount which we felt fairly represents her additional contributions
to the Company's continued growth and success. The salary adjustment brought the
base salary of Ms. Conte for the 1996 fiscal year to a salary level at the 50th
percentile of the salary levels in effect for chief executive officers at the
peer group companies. Bonuses totaling $53,000 were granted to Ms. Conte for
fiscal 1996 because of her contribution to achievement of the collaborative
agreement with Lipha/Merck and financing activities.
DEDUCTION LIMIT FOR EXECUTIVE COMPENSATION. As a result of Section 162(m)
of the Internal Revenue Code, which was enacted into law in 1993, the Company
will not be allowed a federal income tax deduction for compensation paid to
certain executive officers, to the extent that compensation exceeds $1 million
per officer in any one year. This limitation will be in effect for each fiscal
year of the Company beginning after December 31, 1993 and will apply to all
compensation paid to the covered executive officers which is not considered to
be performance based. Compensation which qualifies as performance-based
compensation will not have to be taken into account for purposes of this
limitation. At the 1994 Annual Meeting of Stockholders, the Company obtained
stockholder approval for certain amendments to the 1992 Stock Option Plan which
were intended to assure that any compensation deemed paid in connection with the
exercise of stock options granted under the Plan with an exercise price equal to
the fair market value of the option shares on the grant date will qualify as
performance-based compensation. The recent amendment to the Plan for which
stockholder approval is sought at the 1997 Annual Meeting will assure that
future option grants with such fair market value exercise prices will continue
to qualify as performance-based compensation.
We do not expect that the compensation to be paid to the Company's
executive officers for the 1996 fiscal year will exceed the $1 million limit per
officer. Accordingly, we have decided at this time not to take any other action
to limit or restructure the elements of cash compensation payable to the
Company's executive officers. We will reconsider this decision should the
individual compensation of any executive officer ever approach the $1 million
level.
Compensation Committee
Herbert H. McDade, Jr.
M. David Titus
John A. Young
20
<PAGE> 24
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the 1996 fiscal year, Herbert H. McDade, Jr., M. David Titus and
John A. Young served as members of the Compensation Committee of the Board of
Directors. No member of the Compensation Committee was, at any time during the
1996 fiscal year or at any earlier time, an officer or employee of the Company.
No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of the Company's Board or Compensation
Committee.
21
<PAGE> 25
STOCK PERFORMANCE GRAPH
The graph below depicts the Company's stock price as an index assuming $100
invested on January 26, 1993 (the date of the Company's initial public
offering), along with the composite prices of companies listed in the Hambrecht
& Quist Biotechnology Index and Nasdaq Total U.S. Stock Market Index. This
information has been provided to the Company by Hambrecht & Quist. The
comparisons in the graph are required by regulations of the Securities and
Exchange Commission and are not intended to forecast or to be indicative of the
possible future performance of the Common Stock.
COMPARISON OF CUMULATIVE TOTAL RETURN SINCE JANUARY 26, 1993**
AMONG SHAMAN PHARMACEUTICALS, INC.,
THE HAMBRECHT & QUIST BIOTECHNOLOGY INDEX AND
THE NASDAQ STOCK MARKET -- U.S. INDEX
<TABLE>
<CAPTION>
NASDAQ STOCK
MEASUREMENT PERIOD SHAMAN H&O BIOTECHNOLOGY MARKET - U.S.
(FISCAL YEAR COVERED) PHARMACEUTICALS INDEX INDEX
<S> <C> <C> <C>
1/26/93 100 100 100
MAR-93 71.67 72.27 97.54
JUN-93 86.67 81.17 99.41
SEP-93 90.00 81.86 107.79
DEC-93 78.33 94.40 109.91
MAR-94 65.00 76.98 105.28
JUN-94 51.67 77.57 100.36
SEP-94 47.50 93.26 108.67
DEC-94 26.67 89.68 107.43
MAR-95 25.83 93.13 117.12
JUN-95 33.33 104.75 133.96
SEP-95 40.83 126.59 150.10
DEC-95 44.17 152.54 151.93
MAR-96 45.83 145.79 159.03
JUN-96 57.50 136.24 172.01
SEP-96 45.83 144.73 178.13
DEC-96 39.17 140.75 186.88
</TABLE>
- ---------------
** $100 invested on January 26, 1993 in stock or index, including reinvestment
of dividends.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, which might incorporate future filings made by
the Company under those statutes, the preceding Compensation Committee Report on
Executive Compensation and the Company Stock Performance Graph will not be
incorporated by reference into any of those prior filings, nor will such report
or graph be incorporated by reference into any future filings made by the
Company under those Acts.
22
<PAGE> 26
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation earned, for services
rendered in all capacities to the Company, for each of the last three fiscal
years by the Company's Chief Executive Officer and the four other highest paid
executive officers serving as such at the end of 1996 whose salary and bonus for
that fiscal year was in excess of $100,000. The individuals named in the table
will be hereinafter referred to as the "Named Officers." No other executive
officer who would otherwise have been included in such table on the basis of
1996 salary and bonus resigned or terminated employment during the year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
------------
--------------------------------------------------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
COMPEN- OPTIONS/ COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) SATION($) SARS(#) SATION($)
- ------------------------------- ---- ------------ -------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Lisa A. Conte.................. 1996 286,190(2) 53,000(3) -- 105,000 --
President and Chief 1995 247,644(4) 24,000 -- -- --
Executive Officer 1994 212,858 -- -- -- --
Gerald M. Reaven, M.D.......... 1996 227,878 3,000 -- 5,000 --
Senior Vice President, 1995 100,088 -- 68,000(5) -- --
Research 1994 -- -- 4,500(5) -- --
Atul S. Khandwala, Ph.D........ 1996 187,500 3,000 51,200(5) 125,000 105,625(6)
Vice President, Development 1995 -- -- 30,000(5) -- --
1994 -- -- -- -- --
Steven R. King, Ph.D........... 1996 166,572 3,000 -- 55,000 --
Senior Vice President, 1995 149,711 -- -- -- 20,000(7)
Ethnobotany and Conservation 1994 130,000 -- -- -- --
Barbara Evans Goodrich*........ 1996 105,692 3,000 -- -- --
Vice President and Chief 1995 48,623 1,000 -- -- --
Financial Officer 1994 -- -- -- -- --
</TABLE>
- ---------------
* Ms. Goodrich resigned her position with the Company on February 28, 1997.
(1) Includes amounts deferred under the Company's Internal Revenue Code Section
401(k) Plan.
(2) Includes $49,646 and $16,858 attributable to child care costs and family
travel, respectively.
(3) Includes $50,000 paid in 1997 for achievement of milestones in 1996.
(4) Includes $27,597 attributable to child care costs.
(5) Represents fees received for consulting services.
(6) Includes $12,671 received as a housing subsidy, $23,746 for moving and
relocation expenses, $1,562 for travel expenses and $67,646 in indebtedness
for which repayment was forgiven.
(7) Represents indebtedness for which repayment was forgiven.
23
<PAGE> 27
OPTIONS AND STOCK APPRECIATION RIGHTS
The following table contains information concerning the grant of stock
options under the Plan to the Named Officers during the 1996 fiscal year. Except
for the limited stock appreciation right described in footnote (2) below which
formed part of the option grant made to each Named Officer, no stock
appreciation rights were granted to such Named Officers during the 1996 fiscal
year.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION -------------------
NAME GRANTED(#)(2) FISCAL YEAR ($/SHARE)(3) DATE 5% 10%
- -------------------------- ------------- --------------- -------------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Lisa A. Conte............. 100,000(4) 11.79 $6.875 01/29/06 432,365 1,095,698
5,000(5) .59 $5.875 10/21/06 18,474 46,816
Gerald M. Reaven, M.D..... 5,000(5) .59 $5.875 10/21/06 18,474 46,816
Atul S. Khandwala,
Ph.D.................... 120,000(7) 14.15 $6.875 01/29/06 518,838 1,314,838
5,000(5) .59 $5.875 10/21/06 18,474 46,816
Steven R. King, Ph.D...... 50,000(4) 5.90 $6.875 01/29/06 216,183 547,849
5,000(5) .59 $5.875 10/21/06 18,474 46,816
Barbara Evans Goodrich.... 10,000(6) 1.18 $6.875 02/28/98(8) 43,237 109,570
37,500(6) 4.42 $6.375 02/28/98(8) 150,345 381,004
5,000(5) .59 $5.875 02/28/98(8) 18,474 46,816
</TABLE>
- ---------------
(1) Potential realizable value is based on assumption that the market price of
the Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the 10-year option term. There can
be no assurance that the actual stock price appreciation over the 10-year
option term will be at the assumed 5% and 10% levels or at any other defined
level.
(2) Each option has a maximum term of 10 years, subject to earlier termination
in the event of the optionee's cessation of service with the Company.
However, each option will become immediately exercisable in full upon an
acquisition of the Company by merger or asset sale, unless the option is
assumed by the successor entity. Each option includes a limited stock
appreciation right which will result in the cancellation of that option, to
the extent exercisable for vested shares, upon the successful completion of
a hostile tender for securities possessing more than 50% of the combined
voting power of the Company's outstanding voting securities. In return for
the cancelled option, the optionee will receive a cash distribution per
cancelled option share equal to the excess of (i) the highest price paid per
share of the Company's Common Stock in such hostile tender offer over (ii)
the exercise price payable per share under the cancelled option.
(3) The exercise price may be paid in cash or in shares of Common Stock (valued
at fair market value on the exercise date) or through a cashless exercise
procedure involving a same-day sale of the purchased shares. The Company may
also finance the option exercise by loaning the optionee sufficient funds to
pay the exercise price for the purchased shares and the federal and state
income tax liability incurred by the optionee in connection with such
exercise. The optionee may be permitted, subject to the approval of the Plan
Administrator, to apply a portion of the shares purchased under the option
(or to deliver existing shares of Common Stock) in satisfaction of such tax
liability.
(4) Each option will become exercisable over a four year period with 10% of the
option shares becoming exercisable upon the optionee's completion of one
year of service with the Company measured from January 30, 1996, with an
additional 20% of the option shares becoming exercisable upon the optionee's
completion of each of the second and third years of service with the Company
measured from January 30, 1996 and the remaining 50% of the option shares
becoming exercisable upon the optionee's completion of the fourth year of
service with the Company measured from January 30, 1996.
24
<PAGE> 28
(5) Each option will become fully exercisable on October 21, 1997.
(6) Each option will become exercisable for 12.5% of the option shares upon the
optionee's completion of six months of service, measured from the grant
date, and will become exercisable for the balance of the option shares in 42
successive equal monthly installments upon the optionee's completion of each
of the next 42 months of service thereafter.
(7) Dr. Khandwala's option will become exercisable over a four year period in a
series of 48 successive equal monthly installments upon Dr. Khandwala's
completion of each month of service with the Company over the four-year
period measured from March 1, 1996.
(8) Expiration of stock option was due to cessation of employment on February
28, 1997. Ms. Goodrich has one year during which she may exercise any such
vested options.
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the Named Officers
concerning the exercise of options during the last fiscal year and unexercised
options held as of the end of the fiscal year (as of December 31, 1996). No
stock appreciation rights were exercised during such fiscal year, and except for
the limited stock appreciation right described in Footnote (2) to the Option/SAR
Grants Table which forms part of each outstanding stock option, no stock
appreciation rights were outstanding at the end of that fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE
REALIZED
(MARKET VALUE OF UNEXERCISED
PRICE AT IN-THE-MONEY OPTIONS AT
EXERCISE NO. OF SECURITIES FY-END (MARKET PRICE OF
SHARES DATE UNDERLYING UNEXERCISED SHARES AT FY-END LESS
ACQUIRED LESS OPTIONS AT FY-END(#) EXERCISE PRICE)($)(1)
ON EXERCISE EXERCISE --------------------------- ---------------------------
NAME (#) PRICE)($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lisa A. Conte............... 100,000 581,500 139,167 185,833 546,500 213,750
Gerald M. Reaven, M.D....... -- -- 132,225 82,775 298,757 174,993
Atul S. Khandwala, Ph.D..... -- -- 26,400 98,600 0 0
Steven R. King, Ph.D........ -- -- 53,604 100,854 102,892 84,570
Barbara Evans Goodrich...... -- -- 8,855 61,145 2,461 4,101
</TABLE>
- ---------------
(1) Based on the fair market value of the Company's Common Stock on December 31,
1996 of $5.875 per share, the Nasdaq National Market trading price at the
close of business that same day.
(2) Equal to the closing selling price of the purchased shares on the option
exercise date less the exercise price paid for such shares.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL AGREEMENTS
None of the Company's executive officers have employment agreements with
the Company, and their employment may be terminated at any time at the
discretion of the Board of Directors. As administrator of the Plan, the
Compensation Committee has the authority to provide for accelerated vesting of
the shares of Common Stock subject to any outstanding options held by the Chief
Executive Officer and the Company's other executive officers or any unvested
shares actually held by those individuals under the Plan, in the event their
employment were to be terminated (whether involuntarily or through a forced
resignation) following (i) an acquisition of the Company by merger or asset sale
or (ii) a change in control of the Company effected through a successful tender
offer for more than 50% of the Company's outstanding voting securities or
through a change in the majority of the Board as a result of one or more
contested elections for Board membership.
25
<PAGE> 29
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Proposal One -- Director Compensation" for a discussion of the
Company's consulting agreement with Mr. Raab, the Company's Chairman of the
Board.
The Company's Restated Certificate of Incorporation and Bylaws provide for
indemnification of directors, officers and other agents of the Company. Each of
the current directors and certain officers and agents of the Company have
entered into separate indemnification agreements with the Company.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and persons who are the beneficial owners of
more than 10% of the Common Stock to file initial reports of ownership and
reports of changes in ownership of the Common Stock with the United States
Securities and Exchange Commission ("SEC"). Officers, directors and greater than
10% stockholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms furnished to the
Company and the written representations that no other reports were required, the
Company believes that, during the period from January 1, 1996 to December 31,
1996, all officers, directors and beneficial owners of more than 10% of the
Common Stock complied with all Section 16(a) requirements.
26
<PAGE> 30
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Common Stock as of February 28,
1997 by (i) all persons who are beneficial owners of five percent or more of the
Common Stock, (ii) each director and nominee for director, (iii) the Named
Officers in the Summary Compensation Table above and (iv) all current directors
and executive officers as a group. The number of shares beneficially owned by
each director or executive officer is determined under rules of the SEC and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Shares of Common Stock subject to options or warrants currently
exercisable or exercisable within 60 days of February 28, 1997 are deemed to be
beneficially owned by the person holding such option or warrant for computing
the percentage ownership of such person, but are not treated as outstanding for
computing the percentage of any other person. Except as otherwise indicated, the
Company believes that the beneficial owners of the Common Stock listed below,
based upon such information furnished by such owners, have sole investment power
with respect to such shares, subject to community property laws where
applicable.
<TABLE>
<CAPTION>
NUMBER PERCENT OF TOTAL
NAME AND ADDRESS OF SHARES SHARES OUTSTANDING(1)(2)
- ----------------------------------------------------------- --------- ------------------------
<S> <C> <C>
State of Wisconsin Investment Board........................ 1,290,000 8.10%
Post Office Box 7842
Madison, WI 53707
Delphi Ventures(3)......................................... 993,571 6.24%
3000 Sand Hill Road
Building One, Suite 135
Menlo Park, CA 94025
Fletcher International Ltd.(4)............................. 950,000 5.97%
c/o Midland Bank Trust Corporation (Cayman) Limited
Post Office Box 1109, Mary Street
Grand Cayman, Cayman Islands
British West Indies
Travelers Group Inc........................................ 929,700 5.84%
388 Greenwich Street
New York, NY 10013
Lisa A. Conte(5)........................................... 717,000 4.46%
G. Kirk Raab(6)............................................ 128,316 *
John A. Young(7)........................................... 34,983 *
M. David Titus(8).......................................... 29,983 *
Herbert H. McDade, Jr.(9).................................. 24,983 *
Gerald R. Reaven, M.D.(10)................................. 154,947 *
Steven R. King, Ph.D.(11).................................. 86,861 *
Atul S. Khandwala, Ph.D.(12)............................... 37,000 *
Barbara Evans Goodrich(13)................................. 15,970 *
Current Officers and Directors as a group(14) (10
persons)................................................. 1,251,927 7.55%
</TABLE>
- ---------------
* Less than 1.0%
(1) Percentage of beneficial ownership is calculated assuming 15,951,417 shares
of Common Stock were outstanding as of February 28, 1997. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Shares of Common Stock subject to options or
warrants currently exercisable or convertible, or exercisable or
convertible within 60 days of February 28, 1997, are deemed outstanding for
computing the percentage of the person holding such option or warrant but
are not deemed outstanding for computing the percentage of any other
person. Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common Stock
beneficially owned.
27
<PAGE> 31
(2) This table is based upon information supplied to the Company by executive
officers, directors and principal stockholders. The address of each officer
and director identified in this table is that of the Company's executive
offices, 213 East Grand Avenue, South San Francisco, CA 94080. Unless
otherwise indicated in the footnotes to this table and subject to
applicable community property laws, each of the stockholders named in this
table has sole voting and investment power with respect to the shares shown
as beneficially owned by it, him or her.
(3) Represents 931,934 shares, 3,304 shares, 58,006 shares and 327 shares held
by entities affiliated with Delphi Ventures.
(4) Includes 400,000 shares issuable upon conversion of preferred stock
convertible within 60 days of February 28, 1997 and 550,000 shares issuable
upon exercise of warrants exercisable within 60 days of February 28, 1997.
(5) Includes 145,000 shares subject to options exercisable within 60 days of
February 28, 1997.
(6) Represents 128,316 shares subject to options exercisable within 60 days of
February 28, 1997.
(7) Represents 34,983 shares subject to options exercisable within 60 days of
February 28, 1997.
(8) Includes 24,983 shares subject to options exercisable within 60 days of
February 28, 1997.
(9) Represents 24, 983 shares subject to options exercisable within 60 days of
February 28, 1997.
(10) Includes 154,447 shares subject to options exercisable within 60 days of
February 28, 1997.
(11) Includes 64,603 shares subject to options exercisable within 60 days of
February 28, 1997.
(12) Represents 36,000 shares subject to options exercisable within 60 days of
February 28, 1997.
(13) Includes 15,470 shares subject to options exercisable within 60 days of
February 28, 1997.
(14) Includes shares held by family members associated with directors and
officers listed above. Also includes 665,639 shares which are currently
issuable upon the exercise of outstanding options.
To the Company's knowledge, each beneficial owner of more than 10% capital
stock filed all reports and reported all transactions on a timely basis with the
SEC, National Association of Securities Dealers, Inc. and the Company.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 1998 Annual Meeting must be received by
the Company no later than December 31, 1997 in order that they may be included
in the proxy statement and form of proxy relating to that meeting.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1996 has been mailed concurrently with this Proxy Statement to all
stockholders entitled to notice of and to vote at the Annual Meeting. The Annual
Report is not incorporated into this Proxy Statement and is not considered proxy
soliciting material.
FORM 10-K
The Company filed an Annual Report on Form 10-K with the Securities and
Exchange Commission. A copy of this report may be obtained, without charge, by
writing to Investor Relations, Shaman Pharmaceuticals, Inc., 213 East Grand
Avenue, South San Francisco, California 94080.
28
<PAGE> 32
APPENDIX A
SHAMAN PHARMACEUTICALS, INC.
PROXY
Annual Meeting of Stockholders, May 22, 1997
This Proxy is Solicited on Behalf of the Board of Directors of
Shaman Pharmaceuticals, Inc.
The undersigned revokes all previous proxies, acknowledges receipt of the Notice
of the Annual Meeting of Stockholders to be held May 22, 1997 and the Proxy
Statement and appoints Lisa A. Conte and Jacqueline Cossmon, and each of them,
the Proxy of the undersigned, with full power of substitution, to vote all
shares of Common Stock or Preferred Stock of Shaman Pharmaceuticals, Inc. (the
"Company") which the undersigned is entitled to vote, either on his or her own
behalf or on behalf of any entity or entities, at the Annual Meeting of
Stockholders of the Company to be held at The Embassy Suites (formerly The Crown
Sterling Suites), 250 Gateway Boulevard, South San Francisco, California, 94080
on Thursday, May 22, 1997 at 9:00 A.M. Pacific Time (the "Annual Meeting"), and
at any adjournment or postponement thereof, with the same force and effect as
the undersigned might or could do if personally present thereat. The shares
represented by this Proxy shall be voted in the manner set forth on the reverse
side.
1. To elect three Class II directors to serve on the Board of Directors for
two years or until their respective successors are duly elected and
qualified:
WITHHOLD
AUTHORITY
FOR TO VOTE
G. Kirk Raab _____ _____
Herbert H. McDade, Jr. _____ _____
M. David Titus _____ _____
2. FOR AGAINST ABSTAIN To approve the amendment and restatement of
the Company's Restated Certificate of
Incorporation to increase the number of
authorized shares of Common Stock
thereunder from 25,000,000 shares to
40,000,000 shares;
3. FOR AGAINST ABSTAIN To approve a series of amendments to the
Company's 1992 Stock Option Plan, including
(1) an increase in the maximum number of
shares of the Company's Common Stock
authorized for issuance under the Plan by
an additional 700,000 shares and (2) an
increase in the maximum number of shares
for which options may be granted to any one
individual from 500,000 shares to 750,000
shares; and
4. FOR AGAINST ABSTAIN To ratify the Board of Director's selection
of Ernst & Young LLP to serve as the
Company's independent auditors for the year
ending December 31, 1997.
5. In accordance with the discretion of the
proxy holders, to act upon all matters
incident to the conduct of the meeting and
upon other matters as may properly come
before the meeting.
The Board of Directors recommends a vote IN FAVOR OF each of the directors
listed above and a vote IN FAVOR OF the other proposals. This Proxy, when
properly executed, will be voted as specified above. IF NO SPECIFICATION IS
MADE, THIS PROXY WILL BE VOTED IN FAVOR OF THE ELECTION OF THE DIRECTORS LISTED
ABOVE AND IN FAVOR OF THE OTHER PROPOSALS.
Please print the name(s) appearing on each share certificate(s) over which you
have voting authority: _______________________________________________________
(Print name(s) on certificate)
Please sign your name: _________________________________________ Date: ______
(Authorized Signature(s))
<PAGE> 33
APPENDIX B
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF SHAMAN PHARMACEUTICALS, INC.
a Delaware Corporation
SHAMAN PHARMACEUTICALS, INC., a corporation organized and
existing under the laws of the State of Delaware, hereby certifies as follows:
1. The name of this corporation is Shaman
Pharmaceuticals, Inc. The original Certificate of Incorporation of the
corporation was filed with the Secretary of State of the State of Delaware on
December 21, 1992.
2. The Amended and Restated Certificate of Incorporation
has been duly adopted in accordance with the provisions of Sections 242 and 245
of the General Corporation Law of the State of Delaware.
3. The text of the Restated Certificate of Incorporation
is hereby restated to read in its entirety as follows:
ARTICLE I
The name of this corporation is Shaman Pharmaceuticals, Inc.
ARTICLE II
The address of the registered office of the corporation in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under General Corporation Law of Delaware.
<PAGE> 34
ARTICLE IV
A. Classes of Stock. The corporation is authorized to
issue two classes of shares to be designated, respectively, Common Stock
("Common") and Preferred Stock ("Preferred"). The total number of shares of
Preferred the corporation shall have authority to issue is 1,000,000 with a par
value of $0.001 per share, and the total number of shares of Common the
corporation shall have authority to issue is 40,000,000 with a par value of
$0.001 per share.
B. Rights, Preferences and Restrictions of Preferred.
The Preferred authorized by this Amended and Restated Certificate of
Incorporation may be issued from time to time in series. The Board of
Directors is hereby authorized to fix or alter the rights, preferences,
privileges and restrictions granted to or imposed upon any authorized series of
Preferred, and the number of shares constituting any such series and the
designation thereof, or of any of them. Subject to compliance with applicable
protective voting rights which may be granted to the holders of the Preferred
or series thereof in Certificates of Designation or in the corporation's
Certificate of Incorporation, as amended and restated from time to time, and
requirements and restrictions of applicable law ("Protective Provisions"), the
rights, privileges, preferences and restrictions of any such additional series
may be subordinated to, pari passu with (including, without limitation,
inclusion in provisions with respect to liquidation and acquisition
preferences, redemption and/or approval of matters by vote or written consent),
or senior to any of those of any present or future class or series of Preferred
or Common. Subject to compliance with applicable Protective Provisions, the
Board of Directors is also authorized to increase or decrease the number of
shares of any series, 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.
C. Common Stock.
Section 1. Dividend Rights. Subject to the prior rights of
holders of all classes of stock at the time outstanding having prior rights as
to dividends, the holders of the Common 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.
Section 2. Redemption. The Common is not redeemable.
Section 3. Voting Rights. The holder of each share of Common
shall have the right to one vote, and shall be entitled to notice of any
stockholders' meeting in accordance with this Amended and Restated Certificate
of Incorporation and the Bylaws of this corporation, and shall be entitled to
vote upon such matters and in such manner as may be provided by law.
2.
<PAGE> 35
Section 4. Residual Rights. All rights accruing to the
outstanding shares of the corporation not expressly provided for to the
contrary herein shall be vested in the Common.
ARTICLE V
Except as otherwise provided in this Amended and Restated
Certificate of Incorporation, in furtherance and not in limitation of the
powers conferred by statute, the Board of Directors is expressly authorized to
make, repeal, alter, amend and rescind from time to time any or all of the
Bylaws of the corporation.
ARTICLE VI
The number of directors of the corporation shall be fixed from
time to time by a Bylaw or amendment thereof duly adopted by the Board of
Directors or by the stockholders.
The Board of Directors shall be and is divided into two
classes, Class I and Class II. Such classes shall be as nearly equal in number
of directors as possible. Each director shall serve for a term ending on the
second annual meeting following the annual meeting at which such director was
elected; provided however, that the directors first elected to Class I, which
class shall initially consist of three (3) directors, shall serve for a term
ending on the annual meeting next following the end of fiscal year 1993 and the
directors first elected to Class II, which class shall initially consist of
four (4) directors, shall serve for a term ending on the second annual meeting
next following the end of fiscal year 1994. The foregoing notwithstanding,
each director shall serve until his successor shall have been duly elected and
qualified, unless he shall resign, become disqualified, disabled or shall
otherwise be removed. Any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares
entitled to vote at an election of directors.
At each annual election, directors chosen to succeed those
whose terms then expire shall be of the same class as the directors they
succeed, unless by reason of any intervening changes in the authorized number
of directors, the Board shall designate one or more directorships whose term
then expires as directorships of another class in order more nearly to achieve
equality of number of directors among the classes.
Notwithstanding the rule that the two classes shall be as
nearly equal in number of directors as possible, in the event of any change in
the authorized number of directors each director then continuing to serve as
such shall nevertheless continue as a director of the class of which he is a
member until the expiration of his current term, or his prior death,
resignation or removal. If any newly created directorship may, consistently
with the rule that the two classes shall be as nearly equal in number of
directors as possible, be allocated to one of two classes, the Board shall
allocate it to that of the available classes whose term of office is due to
expire at the earliest date following such allocation.
3.
<PAGE> 36
ARTICLE VII
Elections of directors need not be by written ballot unless
the Bylaws of the corporation shall so provide.
ARTICLE VIII
Meetings of stockholders may be held within or outside of the
State of Delaware, as the Bylaws may provide. The books of the corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the Bylaws of the corporation.
ARTICLE IX
A director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived
any improper personal benefit. If the Delaware General Corporation Law is
hereafter amended to authorize, with the approval of the corporation's
stockholders, further reductions in the liability of the corporation's
directors for breach of fiduciary duty, then a director of the corporation
shall not be liable for any such breach to the fullest extent permitted by the
Delaware General Corporation Law as so amended. Any repeal or modification of
the foregoing provisions of this Article IX by the stockholders of the
corporation shall not adversely affect any right or protection of a director of
the corporation existing at the time of such repeal or modification.
ARTICLE X
The corporation reserves the right to amend, alter, change or
repeal any provision contained in this amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred on stockholders herein are granted subject to this
reservation.
4.
<PAGE> 37
IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been signed by the President and the Secretary of the
corporation this ____ day of May, 1997.
SHAMAN PHARMACEUTICALS, INC.
By______________________________
Lisa A. Conte, President
ATTEST:
_______________________________
J. Stephan Dolezalek, Secretary
<PAGE> 38
APPENDIX C
SHAMAN PHARMACEUTICALS, INC.
1992 STOCK OPTION PLAN
(AS RESTATED AND AMENDED THROUGH FEBRUARY 14, 1997)
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1992 Stock Option Plan ("Plan") is intended to promote
the interests of Shaman Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), by providing a method whereby eligible individuals may be offered
the opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Company as an incentive for them to remain in the
service of the Company (or its parent or subsidiary corporations).
B. The Plan became effective on the date on which shares of
the Company's common stock were first registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"). Such date is
hereby designated as the Effective Date of the Plan.
C. This Plan shall serve as the successor to the Company's
1990 Stock Option Plan (the "1990 Plan"), and no further option grants shall be
made under the 1990 Plan from and after the Effective Date of this Plan. All
options outstanding under the 1990 Plan on such Effective Date are hereby
incorporated into this Plan and shall accordingly be treated as outstanding
options under this Plan. However, each outstanding option so incorporated shall
continue to be governed solely by the express terms and conditions of the
instrument evidencing such grant, and no provision of this Plan shall be deemed
to affect or otherwise modify the rights or obligations of the holders of such
incorporated options with respect to their acquisition of shares of the
Company's common stock thereunder or their exercise of any outstanding stock
appreciation rights thereunder.
D. For purposes of the Plan, the following provisions shall be
applicable in determining the parent and subsidiary corporations of the Company:
Any corporation (other than the Company) in an unbroken chain
of corporations ending with the Company shall be considered to be a
PARENT of the Company, provided each such corporation in the unbroken
chain (other than the Company) owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations
in such chain.
<PAGE> 39
Each corporation (other than the Company) in an unbroken chain
of corporations beginning with the Company shall be considered to be a
SUBSIDIARY of the Company, provided each such corporation (other than
the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
II. STRUCTURE OF THE PLAN
A. Stock Programs. The Plan shall be divided into two separate
components: the Discretionary Option Grant Program specified in Article Two and
the Automatic Option Grant Program specified in Article Three. Under the
Discretionary Option Grant Program, eligible individuals may, at the discretion
of the Plan Administrator, be granted options to purchase shares of Common Stock
in accordance with the provisions of Article Two. Under the Automatic Option
Grant Program, certain non-employee members of the Company's Board of Directors
(the "Board") will at periodic intervals automatically receive special option
grants to purchase shares of Common Stock in accordance with the provisions of
Article Three.
B. General Provisions. Unless the context clearly indicates
otherwise, the provisions of Articles One and Four of the Plan shall apply to
both the Discretionary Option Grant Program and the Automatic Option Grant
Program and shall accordingly govern the interests of all individuals under the
Plan.
III. ADMINISTRATION OF THE PLAN
A. The Discretionary Option Grant Program shall be
administered by a committee ("Committee") of two (2) or more non-employee Board
members appointed by the Board. Members of the Committee shall serve for such
period of time as the Board may determine and shall be subject to removal by the
Board at any time.
B. The Committee as Plan Administrator shall have full power
and authority (subject to the express provisions of the Plan) to establish such
rules and regulations as it may deem appropriate for the proper administration
of the Discretionary Option Grant Program and to make such determinations under,
and issue such interpretations of, the provisions of such program and any
outstanding option grants as it may deem necessary or advisable. Decisions of
the Plan Administrator shall be final and binding on all parties who have an
interest in the Discretionary Option Grant Program or any outstanding option
thereunder.
2.
<PAGE> 40
C. Administration of the Automatic Option Grant Program shall
be self- executing in accordance with the express terms and conditions of
Article Three, and the Committee as Plan Administrator shall exercise no
discretionary functions with respect to option grants made pursuant to that
program.
IV. OPTION GRANTS
A. The persons eligible to participate in the Discretionary
Option Grant Program under Article Two of the Plan shall be limited to the
following:
(i) officers and other key employees of the Company (or
its parent or subsidiary corporations) who render services which
contribute to the management, growth and financial success of the
Company (or its parent or subsidiary corporations);
(ii) non-employee members of the Board;
(iii) non-employee members of the board of directors of
any parent or subsidiary corporation; and
(iv) those consultants or other independent advisors who
provide valuable services to the Company (or its parent or subsidiary
corporations).
B. The Plan Administrator shall have full authority to
determine the eligible individuals who are to receive option grants under the
Discretionary Option Grant Program, the number of shares to be covered by each
such grant, the status of the granted option as either an incentive stock option
("Incentive Option") which satisfies the requirements of Section 422 of the
Internal Revenue Code or a non-statutory option not intended to meet such
requirements, the time or times at which each granted option is to become
exercisable and the maximum term for which the option may remain outstanding.
V. STOCK SUBJECT TO THE PLAN
A. Shares of the Company's common stock (the "Common Stock")
shall be available for issuance under the Plan and shall be drawn from either
the Company's authorized but unissued shares of Common Stock or from reacquired
shares of Common Stock, including shares repurchased by the Company on the open
market. The maximum number of shares of Common Stock which may be issued over
the term of the Plan shall
3.
<PAGE> 41
not exceed 3,716,660(1) shares, subject to adjustment from time to time in
accordance with the provisions of this Section V. Such authorized share reserve
includes the number of shares which remained available for issuance under the
1990 Plan as of the Effective Date, including the shares subject to the
outstanding options incorporated into this Plan and any other shares available
for future option grant under the 1990 Plan as of such Effective Date. Such
share reserve also includes (i) the increase of 107,166 shares authorized by the
Board in May 1992 and subsequently approved by the stockholders in August 1992,
(ii) the increases of 250,000 shares and 176,166 shares authorized by the Board
in November 1992 and December 1992, respectively, and subsequently approved in
the aggregate by the stockholders in December 1992, (iii) the increase of
1,000,000 shares authorized by the Board in May 1993 and subsequently approved
by the stockholders at the 1994 Annual Stockholders Meeting, (iv) the increase
of 545,000 shares authorized by the Board in February 1995 and approved by the
stockholders at the 1995 Annual Stockholders Meeting, (v) the increase of
450,000 shares authorized by the Board in January 1996 and subsequently approved
by the stockholders at the 1996 Annual Stockholders Meeting, and (vi) the
increase of 700,000 shares authorized by the Board on February 14, 1997, subject
to stockholder approval at the 1997 Annual Meeting.
B. To the extent one or more outstanding options under the
1990 Plan which have been incorporated into this Plan are subsequently
exercised, the number of shares issued with respect to each such option shall
reduce, on a share-for-share basis, the number of shares available for issuance
under this Plan. In no event may any one individual participating in the Plan be
granted stock options and separately exercisable stock appreciation rights for
more than 750,000 shares of Common Stock under the Plan (including the
250,000-share increase authorized by the Board in January 1996 and subsequently
approved by the stockholders at the 1996 Annual Meeting and the additional
250,000-share increase authorized by the Board in February 1997, subject to
stockholder approval at the 1997 Annual Meeting). For purposes of this
limitation, any stock options or stock appreciation rights granted prior to
December 31, 1993 shall not be taken into account.
C. Should one or more outstanding options under this Plan
(including outstanding options under the 1990 Plan incorporated into this Plan)
expire or terminate for any reason prior to exercise in full (including any
option cancelled in accordance with the cancellation-regrant provisions of
Section IV of Article Two of the Plan), then the shares subject to the portion
of each option not so exercised shall be available for subsequent option grant
under the Plan. In addition, any unvested shares issued under the Plan and
subsequently repurchased by the Company at the original exercise price per share
pursuant
- --------
(1) Such share reserve gives effect to the 1-for-3 reverse stock split of the
Common Stock effected in connection with the reincorporation of the Company in
Delaware and the associated exchange of three (3) shares of the California
corporation's common stock for one (1) share of the Delaware corporation's
common stock on January 25, 1993.
4.
<PAGE> 42
to the Company's repurchase rights under the Plan shall be added back to the
number of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants under the Plan. However, shares subject to any option or portion thereof
surrendered or cancelled in accordance with Section V of Article Two or Section
III of Article Three shall reduce on a share-for-share basis the number of
shares of Common Stock available for subsequent option grants under the Plan. In
addition, should the exercise price of an outstanding option under the Plan
(including any option incorporated from the 1990 Plan) be paid with shares of
Common Stock or should shares of Common Stock otherwise issuable under the Plan
be withheld by the Company in satisfaction of the withholding taxes incurred in
connection with the exercise of an outstanding option under the Plan, then the
number of shares of Common Stock available for issuance under the Plan shall be
reduced by the gross number of shares for which the option is exercised, and not
by the net number of shares of Common Stock actually issued to the option
holder.
D. In the event any change is made to the Common Stock
issuable under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Company's receipt
of consideration, then appropriate adjustments shall be made to (i) the maximum
number and/or class of securities issuable under the Plan, (ii) the maximum
number and/or class of securities for which any one individual participating in
the Plan may be granted stock options and separately exercisable stock
appreciation rights after December 31, 1993, (iii) the number and/or class of
securities for which automatic option grants are to be subsequently made to each
newly-elected or continuing Board member under the Automatic Option Grant
Program, (iv) the number and/or class of securities and price per share in
effect under each option outstanding under either the Discretionary Option Grant
or Automatic Option Grant Program under the Plan and (v) the number and/or class
of securities and price per share in effect under each outstanding option
incorporated into this Plan from the 1990 Plan. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
5.
<PAGE> 43
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Discretionary Option Grant
Program shall be authorized by action of the Plan Administrator and may, at the
Plan Administrator's discretion, be either Incentive Options or non-statutory
options. Individuals who are not Employees of the Company or its parent or
subsidiary corporations may only be granted non-statutory options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; provided, however, that each such instrument shall comply
with the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section II of this Article Two.
A. Option Price.
(1) The option price per share shall be fixed by the
Plan Administrator in accordance with the following provisions:
(i) The option price per share of the Common
Stock subject to an Incentive Option shall in no event be less than one hundred
percent (100%) of the fair market value of such Common Stock on the grant date.
(ii) The option price per share of the
Common Stock subject to a non-statutory stock option shall be determined by the
Plan Administrator in its sole discretion and may be less than, equal to or
greater than the fair market value of such Common Stock on the grant date.
(2) The option price shall become immediately due
upon exercise of the option and, subject to the provisions of Section VI of this
Article Two and the instrument evidencing the grant, shall be payable in one of
the following alternative forms specified below:
- full payment in cash or check drawn to the
Company's order;
- full payment in shares of Common Stock
held by the optionee for the requisite period necessary to avoid a
charge to the Company's earnings for financial reporting purposes and
valued at fair market value on the Exercise Date (as such term is
defined below);
6.
<PAGE> 44
- full payment in a combination of shares of
Common Stock of the Company held by the optionee for the requisite
period necessary to avoid a charge to the Company's earnings for
financial reporting purposes and valued at fair market value on the
Exercise Date and cash or check drawn to the Company's order; or
- full payment through a broker-dealer sale
and remittance procedure pursuant to which the optionee (I) shall
provide irrevocable instructions to a Company-designated brokerage firm
to effect the immediate sale of the purchased shares and remit to the
Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate option price payable for the
purchased shares plus all applicable Federal and State income and
employment taxes required to be withheld by the Company in connection
with such purchase and (II) shall provide directives to the Company to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction.
For purposes of this subparagraph (2), the Exercise Date shall
be the date on which written notice of the option exercise is delivered to the
Company. Except to the extent the sale and remittance procedure is utilized in
connection with the exercise of the option, payment of the option price for the
purchased shares must accompany such notice.
(3) The fair market value per share of Common Stock
shall be determined in accordance with the following provisions:
- If the Common Stock is not at the time listed or
admitted to trading on any national stock exchange but is traded on the
Nasdaq National Market, the fair market value shall be the closing
selling price per share on the date in question, as such price is
reported by the National Association of Securities Dealers on the
Nasdaq National Market or any successor system. If there is no reported
closing selling price for the Common Stock on the date in question,
then the closing selling price on the last preceding date for which
such quotation exists shall be determinative of fair market value.
- If the Common Stock is at the time listed or
admitted to trading on any national stock exchange, then the fair
market value shall be the closing selling price per share on the date
in question on the exchange determined by the Plan Administrator to be
the primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange. If there
is no reported sale of Common Stock on such exchange on the date in
question, then the fair market value shall be the closing selling price
on the exchange on the last preceding date for which such quotation
exists.
7.
<PAGE> 45
B. Term and Exercise of Options. Each option granted under
this Discretionary Option Grant Program shall be exercisable at such time or
times and during such period as is determined by the Plan Administrator and set
forth in the instrument evidencing the grant. No such option, however, shall
have a maximum term in excess of ten (10) years from the grant date.
C. Limited Transferability of Options. During the lifetime of
the optionee, Incentive Options shall be exercisable only by the optionee and
shall not be assignable or transferable other than by will or by the laws of
descent and distribution following the optionee's death. However, non-statutory
options may, in connection with the optionee's estate plan, be assigned in whole
or in part during the optionee's lifetime to one or more members of the
optionee's immediate family or to a trust established exclusively for one or
more such family members. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.
D. Termination of Service.
(1) The following provisions shall govern the
exercise period applicable to any outstanding options held by the optionee at
the time of cessation of Service or death.
- Should an optionee cease Service for any reason
(including death or permanent disability as defined in Section 22(e)(3)
of the Internal Revenue Code) while holding one or more outstanding
options under this Article Two, then none of those options shall
(except to the extent otherwise provided pursuant to subparagraph D.(3)
below) remain exercisable for more than a thirty-six (36)-month period
(or such shorter period determined by the Plan Administrator and set
forth in the instrument evidencing the grant) measured from the date of
such cessation of Service.
- Any option held by the optionee under this Article
Two and exercisable in whole or in part on the date of his/her death
may be subsequently exercised by the personal representative of the
optionee's estate or by the person or persons to whom the option is
transferred pursuant to the optionee's will or in accordance with the
laws of descent and distribution. Any exercise, however, must occur
prior to the earlier of (i) the third anniversary of the date of the
optionee's death or (ii) the specified expiration date of the option
term. Upon the occurrence of the earlier event, the option shall
terminate and cease to be outstanding.
8.
<PAGE> 46
- Under no circumstances, however, shall any such
option be exercisable after the specified expiration date of the option
term.
- During the applicable post-Service exercise period,
the option may not be exercised in the aggregate for more than the
number of shares (if any) in which the optionee is vested at the time
of his/her cessation of Service. Upon the expiration of the limited
post-Service exercise period or (if earlier) upon the specified
expiration date of the option term, each such option shall terminate
and cease to be outstanding with respect to any vested shares for which
the option has not otherwise been exercised. However, each outstanding
option shall immediately terminate and cease to be outstanding, at the
time of the optionee's cessation of Service, with respect to any shares
for which the option is not otherwise at that time exercisable or in
which the optionee is not otherwise vested.
- Should (i) the optionee's Service be terminated for
misconduct (including, but not limited to, any act of dishonesty,
willful misconduct, fraud or embezzlement) or (ii) the optionee make
any unauthorized use or disclosure of confidential information or trade
secrets of the Company or its parent or subsidiary corporations, then
in any such event all outstanding options held by the optionee under
this Article Two shall terminate immediately and cease to be
outstanding.
(2) The Plan Administrator shall have complete discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to permit one or more options held by the optionee
under this Article Two to be exercised, during the limited post-Service exercise
period applicable under subparagraph (1) above, not only with respect to the
number of vested shares of Common Stock for which each such option is
exercisable at the time of the optionee's cessation of Service but also with
respect to one or more subsequent installments in which the optionee would
otherwise have vested had he/she continued in Service.
(3) The Plan Administrator shall also have full power and
authority to extend the period of time for which the option is to remain
exercisable following the optionee's cessation of Service or death from the
limited period in effect under subparagraph (1) above to such greater period of
time as the Plan Administrator shall deem appropriate. In no event, however,
shall such option be exercisable after the specified expiration date of the
option term.
(4) For purposes of the foregoing provisions of this Section
I.D (and for all other purposes under the Discretionary Option Grant Program):
9.
<PAGE> 47
- The optionee shall (except to the extent otherwise
specifically provided in the applicable stock option or stock purchase
agreement) be deemed to remain in the SERVICE of the Company for so
long as such individual renders services on a periodic basis to the
Company (or any parent or subsidiary corporation) in the capacity of an
Employee, a non-employee member of the Board or an independent
consultant or advisor.
- The optionee shall be considered to be an EMPLOYEE
for so long as he or she remains in the employ of the Company or one or
more parent or subsidiary corporations, subject to the control and
direction of the employer entity not only as to the work to be
performed but also as to the manner and method of performance.
E. Stockholder Rights.
An optionee shall have no stockholder rights with
respect to any shares covered by the option until such individual shall have
exercised the option and paid the option price for the purchased shares.
F. Repurchase Rights.
The shares of Common Stock acquired upon the exercise of any
Article Two option grant may be subject to repurchase by the Company in
accordance with the following provisions:
(a) The Plan Administrator shall have the discretion
to authorize the issuance of unvested shares of Common Stock under this
Article Two. Should the optionee cease Service while holding such
unvested shares, the Company shall have the right to repurchase any or
all of those unvested shares at the option price paid per share. The
terms and conditions upon which such repurchase right shall be
exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be
established by the Plan Administrator and set forth in the instrument
evidencing such repurchase right.
(b) All of the Company's outstanding repurchase
rights under this Article Two shall automatically terminate, and all
shares subject to such terminated rights shall immediately vest in
full, upon the occurrence of any Corporate Transaction under Section
III of this Article Two, except to the extent: (i) any such repurchase
right is expressly assigned to the successor corporation (or parent
thereof) in connection with the Corporate Transaction or (ii) such
accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.
10.
<PAGE> 48
(c) The Plan Administrator shall have the
discretionary authority, exercisable either before or after the
optionee's cessation of Service, to cancel the Company's outstanding
repurchase rights with respect to one or more shares purchased or
purchasable by the optionee under this Discretionary Option Grant
Program and thereby accelerate the vesting of such shares in whole or
in part at any time.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable
to all Incentive Options granted under this Article Two. Incentive Options may
only be granted to individuals who are Employees of the Company. Options which
are specifically designated as "non-statutory" options when issued under the
Plan shall not be subject to such terms and conditions.
A. Dollar Limitation. The aggregate fair market value
(determined as of the respective date or dates of grant) of the Common Stock for
which one or more options granted to any Employee after December 31, 1986 under
this Plan (or any other option plan of the Company or its parent or subsidiary
corporations) may for the first time become exercisable as incentive stock
options under the Federal tax laws during any one calendar year shall not exceed
the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee
holds two (2) or more such options which become exercisable for the first time
in the same calendar year, the foregoing limitation on the exercisability of
such options as incentive stock options under the Federal tax laws shall be
applied on the basis of the order in which such options are granted. Should the
number of shares of Common Stock for which any Incentive Option first becomes
exercisable in any calendar year exceed the applicable One Hundred Thousand
Dollar ($100,000) limitation, then that option may nevertheless be exercised in
that calendar year for the excess number of shares as a non-statutory option
under the Federal tax laws.
B. 10% Stockholder. If any individual to whom an Incentive
Option is granted is the owner of stock (as determined under Section 424(d) of
the Internal Revenue Code) possessing ten percent (10%) or more of the total
combined voting power of all classes of stock of the Company or any one of its
parent or subsidiary corporations, then the option price per share shall not be
less than one hundred and ten percent (110%) of the fair market value per share
of Common Stock on the grant date, and the option term shall not exceed five (5)
years, measured from the grant date.
Except as modified by the preceding provisions of this Section
II, the provisions of Articles One, Two and Four of the Plan shall apply to all
Incentive Options granted hereunder.
11.
<PAGE> 49
III. CORPORATE TRANSACTIONS/CHANGES IN CONTROL
A. In the event of any of the following stockholder-approved
transactions (a "Corporate Transaction") to which the Company is a party:
(i) a merger or consolidation in which the
Company is not the surviving entity, except for a transaction the
principal purpose of which is to change the State of the Company's
incorporation,
(ii) the sale, transfer or other disposition
of all or substantially all of the assets of the Company in complete
liquidation or dissolution of the Company, or
(iii) any reverse merger in which the Company
is the surviving entity but in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Company's
outstanding securities are transferred to person or persons different
from those who held such securities immediately prior to such merger,
then each option which is at the time outstanding under this
Article Two shall automatically accelerate so that each such option shall,
immediately prior to the specified effective date for the Corporate Transaction,
become fully exercisable with respect to the total number of shares of Common
Stock at the time subject to such option and may be exercised for all or any
portion of such shares. However, an outstanding option under this Article Two
shall not so accelerate if and to the extent: (i) such option is, in connection
with the Corporate Transaction, either to be assumed by the successor
corporation or parent thereof or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation or parent
thereof, (ii) such option is to be replaced with a cash incentive program of the
successor corporation which preserves the option spread existing at the time of
the Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to such option, or (iii) the acceleration
of such option is subject to other limitations imposed by the Plan Administrator
at the time of the option grant. The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.
B. Immediately following the consummation of the Corporate
Transaction, all outstanding options under this Article Two shall terminate and
cease to be outstanding, except to the extent assumed by the successor
corporation or its parent company.
C. Each outstanding option under this Article Two which is
assumed in connection with the Corporate Transaction or is otherwise to continue
in effect shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issued to the option holder, in consummation of such Corporate
Transaction, had such person exercised the option
12.
<PAGE> 50
immediately prior to such Corporate Transaction. Appropriate adjustments shall
also be made to the option price payable per share, provided the aggregate
option price payable for such securities shall remain the same. In addition, the
class and number of securities available for issuance under the Plan on both an
aggregate and per participant basis following the consummation of the Corporate
Transaction shall be appropriately adjusted.
D. The grant of options under this Article Two shall in no way
affect the right of the Company to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
E. The Plan Administrator shall have the discretionary
authority, exercisable either at the time the option is granted or at any time
while the option is outstanding, to provide for the automatic acceleration of
one or more outstanding options under this Article Two (and the termination of
one or more of the Company's outstanding repurchase rights under this Article
Two) upon the occurrence of the Change in Control. The Plan Administrator shall
also have full power and authority to condition any such option acceleration
(and the termination of any outstanding repurchase rights) upon the subsequent
termination of the optionee's Service within a specified period following the
Change in Control.
F. For purposes of this Section III, a Change in Control shall
be deemed to occur in the event:
(i) any person or related group of persons
(other than the Company or a person that directly or indirectly
controls, is controlled by, or is under common control with, the
Company) directly or indirectly acquires beneficial ownership (within
the meaning of Rule 13d-3 of the 1934 Act) of securities possessing
more than fifty percent (50%) of the total combined voting power of the
Company's outstanding securities pursuant to a tender or exchange offer
made directly to the Company's stockholders; or
(ii) there is a change in the composition of
the Board over a period of twenty-four (24) consecutive months or less
such that a majority of the Board members ceases, by reason of one or
more proxy contests for the election of Board members, to be comprised
of individuals who either (A) have been Board members continuously
since the beginning of such period or (B) have been elected or
nominated for election as Board members during such period by at least
a majority of the Board members described in clause (A) who were still
in office at the time such election or nomination was approved by the
Board.
G. Any options accelerated in connection with the Change in
Control shall remain fully exercisable until the expiration or sooner
termination of the option term.
13.
<PAGE> 51
H. The exercisability as incentive stock options under the
Federal tax laws of any options accelerated under this Section III in connection
with a Corporate Transaction or Change in Control shall remain subject to the
dollar limitation of Section II of this Article Two.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under this Article Two (including
outstanding options under the 1990 Plan incorporated into this Plan) and to
grant in substitution new options under the Plan covering the same or different
numbers of shares of Common Stock but with an option price per share based on
the fair market value of the Common Stock on the date of the new grant.
V. STOCK APPRECIATION RIGHTS
A. Provided and only if the Plan Administrator determines in
its discretion to implement the stock appreciation right provisions of this
Section V, one or more optionees may be granted the right, exercisable upon such
terms and conditions as the Plan Administrator may establish, to surrender all
or part of an unexercised option under this Article Two in exchange for a
distribution from the Company in an amount equal to the excess of (i) the fair
market value (on the option surrender date) of the number of shares in which the
optionee is at the time vested under the surrendered option (or surrendered
portion thereof) over (ii) the aggregate option price payable for such vested
shares.
B. No surrender of an option shall be effective hereunder
unless it is approved by the Plan Administrator. If the surrender is so
approved, then the distribution to which the optionee shall accordingly become
entitled under this Section V may be made in shares of Common Stock valued at
fair market value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the optionee shall retain whatever rights the optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the later of
(i) five (5) business days after the receipt of the rejection notice or (ii) the
last day on which the option is otherwise exercisable in accordance with the
terms of the instrument evidencing such option, but in no event may such rights
be exercised more than ten (10) years after the date of the option grant.
14.
<PAGE> 52
D. One or more officers of the Company subject to the
short-swing profit restrictions of the Federal securities laws may, in the Plan
Administrator's sole discretion, be granted limited stock appreciation rights in
tandem with their outstanding options under the Plan. Upon the occurrence of a
Hostile Take-Over effected at any time when the Company's outstanding Common
Stock is registered under Section 12(g) of the 1934 Act, each outstanding option
with such a limited stock appreciation right shall automatically be cancelled,
to the extent such option is at the time exercisable for fully-vested shares of
Common Stock. The optionee shall in return be entitled to a cash distribution
from the Company in an amount equal to the excess of (i) the Take-Over Price of
the vested shares of Common Stock at the time subject to the cancelled option
(or cancelled portion of such option) over (ii) the aggregate exercise price
payable for such shares. The cash distribution shall be made within five (5)
days following the consummation of the Hostile Take-Over. The Plan Administrator
shall pre-approve, at the time the limited right is granted, the subsequent
exercise of that right in accordance with the terms of the grant and the
provisions of this Section V.D. No additional approval of the Plan Administrator
or the Board shall be required at the time of the actual option cancellation and
cash distribution. The balance of the option (if any) shall continue to remain
outstanding and become exercisable in accordance with the terms of the
instrument evidencing such grant.
E. For purposes of Section V.D, the following definitions
shall be in effect:
A Hostile Take-Over shall be deemed to occur in the
event any person or related group of persons (other than the Company or
a person that directly or indirectly controls, is controlled by, or is
under common control with, the Company) acquires directly or indirectly
beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act)
of securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities pursuant
to a tender or exchange offer made directly to the Company's
stockholders which the Board does not recommend such stockholders to
accept.
The Take-Over Price per share shall be deemed to be
equal to the greater of (a) the fair market value per share of Common
Stock on the option cancellation date, as determined pursuant to the
valuation provisions of Section I.A.(3) of this Article Two, or (b) the
highest reported price per share of Common Stock paid in effecting such
Hostile Take-Over. However, if the cancelled option is an Incentive
Option, the Take-Over Price shall not exceed the clause (a) price per
share.
F. The shares of Common Stock subject to any option
surrendered or cancelled for an appreciation distribution pursuant to this
Section V shall NOT be available for subsequent option grant under the Plan.
15.
<PAGE> 53
VI. LOANS OR INSTALLMENT PAYMENTS
The Plan Administrator may, in its discretion, assist any
optionee (including an optionee who is an officer or director of the Company) in
the exercise of one or more options granted to such optionee under this Article
Two, including the satisfaction of any Federal and State income and employment
tax obligations arising therefrom, by (i) authorizing the extension of a loan
from the Company to such optionee or (ii) permitting the optionee to pay the
option price for the purchased Common Stock in installments over a period of
years. The terms of any loan or installment method of payment (including the
interest rate and terms of repayment) will be upon such terms as the Plan
Administrator specifies in the applicable option agreement or otherwise deems
appropriate under the circumstances. Loans and installment payments may be
granted with or without security or collateral. However, the maximum credit
available to the optionee shall not exceed the sum of (i) the aggregate option
price of the purchased shares plus (ii) any Federal and State income and
employment tax liability incurred by the optionee in connection with the
exercise of the option.
16.
<PAGE> 54
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
The individuals eligible to receive automatic option grants
pursuant to the provisions of this Article Three program shall be limited to (i)
those individuals who are first elected or appointed as non-employee Board
members on or after the Effective Date of this Plan, whether through appointment
by the Board or election by the Company's stockholders, provided they have not
otherwise been in the prior employ of the Company (or any parent or subsidiary
corporation), and (ii) those individuals who are re-elected as non-employee
Board members at one or more Annual Stockholder Meetings held after the
Effective Date, whether or not such individuals are otherwise serving as
non-employee Board members on the Effective Date.
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Option grants shall be made under this Article
Three on the dates specified below. Stockholder approval of this February 14,
1997 restatement at the 1997 Annual Meeting shall constitute pre-approval of
each option granted under this Article Three on or after the date of that Annual
Meeting and the subsequent exercise of each such option in accordance with the
provisions of this Article Three.
(i) Each individual who first becomes a
non-employee Board member on or after the Effective Date of this Plan,
whether through election by the Company's stockholders or appointment
by the Board shall automatically be granted, at the time of such
initial election or appointment, a non-statutory stock option to
purchase 20,000 shares of Common Stock upon the terms and conditions of
this Article Three, provided such individual has not otherwise been in
the prior employ of the Company or any parent or subsidiary
corporation.
(ii) On the date of each Annual Stockholders
Meeting held after February 24, 1995, each individual who is to
continue to serve as a non-employee Board member and who has served in
such capacity for at least six (6) months shall automatically be
granted, whether or not such individual is standing for re-election as
a Board member at that Annual Meeting, a non-statutory stock option to
purchase, upon the terms and conditions of this Article Three, that
number of shares of Common Stock determined by dividing $50,000 by the
average closing selling price per share of the Common Stock for the
thirty (30) trading days immediately preceding the date of such Annual
Meeting. In no event, however, shall the number of shares subject to
such option be greater than 7,500 or less than 5,000. There shall be no
limit on the number of such annual automatic option grants any
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one non-employee Board member may receive over his/her continued period
of Board service.
The number of shares subject to the automatic option grants to
be made to each newly-elected or continuing non-employee Board member shall be
subject to periodic adjustment pursuant to the applicable provisions of Section
V.D of Article One.
B. Exercise Price. The exercise price per share of each
automatic option grant made under this Article Three shall be equal to one
hundred percent (100%) of the fair market value per share of Common Stock on the
automatic grant date.
C. Payment.
The exercise price shall be payable in one of the
alternative forms specified below:
(i) full payment in cash or check made payable
to the Company's order; or
(ii) full payment in shares of Common Stock
held for the requisite period necessary to avoid a charge to the
Company's reported earnings and valued at fair market value on the
Exercise Date (as such term is defined below); or
(iii) full payment in a combination of shares
of Common Stock held for the requisite period necessary to avoid a
charge to the Company's reported earnings and valued at fair market
value on the Exercise Date and cash or check payable to the Company's
order; or
(iv) full payment through a sale and
remittance procedure pursuant to which the non-employee Board member
(I) shall provide irrevocable instructions to a Company-designated
brokerage firm to effect the immediate sale of the purchased shares and
remit to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price
payable for the purchased shares and shall (II) concurrently provide
directives to the Company to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale
transaction.
For purposes of this subparagraph C, the Exercise Date shall
be the date on which written notice of the option exercise is delivered to the
Company, and the fair market value per share of Common Stock on any relevant
date shall be determined in accordance with the provisions of Section I.A.(3) of
Article Two. Except to the extent the sale and
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remittance procedure specified above is utilized for the exercise of the option,
payment of the option price for the purchased shares must accompany the exercise
notice.
D. Option Term. Each automatic grant under this Article Three
shall have a maximum term of ten (10) years measured from the automatic grant
date.
E. Exercisability. Each automatic grant shall become
exercisable for the option shares in a series of twenty-four (24) equal and
successive monthly installments over the optionee's period of service on the
Board, with the first such installment to become exercisable one (1) month after
the automatic grant date. The option shall not become exercisable for any
additional option shares following the optionee's cessation of Board service for
any reason.
F. Limited Transferability of Options. Options granted under
the Automatic Option Grant Program may, in connection with the optionee's estate
plan, be assigned in whole or in part during the optionee's lifetime to one or
more members of the optionee's immediate family or to a trust established
exclusively for one or more such family members. The assigned portion may only
be exercised by the person or persons who acquire a proprietary interest in the
option pursuant to the assignment. The terms applicable to the assigned portion
shall be the same as those in effect for the option immediately prior to such
assignment and shall be set forth in such documents issued to the assignee as
the Plan Administrator may deem appropriate.
G. Effect of Termination of Board Membership.
1. Should the optionee cease to serve as a Board member for
any reason (other than death) while holding one or more automatic option grants
under this Article Three, then such optionee shall have a six (6)-month period
following the date of such cessation of Board membership in which to exercise
each such option for any or all of the shares of Common Stock for which the
option is exercisable at the time of such cessation of Board service. Each such
option shall immediately terminate and cease to be outstanding, at the time of
such cessation of Board service, with respect to any shares for which the option
is not otherwise at that time exercisable.
2. Should the optionee die while serving as a member of the
Board or within six (6) months after cessation of Board service, then each
outstanding automatic option grant held by the optionee at the time of death may
subsequently be exercised, for any or all of the shares of Common Stock for
which the option is exercisable at the time of the optionee's cessation of Board
service (less any option shares subsequently purchased by the optionee prior to
death), by the personal representative of the optionee's estate or by the person
or persons to whom the option is transferred pursuant to the optionee's will or
in accordance with the laws of descent and distribution. Any such exercise must
occur within twelve (12) months after the date of the optionee's death. However,
each such automatic option grant shall immediately terminate and cease to be
outstanding, at the time
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of the optionee's cessation of Board service, with respect to any option shares
for which it was not otherwise exercisable at that time.
3. In no event shall any automatic option grant under
this Article Three remain exercisable after the specified expiration date of the
ten (10)-year option term. Upon the expiration of the applicable post-service
exercise under subparagraph 1 or 2 above or (if earlier) upon the expiration of
the ten (10)-year option term, the automatic option grant shall terminate and
cease to be outstanding for any unexercised shares for which the option was
exercisable at the time of the optionee's cessation of Board service.
H. Stockholder Rights. The holder of an automatic option grant
under this Article Three shall have none of the rights of a stockholder with
respect to any shares subject to such option until such individual shall have
exercised the option and paid the exercise price for the purchased shares.
I. Remaining Terms. The remaining terms and conditions of each
automatic option grant shall be as set forth in the prototype Non-statutory
Stock Option Agreement attached as Exhibit A to the Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-
OVER
A. In the event of any of the following stockholder-approved
transactions to which the Company is a party (a "Corporate Transaction"):
(i) a merger or consolidation in which the Company is
not the surviving entity, except for a transaction the principal purpose of
which is to change the State of the Company's incorporation,
(ii) the sale, transfer or disposition of all or
substantially all of the assets of the Company in liquidation or dissolution of
the Company, or
(iii) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding securities
are transferred to person or persons different from those who held such
securities immediately prior to such merger,
the exercisability of each automatic option grant at the
time outstanding under this Article Three shall automatically accelerate so that
each such option shall, immediately prior to the specified effective date for
the Corporate Transaction, become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of such shares. Immediately
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following the consummation of the Corporate Transaction, all automatic option
grants under this Article Three shall terminate and cease to be outstanding,
except to the extent assumed by the successor corporation or its parent company.
B. In connection with any Change in Control of the Company,
the exercisability of each automatic option grant at the time outstanding under
this Article Three shall automatically accelerate so that each such option
shall, immediately prior to the specified effective date for the Change in
Control, become fully exercisable with respect to the total number of shares of
Common Stock at the time subject to such option and may be exercised for all or
any portion of such shares at any time prior to the expiration or sooner
termination of the option term. For purposes of this Article Three, a Change in
Control shall be deemed to occur in the event:
(i) any person or related group of persons
(other than the Company or a person that directly or indirectly
controls, is controlled by, or is under common control with, the
Company) directly or indirectly acquires beneficial ownership (within
the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities
pursuant to a tender or exchange offer made directly to the Company's
stockholders; or
(ii) there is a change in the composition of
the Board over a period of twenty-four (24) consecutive months or less
such that a majority of the Board members ceases, by reason of one or
more proxy contests for the election of Board members, to be comprised
of individuals who either (A) have been Board members continuously
since the beginning of such period or (B) have been elected or
nominated for election as Board members during such period by at least
a majority of the Board members described in clause (A) who were still
in office at the time such election or nomination was approved by the
Board.
C. Upon the occurrence of a Hostile Take-Over, each option
granted under this Article Three shall automatically be cancelled, and the
optionee shall in return be entitled to a cash distribution from the Company in
an amount equal to the excess of (i) the Take-Over Price of the shares of Common
Stock at the time subject to the cancelled option (whether or not the option is
otherwise at the time exercisable for such shares) over (ii) the aggregate
exercise price payable for such shares. Such cash distribution shall be paid
within five (5) days following the consummation of the Hostile Take-Over.
Stockholder approval of the February 14, 1997 restatement of the Plan at the
1997 Annual Meeting shall constitute pre-approval of each option granted on or
after the date of that Annual Meeting with such an automatic cancellation
provision and the subsequent cancellation of that option
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in accordance with such provision. No additional approval of the Plan
Administrator or the Board shall be required at the time of the actual option
cancellation and cash distribution.
D. For purposes of this Section III, the following definitions
shall be in effect:
A HOSTILE TAKE-OVER shall be deemed to occur in the
event any person or related group of persons (other than the Company or a person
that directly or indirectly controls, is controlled by, or is under common
control with, the Company) directly or indirectly acquires beneficial ownership
(within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities pursuant to a
tender or exchange offer made directly to the Company's stockholders which the
Board does not recommend such stockholders to accept.
The TAKE-OVER PRICE per share shall be deemed to be
equal to the greater of (a) the fair market value per share of Common Stock on
the option cancellation date, as determined pursuant to the valuation provisions
of Section I.A.(3) of Article Two, or (b) the highest reported price per share
paid by the tender offeror in effecting such Hostile Take-Over.
E. The shares of Common Stock subject to each option cancelled
in connection with the Hostile Take-Over shall NOT be available for subsequent
option grant under this Plan.
F. The automatic option grants outstanding under this Article
Three shall in no way affect the right of the Company to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
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ARTICLE FOUR
MISCELLANEOUS
I. AMENDMENT OF THE PLAN AND AWARDS
The Board has complete and exclusive power and authority to
amend or modify the Plan (or any component thereof) in any or all respects
whatsoever. However, no such amendment or modification shall, without the
consent of the Company's stockholders, adversely affect rights and obligations
with respect to options at the time outstanding under the Plan. In addition,
certain amendments may require stockholder approval pursuant to applicable laws
or regulations.
II. TAX WITHHOLDING
The Company's obligation to deliver shares or cash upon the
exercise of stock options or stock appreciation rights granted under the Plan
shall be subject to the satisfaction of all applicable Federal, State and local
income tax and employment tax withholding requirements.
The Plan Administrator may, in its discretion and in
accordance with the provisions of this Section II of Article Four and such
supplemental rules as the Plan Administrator may from time to time adopt
(including the applicable safe-harbor provisions of SEC Rule 16b-3), provide any
or all holders of non-statutory options under the Plan (other than the automatic
grants made pursuant to Article Three of the Plan) with the right to use shares
of the Company's Common Stock in satisfaction of all or part of the Federal,
State and local income tax and employment tax liabilities incurred by such
holders in connection with the exercise of their options (the "Taxes"). Such
right may be provided to any such option holder in either or both of the
following formats:
1. Stock Withholding: The holder of the non-statutory option
may be provided with the election to have the Company withhold, from
the shares of Common Stock otherwise issuable upon the exercise of such
non-statutory option, a portion of such shares with an aggregate fair
market value equal to the percentage of the applicable Taxes (not to
exceed one hundred percent (100%)) designated by the option holder.
2. Stock Delivery: The Plan Administrator may, in its
discretion, provide the holder of the non-statutory option with the
election to deliver, at the time the non-statutory option is exercised,
one or more shares of Common Stock already held by such individual with
an aggregate fair market value equal to the percentage of the Taxes
incurred in connection with such option exercise (not to exceed one
hundred percent (100%)) designated by the option holder.
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III. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan first became effective on the Effective Date and
serves as the successor to the Company's 1990 Stock Option Plan. No further
option grants shall be made under the 1990 Plan from and after the Effective
Date.
B. On May 26, 1993, the Board amended the Plan to increase the
number of shares issuable thereunder by 1,000,000 shares. The 1,000,000-share
increase was approved by the Company's stockholders at the 1994 Annual
Stockholders Meeting. On March 28, 1994, the Board further amended the Plan to
impose a limitation on the maximum number of shares for which any one individual
participating in the Plan may be granted stock options and separately
exercisable stock appreciation rights.
C. On February 24, 1995, the Board amended the Plan to
increase the number of shares of Common Stock issuable thereunder by 545,000
shares. The 545,000-share increase was approved by the Company's stockholders
at the 1995 Annual Stockholders Meeting.
D. On February 24, 1995, the Board further amended the Plan to
increase the number of shares of Common Stock for which automatic option grants
are to be made to continuing non-employee Board members on the date of each
Annual Stockholders Meeting held after February 24, 1995. The amendment was
approved by the Company's stockholders at the 1995 Annual Stockholders Meeting.
E. On August 21, 1995, the Board amended the Plan to extend
the eligibility provisions of the Discretionary Option Grant Program to all
non-employee Board members other than those at the time serving on the Committee
acting as the Plan Administrator. The amendment was approved by the Company's
stockholders at the 1996 Annual Stockholders Meeting.
F. In January 1996, the Board adopted an amendment to the Plan
which (i) increased the number of shares of Common Stock available for issuance
under the Plan by an additional 450,000 shares and (ii) increased the maximum
number of shares for which any one individual may be granted stock options and
separately exercisable stock appreciation rights over the remaining term of the
Plan by an additional 250,000 shares of Common Stock. The amendment was approved
by the Company's stockholders at the 1996 Annual Stockholders Meeting.
G. On February 14, 1997, the Board adopted a series of
amendments to the Plan (the "1997 Amendments") which (i) increased the number of
shares of Common Stock available for issuance under the Plan by an additional
700,000 shares, (ii) increased the limit on the maximum number of shares of the
Company's common stock for which any one individual may be granted stock options
and separately exercisable stock appreciation rights under the Plan from 500,000
shares to 750,000 shares, (iii) rendered the non-employee
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Board members who serve as Plan Administrator eligible to receive option grants
under the Discretionary Option Grant Program, (iv) allowed unvested shares
issued under the Plan and subsequently repurchased by the Company at the option
exercise price paid per share to be reissued under the Plan, (v) removed certain
restrictions on the eligibility of non-employee Board members to serve as Plan
Administrator, and (vi) effected a series of additional changes to the
provisions of the Plan (including the stockholder approval requirements, the
transferability of non-statutory stock options and the elimination of the six
(6)-month holding period requirement as a condition to the exercise of stock
appreciation rights) in order to take advantage of the recent amendments to Rule
16b-3 of the Securities and Exchange Commission which exempts certain officer
and director transactions under the Plan from the short-swing liability
provisions of the federal securities laws. The 1997 Amendments are subject to
stockholder approval at the 1997 Annual Meeting. If such stockholder approval is
not obtained, then any options granted on the basis of the 700,000-share
increase which forms part of the 1997 Amendments will terminate without becoming
exercisable for any of the shares of Common Stock subject to those options, and
no further option grants or stock issuances will be made on the basis of such
share increase. The 250,000-share increase to the limitation on the maximum
number of shares for which any one participant may be granted stock options and
separately exercisable stock appreciation rights under the Plan after December
31, 1993 will not be implemented, and any options granted on the basis of that
increase will terminate without becoming exercisable for any of the shares of
Common Stock subject to those options. In addition, non-employee Board members
will not be eligible to participate in the Discretionary Option Grant Program
while serving as the Plan Administrator, and any unvested shares repurchased by
the Company at the option exercise price paid per share will not be added back
to the share reserve for reissuance. However, the Plan will continue to remain
in effect, and option grants may continue to be made pursuant to the provisions
of the Plan in effect prior to the 1997 Amendments, until the available reserve
of Common Stock as last approved by the stockholders has been issued.
H. Each option issued and outstanding under the 1990 Plan
immediately prior to the Effective Date shall be incorporated into this Plan and
treated as an outstanding option under this Plan, but each such option shall
continue to be governed solely by the terms and conditions of the instrument
evidencing such grant, and nothing in this Plan shall be deemed to affect or
otherwise modify the rights or obligations of the holders of such options with
respect to their acquisition of shares of Common Stock thereunder.
I. The sale and remittance procedure authorized for the
exercise of outstanding options under this Plan shall be available for all
options granted under this Plan on or after the Effective Date and for all
non-statutory options outstanding under the 1990 Plan and incorporated into this
Plan. The Plan Administrator may also allow such procedure to be utilized in
connection with one or more disqualifying dispositions of Incentive Option
shares effected after the Effective Date, whether such Incentive Options were
granted under this Plan or the 1990 Plan.
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<PAGE> 63
J. The option acceleration provisions of Section III of
Article Two relating to Corporate Transactions and Changes in Control may, in
the Plan Administrator's discretion, be extended to one or more stock options
which are outstanding under the 1990 Plan on the Effective Date of this Plan but
which do not otherwise provide for such acceleration.
K. The Plan shall terminate upon the earlier of (i) December
31, 2002 or (ii) the date on which all shares available for issuance under the
Plan shall have been issued or cancelled pursuant to the exercise, surrender or
cash-out of the options granted under the Plan. If the date of termination is
determined under clause (i) above, then all option grants outstanding on such
date shall thereafter continue to have force and effect in accordance with the
provisions of the instruments evidencing such grants.
L. Options to purchase shares of Common Stock may be granted
under the Plan which are in excess of the number of shares then available for
issuance under the Plan, provided each option granted is not to become
exercisable, in whole or in part, at any time prior to stockholder approval of
an amendment authorizing a sufficient increase in the number of shares available
for issuance under the Plan.
IV. USE OF PROCEEDS
Any cash proceeds received by the Company from the sale of
shares pursuant to options granted under the Plan shall be used for general
corporate purposes.
V. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option
thereunder and the issuance of stock upon the exercise or surrender of the
option grants made hereunder shall be subject to the Company's procurement of
all approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the stock issued pursuant to
it.
VI. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Company in establishing the Plan,
nor any action taken by the Plan Administrator hereunder, nor any provision of
the Plan shall be construed so as to grant any individual the right to remain in
the employ or service of the Company (or any parent or subsidiary corporation)
for any period of specific duration, and the Company (or any parent or
subsidiary corporation retaining the services of such individual) may terminate
such individual's employment or service at any time and for any reason, with or
without cause.
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VIII. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets under the
Plan may not be assigned, encumbered or otherwise transferred by any optionee.
B. The provisions of the Plan relating to the vesting and
termination of outstanding options shall be governed by the laws of the State of
California, as such laws are applied to contracts entered into and performed in
such State.
C. The provisions of the Plan shall inure to the benefit of,
and be binding upon, the Company and its successors or assigns, whether by
Corporate Transaction or otherwise, and the optionees, the legal representatives
of their respective estates, their respective heirs or legatees and their
permitted assignees.
27.
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EXHIBIT A
NON-STATUTORY STOCK OPTION AGREEMENT
AUTOMATIC OPTION GRANT PROGRAM
<PAGE> 66
SHAMAN PHARMACEUTICALS, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT
AGREEMENT made the ___ day of __________________, 199__ by and
between Shaman Pharmaceuticals, Inc., a corporation (the "Company") organized
and existing under the laws of the State of California, and __________________,
a member of the Company's Board of Directors to whom the option grant
evidenced by this Agreement is hereby made (the "Optionee").
WHEREAS the Company's Board of Directors (the "Board") has
adopted, and the stockholders have approved, the Company's 1992 Stock Option
Plan, as amended (the "Plan"), for the purpose of attracting and retaining the
services of key employees (including officers and directors), and non-employee
members of the Board and consultants and other independent contractors of the
Company and its parent or subsidiary organizations.
WHEREAS Optionee is a non-employee Board member who is
entitled to receive an option to acquire shares of the Company's common stock
pursuant to the automatic option grant program in effect for non-employee Board
members under the Plan. This Agreement is executed pursuant to, and is intended
to carry out the purposes of, the Plan in connection with the automatic option
grant made to such Optionee thereunder.
WHEREAS the granted option is not intended to be an incentive
stock option ("Incentive Option") within the meaning of Section 422 of the
Internal Revenue Code.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and
conditions set forth in this Agreement, Company hereby grants to Optionee, as of
the date of this Agreement (the "Grant Date"), a stock option to purchase up to
__________ shares of the Company's common stock (the "Option Shares"). The
Option Shares shall be purchasable from time to time during the option term at
the price of $______ per share (the "Option Price").
2. OPTION TERM. This option shall have a maximum term of ten
(10) years measured from the Grant Date and shall accordingly expire at the
close of business on the last day of such ten (10)-year period (the "Expiration
Date"), unless sooner terminated in accordance with Paragraph 5 or Paragraph 7.A
or sooner cancelled in accordance with Paragraph 8.
<PAGE> 67
3. LIMITED TRANSFERABILITY. This option may, in connection
with the Optionee's estate plan, be assigned in whole or in part during the
Optionee's lifetime to one or more members of the Optionee's immediate family or
to a trust established exclusively for one or more such family members. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem appropriate.
4. EXERCISABILITY. This option shall become exercisable in a
series of twenty-four (24) successive equal monthly installments over Optionee's
period of Board service, with the first such installment to become exercisable
one (1) month after the automatic grant date.
Once this option becomes exercisable for one or more
installments of the Option Shares, those installments shall accumulate, and this
option shall remain exercisable for the accumulated installments until the
Expiration Date or sooner termination of the option term under Paragraph 5 or
Paragraph 7.A or the cancellation of this option under Paragraph 8.
5. CESSATION OF BOARD MEMBERSHIP. Should Optionee's service as
a Board member cease for any reason while this option remains outstanding, then
the option term specified in Paragraph 2 shall terminate (and this option shall
cease to be outstanding) prior to the Expiration Date in accordance with the
following provisions:
(i) This option shall immediately terminate and cease
to be outstanding for any Option Shares for which it is not otherwise
exercisable at the time of the Optionee's cessation of Board service.
(ii) Should Optionee cease for any reason other than
death to serve as a member of the Board, then Optionee shall have a six (6)-
month period measured from the date of such cessation of Board service in which
to exercise this option for up to that number of Option Shares (if any) for
which this option is, in accordance with the provisions of this Agreement,
exercisable at the time of such cessation of Board service. In no event,
however, may this option be exercised at any time after the expiration of the
maximum ten (10)-year term in effect for such option.
(iii) Should Optionee die while serving as a Board
member or within six (6) months after cessation of Board service, then the
personal representative of the Optionee's estate (or the person or persons to
whom the Option is transferred pursuant to the Optionee's will or in
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accordance with the laws of descent and distribution) shall have the right to
exercise this option for any or all of the Option Shares for which this option
is, in accordance with the provisions of this Agreement, exercisable at the time
of the Optionee's cessation of Board service, less any Option Shares
subsequently purchased by Optionee prior to death. Such right shall cease to be
exercisable, and this option shall accordingly terminate with respect to those
Option Shares, upon the earlier of (i) the expiration of the twelve (12)-month
period measured from the date of Optionee's death or (ii) the expiration of the
ten (10)-year maximum term in effect for this option.
6. ADJUSTMENT IN OPTION SHARES. In the event any change is
made to the common stock issuable under the Plan by reason of any stock split,
stock dividend, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding common stock as a class effected without
the Company's receipt of consideration, appropriate adjustments shall
automatically be made to (i) the class and/or number of securities subject to
this option and (ii) the Option Price payable per share in order to prevent any
dilution or enlargement of benefits hereunder. The adjustments determined by the
Plan Administrator shall be final, binding and conclusive.
7. CORPORATE TRANSACTION/CHANGE IN CONTROL.
A. In the event of any of the following stockholder-approved
transactions to which the Company is a party (a "Corporate Transaction"):
(i) a merger or consolidation in which the Company is not
the surviving entity, except for a transaction the principal purpose
of which is to change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in complete liquidation
or dissolution of the Company; or
(iii) any reverse merger in which the Company is the
surviving entity but in which the securities possessing more than
fifty percent (50%) of the total combined voting power of the Company's
outstanding securities are transferred to a person or persons
different from than those who held those securities immediately prior
to such merger,
this option, to the extent outstanding at such time
but not otherwise fully exercisable, shall automatically accelerate so that the
option shall, immediately prior to the specified effective date for the
Corporate Transaction, become fully exercisable for all the Option Shares at the
time subject to this option and may be exercised for any or all
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<PAGE> 69
of such Option Shares. Upon the consummation of the Corporate Transaction, this
option shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation or its parent company.
B. This option, to the extent outstanding but not otherwise at
the time fully exercisable, shall automatically accelerate in connection with a
Change in Control so that this option shall, immediately prior to the effective
date of such Change in Control, become fully exercisable for all of the Option
Shares at the time subject to this option and may be exercised for any or all of
such Option Shares. The option shall remain so exercisable until the earliest to
occur of (i) the expiration of the maximum ten (10)-year term in effect for this
option, (ii) the sooner termination of the option in accordance with Paragraph 5
or 7.A of this Agreement or (iii) the cancellation of this option in accordance
with Paragraph 8. For purposes of this Agreement, a Change in Control shall be
deemed to occur in the event:
(i) any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is controlled
by, or is under common control with, the Company) directly or
indirectly acquires beneficial ownership (within the meaning of Rule
13d-3 of the Securities Exchange Act of 1934, as amended (the "1934
Act")) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities
pursuant to a tender or exchange offer made directly to the Company's
stockholders; or
(ii) there is a change in the composition of the Board over
a period of twenty-four (24) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more proxy
contests for the election of Board members, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of
the Board members described in clause (A) who were still in office at
the time such election or nomination was approved by the Board.
C. This Agreement shall in no way affect the right of the
Company to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
4.
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8. LIMITED STOCK APPRECIATION RIGHT
Optionee is hereby granted a limited stock appreciation right
in tandem with this option, exercisable upon the terms and conditions set forth
below:
(a) Should a Hostile Take-Over occur, then this
option shall automatically be cancelled with respect to all the Option
Shares at the time subject to such option. The optionee shall in return
be entitled to a cash distribution from the Company in an amount equal
to the excess of (i) the Take-Over Price of the shares of the Company's
common stock at the time subject to the cancelled option (whether or
not the option is otherwise at the time exercisable for those shares)
over (ii) the aggregate option price payable for such shares.
(b) The cash distribution shall be paid to the
Optionee within five (5) days following the consummation of the Hostile
Take-Over, and neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with such option
cancellation and cash distribution. Upon receipt of such cash
distribution, this option shall be cancelled and the Optionee shall
cease to have any further right to acquire any Option Shares under this
Agreement.
(c) For purposes of this limited stock appreciation
right, the following definitions shall be in effect:
- A HOSTILE TAKE-OVER shall be deemed to occur in
the event any person or related group of persons (other than the Company or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting power of
the Company's outstanding securities pursuant to a tender or exchange offer
made directly to the Company's stockholders which the Board does not recommend
such stockholders to accept.
- The TAKE-OVER PRICE per share shall be deemed to
be equal to the greater of (a) the Fair Market Value per share of the Company's
common stock on the date of the option cancellation, as determined in
accordance with the valuation provisions of paragraph 10.B of the Agreement, or
(b) the highest reported price paid per share of such common stock by the
tender offeror in effecting the Hostile Take-Over.
5.
<PAGE> 71
9. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option
shall not have any of the rights of a stockholder with respect to the Option
Shares until such individual shall have exercised the option and paid the Option
Price for the purchased shares.
10. MANNER OF EXERCISING OPTION.
A. In order to exercise this option with respect to any or all
Option Shares for which this option is at the time exercisable, Optionee (or in
the case of exercise after Optionee's death, Optionee's executor, administrator,
heir or legatee, as the case may be) must take the following action:
(i) Execute and deliver to the Secretary of the
Company a written notice of exercise (the "Exercise Notice") in
substantially the form of attached Exhibit I.
(ii) Pay the aggregate Option Price for the purchased
shares in one or more of the following alternative forms:
- full payment in cash or check made payable to the
Company's order;
- full payment in shares of the Company's common
stock held by the Optionee for the requisite period necessary to avoid
a charge to the Company's reported earnings and valued at Fair Market
Value on the Exercise Date (as such terms are defined below);
- full payment in a combination of shares of the
Company's common stock held for the requisite period necessary to
avoid a charge to the Company's reported earnings and valued at Fair
Market Value on the Exercise Date and cash or check made payable to
the Company's order; or
- full payment through a sale and remittance
procedure pursuant to which the Optionee (I) shall provide irrevocable
instructions to a designated brokerage firm to effect the immediate
sale of the purchased shares and remit to the Company, out of the sale
proceeds available on the settlement date, sufficient funds to cover
the aggregate option price payable for the purchased shares and (II)
shall concurrently provide directives to the Company to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale transaction.
6.
<PAGE> 72
(iii) Furnish appropriate documentation that the
person or persons exercising the option (if not the Optionee) have the
right to exercise this option.
B. For purposes of this Agreement, the Exercise Date shall be the
date on which the executed Exercise Notice shall have been delivered to the
Company. Except to the extent the sale and remittance procedure specified above
is utilized in connection with the option exercise, payment of the Option Price
for the purchased shares must accompany such Exercise Notice. For all valuation
purposes under this Agreement, the Fair Market Value of a share of common stock
on any relevant date shall be determined in accordance with the following
provisions:
(i) If the common stock is not at the time listed or
admitted to trading on any national stock exchange but is traded on the
Nasdaq National Market, then the fair market value shall be the closing
selling price per share of common stock on the date in question, as
reported by the National Association of Securities Dealers on the
Nasdaq National Market or any successor system. If there is no reported
closing selling price for the common stock on the date in question,
then the closing selling price on the last preceding date for which
such quotation exists on the Nasdaq National Market shall be
determinative of fair market value.
(ii) If the common stock is at the time listed or
admitted to trading on any national stock exchange, then the fair
market value shall be the closing selling price per share of common
stock on the date in question on the stock exchange determined by the
Plan Administrator to be the primary market for the common stock, as
such price is officially quoted in the composite tape of transactions
on such exchange. If there is no such reported price for the date in
question, then the fair market value shall be the closing selling price
on the exchange on the last preceding date for which such quotation
exists.
(c) As soon after the Exercise Date as practical, the Company
shall mail or deliver to or on behalf of the Optionee (or any other person or
persons exercising this option in accordance herewith) a certificate or
certificates representing the shares for which the option has been exercised in
accordance with the provisions of this Agreement.
(d) In no event may this option be exercised for any fractional
shares.
7.
<PAGE> 73
11. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of Option
Shares upon the exercise of this option shall be subject to compliance by the
Company and the Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange on which the
Company's common stock may be listed at the time of such exercise and issuance.
(b) In connection with the exercise of this option, Optionee
shall execute and deliver to the Company such representations in writing as may
be requested by the Company in order for it to comply with the applicable
requirements of Federal and State securities laws.
12. NOTICES. Any notice required to be given to the Company
under the terms of this Agreement shall be in writing and addressed to the
Company in care of its Chief Financial Officer at the Corporate Offices at 213
East Grand Avenue, South San Francisco, California CA 94080. Any notice to be
given to Optionee shall be in writing and addressed to him at the address
indicated below his signature line in this Agreement. Any such notice shall be
deemed effectively given upon personal delivery or upon deposit in the United
States Post Office, by registered or certified mail, postage prepaid and
properly addressed to the party to be notified.
13. SUCCESSORS AND ASSIGNS. Except as otherwise expressly set
forth in this Agreement, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the administrators, heirs, legal
representatives and assigns of the Optionee and of the Company.
14. INTERPRETATION OF THIS AGREEMENT. This Agreement and the
option evidenced hereby are made and granted pursuant to the automatic grant
provisions in effect under the Plan for non-employee Board members and are in
all respects limited by and subject to the express provisions of the Plan
applicable to such automatic grants.
15. LIABILITY OF COMPANY. The inability of Company to obtain
approval from any regulatory body having authority deemed by the Company to be
necessary to the lawful issuance and sale of any common stock pursuant to this
option shall relieve the Company of any liability with respect to the
non-issuance or sale of the common stock as to which approval shall not have
been obtained. The Company however, shall use its best efforts to obtain all
such approvals.
16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts entered into and wholly to be performed within the State of California
by California residents.
8.
<PAGE> 74
17. NO IMPAIRMENT OF RIGHTS. Nothing in this Agreement or in
the Plan shall be deemed to impair or otherwise restrict the rights of the
Company or the stockholders to remove the Optionee from the Board at any time
pursuant to the provisions of applicable law.
IN WITNESS WHEREOF, Shaman Pharmaceuticals, Inc. has caused
this Agreement to be executed on its behalf by its duly-authorized officer, and
the Optionee has executed this Agreement, all as of the day and year indicated
above.
SHAMAN PHARMACEUTICALS, INC.
By__________________________________
Title_______________________________
____________________________________
OPTIONEE
Address_____________________________
_____________________________
9.
<PAGE> 75
EXHIBIT I
NOTICE OF EXERCISE OF STOCK OPTION
I hereby notify Shaman Pharmaceuticals, Inc. (the "Company")
that I elect to purchase ______ shares of common stock of the Company (the
"Purchased Shares") at the option price of $________ per share (the "Option
Price") pursuant to that certain option (the "Option") granted me on
____________, 199__.
Concurrently with the delivery of this Exercise Notice to the
Chief Financial Officer of the Company, I shall hereby pay to the Company the
Option Price for the Purchased Shares in accordance with the provisions of my
agreement with the Company evidencing the Option and shall deliver whatever
additional documents may be required by such agreement as a condition for
exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect the payment of the
Option Price for the Purchased Shares.
____________ ____________________________________________
Date OPTIONEE
Address:____________________________________
____________________________________
Print name in exact manner
it is to appear on the
stock certificate: _____________________________________________
Address to which certificate
is to be sent, if different
from address above: _____________________________________________
_____________________________________________
_____________________________________________
Social Security Number: ____________________
