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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 1998
REGISTRATION NO. 333-67023
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SHAMAN PHARMACEUTICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 2834 94-3095806
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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213 EAST GRAND AVENUE
SOUTH SAN FRANCISCO, CALIFORNIA 94080
(650) 952-7070
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
LISA A. CONTE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SHAMAN PHARMACEUTICALS, INC.
213 EAST GRAND AVENUE
SOUTH SAN FRANCISCO, CALIFORNIA 94080
(650) 952-7070
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF AGENT FOR SERVICE)
COPY TO:
J. STEPHAN DOLEZALEK, ESQ.
BROBECK, PHLEGER & HARRISON LLP
TWO EMBARCADERO PLACE, 2200 GENG ROAD
PALO ALTO, CALIFORNIA 94303
(650) 424-0160
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective:
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT
CLASS OF SECURITIES TO BE AGGREGATE OFFERING AGGREGATE OF REGISTRATION
TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE(2) FEE(3)
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Common Stock, $0.001
par value per
share.............. 6,109,277 shares $2.00 $11,671,393 $3,245
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(1) Includes (a) shares of Common Stock issuable upon exercise of Warrants to
purchase shares of Common Stock and (b) an indeterminate number of
additional shares of Common Stock as may from time to time become issuable
upon exercise of such warrants by reason of stock splits, stock dividends
and other similar transactions, which shares are registered hereunder
pursuant to Rule 416 under the Securities Act.
(2) The price of $2.00 per share, which was the average of the high and low bid
prices of the Common Stock reported by The Nasdaq Stock Market on November
17, 1998, is set forth solely for the purpose of calculating the
registration fee in accordance with Rule 457(c) of the Securities Act of
1933, as amended, for the 4,812,071 additional shares included in this
Amendment.
(3) Includes $569 which was previously paid with respect to 1,297,206 shares.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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PRELIMINARY PROSPECTUS -- SUBJECT TO COMPLETION, DATED NOVEMBER 18, 1998
6,109,277 Shares of Common Stock
Offered by certain Selling Stockholders
SHAMAN PHARMACEUTICALS, INC.
213 EAST GRAND AVENUE
SOUTH SAN FRANCISCO, CA 94080
(650) 952-7070
This Prospectus covers the offer and sale by certain Selling Stockholders
named below of up to 6,109,277 Shares of Common Stock, par value $0.001 per
share, of Shaman Pharmaceuticals, Inc., which consist of:
(1) 4,812,071 Shares of Common Stock to be issued to certain
of the Selling Stockholders at a price of $1.50 per
share in a Common Stock offering;
(2) 550,000 Shares of Common Stock that we may issue to some
of the Selling Stockholders upon exercise of Warrants
that we issued on July 26, 1996;
(3) 747,206 Shares of Common Stock issued to some of the
Selling Stockholders as compensation for consulting
services rendered; and
(4) an indeterminate number of additional shares of Common
Stock as may from time to time become exercisable upon
exercise of the Warrants by reason of stock splits,
stock dividends and anti-dilution provisions.
The Selling Stockholders may offer the Shares through public or private
transactions at prevailing market prices, at prices related to such prevailing
market prices or at privately negotiated prices. Shaman's Common Stock is traded
on The Nasdaq National Market tier of The Nasdaq Stock Market under the symbol
"SHMN." On November 17, 1998, the last reported sale price for the Common Stock
was $2.00 per share.
We will not receive any proceeds from the sale of 747,206 shares of Common
Stock offered by the Selling Stockholders for consulting services but will
receive proceeds from the exercise of the Warrants and from the sale of
4,812,071 shares of Common Stock issued in the Common Stock offering. We have
agreed to pay certain expenses in connection with the registration of these
Shares and to indemnify the Selling Stockholders against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
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THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 5.
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THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED WHETHER THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THE SHARES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
The date of this Prospectus is November , 1998
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You should rely only on the information contained in this Prospectus. We
have not authorized anyone to provide you with information different from that
contained in this Prospectus. The Selling Stockholders are offering to sell and
seeking offers to buy shares of our Common Stock only in jurisdictions where
offers and sales are permitted. The information contained in this Prospectus is
accurate only as of the date of this Prospectus, regardless of the time of
delivery of this Prospectus or of any sale of the Shares.
WHERE TO FIND MORE INFORMATION
We file reports, proxy statements and other information with the Securities
and Exchange Commission. You may read and copy any document we file at the SEC's
Public Reference Room at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549 and at the following regional offices of the SEC: Pacific
Regional Office, 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California
90036-3648; and San Francisco District Office, 44 Montgomery Street, Suite 1100,
San Francisco, California 94104. Copies can also be obtained from the Public
Reference Room of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549,
upon payment of prescribed rates. You may obtain information on the operation of
the SEC's Public Reference Room by calling the SEC at (800) SEC-0300. Our SEC
filings are available to you on the SEC's Internet site at http://www.sec.gov.
Our Common Stock is quoted on The Nasdaq National Market. Reports, proxy
statements and other information concerning Shaman may be inspected at the
National Association of Securities Dealers, Inc. at 1735 K Street, N.W.,
Washington, D.C. 20006.
This Prospectus is only part of a Registration Statement on Form S-3 that
we have filed with the SEC under the Securities Act, and therefore omits certain
information contained in the Registration Statement. We have also filed exhibits
and schedules with the Registration Statement that are not included in this
Prospectus, and you should refer to the applicable exhibit or schedule for a
complete description of any statement referring to any contract or other
document. A copy of the Registration Statement, including the exhibits and
schedules thereto, may be inspected without charge at the Public Reference Room
of the SEC described above, and copies of such material may be obtained from
such office upon payment of the fees prescribed by the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference the information we file with
it, which means that we can disclose important information to you by referring
you to these documents. This information incorporated by reference is considered
to be part of this prospectus and later information we file with the SEC will
automatically update and supercede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act. The documents we are
incorporating by reference are:
(a) our Annual Report on Form 10-K for the year ended December 31, 1997,
filed with the SEC on March 4, 1998 and amended on each of May 7, 1998, May 11,
1998 and May 28, 1998;
(b) our Definitive Proxy Statement dated April 15, 1998, filed in
connection with our 1998 Annual Meeting of Stockholders;
(c) our Quarterly Report on Form 10-Q for the quarter ended June 30, 1998,
filed with the SEC on August 14, 1998;
(d) our Quarterly Report on Form 10-Q for the quarter ended September 30,
1998, filed with the SEC on November 13, 1998; and
(e) the description of our Common Stock contained in our Registration
Statement on Form 8-A, as amended, filed with the SEC on December 18, 1992,
including any amendments or reports filed for the purpose of updating such
description.
You may request a copy of any of these filings at no cost by writing or
telephoning us at the following address: 213 East Grand Avenue, South San
Francisco, California 94080; telephone number (650) 952-7070, Attn: Investor
Relations.
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Provir(TM) and our stylized logo are trademarks of Shaman. Shaman
Pharmaceuticals(R) and Virend(R) are registered U.S. trademarks of Shaman.
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THE COMPANY
The following information is qualified in its entirety by the more detailed
information and financial statements, and notes to financial statements,
appearing elsewhere or incorporated by reference in this Prospectus. This
Prospectus contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Actual
results could differ materially from those projected in the forward-looking
statements as a result of certain of the risk factors set forth elsewhere in
this Prospectus. Investors should carefully consider the information set forth
under the heading "Risk Factors."
Shaman discovers and develops novel pharmaceutical products for the
treatment of human diseases and their symptoms through the isolation and
optimization of active compounds found in tropical plants. We believe that by
focusing on drugs extracted from plants with a history of medicinal use, our
drug discovery efforts may be quicker and more likely to lead to safe and
effective pharmaceuticals.
We have three product candidates in clinical development: SP-303/Provir,
nikkomycin Z and SP-134101. These product candidates target five indications.
SP-303/PROVIR
SP-303/Provir is our most advanced product candidate. SP-303/Provir entered
into a Phase III human clinical trial in March 1998 for the treatment of
diarrhea in people with AIDS. In May 1998, the U.S. Food and Drug
Administration, or FDA, formally notified us that it had granted SP-303/Provir a
"fast track product" designation. Earlier in 1998, the FDA also advised us that
upon the completion of our single Phase III study, the resulting data, along
with corroborative information from a previously completed Phase II trial, may
serve as the basis for the submission of a New Drug Application, or NDA. In the
Phase II trial, SP-303/Provir was shown to provide a significant treatment
effect for diarrhea in people with AIDS. Enrollment of the Phase III clinical
trial was completed in August 1998. If the results of this trial are positive,
we expect to file an NDA for commercial approval of SP-303/Provir in early 1999.
The fast track designation from the FDA for the indication of diarrhea in people
with AIDS is allowing us to prepare for potential product launch in the second
half of 1999. We intend to retain U.S. marketing rights to this product and
intend to out-license marketing rights for Europe and other parts of the world.
SP-303/Provir has shown an ability to inhibit a primary mechanism in watery
diarrhea and is also being evaluated in human clinical trials for watery
diarrhea indications other than diarrhea in people with AIDS. In July 1998, we
completed two separate Phase II dose-optimization studies of SP-303/Provir in
acute watery diarrhea from two different populations. Both studies were
double-blind, randomized, placebo-controlled. Positive, statistically
significant results in the reduction of time to last unformed stool, or TLUS,
over 48 hours, the key efficacy endpoint, were achieved in each study. These
studies also showed SP-303/Provir to be well tolerated. We also intend to
advance SP-303/Provir in clinical development for a third indication, pediatric
diarrhea, and are currently engaged in formulation development and in planning
the ongoing clinical development program for this indication. SP-303/Provir has
now been tested in over 890 patients, including over 340 people with AIDS, with
no significant drug-related effects.
NIKKOMYCIN Z
Nikkomycin Z is an orally-active anti-fungal compound. We believe that
nikkomycin Z has the potential to treat endemic mycoses and other systemic
fungal infections. In 1997, we completed a Phase I trial of nikkomycin Z in the
United Kingdom, with results showing that the drug appeared to be safe when
orally administered. We filed an Investigational New Drug application, or IND,
for nikkomycin Z in the United States in December 1997.
SP-134101
SP-134101 is an oral product for the treatment of Type II (adult onset or
non-insulin dependent) diabetes. In animal models, the compound demonstrated the
ability to lower glucose and triglycerides and have a beneficial effect on blood
pressure. The compound appears to work by increasing glucose uptake in the
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peripheral tissues and decreasing triglyceride output from the liver. From the
discovery research effort that led to the identification of 26 chemically
distinct, orally-active compounds that demonstrated glucose lowering effects in
preclinical animal testing, SP-134101 was our first proprietary product
candidate from our diabetes program to enter clinical trials in January 1998.
Significant funding for our diabetes discovery research program has been and is
being provided through a collaboration with Lipha, s.a., a wholly-owned
subsidiary of Merck KGaA, Darmstadt, Germany ("Lipha/Merck"), and has been
previously provided through a collaboration with Ono Pharmaceutical Co., Ltd.
which expired in May 1998 ("Ono"). Both Lipha/Merck and Ono will pay milestone
payments to us on any product candidates resulting from their respective
collaborations. Lipha/Merck and Ono have no commercialization rights to
SP-134101 and no milestone payments are due to us for the development and
commercialization of this compound.
RECENT DEVELOPMENTS
On October 16, 1998, we completed the sale to public of an aggregate of
140,880 shares of our Series C Convertible Preferred Stock for aggregate
proceeds of $14,088,000. Each share of Series C Preferred Stock is entitled to
receive cumulative dividends paid semi-annually to the holders of record of such
shares as follows: (i) a stock-on-stock dividend of $10.00 per year, paid in
arrears, in shares of Common Stock (valued at 85% of the average closing price
of the Common Stock for the 10-trading-day period ending three trading days
prior to the date the dividend is paid); plus (ii) a cash amount equaling
0.00005% of our U.S. net sales of our SP-303/Provir product for the treatment of
diarrhea, if any, for the preceding two calendar quarters (equivalent to a
7.044% royalty for the 140,880 shares of Series C Preferred Stock) less $5.00
(the value of the semi-annual stock dividend). If, under Delaware law, we are
unable to pay the cash portion of the dividends, then the cash portion will be
paid in shares of Common Stock (valued at 85% of the average closing price of
the Common Stock for the 10-day trading period ending three trading days prior
to the date on which the dividend is paid). Each share shall be convertible at
any time commencing on the date any shares of Series C Preferred Stock are first
issued and ending 30 days later and again commencing 12 months after the initial
issuance date at the election of each holder, and automatically on the sixth
anniversary of the initial issuance date into greater of (a) 16.6667 shares of
Common Stock or (b) such number of shares of Common Stock as equals $100 (the
price paid per share of Series C Preferred Stock) divided by 85% of the average
closing price of the Common Stock reported by Nasdaq for the 10-trading-day
period ending three trading days prior to the date of conversion.
In September 1998 and October 1998, we held two separate closings for the
Series C Convertible Preferred Stock offering for aggregate proceeds of $14.1
million. During the initial 30-day conversion period, 24,922 shares of the
Series C Convertible Preferred Stock were converted into an aggregate of
1,861,550 shares of Common Stock.
In November 1998, we signed an agreement for the private sale of 4,812,071
shares of Common Stock for aggregate proceeds of approximately $7,218,000. The
shares will be offered at $1.50 per share. In connection with this offering, the
Company has committed a five year, 3.6% royalty on net sales of SP-303/Provir in
the U.S. for distribution to HIV/AIDS charities.
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RISK FACTORS
The shares offered involve a high degree of risk. You should carefully
consider the risks below before making an investment decision. The risks below
are not the only risks facing our company. There may be additional risks and
uncertainties not presently known to us or that we have deemed immaterial which
could also negatively impact our business operations. If any of the following
risks actually occur, our business, financial condition and results of
operations would be materially adversely affected. In that event, the trading
price of our Common Stock could decline, and you may lose all or part of your
investment. This Prospectus may contain certain forward-looking statements that
involve risks and uncertainties, such as statements of our plans, objectives,
expectations and intentions. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including the risks described below and elsewhere in this prospectus.
RISKS REGARDING FAILURE TO CONTINUE TO MEET NASDAQ LISTING REQUIREMENTS
On June 10, 1998, we received correspondence from The Nasdaq National
Market ("Nasdaq") stating that we no longer met the $4,000,000 net tangible
asset requirement for continued listing on Nasdaq. As of September 30, 1998, we
had a net capital deficiency of ($2,359,000). We believe we comply with all
other listing requirements. On September 3, 1998, we attended a formal hearing
and presented a plan to a Nasdaq Listing Qualifications Panel (the "Panel") for
achieving and maintaining long-term compliance with Nasdaq listing requirements.
On October 14, 1998, we requested a waiver of Marketplace Rule 4310(H) to enable
us to exchange existing debt for equity, which will assist us in achieving
long-term compliance with the Nasdaq listing requirement. This rule would have
required us to seek shareholder approval of this exchange because we would be
selling greater than 20% of the voting power outstanding prior to the issuance.
On October 26, 1998, the Panel granted this waiver and stated we would continue
to be listed on Nasdaq providing:
- we must make a public filing with the SEC and Nasdaq on or
before December 15, 1998 showing an October 31, 1998 balance
sheet with (i) pro forma adjustments for any significant
transactions or events occurring on or before the filing date
and (ii) evidencing a minimum of $8.0 million in net tangible
assets; and
- we must make a public filing with the SEC and Nasdaq on or
before February 1, 1999 showing a November 30, 1998 balance
sheet with (i) pro forma adjustments for any significant
transactions or events occurring on or before the filing date
and (ii) evidencing a minimum of $14.0 million in net tangible
assets.
We must also issue a press release describing the exchange of debt to
equity transaction and announce grant of the financial viability exception and
the associated audit committee determination. We must also notify each
stockholder with the same information as contained in the press release. The
press release must be issued and the letter must be mailed at least 10 days
prior to the closing of the transaction.
Without additional financing, the receipt of license fees or milestone
payments from corporate partnerships or the conversion of outstanding
convertible notes, we will not satisfy the Nasdaq listing requirements, and our
Common Stock will no longer be traded on Nasdaq. If that happens, we would need
to seek listing on the Nasdaq Over-the-Counter Bulletin Board. If our Common
Stock were traded on the Nasdaq Over-the-Counter Bulletin Board, our Common
Stock may be subject to reduced liquidity and reduced analyst coverage, our
ability to raise capital in the future may be inhibited and our business,
financial condition and results of operations could be materially adversely
affected. In addition, if our Common Stock is listed on the Nasdaq
Over-the-Counter Bulletin Board rather than on a national exchange, we will be
in default under various agreements with certain of our investors and
stockholders. Under one such agreement, we will lose rights to sell up to an
aggregate of 1,200,000 shares of our common stock. Under other agreements, we
will be required to redeem all or some portion of the principal balance
remaining under certain convertible promissory notes ($5.4 million at September
30, 1998). Redemption of these notes could significantly accelerate our cash
expenditures and capital requirements beyond the levels currently anticipated
and would materially and adversely affect our ability to conduct our business.
See "-- Continuing Future Capital Needs; Uncertainty of Sources of Additional
Funding."
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CONTINUING FUTURE CAPITAL NEEDS; UNCERTAINTY OF SOURCES OF ADDITIONAL FUNDING
As of September 30, 1998, we had cash, cash equivalents and short-term
investment balances of approximately $10.5 million. In September 1998, our
expenses were approximately $2.5 million. We expect this expenditure rate to
continue through December 31, 1998. Accordingly, unless we are successful in
obtaining additional funds, our current cash resources will be substantially
used by the first quarter 1999. We will require substantial additional funds to
conduct the development and testing of our potential products and to manufacture
and market any products that may be developed in the future. Our future capital
requirements will depend on numerous factors, including:
- the progress of our research and development programs,
- the progress of preclinical and clinical testing,
- the time and costs involved in obtaining regulatory approvals,
- the cost of filing, prosecuting, defending and enforcing patent
claims and other intellectual property rights,
- competing technological and market developments,
- changes in our existing collaborative and licensing relationships,
- our ability to establish additional collaborative relationships for
the manufacture and marketing of our potential products, and
- our need to purchase additional capital equipment.
In addition, we entered into senior convertible note purchase agreements in
connection with a private placement which provide that under certain
circumstances we would be required to redeem all or some portion of the
principal balance remaining ($5.4 million at September 30, 1998). Redemption of
these notes could significantly accelerate our cash expenditures and capital
requirements beyond the levels currently anticipated and would materially and
adversely affect our ability to conduct our business.
We will need to obtain additional funding through public or private equity
or debt financings, collaborative arrangements or from other sources to continue
our research and development activities, fund operating expenses and pursue
regulatory approvals for our products in development. If additional funds are
raised by issuing equity securities, current stockholders may experience
significant dilution. If additional funds are obtained through collaborative
agreements, we may be required to relinquish rights to certain of our
technologies, product candidates, products or marketing territories that we
would otherwise seek to develop or commercialize ourselves. Additional financing
sources may not be available on acceptable terms if at all. If adequate funds
are not available, significant reductions in spending and the delay, scaling
back or elimination of one or more of our research, discovery or development
programs may be necessary which would have a material adverse effect on our
business, financial condition and results of operations.
RISKS DUE TO THE EARLY STAGE OF DEVELOPMENT OF OUR PRODUCTS AND TECHNOLOGICAL
UNCERTAINTY
We have not yet completed the development of any products. Many of our
products still require significant additional clinical testing and investment of
capital before they can be commercialized. Products for therapeutic use in human
health care must be evaluated in extensive human clinical trials to determine
their safety and efficacy. These clinical trials are part of a lengthy process
necessary to obtain government approval. Our SP-303/Provir, nikkomycin Z and
SP-134101 products are each in clinical development. However, positive results
for any of these products in a clinical trial do not necessarily assure that
positive results will be obtained in future clinical trials or that government
approval to commercialize the products will be obtained.
Clinical trials may be terminated at any time for many reasons, including
toxicity or adverse event reporting. It is possible that Shaman's products may
not be successfully developed, enter into human clinical trials, prove to be
safe and effective in clinical trials, meet applicable regulatory standards,
obtain required regulatory approvals, be capable of being produced in commercial
quantities at reasonable costs, be successfully marketed or may encounter
problems in clinical trials that will cause us to delay or suspend product
development. Failure of any of our products to be commercialized could have a
material adverse effect on our business, financial condition and results of
operations.
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A significant portion of our assets are dedicated to the development and
commercialization of SP-303/ Provir. Should we be unable to commercialize
SP-303/Provir there could be a material adverse effect on our business,
financial condition and results of operations.
HISTORY OF OPERATING LOSSES; PRODUCTS STILL IN DEVELOPMENT; FUTURE
PROFITABILITY UNCERTAIN
Shaman was incorporated in 1989 and has experienced significant operating
losses in each of our fiscal years since then. We incurred an operating loss of
approximately $27.6 million for the nine months ended September 30, 1998 and an
additional non-cash expense of $679,000 incurred in connection with the Series C
Convertible Preferred Stock offering. The nine-month loss was due to our
incurring research and development expenses of approximately $24.3 million,
general and administrative expenses of approximately $4.3 million and interest
expense net of interest income of approximately $1.4 million. These expenses
were partially offset by revenues in the first three quarters of 1998 of
approximately $2.3 million. As of September 30, 1998, our accumulated deficit
was approximately $140.2 million. We have not generated any product sales to
date. All of our products and compounds are still in the research and
development stage, which requires substantial expenditures. In order to generate
revenues or profits, we must, alone or with other third parties, successfully
develop, test, obtain regulatory approval for and market our potential products.
It is possible that our product development efforts may not be successful, and
that we may not obtain required regulatory approvals. Even if our products are
developed and introduced, they may not be successfully marketed or may not
achieve market acceptance.
NO ASSURANCE OF SUCCESSFUL PRODUCT DEVELOPMENT
Our research and development programs are at various stages of development,
ranging from the research stage to clinical trials. Substantial additional
research and development will be necessary for us to move additional product
candidates into clinical testing or to complete clinical testing of current
product candidates. Our research and development efforts on these or other
potential products, including SP-303/Provir, nikkomycin Z and SP-134101, may not
lead to development of products that are shown to be safe and effective in
clinical trials.
In addition, our products may not:
- meet applicable regulatory standards,
- be capable of being produced in commercial quantities at acceptable
costs,
- be eligible for third party reimbursement from governmental or
private insurers, be successfully marketed, or
- achieve market acceptance.
Our products may also prove to have undesirable or unintended side effects
that may prevent or limit their commercial use. At any stage of this complex
product development process, products that appeared promising in preclinical
studies or Phase I and Phase II clinical trials may not demonstrate efficacy in
larger-scale, Phase III clinical trials and will therefore not receive
regulatory approvals. Accordingly, any of our product development programs may
be curtailed, redirected, suspended or eliminated at any time.
UNCERTAINTIES ASSOCIATED WITH CLINICAL TRIALS
We have conducted, and plan to continue conducting, extensive and costly
clinical trials to assess the safety and efficacy of our potential products. The
rate of completion of these clinical trials is dependent upon, among other
factors, the rate of completion and approval of trial protocols, the
availability of funds for trials and the rate of patient enrollment. Patient
enrollment is a function of many factors, including the nature of our clinical
trial protocols, existence of competing protocols, size of patient population,
proximity of patients to clinical sites and eligibility criteria for the study.
Any delay in patient enrollment will result in increased costs and delays, which
could have a material adverse effect on our ability to complete clinical trials
in a timely fashion.
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In addition, any failure to meet our testing and development schedules
could have a material adverse effect on our business, financial condition and
results of operations. Our clinical trials may be delayed by many factors,
including:
- slower than anticipated patient enrollment,
- difficulty in finding a sufficient number of patients fitting the
appropriate trial profile,
- difficulties in the acquisition of sufficient supplies of clinical
trial materials, or
- failure to show efficacy in clinical trials or adverse events
occurring during the clinical trials.
Completion of testing, studies and trials may take several years, and the
length of time varies substantially with the type, complexity, novelty and
intended use of each of our products. In addition, data obtained from
preclinical and clinical activities are susceptible to varying interpretations,
which could delay, limit or prevent regulatory approval. Delays or rejections
may be encountered based upon many factors, including changes in regulatory
policy during the period of product development, and could have a material
adverse effect on our business, financial condition and results of operations.
Not all patients enrolled in our clinical trials will respond to our
product candidates. Human clinical trials often experience setbacks. Failure to
comply with the FDA regulations applicable to such testing can result in delay,
suspension or cancellation of such testing, and/or refusal by the FDA to accept
the results of such testing. In addition, the FDA or Shaman may suspend clinical
trials at any time if one or the other concludes that any patients in a trial
are exposed to unacceptable health risks. Further, there can be no assurance
that human clinical testing will demonstrate that any current or future product
candidate is safe or effective or that data derived from any such study will be
suitable for submission to the FDA or other regulatory authorities. Failure of
our clinical trials to demonstrate safety or efficacy in humans could cause the
delay, suspension or termination of any product program, including
SP-303/Provir, nikkomycin Z and SP-134101, and could have a material adverse
effect on our business, financial condition and results of operations.
DEPENDENCE ON COLLABORATIVE RELATIONSHIPS
The research and development efforts in our diabetes program and, to a
lesser extent, in our other programs, have been dependent upon arrangements with
Lipha/Merck and Ono and their funding for research and development efforts
thereunder. Funding from Ono has concluded and therefore in the future we must
rely on continued funding from Lipha/Merck or milestone payments from products
developed by either Ono or Lipha/Merck, if any. We may have to seek new
collaborations to provide further funding for our diabetes program. We cannot
assure our current or future stockholders that we can obtain further funding or
that we may ultimately derive any significant revenues from any of our
collaborations.
We expect to seek additional collaborative agreements to commercialize our
other product candidates and will, in particular, need to rely on such third
party arrangements to commercialize our products, including SP-303/Provir,
outside the United States. We may not be successful in negotiating or entering
into such agreements on terms favorable to us or at all, and any agreement, if
entered into, may be unsuccessful. A failure to successfully enter into such
agreements and sell products thereunder would have a material adverse effect on
our business, financial condition and results of operations.
RAPID TECHNOLOGICAL CHANGE AND SUBSTANTIAL COMPETITION
Technological changes in the pharmaceutical industry are rapid and
substantial, and competition from pharmaceutical and biotechnology companies and
universities is intense. Many of these entities have significantly greater
research and development capabilities, as well as substantial marketing,
manufacturing, financial and managerial resources, and represent significant
competition for us. Developments by others may render our products or
technologies noncompetitive, and we may not be able to keep pace with
technological developments. Competitors have, and continue to develop,
technologies that are, or in the future may be, the basis for competitive
products. Some of these products may have an entirely different approach or
means of accomplishing the desired therapeutic effect than the products we may
develop. These competing products may be more effective and less costly than the
products we may develop. In addition, other forms of medical
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treatment may offer competition to our products. The development of competing
compounds could have a material adverse effect on our business, financial
condition and results of operations.
GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVALS
All new drugs, including our products under development, are subject to
extensive and rigorous regulation by the federal government, principally the
FDA, as well as comparable agencies in state and local jurisdictions and in
foreign countries. These authorities, particularly the FDA, impose substantial
requirements upon preclinical and clinical testing, manufacturing and marketing
of pharmaceutical products. The steps required before a drug may be approved for
marketing in the United States generally include:
- preclinical laboratory and animal tests,
- the submission to the FDA of an IND for human clinical testing,
- adequate and well controlled human clinical trials to establish the
safety and efficacy of the drug,
- submission to the FDA of a NDA, and
- satisfactory completion of an FDA inspection of the manufacturing
facility or facilities
at which the drug is made to assess compliance with Good Manufacturing
Practices, or GMP.
There are many costly and time-consuming procedures required for approval
of a new drug, including lengthy and detailed preclinical and clinical testing
and validation of manufacturing and quality control processes. Several years may
be needed to satisfy these requirements, and this time period may vary
substantially depending on the type, complexity and novelty of the product
candidate. Government regulation can delay or prevent marketing of potential
products for a considerable period of time and impose costly procedures upon our
activities. Moreover, the FDA or any other regulatory agency may not grant
approval for any products developed or not grant approval on a timely basis, and
success in preclinical or early stage clinical trials does not assure success in
later stage clinical trials.
Data obtained from preclinical and clinical activities are susceptible to
varying interpretations which could delay, limit or prevent regulatory approval.
Even if regulatory approval of a product is granted, limitations may be imposed
on the indicated uses for a product. Further, later discovery of previously
unknown problems with a product may result in added restrictions on the product,
including withdrawal of the product from the market. Any delay or failure in
obtaining regulatory approvals would have a material adverse effect on our
business, financial condition and results of operations.
The FDA also requires that a drug manufacturer (either Shaman or one of our
third-party manufacturers) must have quality controls and manufacturing
procedures which conform to GMP, a protocol which must be followed at all times.
The FDA strictly enforces GMP requirements through periodic unannounced
inspections. The FDA could determine that Shaman's or any third-party
manufacturer's facilities and manufacturing procedures do not conform to GMP
requirements. Additionally, we or our third-party manufacturers must pass a
pre-approval inspection of their manufacturing facilities by the FDA even before
we can obtain marketing approval. Failure to comply with applicable regulatory
requirements may result in penalties such as restrictions on the marketing of
our products or withdrawal of a product from the market.
The FDA's policies may change and additional government regulations and
policies may be instituted, both of which could prevent or delay regulatory
approval of our potential products. Moreover, increased attention to the
containment of health care costs in the United States could result in new
government regulations that could have a material adverse effect on our
business. We are unable to predict the likelihood of adverse governmental
regulation that could arise from future legislative or administrative action,
either in the United States or abroad.
We will also be subject to a variety of foreign regulations governing
clinical trials, registration and sales of our products. Regardless of whether
FDA approval is obtained, approval of a product by comparable regulatory
authorities of foreign countries must be obtained prior to marketing the product
in those countries. The approval process varies from country to country and the
time needed to secure approval may be longer or shorter than that required for
FDA approval. Delays in the approval process or the failure to obtain such
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foreign approvals would have a material adverse effect on our business,
financial condition and results of operations.
DEPENDENCE ON SOURCES OF SUPPLY
We currently import all of the plant materials for our products from
countries in Latin and South America, Africa and Southeast Asia. To the extent
that our products cannot be economically synthesized or otherwise produced, we
will continue to be dependent upon a supply of raw plant material. We do not
have formal agreements in place with all of our suppliers. Continued source of
plant supply risks include:
- unexpected changes in regulatory requirements,
- exchange rates, tariffs and barriers,
- difficulties in coordinating and managing foreign operations,
- political instability, and
- potentially adverse tax consequences.
Interruptions in supply or material increases in the cost of supply could
have a material adverse effect on our business, financial condition and results
of operations. In addition, tropical rain forests, and certain irreplaceable
plant resources therein, are currently threatened with destruction. In the event
portions of the rain forests are destroyed which contain the source material
from which our current or future products are derived, such destruction could
have a material adverse effect on our business, financial condition and results
of operations.
LIMITED MANUFACTURING AND MARKETING EXPERIENCE AND CAPACITY
We currently produce products only in quantities necessary for clinical
trials and do not have the staff or facilities necessary to manufacture products
in commercial quantities. Therefore, we must rely on collaborative partners or
third-party manufacturing facilities. Should we or our third party manufacturers
encounter delays or difficulties in producing, packaging and distributing our
finished products, clinical trials, regulatory filings, market introduction and
subsequent sales of our products could be adversely affected.
Contract manufacturers must conform to GMP regulations strictly enforced by
the FDA on an ongoing basis through their facilities inspection programs.
Contract manufacturing facilities must pass a pre-approval inspection of their
manufacturing facilities before the FDA will approve an NDA. Certain material
manufacturing changes that occur after approval are also subject to FDA review
and clearance or approval. FDA or other regulatory agencies may not approve the
process or the facilities by which any of our products may be manufactured. Our
dependence on third parties for the manufacture of our products may adversely
affect our ability to develop and deliver products on a timely and competitive
basis. If we are required to manufacture our own products we will be required to
build or purchase a manufacturing facility, will be subject to the regulatory
requirements described above, to similar risks regarding delays or difficulties
encountered in manufacturing any such products and will require substantial
additional capital. We may be unable to manufacture any such products
successfully or in a cost-effective manner.
We currently have no sales staff and may be unable to successfully
establish a marketing and sales force. If we are unable to successfully
establish a complete marketing and sales force, we may not achieve a successful
product entry into the marketplace. Such failure would have a material adverse
effect on our business, financial condition and results of operations.
UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS; CURRENT LEGAL PROCEEDINGS
REGARDING PATENTS AND PROPRIETARY RIGHTS
Our success depends in large part on our ability to obtain and maintain
patents, protect trade secrets and operate without infringing upon the
proprietary rights of others. Moreover, others may have filed patent
applications, may have been issued patents or may obtain additional patents and
proprietary rights relating to competitive products or processes. Our patent
applications may not be approved, we may be unable to develop additional
proprietary products that are patentable, issued patents may not provide us with
adequate protection
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for our inventions or they may be challenged by others, or the patents of others
may impair our ability to commercialize our products. The patent position of
companies in the pharmaceutical industry generally is highly uncertain, involves
complex legal and factual questions, and has recently been the subject of much
litigation. No consistent policy has emerged from the U.S. Patent and Trademark
Office, or PTO, or the courts regarding the breadth of claims allowed or the
degree of protection afforded under pharmaceutical patents. There is
considerable variation between countries as to the level of protection afforded
under patents and other proprietary rights. Such differences may expose Shaman
to differing risks of commercialization in each foreign country in which we may
sell products. Others may independently develop similar products, duplicate any
of our products or design around any of our patents.
A number of pharmaceutical companies and research and academic institutions
have developed technologies, filed patent applications or received patents on
various technologies that may be related to our business. Some of these
technologies, applications or patents may conflict with our technologies or
patent applications. The European Patent Office, the French Patent Office, the
German Patent Office and the Australian Patent Office have each granted a patent
containing broad claims to proanthocyanidin polymer compositions (and methods of
use of such compositions), which are similar to our specific proanthocyanidin
polymer composition (which covers the active pharmaceutical ingredient in
SP-303/Provir), to Leon Cariel and the Institut des Substances Vegetales. The
effective filing date of these patents is prior to the effective filing date of
our foreign pending patent application in Europe. Certain of the foreign patents
have been granted in jurisdictions where examination is not rigorous. Shaman has
instituted an Opposition in the European Patent Office against granted European
Patent No. 472531 owned by Leon Cariel and Institut des Substances Vegetales. We
believe that the granted claims are invalid and intend to vigorously prosecute
the Opposition.
We may be unsuccessful in having the granted European patent revoked or the
claims sufficiently narrowed so that our proanthocyanidin polymer composition
and methods of use are not potentially covered. There can be no assurance that
Daniel Jean, Leon Cariel and the Institut des Substances Vegetales will not
assert against us claims relating to this patent. In that event, we may not be
able to obtain a license to this patent at all, or at reasonable cost, or be
able to develop or obtain alternative technology to use in Europe or elsewhere.
The earlier effective filing date of this patent could limit the scope of the
patents, if any, that we may be able to obtain or result in the denial of our
patent applications in Europe or elsewhere.
In the United States, the PTO has rendered judgment in an Interference
declared between our issued patent covering our specific proanthocyanidin
polymer composition and certain claims of a U.S. application corresponding to
the granted European patent of Leon Cariel and the Institut des Substances
Vegetales by Daniel Jean and Leon Cariel. Judgment was awarded to Shaman on July
14, 1997. Since the period for appeal has passed, this judgment is now final.
Additionally, in connection with the Interference proceeding, we have had
an opportunity to review the claims and file history of the Daniel Jean and Leon
Cariel patent application which, under U.S. patent law, are kept confidential.
One broad claim, in particular, of the Daniel Jean and Leon Cariel patent
application, which was not involved in the Interference proceeding and which has
been indicated to be allowable, covers a large variety of proanthocyanidin
polymers. We believe that this broad claim is subject to attack as invalid in
view of prior art. Based on knowledge of our specific proanthocyanidin polymer
composition, we believe that the manufacture, use or sale of our specific
proanthocyanidin polymer composition would not constitute infringement of this
broad claim, once it issues. However, if Daniel Jean or Leon Cariel bring an
action for infringement of this claim, we may not prevail in defending our
beliefs. In addition, if patents that cover our activities have been or are
issued to other companies, we may be unable to obtain licenses to these patents
at a reasonable cost, or at all, or be able to develop or obtain alternative
technology.
If we cannot obtain such licenses, we could encounter delays or be
precluded from introducing our products to the market. Litigation may be
necessary to defend against or assert claims of infringement, to enforce patents
issued to us or to protect our trade secrets or know-how. Additional
interference proceedings may be declared or become necessary to determine issues
of invention; such litigation and/or interference proceedings could result in
substantial cost to and diversion of effort by us and may have a material
adverse
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effect on our business, financial condition and results of operations. In
addition, our efforts may be unsuccessful.
Our competitive position is also dependent upon unpatented trade secrets.
All of our employees have entered into confidentiality agreements. However,
others may independently develop substantially equivalent information and
techniques or otherwise gain access to our trade secrets, our trade secrets may
be disclosed or we may be unable to effectively protect our rights to unpatented
trade secrets. To the extent that we or our consultants or research
collaborators use intellectual property owned by others in their work for us,
disputes also may arise as to the rights in related or resulting know-how and
inventions.
Patent applications in the United States are generally maintained in
secrecy until patents are issued. Since publication of discoveries in the
scientific or patent literature tends to lag behind actual discoveries by
several months, we cannot be certain that we were the first to discover
compositions covered by our pending patent applications or the first to file
patent applications on such compositions. Our patent applications may not result
in issued patents and issued patents may not afford comprehensive protection
against potential infringement.
We currently have 10 U.S. patent applications pending with the U.S. PTO and
one international application filed via PCT, but we do not know whether any of
these applications will result in the issuance of any patents or, if any patents
are issued, whether any issued patent will provide significant proprietary
protection or will be circumvented or invalidated. During the course of patent
prosecution, patent applications are evaluated for, among other things, utility,
novelty, non-obviousness and enablement. The PTO may require that the claims of
an initially filed patent application be amended if it is determined that the
scope of the claims includes subject matter that is not useful, novel,
non-obvious or enabled.
Furthermore, in certain instances, the practice of a patentable invention
may require a license from the holder of dominant patent rights. In cases where
one party believes that it has a claim to an invention covered by a patent
application or patent of a second party, the first party may provoke an
interference proceeding in the PTO or such a proceeding may be declared by the
PTO. In general, in an interference proceeding, the PTO would review the
competing patents and/or patent applications to determine the validity of the
competing claims, including but not limited to determining priority of
invention. Any such determination would be subject to appeal in the appropriate
U.S. federal courts.
We may not obtain additional patents and the 19 U.S. patents issued to date
may not provide substantial protection or be of commercial benefit to us. The
issuance of a patent is not conclusive as to its validity or enforceability, nor
does it provide the patent holder with freedom to operate without infringing the
patent rights of others. A patent could be challenged by litigation and, if the
outcome of such litigation were adverse to the patent holder, competitors could
be free to use the subject matter covered by the patent, or the patent holder
may license the technology to others in settlement of such litigation. The
invalidation of patents owned by or licensed to us or non-approval of pending
patent applications could create increased competition, with potential adverse
effects on us and our business prospects. In addition, applications of our
technology may infringe on patents or proprietary rights of others and licenses
that might be required as a result of such infringement for our processes or
products may be unavailable on commercially reasonable terms, if at all.
We cannot predict whether we or our competitors' patent applications will
result in valid patents being issued. Litigation, which could result in
substantial cost to us, may also be necessary to enforce our patent and
proprietary rights and/or to determine the scope and validity of others'
proprietary rights. We may, on a voluntary or involuntary basis, participate in
interference proceedings that may in the future be declared by the PTO, which
could result in substantial costs to us. The outcome of any such litigation or
interference proceedings may not be favorable to us, we may be unable to obtain
licenses to required technology or we may be unable to license such technology
at a reasonable cost.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of our computer
programs or hardware that have date-sensitive software or
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embedded chips may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions or engage in similar normal business activities.
Based on recent assessments, we have determined that we will be required to
certify portions of our software and certain hardware so that those systems will
properly utilize dates beyond December 31, 1999. We presently believe that with
modifications or replacements of existing software and certain hardware, the
Year 2000 issue can be mitigated. We believe that such modification and
replacements are not significant, and should such modification and replacements
be delayed there would be no material impact on our operations.
We are approximately 85% complete with the assessment of all internal
systems that could be significantly affected by the Year 2000. To date, cost
estimates for upgrades for those systems not in compliance total approximately
$200,000. After the assessment phase is completed, we will have to purchase,
install and test the upgrades to ensure they meet internal year 2000 compliance.
We expect to complete our internal year 2000 readiness program in the third
quarter of 1999. We are in the process of asking our significant suppliers and
subcontractors that do not share information systems with us (external agents)
whether their systems are Year 2000 compliant. To date, we are not aware of any
external agent with a Year 2000 Issue that would materially impact our results
of operations, liquidity, or capital resources. However, we have no means of
ensuring that external agents will be Year 2000 ready. The inability of external
agents to complete their Year 2000 resolutions to process in a timely fashion
could materially impact us.
We currently have no contingency plans in place in the event we do not
complete all phases of the Year 2000 program. We plan to evaluate the status of
completion in first quarter 1999 and determine whether such a plan is necessary.
UNCERTAINTY OF PRODUCT PRICING, REIMBURSEMENT AND RELATED MATTERS
The continuing efforts of governmental and third party payers to contain or
reduce the costs of health care through various means may materially adversely
affect us. For example, in certain foreign markets, the pricing or profitability
of health care products is subject to government control. In the United States,
there have been, and we expect there will continue to be, a number of federal
and state proposals to implement similar government control. Although we cannot
predict whether any such legislative or regulatory proposals or reforms will be
adopted, the announcement of such proposals or reforms could have a material
adverse effect on our ability to raise capital or form collaborations, and
therefore the adoption of such proposals or reforms could have a material
adverse effect on our business, financial condition and results of operations.
In addition, in both the United States and elsewhere, sales of health care
products are dependent in part on the availability of reimbursement from third
party payers, such as government and private insurance plans. Significant
uncertainty exists as to the reimbursement status of newly approved health care
products, and third party payors are increasingly challenging the prices charged
for medical products and services. Even if we succeed in bringing one or more
products to the market, reimbursement from third-party payers may be unavailable
or may be insufficient to allow us to sell our products on a competitive or
profitable basis.
POSSIBLE VOLATILITY OF STOCK PRICE
From time to time, the stock market experiences significant price and
volume fluctuations that may be unrelated to the operating performance of
particular companies or industries. Thus, the market price of our Common Stock,
like the stock prices of many publicly traded biotechnology and smaller
pharmaceutical companies, has been and may continue to be highly volatile.
Announcements of technological innovations, regulatory matters or new commercial
products by us or our competitors, developments or disputes concerning patent or
proprietary rights, publicity regarding actual or potential medical results
relating to products under development by us or our competitors, regulatory
developments in both the United States and foreign countries, public concern as
to the safety of pharmaceutical products, and economic and other external
factors, as well as period-to-period fluctuations in financial results, may have
a significant impact on the market price of our Common Stock.
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ENVIRONMENTAL REGULATION
In connection with our research and development activities and
manufacturing of clinical trial materials, Shaman is subject to federal, state
and local laws, rules, regulations and policies governing the use, generation,
manufacture, storage, air emission, effluent discharge, handling and disposal of
certain materials and wastes. Although we believe we comply with these laws and
regulations in all material respects and have not been required to take any
action to correct any noncompliance, we may be required to incur significant
costs to comply with environmental and health and safety regulations in the
future. Our research and development activities involve the controlled use of
hazardous materials, chemicals, viruses and various radioactive compounds.
Although we believe that our safety procedures for handling and disposing of
such materials comply with the standards prescribed by state and federal
regulations, we cannot eliminate the risk of accidental contamination or injury
from these materials completely. In the event of such an accident, we could be
held liable for any resulting damages. Although we have secured insurance to
mitigate such expense, any such liability could exceed our insurance coverage
and resources. Such liability could have a material adverse effect on our
business, financial condition and results of operations.
ANTI-TAKEOVER EFFECT OF DELAWARE LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
Certain provisions of our Certificate of Incorporation and Bylaws make it
more difficult for a third party to acquire, and discourages a third party from
attempting to acquire, control of Shaman. These provisions could limit the price
that certain investors might be willing to pay in the future for shares of the
Common Stock. At October 30, 1998, our Board of Directors had the authority to
issue up to 459,120 additional shares of Preferred Stock and to determine the
price, rights, preferences, privileges and restrictions of those shares without
any further vote or action by the stockholders.
The rights of the holders of Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any Preferred Stock that may
be issued in the future. Issuance of Preferred Stock with voting rights, while
providing desirable flexibility for possible acquisitions and other corporate
purposes, could make it more difficult for a third party to acquire a majority
of the outstanding voting stock. We may in the future issue shares of Preferred
Stock with voting rights. Certain provisions of Delaware law applicable to us
could also delay or make more difficult a merger, tender offer or proxy contest
involving Shaman, including Section 203 of the Delaware General Corporation Law,
which prohibits a Delaware corporation from engaging in any business combination
with any interested stockholder for a period of three years unless certain
conditions are met.
PRODUCT LIABILITY EXPOSURE; LIMITED INSURANCE COVERAGE
Our business exposes us to potential product liability risks which are
inherent in the development, testing, manufacture, marketing and sale of
pharmaceutical products. Product liability insurance for the pharmaceutical
industry generally is expensive. Our present product liability insurance
coverage, which includes coverage for acts by third parties, including
manufacturers of our product candidates, may not be adequate under all
circumstances. Existing coverage will not be adequate as we further develop our
products, and we do not know that adequate insurance coverage against all
potential claims will be available in sufficient amounts or at a reasonable
cost. Some of our development and manufacturing agreements contain insurance and
indemnification provisions pursuant to which we could be held accountable for
certain occurrences. Such liability could have a material adverse effect on our
business, financial condition and results of operations.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Shaman's Certificate of Incorporation limits, to the maximum extent
permitted by Delaware Law, the personal liability of directors for monetary
damages for breach of their fiduciary duties as a director. Our Bylaws provide
that we will indemnify our officers, directors, employees and agents to the full
extent permitted by the general corporation law of Delaware. We have entered
into indemnification agreements with our officers and directors containing
provisions which are in some respects broader than the specific indemnification
provisions contained in Delaware Law. The indemnification agreements may require
us, among other
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things, to indemnify such officers and directors against certain liabilities
that may arise by reason of their status or service as directors or officers
(other than liabilities arising from willful misconduct of a culpable nature),
to advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified, and to obtain directors' and officers'
insurance, if available on reasonable terms. We currently maintains directors'
and officers' insurance.
Section 145 of the Delaware Law provides that a corporation may indemnify a
director, officer, employee or agent made or threatened to be made a party to an
action by reason of the fact that he was a director, officer, employee or agent
of the corporation or was serving at the request of the corporation against
expenses actually and reasonably incurred in connection with such action if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Delaware Law does not permit a corporation to eliminate a
director's duty of care, and the provisions of our Certificate of Incorporation
have no effect on the availability of equitable remedies, such as injunction or
rescission, for a director's breach of the duty of care.
DILUTION
The biopharmaceutical industry is capital intensive. In this regard we have
entered into a number of financings, many of which have included securities that
are convertible into shares of Common Stock. Dilution may occur upon the
exercise of outstanding options and warrants and upon conversion of senior
convertible notes, the Series A Preferred Stock and the Series C Preferred
Stock. Stockholders may also suffer additional dilution if we exercise our right
to sell additional shares of our Common Stock to Fletcher International Limited,
pursuant to our agreements with such investor.
DEPENDENCE ON KEY PERSONNEL
Our ability to maintain our competitive position depends in part upon the
continued contributions of our key senior management. Our future performance
also depends on our ability to attract and retain qualified management and
scientific personnel. Competition for such personnel is intense, and we may be
unable to continue to attract, assimilate or retain other highly qualified
technical and management personnel in the future. The loss of key personnel or
the failure to recruit additional personnel or to develop needed expertise could
have a material adverse effect on our business, financial condition and results
of operations.
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SELLING STOCKHOLDERS
The following table sets forth certain information, as of November 11,
1998, with respect to the number of shares of Common Stock beneficially owned by
each of the Selling Stockholders both before and after the sale of the Shares
offered hereby.
We sold the Shares being offered by the Selling Stockholders in private
placement transactions. This Prospectus covers the resale by the Selling
Stockholders of up to 6,109,277 Shares, plus, in accordance with Rule 416 under
the Securities Act, such additional number of shares of Common Stock as may be
issued pursuant to the Warrants and the Promissory Notes resulting from stock
splits, stock dividends and similar transactions. See "Recent Developments." The
Warrants provide for adjustment of the number of shares of capital stock
issuable upon exercise thereof in certain circumstances, including upon the
distribution of certain dividends, upon our reorganization, reclassification or
merger, or upon the division or combination of our Common Stock.
The number of Shares shown in the following table as being offered by the
Selling Stockholders does not include such presently indeterminate number of
additional shares of Common Stock as may be issuable as a result of stock
splits, stock dividends and similar transactions, but which shares are, in
accordance with Rule 416 under the Securities Act, included in the Registration
Statement of which this Prospectus forms as part.
Any or all of the shares of Common Stock listed below may be offered for
sale pursuant to this Prospectus by the Selling Stockholders from time to time.
Accordingly, no estimate can be given as to the amounts of shares of Common
Stock that will be held by the Selling Stockholders upon consummation of any
such sales. In addition, the Selling Stockholders identified below may have
sold, transferred or otherwise disposed of all or a portion of their shares of
Common Stock since the date on which the information regarding their Common
Stock was provided, in transactions exempt from the registration requirements of
the Securities Act.
Beneficial ownership of the securities held by the Selling Stockholders
after this offering will depend on the number of securities sold by each Selling
Stockholder in this offering. Except as indicated in this Prospectus, none of
the Selling Stockholders has had a material relationship with the Company within
the past three years other than as a result of the ownership of the Shares or
other securities of the Company. See "Plan of Distribution."
The Shares covered by this Prospectus may be offered from time to time by
the Selling Stockholders named below:
<TABLE>
<CAPTION>
OWNERSHIP
NUMBER OF AFTER OFFERING(1)
SHARES OWNED NUMBER OF --------------------
NAME AND ADDRESS OF PRIOR TO SHARES BEING NUMBER OF
SELLING STOCKHOLDERS OFFERING(1) OFFERED SHARES PERCENT
-------------------- ------------ ------------ ---------- -------
<S> <C> <C> <C> <C>
Fletcher International, Ltd.(2).............. 1,093,133 550,000(3) 543,133 1.9%
Brown Simpson Asset Management(4)............ 407,009 407,009 0 *
Genessee Fund Limited(5)..................... 999,999(5) 999,999(5) 0 *
Labrador Ventures, Inc.(6)................... 133,400 133,400 0 *
Odyssey Fund................................. 262,424 166,666 95,758 *
Travelers Insurance Company(7)............... 1,266,366 333,333 933,033 3.2%
Vulcan Ventures, Inc......................... 2,080,000 2,000,000 80,000 *
Dr. Steven Adams............................. 3,339 3,339 0 *
Franklin Ayala............................... 208,696 208,696 0 *
Michael Balick(8)............................ 40,295 11,130 29,165 *
Nina Bohlen.................................. 55,652 55,652 0 *
Silviano Camberos............................ 27,826 27,826 0 *
Julie Chinnock............................... 2,783 2,783 0 *
Matt Clarke.................................. 9,043 9,043 0 *
James X. Clemens............................. 6,666 6,666 0 *
</TABLE>
16
<PAGE> 18
<TABLE>
<CAPTION>
OWNERSHIP
NUMBER OF AFTER OFFERING(1)
SHARES OWNED NUMBER OF --------------------
NAME AND ADDRESS OF PRIOR TO SHARES BEING NUMBER OF
SELLING STOCKHOLDERS OFFERING(1) OFFERED SHARES PERCENT
-------------------- ------------ ------------ ---------- -------
<S> <C> <C> <C> <C>
Sally Clemens................................ 6,666 6,666 0 *
Helen Conte(9)............................... 11,173 6,957 4,216 *
Norm Farnsworth(10).......................... 16,927 8,348 8,579 *
Sharon Flynn................................. 13,913 13,913 0 *
Gustavo Gonzales............................. 4,174 4,174 0 *
AWD LLC...................................... 32,533 32,533 0 *
JMJ Trusts Partnership....................... 113,800 113,800 0 *
AJ Trusts Partnership........................ 54,200 54,200 0 *
Douglas E. Goldman(11)....................... 168,033 168,033 0 *
John D. Goldman(12).......................... 168,033 168,033 0 *
Carlyn R. McCaffrey & R. Todd Lay............ 108,400 108,400 0 *
Mike Hennahane............................... 3,478 3,478 0 *
Kerry Hughes................................. 11,826 11,826 0 *
Judy Hung.................................... 478 478 0 *
Maurice Iwu(13).............................. 87,732 66,087 21,645 *
Alexander Johns.............................. 90,000 40,000 50,000 *
Paul Michael Kaestle......................... 40,000 40,000 0 *
Dr. Atul Khandwala(14)....................... 108,326 87,326 21,000 *
Elsa Meza.................................... 8,348 8,348 0 *
Mark Plotkin(15)............................. 37,419 18,087 19,332 *
G. Kirk Raab(16)............................. 359,726 135,652 224,074 *
Dr. Henry Rappaport(17)...................... 26,000 25,000 1,000 *
Paul Rice.................................... 27,826 27,826 0 *
David Schienman.............................. 7,565 5,565 2,000 *
Kathleen O'Boyle Scutchfield................. 33,333 33,333 0 *
James Tang(18)............................... 2,496 2,194 302 *
Ken Weiner................................... 3,478 3,478 0 *
--------- --------- ---------- ----
Total.............................. 8,142,514 6,109,277 2,033,237
</TABLE>
- -------------------------
* Less than one percent.
(1) Percentage of beneficial ownership is calculated assuming 24,060,360 shares
of Common Stock were outstanding as of November 11, 1998. Ownership after
this offering assumes the sale of all shares held by such Selling
Stockholders offered hereby. Beneficial ownership is determined in
accordance with the rules of the SEC and the footnotes to this table, 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 October 30,
1998, 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, the persons named in the table have sole voting and investment
power with respect to all shares of Common Stock beneficially owned.
(2) Includes 400,000 shares of Series A Preferred Stock, which are currently
convertible into 400,000 shares of Common Stock. Also includes 550,000
shares of Common Stock that are issuable upon exercise of the Warrants.
(3) Represents the number of shares of Common Stock issuable upon exercise of
the Warrants.
17
<PAGE> 19
(4) Represents 264,556 shares of Common Stock owned by Brown Simpson Strategic
Growth Fund, Ltd. and 142,453 shares owned by Brown Simpson Strategic
Growth Fund, L.P.
(5) Represents 666,666 shares of Common Stock held by Genesee Fund
Limited -- Portfolio B and 333,333 shares of Common Stock held by Advantage
Fund II, Ltd.
(6) Represents 66,700 shares held by Lysander, L.L.C. and 66,700 shares of
Common Stock held by Phalarope Foundation.
(7) Includes shares held by The Travelers Indemnity Company, Travelers Property
Casualty Corp., The Travelers Insurance Group Inc., PFS Services, Inc., and
Associated Madison Companies, Inc., each an entity affiliated with
Travelers Group Inc.
(8) Includes options to purchase 28,165 shares of Common Stock exercisable
within 60 days of October 30, 1998.
(9) Includes options to purchase 1,666 shares of Common Stock exercisable
within 60 days of October 30, 1998. Does not include 560 shares of Series C
Preferred Stock or the shares of Common Stock Ms. Conte may acquire upon
conversion of the Series C Preferred Stock.
(10) Includes options to purchase 8,579 shares of Common Stock exercisable
within 60 days of October 30, 1998.
(11) Represents 54,200 shares of Common Stock held by Chase Manhattan Bank
Delaware, Trustee Douglas E. Goldman 1997 Charitable Lead Trust, 27,100
shares of Common Stock held by Chase Manhattan Bank Delaware, Trustee
Douglas E. Goldman 1997 Trust and 86,733 shares of Common Stock held by
Douglas E. Goldman, Trustee, The Douglas E. Goldman Revocable Trust.
(12) Represents 54,200 shares of Common Stock held by Chase Manhattan Bank
Delaware, Trustee John D. Goldman 1997 Charitable Lead Trust, 27,100 shares
of Common Stock held by Chase Manhattan Bank Delaware, Trustee John D.
Goldman 1997 Trust and 86,733 shares of Common Stock held by John D.
Goldman, Trustee, The John D. Goldman Revocable Trust.
(13) Includes options to purchase 21,645 shares of Common Stock exercisable
within 60 days of October 30, 1998.
(14) Includes options to purchase 20,000 shares of Common Stock exercisable
within 60 days of October 30, 1998.
(15) Includes options to purchase 18,832 shares of Common Stock exercisable
within 60 days of October 30, 1998.
(16) Includes options to purchase 224,074 shares of Common Stock exercisable
within 60 days of October 30, 1998. Does not include 1,500 shares of Series
C Preferred Stock or the shares of Common Stock Mr. Raab may acquire upon
conversion of the Series C Preferred Stock.
(17) Includes options to purchase 1,000 shares of Common Stock exercisable
within 60 days of October 30, 1998.
(18) Includes options to purchase 302 shares of Common Stock exercisable within
60 days of October 30, 1998.
18
<PAGE> 20
The Preceding table has been prepared based upon information furnished to
us by the Selling Stockholders. From time to time, additional information
concerning ownership of the shares of Common Stock may rest with certain holders
thereof not named in the preceding table, with whom we believe we have no
affiliation.
19
<PAGE> 21
PLAN OF DISTRIBUTION
RESALE OF COMMON STOCK BY SELLING STOCKHOLDERS
The offering of the Shares offered for resale is not being underwritten,
and we will receive no proceeds from the offering of 747,206 shares of Common
Stock issued for consulting services but will receive proceeds from the exercise
of the Warrants. The Selling Stockholders (or, subject to applicable law, their
pledgees, distributees, transferees or other successors in interest) may offer
their Shares at various times in one or more of the following transactions:
- on The Nasdaq National Market or any other exchange where our Common
Stock is listed,
- in the over-the-counter market,
- in negotiated transactions not on an exchange or over-the-counter,
- in connection with short sales of our Common Stock,
- by pledge to secure debts or other obligations,
- in connection with the writing of call options, in hedge transactions
and
in settlement of other transactions in standardized or over-the-counter
options, or
- in a combination of any of the above transactions.
The Selling Stockholders also may sell Shares that qualify under Rule 144
of the Securities Act, where applicable.
The Selling Stockholders may sell the Shares through public or private
transactions at prevailing market prices, or at prices related to such
prevailing market prices or at privately negotiated prices. Sales of the Shares
by the Selling Stockholders, or even the potential for such sales, would likely
have an adverse effect on the market price of our outstanding securities.
The Selling Stockholders may use broker-dealers to sell the Shares. In
order to comply with the securities laws of certain states, if applicable, the
Shares will be sold in such jurisdictions only through registered or licensed
brokers or dealers. In addition, in certain states the Shares may not be sold
unless they have been registered or qualified for sale in the applicable state
or an exemption from the registration or qualification requirement is available
and is complied with.
If broker-dealers are used, they will either receive discounts or
commissions from the Selling Stockholder, or they will receive commissions from
the purchasers of Shares from whom they acted as agents. The Selling
Stockholders and any broker-dealers or agents that participate with the Selling
Stockholders in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commissions
received by them and any profit on the resale of the Shares purchased by them
may be deemed to be underwriting commissions or discounts under the Securities
Act.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Shares may not bid for or purchase shares of
Common Stock during a period which commences one business day (five business
days, if our public float is less than $25 million or our average daily trading
volume is less than $100,000) prior to such person's participation in the
distribution, subject to exceptions for certain passive market making
activities. In addition and without limiting the foregoing, each Selling
Stockholder will be subject to applicable provisions of the Exchange Act and the
rules and regulations thereunder, including, without limitation, Regulation M,
which provisions may limit the timing of purchases and sales of shares of our
Common Stock by such Selling Stockholder.
At the time a particular offer of Shares is made by or on behalf of the
Selling Stockholders, or by us upon exercise of the warrants, a prospectus will
be delivered to the extent required by the Securities Act.
DIRECT SALE OF COMMON STOCK BY THE COMPANY
The Company is directly offering 4,812,071 shares of Common Stock to a
limited number of investors. The price of the Common Stock offered is $1.50 per
share. The price of the Common Stock offered hereby
20
<PAGE> 22
could be below the current market price which could result in dilution to
existing stockholders and could have an adverse effect on the market for the
Company's Common Stock.
The chief executive officer of the Company, with the assistance of other
officers as needed, will participate in the sale of the Common Stock to the
investors. These participants will not receive any compensation for these
activities and will not be deemed to be brokers pursuant to Rule 3a4-1 under the
Exchange Act. They sought to identify prospective investors from among
institutional and other potential investors known to have investments in the
biotechnology industry, as well as current stockholders who were interested in
increasing their investment in the Company. No broker-dealers are participating
as potential investors.
Prior to the closing date, all investor funds have been placed in an escrow
account established for the benefit of the investors. The escrow agent will act
only as an escrow agent in connection with the offering of the securities
described herein. The escrow agent will invest such funds in accordance with
Rule 15c2-4 promulgated under the Exchange Act. Prior to the closing date, the
escrow agent will advise the Company that payment for the purchase of the shares
of the Common Stock has been affirmed by the investors and that the investors
have deposited the requisite funds in the escrow account. Upon receipt of such
notice, the Company will instruct its transfer agent or the Depository Trust
Company, as appropriate to deliver the shares of Common Stock to the investors.
Investor funds will be collected by the Company through the facilities of the
escrow agent on the closing date. The offering will not continue after the
closing date. In the event that the offering is not consummated, all funds
deposited in the escrow account, plus interest earned thereon, if any, will be
promptly returned to the investors.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock will be sold in such jurisdiction only through
registered or licensed brokers or dealers. In addition, in certain states the
Common Stock may not be sold unless it has been registered or qualified for
sale.
The Company will pay all the expenses incident to the offering and sale of
the Common Stock to the public. Such expenses are estimated to be $60,000.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for us by
Brobeck, Phleger & Harrison LLP, Palo Alto, California.
EXPERTS
The financial statements at December 31, 1997 appearing in the Company's
Annual Report on Form 10-K, as amended, for the year ended December 31, 1997
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. Such
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
21
<PAGE> 23
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN OUR AFFAIRS OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where to Find More Information...... 2
Incorporation of Certain Documents
by Reference...................... 2
The Company......................... 3
Risk Factors........................ 5
Selling Stockholders................ 16
Plan of Distribution................ 20
Legal matters....................... 21
Experts............................. 21
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
6,109,277 Shares
SHAMAN
PHARMACEUTICALS,
INC.
Common Stock
-----------------
PROSPECTUS
-----------------
NOVEMBER , 1988
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 24
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses expected to be incurred
by the Registrant in connection with the sale and distribution of the securities
being registered hereby. All amounts are estimated except the Securities and
Exchange Commission registration fee and The Nasdaq National Market listing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 3,245
NNM listing fees............................................ 17,500
Accounting fees and expenses................................ 7,500
Legal fees and expenses..................................... 20,000
Printing and engraving expenses............................. 10,000
Miscellaneous fees and expenses............................. 1,755
-------
Total............................................. $60,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, as amended (the
"DGCL"), provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 145 further provides that a corporation similarly may indemnify any such
person serving in any such capacity who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor, against expenses
actually and reasonably incurred in connection with the defense or settlement of
such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Delaware Court of Chancery or
such other court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 102(b)(7) of the DGCL permits a corporation to include in its
certificate of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
shall not eliminate or limit the liability of a director (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 DGCL (relating to
unlawful payment of dividends and unlawful stock purchase and redemption) or
(iv) for any transaction from which the director derived an improper personal
benefit.
The Registrant's Restated Certificate of Incorporation provides that the
Registrant's directors shall not be liable to the Registrant or its stockholders
for monetary damages for breach of fiduciary duty as a director, except to the
extent that exculpation from liabilities is not permitted under the DGCL as in
effect at the time
II-1
<PAGE> 25
such liability is determined. The Registrant has entered into indemnification
agreements with all of its officers and directors, as permitted by the DGCL.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The exhibits listed in the Exhibit Index as filed as part of this
Registration Statement
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
10.1 Common Stock Purchase Agreement dated November 18, 1998.
+23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in the
opinion filed as Exhibit 5.1).
24.1 Power of Attorney (included under the caption "Signatures").
</TABLE>
- ---------------
* Previously filed
+ To be filed by Amendment
(b) FINANCIAL STATEMENT SCHEDULES
No financial statement schedules are included because they are not required
or the required information is included in the financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement; provided, however, that (i) and (ii) do not apply
if the Registration Statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by (i)
and (ii) is contained in periodic reports filed with or furnished to the
SEC by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
II-2
<PAGE> 26
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of South San Francisco, State of California, on the
18th day of November, 1998.
SHAMAN PHARMACEUTICALS, INC.
By: /s/ LISA A. CONTE
------------------------------------
Lisa A. Conte
President, Chief Executive Officer
and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed below by the persons whose
signatures appear below, which persons have signed such Registration Statement
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ LISA A. CONTE Director, President and Chief November 18, 1998
- ------------------------------------------------ Executive Officer (Principal
Lisa A. Conte Executive Officer)
* Chief Financial Officer November 18, 1998
- ------------------------------------------------ (Principal Financial Officer)
Stephanie C. Diaz
* Chairman of the Board November 18, 1998
- ------------------------------------------------
G. Kirk Raab
Director November , 1998
- ------------------------------------------------
Adrian D.P. Bellamy
* Director November 18, 1998
- ------------------------------------------------
Jeffrey Berg
Director November , 1998
- ------------------------------------------------
Herbert H. McDade, Jr.
* Director November 18, 1998
- ------------------------------------------------
M. David Titus
*By: /s/ LISA A. CONTE
-----------------------------------------
Lisa A. Conte
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
<C> <S> <C>
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
10.1 Common Stock Purchase Agreement dated November 18, 1998.
23.1+ Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in the
opinion filed as Exhibit 5.1).
24.1* Power of Attorney (included under the caption "Signatures").
</TABLE>
- ---------------
* Previously filed
+ To be filed by Amendment
<PAGE> 1
EXHIBIT 5.1
[ BROBECK, PHLEGER & HARRISON LLP LETTERHEAD ]
November 18, 1998
Shaman Pharmaceuticals, Inc.
213 East Grand Avenue
South San Francisco, CA 94080
Ladies and Gentlemen:
We have acted as counsel to Shaman Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), in connection with the registration of up to Six
Million One Hundred Nine Thousand Two Hundred Seventy-Seven (6,109,277) shares
of the Company's Common Stock (the "Shares"), as described in the Company's
Registration Statement on Form S-3 filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Registration
Statement").
This opinion is being furnished in accordance with the requirements of
Item 16 of Form S-3 and Item 601(b)(5)(i) of Regulation S-K.
We have examined originals or copies of (i) the Amended and Restated
Certificate of Incorporation of the Company; (ii) the Bylaws of the Company;
(iii) certain resolutions of the Board of Directors of the Company; and (v) such
other documents and records as we have deemed necessary and relevant for the
purposes hereof. In addition, we have relied on certificates of officers of the
Company and certificates of public officials as to certain matters of fact
relating to this opinion and have made such investigations of law as we have
deemed necessary and relevant as a basis hereof.
We have assumed the genuineness of all signatures, the authenticity of
all documents, certificates and records submitted to us as originals, the
conformity to authentic original documents, certificates and records of all such
documentation submitted to us as copies and the truthfulness of all statements
of facts contained therein. Based on the foregoing and subject to the
limitations set forth herein and having due regard for such legal considerations
as we deem relevant, we are of the opinion that the Shares, when issued and sold
in the manner described in the Registration Statement, will be validly issued,
fully paid and nonassessable shares of the Common Stock.
We consent to the filing of this opinion letter as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the prospectus which is part of the Registration Statement.
In giving this consent, we do not thereby admit that we are within the category
of persons whose consent is required under Section 7 of the Act, the rules and
regulations of the Securities and Exchange Commission promulgated thereunder, or
Item 509 of Regulation S-K.
<PAGE> 2
BROBECK, PHLEGER & HARRISON LLP
ATTORNEYS AT LAW
November 18, 1998
Page 2
The foregoing opinion is based on and limited to the General Corporation
Law of the State of Delaware and the relevant federal laws of the United States,
and we express no opinion with respect to the laws of any other jurisdiction.
This opinion letter is rendered as of the date first written above and
we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company or the
Shares.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 10.1
SHAMAN PHARMACEUTICALS, INC.
COMMON STOCK PURCHASE AGREEMENT
This Common Stock Purchase Agreement (the "Agreement") is made as of
November 18, 1998, by and among Shaman Pharmaceuticals, Inc., a Delaware
corporation (the "Company") with its principal office at 213 East Grand Avenue,
South San Francisco, California 94080, and the persons listed on the Schedule of
Purchasers attached hereto as Schedule I (the "Purchasers").
1. Authorization and Sale of Common Stock.
1.1 Authorization. The Company has authorized the issuance and sale
pursuant to this Agreement of up to 4,812,071 shares of the Common Stock, par
value $0.001 per share (the "Common Stock"), of the Company.
1.2 Sale of Common Stock. Subject to the terms and conditions of this
Agreement, the Company agrees to issue and sell to each Purchaser, and each
Purchaser severally agrees to purchase from the Company, the number of shares of
Common Stock set forth opposite each Purchaser's name on Schedule I for a price
per share equal to $1.50. Such number of shares and price per share shall be
adjusted, if necessary, in connection with any stock splits, dividends, or
similar adjustments in accordance with the Company's Amended and Restated
Certificate of Incorporation, as amended.
2. Closing Date; Delivery.
2.1 Closing Date. The closing of the purchase and sale of the shares of
Common Stock (the "Closing") shall be held at the offices of Brobeck, Phleger &
Harrison LLP, Two Embarcadero Place, 2200 Geng Road, Palo Alto, California at
10:00 a.m. Pacific Standard Time, within three business days following
declaration of effectiveness of the Registration Statement (defined below in
Section 7.2) or at such other time and place upon which the Company and the
Purchasers purchasing in the aggregate more than half of the shares of Common
Stock sold hereunder shall agree. The date of the Closing is hereinafter
referred to as the "Closing Date."
2.2 Delivery. At the Closing, the Company will deliver to each Purchaser
certificates, registered in the Purchaser's name as shown on Schedule I,
representing the number of shares of Common Stock to be purchased by each such
Purchaser. Such delivery shall be against payment by each Purchaser of the
aggregate purchase price therefor (the "Purchase Price"), which Purchase Price
shall have been transferred into the Escrow Account as defined below pending the
closing. The Purchase Price payable by each Purchaser shall be as set forth on
Schedule I opposite each Purchaser's name.
2.3 Escrow Account. Each Purchaser shall together with submitting
his/her signature pages to this Subscription Agreement, submit by check or wire
transfer the amount of such Purchaser's Purchase Price for the Shares to Account
No. 200017747 at Citibank for deposit into escrow pending the closing (the
"Escrow Account"). At the Closing, the proceeds of the Escrow Account will be
delivered to the Company in the amounts specified on Schedule I. Interest
accrued
<PAGE> 2
will be returned to each Purchaser. In the event this Agreement is terminated
for any reason and no Closing has occurred, then each Purchaser shall receive a
refund of his/her Purchase Price together with accrued interest thereon. The
interest rate shall be Citibank's money market interest rate compounded daily.
2.4 Contribution to Shaman HIV Investment Trust. In connection with the
Purchasers' agreeing to purchase the Shares, the Company agrees that it shall
promptly establish a Shaman HIV Investment Trust and shall contribute to such
Trust (the "Trust") an amount equal to 3.5% (assuming a total investment by the
Purchasers of at least $7 million) of U.S. Net Revenues from Provir product
sales in the United States for a period of five (5) years from the date of first
product sale in the United States. Net Revenues for purposes hereof shall mean
the aggregate revenues collected by Shaman from U.S. sales of Provir for
HIV/AIDS indications, net of credits or allowances given or made for rejection
or return of product, taxes or governmental charges levied on the sale,
transportation or delivery of product, amounts written off as "bad debt," and
royalties to third parties. The terms of the Trust shall be as follows: (i)
funds shall be disbursed from time to time to qualified organizations providing
services, education, and/or research within the HIV/AIDS Community; (ii) the
funds will be administered by an independent third party, i.e. an ad hoc
Governing Board for the Trust made up of AIDS Community members; (iii) the
Company reserves the right to set criteria for the membership of the Governing
Board, their period of service, and the direction or focus of where funds are to
be distributed, including criteria for recipient organizations (to the extent
that any such rights shall not prejudice the status of the Trust as a qualifying
charitable trust under applicable tax rules and regulations); (iv) nothing in
the terms hereof or of the Trust shall preclude the Company from making other
contributions within the AIDS Community as it deems appropriate; and (v) all
publicity regarding the Trust, the Governing Board thereof, the recipients of
funds, and contributing investors must be reasonably approved by the Company
prior to any disclosure thereof. Payments in accordance with this Section 2.4
shall rank junior to and be paid after payment of dividends and distribution of
assets upon liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, made to any shares of Series C Preferred Stock as
designated in the Company's Amended Certificate of Designation of Preferences of
Series C Convertible Preferred Stock.
3. Representations and Warranties of the Company. The Company represents
and warrants to the Purchasers as of the Closing Date as follows:
3.1 Organization and Standing. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Delaware and is in good standing as a domestic corporation under the laws of
said state with all requisite corporate power and authority to own, operate and
lease its properties and conduct its business as presently conducted.
3.2 Corporate Power; Authorization. The Company has all requisite legal
and corporate power and has taken all requisite corporate action to execute and
deliver this Agreement, to issue and sell the shares of the Common Stock and to
carry out and perform all of its obligations under this Agreement. This
Agreement constitutes the legal, valid and binding obligations of the Company,
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization or similar laws relating to or affecting
the enforcement of creditors' rights generally and (ii) as limited by equitable
principles generally. The execution and delivery of this Agreement does not, and
the performance of this Agreement and the compliance with the provisions
2.
<PAGE> 3
hereof, and the issuance, sale and delivery of the shares of Common Stock by the
Company will not conflict with, or result in a breach or violation of the terms,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of any lien pursuant to the terms of, the Certificate of
Incorporation or Bylaws of the Company or any statute, law, rule or regulation
or any state or federal order, judgment or decree or any indenture, mortgage,
lease or other material agreement or instrument which the Company is required to
file as an Exhibit to its Form 10-K.
3.3 Issuance and Delivery of the Shares of Common Stock. The shares of
Common Stock, when issued in compliance with the provisions of this Agreement,
will be validly issued, fully paid and nonassessable. The issuance and delivery
of the shares of Common Stock is not subject to preemptive or any other similar
rights of the stockholders of the Company or any liens or encumbrances.
3.4 SEC Documents; Financial Statements. The Company has provided the
Purchasers with the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 the Quarterly Report on Form 10-Q for the Quarter Ended June
30, 1998 and the Quarterly Report on Form 10-Q for the Quarter Ended September
30, 1998 which are true and complete copies of such documents as filed by the
Company with the Securities and Exchange Commission (the "SEC"). The Company has
filed all documents (the "SEC Documents") that the Company was required to file
with the SEC under the Securities Exchange Act of 1934, as amended (the "1934
Act"), during the twelve (12) months preceding the date of this Agreement, and
all of such documents conformed in all material respects to the requirements of
the 1934 Act and the rules and regulations thereunder as of their respective
filing dates. None of the SEC Documents as of their respective dates contained
any untrue statement of material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Documents (the
"Financial Statements") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto. The Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied
and fairly present the consolidated financial position of the Company and any
subsidiaries at the dates thereof and the consolidated results of their
operations and consolidated cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal, recurring adjustments that are not
in the aggregate material).
3.5 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, or local governmental authority, regulatory agency,
self-regulatory organization, or stock exchange or market on the part of the
Company is required in connection with the consummation of the transactions
contemplated by this Agreement except for (a) compliance with the securities and
blue sky laws in the states in which shares of Common Stock are offered and/or
sold, which compliance will be effected in accordance with such laws and (b) the
filing of the Nasdaq National Market Notification Form with the Nasdaq National
Market.
3.6 No Stockholder Approval. No stockholder approval is required in
connection with the consummation of the transactions contemplated by this
Agreement.
3.
<PAGE> 4
3.7 No Material Adverse Change. Except as otherwise disclosed herein,
since September 30, 1998, there have not been any changes in the assets,
liabilities, financial condition or results of operations of the Company from
that reflected in the Financial Statements except changes in the ordinary course
of business which have not been, either individually or in the aggregate,
materially adverse;
3.8 Litigation. Other than disclosed in its filings under the Securities
Act or the 1934 Act, there is no action, suit, proceeding or investigation
pending or threatened, or any basis therefor known to the Company, that
questions the validity of this Agreement or the right of the Company to enter
into this Agreement, or that would result, either individually or in the
aggregate, in any material adverse event as described in Section 3.7. There is
no judgment, decree or order of any court in effect against the Company, and the
company is not in default with respect to any order of any governmental
authority to which the Company is a party or by which it is bound. There is no
action, suit, proceeding or investigation by the company currently pending or
which the Company presently intends to initiate;
4. Representations, Warranties and Covenants of the Purchasers. Each
Purchaser hereby severally represents and warrants to the Company, effective as
of the Closing Date, as follows:
4.1 Authorization. Purchaser represents and warrants to the Company
that: (i) Purchaser has all requisite legal and corporate or other power and
capacity and has taken all requisite corporate or other action to execute and
deliver this Agreement, to purchase the shares of Common Stock to be purchased
by it and to carry out and perform all of its obligations under this Agreement;
and (ii) this Agreement constitutes the legal, valid and binding obligation of
the Purchaser, enforceable in accordance with its terms, except (a) as limited
by applicable bankruptcy, insolvency, reorganization, or similar laws relating
to or affecting the enforcement of creditors' rights generally and (b) as
limited by equitable principles generally.
4.2 Investor Qualifications; Investment Experience. Purchaser is an
"accredited investor" as defined in Rule 501(a) under the Securities Act of
1933, as amended (the "Securities Act"), or Purchaser is a "qualified
institutional buyer" as defined in Rule 144A(a)(1) under the Securities Act.
Purchaser is aware of the Company's business affairs and financial condition and
has had access to and believes it has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the shares of
Common Stock. Purchaser has such business and financial experience as is
required to give it the capacity to protect its own interests in connection with
the purchase of the shares of Common Stock.
4.3 Investment Intent. Purchaser is purchasing the shares of Common
Stock in the ordinary course of its business for its own account as principal,
for investment purposes only, and not with a present view to, or for, resale,
distribution or fractionalization thereof, in whole or in part, within the
meaning of the Securities Act. No arrangement or understanding exists between
the Purchaser and any other person regarding the resale, distribution or
fractionalization of the shares of Common Stock, in whole or in part, within the
meaning of the Securities Act. Purchaser understands that its acquisition of the
shares of Common Stock has not been registered under the Securities Act or
registered or qualified under any state securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other things, the
bona fide
4.
<PAGE> 5
nature of Purchaser's investment intent as expressed herein. Purchaser has
completed or caused to be completed and delivered to the Company, the Purchaser
Questionnaire attached hereto as Exhibit A. Purchaser has, in connection with
its decision to purchase the number of shares of Common Stock set forth in
Schedule I hereto, relied solely upon the representations and warranties of the
Company contained herein. Purchaser will not, directly or indirectly, offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) any of the shares of Common
Stock except in compliance with the Securities Act, and the rules and
regulations promulgated thereunder.
4.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the shares of Common Stock may not be resold
or otherwise transferred except in a transaction registered under the Securities
Act or unless an exemption from such registration is available. Purchaser
understands that the certificate(s) evidencing the shares of Common Stock will
be imprinted with a legend that prohibits the transfer of the shares of Common
Stock unless (i) they are registered or such registration is not required, and
(ii) if the transfer is pursuant to an exemption from registration other than
Rule 144 under the Securities Act and, if the Company shall so request in
writing, an opinion of counsel reasonably satisfactory to the Company is
obtained to the effect that the transaction is so exempt.
4.5 No Legal, Tax or Investment Advice. Purchaser understands that
nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the shares of Common Stock constitutes
legal, tax or investment advice. Purchaser has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the shares of Common Stock.
5. Conditions to Purchasers' Obligations. Each Purchaser's obligation to
purchase the shares of Common Stock at the Closing shall be subject to the
fulfillment or waiver as of the Closing Date of each of the following
conditions:
5.1 Representations and Warranties. The representations and warranties
made by the Company in Section 3 hereof shall have been true and correct in all
material respects when made, and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of said date.
5.2 Legal Opinion. The Purchasers shall have received a legal opinion of
Brobeck, Phleger & Harrison LLP, counsel to the Company, in substantially the
form attached hereto as Exhibit B.
5.3 Registration Statement. The Registration Statement (as defined
below) registering the resale of the Shares by the Purchasers shall been filed
with and declared effective by the SEC.
5.4 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all respects.
5.
<PAGE> 6
6. Conditions to Company's Obligations. The Company's obligation to
issue and sell the shares of Common Stock at the Closing shall be subject to the
fulfillment or waiver as of the Closing Date of each of the following
conditions:
6.1 Representations and Warranties. The representations made by the
Purchasers in Section 4 hereof shall be true and correct in all material
respects when made, and shall be true and correct in all material respects on
the Closing Date with the same force and effect as if they had been made on and
as of such date.
6.2 Payment of Purchase Price. Each Purchaser shall have delivered to
the Company payment of the aggregate Purchase Price of the shares of Common
Stock to be purchased by each such Purchaser, in the amounts as set forth on
Schedule I hereto.
6.3 Blue Sky. The Company shall have obtained all necessary blue sky law
permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the shares of Common Stock.
6.4 Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Purchasers on or prior to the Closing Date
shall have been performed or complied with in all respects.
7. Affirmative Covenants of the Company. The Company hereby covenants
and agrees as follows:
7.1 Financial Information. The Company will mail the following reports
to each Purchaser until such Purchaser transfers, assigns or sells the shares of
Common Stock purchased by such Purchaser pursuant to this Agreement:
(a) Within one hundred twenty (120) days after the end of each
fiscal year, a copy of its Annual Report on Form 10-K.
(b) Within sixty (60) days after the end of the first, second
and third quarterly accounting periods of each fiscal year of the Company, a
copy of its Quarterly Report on Form 10-Q.
(c) Within ten (10) days after the Company files any Current
Report on Form 8-K with the SEC, such Current Report on Form 8-K.
7.2 Registration.
(a) No later than ten (10) days after the date hereof, the
Company shall prepare and file a registration statement on Form S-3 with the SEC
under the Securities Act to register the resale of the Shares by the Purchasers
(the "Registration Statement").
(b) The Company shall pay all Registration Expenses (as defined
below) in connection with any registration, qualification or compliance
hereunder, and each Purchaser shall pay all Selling Expenses (as defined below)
and other expenses that are not Registration Expenses relating to the Shares
resold by such Purchaser. "Registration Expenses" shall mean all expenses,
6.
<PAGE> 7
except for Selling Expenses, incurred by the Company in complying with the
registration provisions herein described, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses
and the expense of any special audits incident to or required by any such
registration. "Selling Expenses" means all selling commissions, underwriting
fees and stock transfer taxes applicable to the Shares and all fees and
disbursements of counsel for any Purchaser.
(c) In the case of the registration effected by the Company
pursuant to these registration provisions, the Company will use its best efforts
to keep such registration statement in effect until the earlier of (i) such date
as all of the shares of Common Stock covered by the registration statement have
been resold or (ii) such time as all of the shares of Common Stock purchased
hereunder by each Purchaser can be sold within a 90-day period without
compliance with the registration requirements of the Securities Act pursuant to
Rule 144 thereunder. Notwithstanding anything else in this Section 7.2, the
Company shall have the right, for a period not to exceed twenty (20) days in
duration which blackout periods may not occur more than twice in any 12 month
period (provided, however, that if the Company elects to limit itself to one
such blackout period per 12 month period, such period may be for thirty (30)
days in duration) and upon written notice to each of the Purchasers, to prohibit
the sale of the shares of Common Stock issued and sold to the Purchasers
hereunder pursuant to a registration statement effected under this Section 7.2,
in the event that the Company's Board of Directors, pursuant to advice of
counsel, deems it necessary, in light of a pending or potential corporate event
which has resulted in material nonpublic information not yet having been
disseminated by the Company or otherwise included in such registration
statement, to prohibit such sales until such information can be made public or
included in such registration statement. The Company shall within such twenty
(20) days (or, thirty (30) days, if applicable) add any necessary disclosure to
the registration statement and notify the Purchasers that they are no longer
prohibited from selling shares of Common Stock under such registration
statement.
With respect to any registration effected pursuant to this Section 7.2,
the parties further agree as follows:
(d) The Company shall prepare and file with the SEC such
amendments and supplements to any such registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement.
(e) The Company shall furnish to the Purchasers such numbers of
copies of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Common Stock
owned by the Purchasers.
(f) The Company shall bear all expenses other than underwriting
discounts and commissions incurred in connection with such registration, filing
or qualification, including (without limitation) all registration, filing and
qualification fees, printer's and accounting fees, fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one
counsel for the Purchasers.
7.
<PAGE> 8
(g) The parties agree to the following indemnification rights
and obligations:
(i) To the extent permitted by law, the Company shall
indemnify and hold harmless each Purchaser and each person, if any, who controls
such Purchaser within the meaning of the Securities Act or the 1934 Act against
any losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, or other federal or state law, insofar
as such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto; (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading; or (iii) any violation or alleged
violation by the Company of the Securities Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
or any state securities law. The Company will pay to each Purchaser or
controlling person any legal or other expenses reasonably incurred by them (such
payment to be made as incurred by such persons) in connection with investigating
or defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this paragraph (g)(i) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by the Purchaser or
controlling person thereof.
(ii) To the extent permitted by law, each Purchaser will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, and each person, if any, who
controls the Company within the meaning of the Securities Act, against any
losses, claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Securities Act, or other federal
or state law, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Purchaser expressly for use in connection with such registration; and such
Purchaser will pay any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this paragraph (g)(ii) (such payment to
be made as incurred by such persons), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this paragraph (g)(ii) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Purchaser,
which consent shall not be unreasonably withheld; provided that in no event
shall any indemnity under this paragraph exceed the gross proceeds from the
offering received by the Purchaser, unless such Violation by the Purchaser is
willful.
(iii) Promptly after receipt by an indemnified party
under this paragraph (g) of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this paragraph (g),
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying
8.
<PAGE> 9
party shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
paragraph (g), but the omission so to deliver written notice to the indemnifying
party will not relieve it of any liability that it may have to any indemnified
party otherwise than under this paragraph (g).
8. Restrictions on Transferability of Common Stock; Compliance with
Securities Act.
8.1 Restrictions On Transferability. The shares of Common Stock
purchased hereunder shall not be transferable in the absence of a registration
under the Securities Act or an exemption therefrom. The Company shall be
entitled to give stop transfer instructions to its transfer agent with respect
to the Common Stock in order to enforce the foregoing restrictions.
8.2 Transfer of Shares After Registration. Each Purchaser hereby
covenants with the Company not to make any sale of the Shares except either (i)
in accordance with the Registration Statement, in which case Purchaser covenants
to comply with the requirement under the Securities Act of delivering a current
prospectus, or (ii) in accordance with Rule 144, in which case Purchaser
covenants to comply with Rule 144.
8.3 Purchaser Information. Each Purchaser covenants that it will
promptly notify the Company of any changes in the information set forth in the
Registration Statement regarding such Purchaser or such Purchaser's "Plan of
Distribution."
9. Miscellaneous.
9.1 Waivers and Amendments. The terms of this Agreement may be waived or
amended with the written consent of the Company and each Purchaser.
9.2 Governing Law. This Agreement shall be governed in all respects by
and construed in accordance with the laws of the State of California without any
regard to conflicts of laws principles.
9.3 Survival. The representations, warranties, covenants and agreements
made in this Agreement shall survive any investigation made by the Company or
the Purchasers and the Closing.
9.4 Successors and Assigns. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties to this
9.
<PAGE> 10
Agreement. Notwithstanding the foregoing, no Purchaser shall assign this
Agreement without the prior written consent of the Company.
9.5 Entire Agreement. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
thereof.
9.6 Notices, etc. All notices and other communications required or
permitted under this Agreement shall be effective upon receipt and shall be in
writing and may be delivered in person, by telecopy, overnight delivery service
or registered or certified United States mail, addressed to the Company or the
Purchasers, as the case may be, at their respective addresses set forth at the
beginning of this Agreement or on Schedule I, or at such other address as the
Company or the Purchasers shall have furnished to the other party in writing.
All notices and other communications shall be effective upon the earlier of
actual receipt thereof by the person to whom notice is directed or (i) in the
case of notices and communications sent by personal delivery or telecopy, one
business day after such notice or communication arrives at the applicable
address or was successfully sent to the applicable telecopy number, (ii) in the
case of notices and communications sent by overnight delivery service, at noon
(local time) on the second business day following the day such notice or
communication was sent, and (iii) in the case of notices and communications sent
by United States mail, seven days after such notice or communication shall have
been deposited in the United States mail.
9.7 Severability of this Agreement. If any provision of this
Agreement shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
9.8 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an either an original or facsimile, but
all of which together shall constitute one instrument.
9.9 Further Assurances. Each party to this Agreement shall do
and perform or cause to be done and performed all such further acts and things
and shall execute and deliver all such other agreements, certificates,
instruments and documents as the other party hereto may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement and
the consummation of the transactions contemplated hereby.
9.10 Termination. In the event that the Closing shall not have
occurred on or before sixty (60) days from the date hereof, this Agreement shall
terminate at the close of business on such date.
9.11 Expenses. The Company and each such Purchaser shall bear
its own expenses incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby.
9.12 Effectiveness of Agreement. The Company's agreement to sell
the shares of Common Stock to the Purchasers pursuant to the terms of this
Agreement will only be effective upon acceptance of this Agreement by the
Company as evidenced by the Company's execution of this Agreement.
10.
<PAGE> 11
IN WITNESS WHEREOF, the Company and Purchasers have executed this
Common Stock Purchase Agreement as of the date first above written.
SHAMAN PHARMACEUTICALS, INC.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
11.
<PAGE> 12
IN WITNESS WHEREOF, the Company and Purchasers have executed this
Common Stock Purchase Agreement as of the date first above written.
VULCAN VENTURES, INC.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
12.
<PAGE> 13
IN WITNESS WHEREOF, the Company and Purchasers have executed this
Common Stock Purchase Agreement as of the date first above written.
GENESEE FUND LIMITED - PORTFOLIO B
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
ADVANTAGE FUND II LTD.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
13.
<PAGE> 14
IN WITNESS WHEREOF, the Company and Purchasers have executed this
Common Stock Purchase Agreement as of the date first above written.
BROWN SIMPSON STRATEGIC GROWTH FUND,
LTD.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
BROWN SIMPSON STRATEGIC GROWTH FUND,
L.P.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
14.
<PAGE> 15
IN WITNESS WHEREOF, the Company and Purchasers have executed this
Common Stock Purchase Agreement as of the date first above written.
THE TRAVELERS INSURANCE COMPANY
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
15.
<PAGE> 16
IN WITNESS WHEREOF, the Company and Purchasers have executed this
Common Stock Purchase Agreement as of the date first above written.
ODYSSEY FUND
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
16.
<PAGE> 17
IN WITNESS WHEREOF, the Company and Purchasers have executed this
Common Stock Purchase Agreement as of the date first above written.
JMJ TRUSTS PARTNERSHIP
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
17.
<PAGE> 18
IN WITNESS WHEREOF, the Company and Purchasers have executed this
Common Stock Purchase Agreement as of the date first above written.
JOHN D. GOLDMAN, CO-TRUSTEE,
THE JOHN AND MARCIA GOLDMAN TRUST
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
CHASE MANHATTAN BANK DELAWARE,
TRUSTEE JOHN D. GOLDMAN 1997
CHARITABLE LEAD TRUST
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
CHASE MANHATTAN BANK DELAWARE,
TRUSTEE JOHN D. GOLDMAN 1997 TRUST
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
18.
<PAGE> 19
IN WITNESS WHEREOF, the Company and Purchasers have executed this
Common Stock Purchase Agreement as of the date first above written.
DOUGLAS E. GOLDMAN, TRUSTEE, THE DOUGLAS
E. GOLDMAN REVOCABLE TRUST
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
CHASE MANHATTAN BANK DELAWARE, TRUSTEE
DOUGLAS E. GOLDMAN 1997 CHARITABLE LEAD
TRUST
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
CHASE MANHATTAN BANK DELAWARE, TRUSTEE
DOUGLAS E. GOLDMAN 1997 TRUST
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
19.
<PAGE> 20
IN WITNESS WHEREOF, the Company and Purchasers have executed this
Common Stock Purchase Agreement as of the date first above written.
ALEXANDER JOHNS
------------------------------------
PAUL MICHAEL KAESTLE
------------------------------------
20.
<PAGE> 21
IN WITNESS WHEREOF, the Company and Purchasers have executed this
Common Stock Purchase Agreement as of the date first above written.
AJ TRUSTS PARTNERSHIP
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
21.
<PAGE> 22
IN WITNESS WHEREOF, the Company and Purchasers have executed this
Common Stock Purchase Agreement as of the date first above written.
CARLYN R. MCCAFFREY AND R. TODD LANG,
CO-TRUSTEES RHODA GOLDMAN SUBTRUST NO. 2
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
CARLYN R. MCCAFFREY AND R. TODD LANG,
CO-TRUSTEES RHODA GOLDMAN SUBTRUST NO. 3
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
22.
<PAGE> 23
IN WITNESS WHEREOF, the Company and Purchasers have executed this
Common Stock Purchase Agreement as of the date first above written.
KATHLEEN O'BOYLE SCUTCHFIELD, TRUSTEE OF
THE KATHLEEN O'BOYLE SCUTCHFIELD REVOCABLE
TRUST UTA DTD 7/1/88
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
23.
<PAGE> 24
IN WITNESS WHEREOF, the Company and Purchasers have executed this
Common Stock Purchase Agreement as of the date first above written.
AWD LLC
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
24.
<PAGE> 25
IN WITNESS WHEREOF, the Company and Purchasers have executed this
Common Stock Purchase Agreement as of the date first above written.
SALLY DEFELICE CLEMENS
------------------------------------
JAMES X. CLEMENS
------------------------------------
25.
<PAGE> 26
IN WITNESS WHEREOF, the Company and Purchasers have executed this
Common Stock Purchase Agreement as of the date first above written.
LYSANDER, L.L.C.
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
PHALAROPE FOUNDATION
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
26.
<PAGE> 27
<TABLE>
<CAPTION>
Schedule I
SCHEDULE OF PURCHASERS
----------------------
Purchaser Number of Shares Purchase Price
--------- ---------------- --------------
<S> <C> <C>
Vulcan Ventures, Inc. 2,000,000 $3,000,000
Genesee Fund Limited - Portfolio B 666,666 999,999
Advantage Fund II Ltd. 333,333 499,999.50
The Travelers Insurance Company 333,333 499,999.50
Brown Simpson Asset Management L.P. 142,453 213,679.50
Brown Simpson Asset Management, Ltd. 264,556 396,834
Odyssey Fund 166,666 249,999
JMJ Trusts Partnership 113,800 170,700
John D. Goldman, Co-Trustee, 86,733 130,099.50
The John and Marcia Goldman Trust
Douglas E. Goldman, Trustee, The Douglas E. Goldman 86,733 130,099.50
Revocable Trust
Alexander Johns 40,000 60,000
Lysander, L.L.C 66,700 100,050
Phalarope Foundation 66,700 100,050
AJ Trusts Partnership 54,200 81,300
Carlyn R. McCaffrey and R. Todd Lang, 54,200 81,300
Co-Trustees Rhoda Goldman Subtrust No. 3
Carlyn R. McCaffrey and R. Todd Lang, 54,200 81,300
Co-Trustees Rhoda Goldman Subtrust No. 3
Chase Manhattan Bank Delaware, 54,200 81,300
Trustee John D. Goldman 1997 Charitable
Lead Trust
Chase Manhattan Bank Delaware, 54,200 81,300
Trustee Douglas E. Goldman 1997 Charitable
Lead Trust
Paul Michael Kaestle 40,000 60,000
Kathleen O'Boyle Scutchfield, 33,333 49,999.50
Trustee of the Kathleen O'Boyle Scutchfield
Revocable Trust UTA DTD 7/1/88
AWD LLC 32,533 48,799.50
Chase Manhattan Bank Delaware, 27,100 40,650
Trustee John D. Goldman 1997 Trust
Chase Manhattan Bank Delaware, 27,100 40,650
Trustee Douglas E. Goldman 1997 Trust
Sally DeFelice Clemens 6,666 9,999
James X. Clemens 6,666 9,999
---------- ----------
TOTAL 4,812,071 $7,218,106.50
</TABLE>
<PAGE> 28
EXHIBIT A
INSTRUCTION SHEET FOR PURCHASER, PURCHASER QUESTIONNAIRE AND
CERTIFICATES FOR PURCHASER
<PAGE> 29
EXHIBIT A-1
INSTRUCTION SHEET FOR PURCHASER
(to be read in conjunction with the entire
Common Stock Purchase Agreement)
A. Complete the following items in the Common Stock Purchase Agreement:
1. Provide the information regarding the Purchaser requested on the
signature page. The Agreement must be executed by an individual
authorized to bind the Purchaser.
2. Exhibit A-2 - Stock Certificate Questionnaire:
Provide the information requested by the Stock Certificate
Questionnaire;
3. Exhibits A-3 and A-4 - Certificate for Purchaser:
Provide the information requested by the Certificate for Individual
Purchasers or the Certificate for Corporate, Partnership, Trust,
Foundation and Joint Purchasers, as applicable.
4. Return the signed Purchase Agreement including the properly completed
Exhibit to:
J. Stephan Dolezalek, Esq.
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
B. Instructions regarding the transfer of funds for the purchase of shares
of Common Stock will be telecopied to the Purchaser at a later date.
<PAGE> 30
EXHIBIT A-2
SHAMAN PHARMACEUTICALS, INC.
STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 4.3 of the Agreement, please provide us with the
following information:
1. The exact name that the shares of
Common Stock are to be registered in
(this is the name that will appear on
the stock certificate(s)). You may
use a nominee name if appropriate:
--------------------------------------
2. The relationship between the Purchaser
of the shares of Common Stock and
the Registered Holder listed in response
to item 1 above:
--------------------------------------
3. The mailing address of the Registered
Holder listed in response to item
1 above:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
4. The Tax Identification Number of the Registered Holder listed in
response to item 1 above:
------------------------------------------------------------------------
<PAGE> 31
EXHIBIT A-3
SHAMAN PHARMACEUTICALS, INC.
CERTIFICATE FOR INDIVIDUAL PURCHASERS
If the investor is an individual Purchaser (or married couple)
the Purchaser must complete, date and sign this Certificate.
CERTIFICATE
I certify that the representations and responses below are true
and accurate:
In order for the Company to offer and sell the shares of Common
Stock in conformance with state and federal securities laws, the following
information must be obtained regarding your investor status. Please initial each
category applicable to you as an investor in the Company.
___ (1) A natural person whose net worth, either individually or
jointly with such person's spouse exceeds $1,000,000;
___ (2) A natural person who had an individual income in excess
of $200,000, or joint income with that person's spouse in excess of $300,000, in
1994 and 1995, and reasonably expects to have income reaching the same level in
1996;
___ (3) An executive officer or director of the Company.
Dated: ---------------------------------------------
--------------- Name(s) of Purchaser
---------------------------------------------
Signature
---------------------------------------------
Signature
<PAGE> 32
EXHIBIT A-4
SHAMAN PHARMACEUTICALS, INC.
CERTIFICATE FOR CORPORATE, PARTNERSHIP,
TRUST, FOUNDATION AND JOINT PURCHASERS
If the investor is a corporation, partnership, trust, pension
plan, foundation, joint purchaser (other than a married couple) or other entity,
an authorized officer, partner, or trustee must complete, date and sign this
Certificate.
CERTIFICATE
The undersigned certifies that the representations and responses
below are true and accurate:
(a) The investor has been duly formed and is validly existing and
has full power and authority to invest in the Company. The person signing on
behalf of the undersigned has the authority to execute and deliver the Common
Stock Purchase Agreement on behalf of the Purchaser and to take other actions
with respect thereto.
(b) Indicate the form of entity of the undersigned:
___ Limited Partnership
___ General Partnership
___ Corporation
___ Revocable Trust (identify each grantor and indicate
under what circumstances the trust is revocable by
the grantor): -----------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
(Continue on a separate piece of paper, if
necessary.)
___ Other Type of Trust (indicate type of trust and,
for trusts other than pension trusts, name the
grantors and beneficiaries): ---------------------
---------------------------------------------------
---------------------------------------------------
1.
<PAGE> 33
---------------------------------------------------
---------------------------------------------------
(Continue on a separate piece of paper, if
necessary.)
___ Other form of organization (indicate form of
organization (___________________________).
(c) Indicate the approximate date the undersigned entity was
formed: .
(d) In order for the Company to offer and sell the shares of
Common Stock in conformance with state and federal securities laws, the
following information must be obtained regarding your investor status. Please
initial each category applicable to you as an investor in the Company.
___ 1. A bank as defined in Section 3(a)(2) of the Securities
Act, or any savings and loan association or other institution as
defined in Section 3(a)(5)(A) of the Securities Act whether
acting in its individual or fiduciary capacity;
___ 2. A broker or dealer registered pursuant to Section 15 of
the Securities 1934 Act of 1934;
___ 3. An insurance company as defined in Section 2(13) of the
securities Act;
___ 4. An investment company registered under the Investment
Company Act of 1940 or a business development company as defined
in Section 2(a)(48) of that Act;
___ 5. A Small Business Investment Company licensed by the U.S.
Small Business Administration under Section 301(c) or (d) of the
Small Business Investment Act of 1958;
___ 6. A plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a
state or its political subdivisions, for the benefit of its
employees, if such plan has total assets in excess of
$5,000,000;
___ 7. An employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in
Section 3(21) of such act, which is either a bank, savings and
loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in
excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited
investors;
<PAGE> 34
___ 8. A private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
___ 9. An organization described in Section 501(c)(3) of the
Internal Revenue Code, a corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific
purpose of acquiring the Shares, with total assets in excess of
$5,000,000;
___ 10. A trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the Shares, whose
purchase is directed by a sophisticated person who has such
knowledge and experience in financial and business matters that
such person is capable of evaluating the merits and risks of
investing in the Company;
___ 11. An entity in which all of the equity owners qualify under
any of the above subparagraphs. If the undersigned belongs to
this investor category only, list the equity owners of the
undersigned, and the investor category which each such equity
owner satisfies:
___
___
___
(Continue on a separate piece of paper, if necessary.)
Dated: _______________________, 19___
- -----------------------------------------------
Name of investor
- -----------------------------------------------
Signature and title of authorized
officer, partner or trustee
