<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
[ ] Filed by the registrant
[ ] Filed by a party other than the registrant
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Shaman Pharmaceuticals, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
SHAMAN PHARMACEUTICALS, INC.
213 EAST GRAND AVENUE
SOUTH SAN FRANCISCO, CALIFORNIA 94080
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders
("Special Meeting") of Shaman Pharmaceuticals, Inc. ("Shaman Pharmaceuticals" or
the "Company"), which will be held at 9:00 A.M. Pacific Time on Wednesday, March
24, 1999 at The Embassy Suites, 250 Gateway Boulevard, South San Francisco,
California 94080.
At the Special Meeting, you will be asked to consider and vote upon the
following proposals:
(i) to approve the transfer of certain designated assets of Shaman
Pharmaceuticals to Shaman Botanicals, Inc. ("Shaman Botanicals") in
exchange for shares of Series A Preferred Stock of Shaman Botanicals; and
(ii) to transact such other business as may properly come before the
Special Meeting and any adjournment or postponement thereof.
As you are aware, during the past few months, Shaman Pharmaceuticals has
undergone unprecedented changes. We began the year filled with the optimism of
obtaining positive Phase III results in what was to have been the single pivotal
trial necessary for us to pursue a New Drug Application ("NDA") for our lead
pharmaceutical product candidate, SP-303/Provir, for the treatment of diarrhea
in people with AIDS. However, our optimism quickly turned to surprise and
disappointment following our pre-NDA meeting with the U.S. Food and Drug
Administration in late January. At this meeting, we were advised that although
there were no particular safety issues with SP-303/Provir, and that the drug
appeared to work, particularly in more severely ill patients, more data would
likely be necessary for a successful NDA filing. Hence, we were faced with the
potential need to conduct additional clinical trials, and with the delays and
additional costs associated with doing so. And, we realized, even if we
completed additional studies, we would still be faced with the uncertainty and
risk of further changes in regulatory opinion. As we faced these obstacles to
bringing our first pharmaceutical product to market, the near-term value of our
pharmaceutical business seemed significantly less attractive.
These changes occurred against a backdrop of an increasingly difficult
financing environment in the biotechnology industry. For many investors, the
biotechnology industry has fallen out of favor, with its slower return on
investment paling in comparison to the quick and substantial returns available
in other industries. Business publications have been filled with stories about
the increasingly hostile and quickly dwindling fund-raising environment for
biotechnology companies. Add to this Shaman's own challenge of trying to raise
funds with a low stock price and a concern about further dilution for our
current shareholders. Further, not surprisingly, the value of our on-going
corporate partnering negotiations were also compromised by this course of
events.
Given all of the factors above, as we faced the risk, the potential delay
in time, and the additional potential costs to bring our first pharmaceutical
product to market, we had to stop and take an honest look at our future. How
could we maximize the value from our technology platform and the return to our
existing stockholders with the lowest amount of risk and dilution in the
shortest period of time?
As we surveyed the other assets existing in the Company, we immediately
looked to the business plan already in existence for Shaman Botanicals, our
private, wholly-owned subsidiary focused on the development and marketing of
botanical dietary supplements. Because our plan will include seeking outside
funding in the near term, we feel we must achieve as much initial value as
possible in Shaman Botanicals so that our Shaman Pharmaceuticals stockholders
can retain as much ownership as possible. By comparison with pharmaceuticals,
the dietary supplement industry currently is a $4 billion, high growth industry,
with lower regulatory controls and risk, and with a potential for nearer-term
product introduction and revenue.
<PAGE> 3
In order to provide for the greatest chance for success of our new venture,
we believe that its near-term operations will better thrive in the simpler
structure of a private company, unencumbered by the costs and distractions of
being a public entity. By so doing, we can better focus our limited number of
employees on the task at hand -- to quickly bring our first botanical products
to market, in a market with completely different regulations, channels and
culture from the pharmaceutical market. Further, as an entity operationally and
financially separate from pharmaceuticals with a sole focus on botanicals,
Shaman Botanicals' existence as a private company will allow for simpler
negotiations in corporate partnering, for better coverage and valuation by the
specific analysts in our new dietary supplement industry, and for the
possibility of Shaman Botanicals one day becoming a publicly-traded company.
Our over-riding interest is in building value and gaining liquidity for our
Shaman Pharmaceuticals stockholders. Currently, as a wholly-owned subsidiary,
100% of the value created in Shaman Botanicals flows back to our Shaman
Pharmaceuticals stockholders. However, we will need to raise outside funds in
the near term to support our ongoing Shaman Botanicals business. In such a
situation, to maximize the value of the ownership retained by our shareholders,
we must first seek to increase the valuation of Shaman Botanicals prior to such
outside funding. The most expeditious way to do this is through the transfer of
non-pharmaceutical assets from Shaman Pharmaceuticals to Shaman Botanicals.
Hence, we ask you now to support the transfer of critical assets from Shaman
Pharmaceuticals to Shaman Botanicals in order to create an environment of
success -- for our subsidiary and, therefore, for our Shaman Pharmaceuticals
stockholders.
We will of course leave in Shaman Pharmaceuticals those assets necessary or
appropriate to permit the outlicensing of our current pharmaceutical programs
and payment of its liabilities.
Overall, by combining the botanicals business opportunity with the ongoing
opportunity to outlicense our existing pharmaceutical assets, we feel this
business model will provide greater value to our shareholders than maintaining
our focus solely on pharmaceuticals. This decision was difficult, and was taken
with careful consideration, much discussion and analysis. We thank you for your
support as we transition to our new business model.
The enclosed Proxy Statement more fully describes the details of the
business to be conducted at the Special Meeting. After reading the Proxy
Statement, please mark, date, sign and return the enclosed proxy card in the
accompanying reply envelope as soon as possible. If you attend the Special
Meeting and vote by ballot, your proxy will be automatically revoked and only
your vote at the Special Meeting will be counted. YOUR SHARES CANNOT BE VOTED
UNLESS YOU MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY OR ATTEND THE SPECIAL
MEETING AND VOTE IN PERSON.
After careful consideration, the Company's Board of Directors has
unanimously approved the proposals and recommends that you vote IN FAVOR OF each
such proposal.
We look forward to seeing you at the Special Meeting.
Sincerely,
/s/ Lisa A. Conte
-------------------------------------
Lisa A. Conte
President and Chief Executive Officer
February 24, 1999
IMPORTANT
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE
ACCOMPANYING POSTAGE-PAID RETURN ENVELOPE SO THAT, IF YOU ARE UNABLE TO ATTEND
THE SPECIAL MEETING, YOUR SHARES MAY BE VOTED.
<PAGE> 4
SHAMAN PHARMACEUTICALS, INC.
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 24, 1999
------------------------
TO THE STOCKHOLDERS OF SHAMAN PHARMACEUTICALS, INC.:
NOTICE IS HEREBY GIVEN that the Special Meeting of Stockholders ("Special
Meeting") of Shaman Pharmaceuticals, Inc., a Delaware corporation ("Shaman
Pharmaceuticals" or the "Company"), will be held at 9:00 A.M. Pacific Time on
Wednesday, March 24, 1999 at The Embassy Suites, 250 Gateway Boulevard, South
San Francisco, California 94080, for the following purposes:
1. to approve the transfer of certain designated assets of Shaman
Pharmaceuticals to Shaman Botanicals, Inc. ("Shaman Botanicals") in
exchange for shares of Series A Preferred Stock of Shaman Botanicals;
and
2. to transact such other business as may properly come before the Special
Meeting and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The record date for determining those stockholders entitled to notice of,
and to vote at, the Special Meeting and any adjournment thereof is February 9,
1999. The stock transfer books will not be closed between the record date and
the date of the Special Meeting. A list of the stockholders entitled to vote at
the Special Meeting will be available for inspection at the Company's offices,
213 East Grand Avenue, South San Francisco, California 94080, for a period of 10
days prior to the Special Meeting.
All stockholders are cordially invited to attend the Special Meeting in
person. Whether or not you plan to attend, please carefully read the
accompanying Proxy Statement, which describes the matters to be voted upon at
the Special Meeting, and mark, date, sign and return the enclosed proxy card in
the reply envelope provided. Should you receive more than one proxy because your
shares are registered in different names and addresses, each proxy should be
returned to ensure that all your shares will be voted. You may revoke your proxy
at any time prior to the Special Meeting. If you attend the Special Meeting and
vote by ballot, your proxy vote will be revoked automatically and only your vote
at the Special Meeting will be counted. The prompt return of your proxy card
will assist us in preparing for the Special Meeting.
Sincerely,
/s/ Lisa A. Conte
-------------------------------------
Lisa A. Conte
President and Chief Executive Officer
South San Francisco, California
February 24, 1999
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY. IF YOU DO NOT EXPECT TO ATTEND IN
PERSON, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE
ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE.
<PAGE> 5
SHAMAN PHARMACEUTICALS, INC.
213 EAST GRAND AVENUE
SOUTH SAN FRANCISCO, CALIFORNIA 94080
------------------------
PROXY STATEMENT
------------------------
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 24, 1999
GENERAL INFORMATION FOR STOCKHOLDERS
The enclosed proxy ("Proxy") is solicited on behalf of the Board of
Directors (the "Board") of Shaman Pharmaceuticals, Inc., a Delaware corporation
("Shaman Pharmaceuticals" or the "Company"), for use at a Special Meeting of
Stockholders (the "Special Meeting") to be held at 9:00 A.M. Pacific Time on
Wednesday, March 24, 1999, at The Embassy Suites, 250 Gateway Boulevard, South
San Francisco, California 94080, and at any adjournment thereof.
This Proxy Statement and the accompanying form of Proxy are to be first
mailed to the stockholders entitled to vote at the Special Meeting on or about
February 24, 1999.
RECORD DATE AND VOTING
The specific proposals to be considered and acted upon at the Special
Meeting are summarized in the accompanying Notice and are described in more
detail in this Proxy Statement. Stockholders of record at the close of business
on February 9, 1999 are entitled to notice of, and to vote at, the Special
Meeting. As of the close of business on such date, there were 32,150,975 shares
of the Company's Common Stock, par value $0.001 per share (the "Common Stock"),
outstanding and entitled to vote, held by stockholders of record. In addition,
400,000 shares of the Company's Series A Preferred Stock were outstanding and
entitled to vote and held by one stockholder of record, 115,958 shares of Series
C Preferred Stock were outstanding and entitled to vote and held by 21
stockholders of record, and 2,869 shares of Series D Preferred Stock were
outstanding and entitled to vote and held by six stockholders of record (all of
the Series A Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock is herein referred to collectively as the "Preferred Stock"). Each holder
of Common Stock as of the record date is entitled to one vote for each share of
Common Stock held by such stockholder as of the record date. Each holder of
Preferred Stock as of the record date is entitled to one vote for each share of
Common Stock into which such Preferred Stock is convertible as of the record
date. As of the record date, one share of Series A Preferred Stock was
convertible into one share of Common Stock, one share of Series C Preferred
Stock was convertible into six shares of Common Stock and one share of Series D
Preferred Stock was convertible into one share of Common Stock.
All matters submitted for stockholder approval at this Special Meeting will
be decided by the affirmative vote of a majority of shares outstanding and
entitled to vote on such matters. If a choice as to the matters coming before
the Special Meeting has been specified by a stockholder on the Proxy, the shares
will be voted accordingly. If no contrary instructions are given, the shares
will be voted IN FAVOR OF the approval of all proposals described in the
accompanying Notice of Special Meeting and in this Proxy Statement. All votes
will be tabulated by the inspector of election appointed for the meeting, who
will separately tabulate affirmative and negative votes, abstentions and broker
non-votes (i.e., the submission of a Proxy by a broker or nominee specifically
indicating the lack of discretionary authority to vote on the matter).
Abstentions and broker non-votes are counted as present for purposes of
determining the presence or absence of a quorum for the transaction of business.
Because approval of Proposal 1 will require the affirmative vote of a majority
of the Company's shares outstanding on the record date, both abstentions and
broker non-votes will have the same effect as negative votes against the
approval of Proposal 1.
Any stockholder or stockholder's representative who, because of a
disability, may need special assistance or accommodation to allow him or her to
participate at the Special Meeting may request reasonable assistance
<PAGE> 6
or accommodation from the Company by contacting Investor Relations in writing at
213 East Grand Avenue, South San Francisco, California 94080 or by telephone at
(650) 952-7070. To provide the Company sufficient time to arrange for reasonable
assistance, please submit such requests by March 15, 1999.
REVOCABILITY OF PROXIES
Any stockholder giving a Proxy pursuant to this solicitation may revoke it
at any time prior to its exercise by filing with the Secretary of the Company at
its principal executive offices at 213 East Grand Avenue, South San Francisco,
California 94080, a written notice of such revocation or a duly executed Proxy
bearing a later date, or by attending the Special Meeting and voting in person.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of the Notice of Special Meeting,
this Proxy Statement, the Proxy and any additional solicitation materials
furnished to stockholders. Copies of solicitation materials will be furnished to
brokerage houses, fiduciaries and custodians holding shares in their names that
are beneficially owned by others so that they may forward this solicitation
material to such beneficial owners. The Company has engaged Corporate Investor
Communications, Inc. ("CIC") to provide routine advice and services for Proxy
solicitation. CIC will receive approximately $6,500 from the Company for such
advice and services, plus reimbursement of costs incurred in forwarding the
solicitation materials to the beneficial owners of Common Stock and Series C
Preferred Stock. To assure that a quorum will be present in person or by proxy
at the Special Meeting, it may be necessary for CIC, certain officers,
directors, employees or other agents of the Company to solicit proxies by
telephone, facsimile or other means or in person. Except with respect to CIC,
the Company will not compensate such individuals for any such services. Except
as described above, the Company does not presently intend to solicit proxies
other than by mail.
IMPORTANT
Please mark, date, sign and return the enclosed Proxy in the accompanying
postage-prepaid, return envelope as soon as possible so that, if you are unable
to attend the Special Meeting, your shares may be voted.
2
<PAGE> 7
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
PROPOSAL ONE
TRANSFER OF CERTAIN DESIGNATED ASSETS
OF SHAMAN PHARMACEUTICALS, INC. TO
SHAMAN BOTANICALS, INC. IN EXCHANGE FOR SHARES OF
SERIES A PREFERRED STOCK OF SHAMAN BOTANICALS, INC.
GENERAL INFORMATION ABOUT THE TRANSACTION
As early as 1995, but more earnestly in 1998, Shaman Pharmaceuticals began
to explore the possibility of maximizing its existing assets by looking for uses
of those assets outside its traditional pharmaceutical business. Based upon its
extensive library of plants with a history of medicinal use, some of which were
not appropriate for pharmaceutical development, the Company began to explore the
potential of developing these plants into dietary supplements. In December 1998,
Shaman Botanicals, Inc. ("Shaman Botanicals") was incorporated as a private,
wholly-owned subsidiary of Shaman Pharmaceuticals, with the mission of
discovering, developing, and marketing botanical dietary supplements derived
from tropical plant sources. As the business plan for Shaman Botanicals
developed, it became clear that access to certain of the assets of Shaman
Pharmaceuticals could provide a substantial benefit to Shaman Botanicals.
The Board of Directors of the Company has proposed that Shaman
Pharmaceuticals transfer certain specified assets to Shaman Botanicals (the
"Proposed Transaction") in order to maximize the potential of Shaman Botanicals.
As more fully described below, the Proposed Transaction would transfer these
assets to Shaman Botanicals in exchange for shares of the Series A Preferred
Stock of Shaman Botanicals having a fair market value equal to the net book
value of the assets transferred.
INFORMATION ABOUT SHAMAN PHARMACEUTICALS, INC.
GENERAL
Shaman Pharmaceuticals was incorporated in the State of California in May
1989 and reincorporated in the State of Delaware in January 1993. The Company's
principal executive offices are currently located at 213 East Grand Avenue,
South San Francisco, California, 94080-4812, and its telephone number is (650)
952-7070.
Shaman Pharmaceuticals has been focused on discovering and developing novel
pharmaceutical products for major human diseases by isolating and optimizing
active compounds found in tropical plants with a history of medicinal use.
Shaman believed its plant-based discovery techniques could accelerate
traditional drug discovery time frames as well as lead to safe and effective
pharmaceuticals. The Company has conducted human clinical trials with three lead
product candidates -- SP-303/Provir (Phase III/II), nikkomycin Z (Phase I), and
SP-134101 (Phase I) -- targeting five indications.
Of these, the most advanced, SP-303/Provir, completed a positive Phase III
human clinical trial for the treatment of diarrhea in people with AIDS in
December 1998. In January 1998, the U. S. Food and Drug Administration ("FDA")
advised the Company that upon completion, data from Shaman's single Phase III
study along with corroborative information from a previously completed positive
Phase II trial could serve as the basis for the submission of a New Drug
Application ("NDA"). In Phase II human clinical trials, the product candidate,
SP-303/Provir, was shown to provide a significant treatment effect for diarrhea
in people with AIDS. In May 1998, the Company announced that the product
candidate had been granted a "fast track product" designation by the FDA.
However, the Company was surprised by subsequent advice from the FDA in January
1999 which led the Company to believe it did not have adequate data for a
successful NDA package in 1999. Given the time delay and additional investment
necessary to complete additional trials, the Company determined it could not
meet these requirements. The Company now intends to outlicense worldwide
marketing rights to SP-303/Provir. Further, it has discontinued all
pharmaceutical development,
3
<PAGE> 8
manufacturing, and marketing activities, and plans to outlicense or sell all of
its pharmaceutical assets. The Company will now focus its efforts on its Shaman
Botanicals subsidiary.
CLINICAL AND RESEARCH PROGRAMS AVAILABLE FOR OUTLICENSE OR SALE
The following table describes the major therapeutic areas in which the
Company has had active product development and research. Efforts will be made to
outlicense all of these current pharmaceutical programs:
<TABLE>
<CAPTION>
PRODUCT INDICATION STATUS COMMERCIAL RIGHTS
------- ------------------------ --------------------------------------- -------------------
<S> <C> <C> <C>
Provir AIDS-associated diarrhea Completed Phase III study in Q4, 1998. Shaman
Completed a Phase II efficacy study in
Q4, 1997.
Provir Watery diarrhea Completed two Phase II efficacy trials Shaman
in Q3, 1998. Completed initial Phase II
efficacy studies in 1996 and 1997.
Provir Pediatric diarrhea Formulation to be developed. Shaman
Nikkomycin Z Endemic mycoses Completed Phase I study in Q2, 1997. Shaman
Nikkomycin Z and Azole-resistant Candida Initiation of clinical program pending Shaman
Azoles pre-clinical development by Pfizer.
SP-134101 Type II Diabetes Completed Phase I study in Q1, 1998. Shaman
Oral Type II Diabetes Preclinical, 27 compounds. Ono; Lipha/Merck;
antihyperglycemic and Shaman. Shaman
compounds receives royalties
on sales outside
the U.S. and profit
sharing in the U.S.
</TABLE>
The Company is currently in negotiations with Lipha s.a., a wholly-owned
subsidiary of Merck KGaA, Darmstadt, Germany ("Lipha/Merck"), for the
discontinuation of their research agreement. There will be no further research
payments from Lipha and the Company anticipates there will be some continuation
of payment for development costs, milestone and royalty payments, for the
compounds that have already been discovered if any of these product candidates
do continue into development and clinical trials, or commercialization, based on
Lipha's efforts.
EMPLOYEES
On February 1, 1999, the Company announced it would immediately cease
operations in its pharmaceuticals business and would downsize by approximately
60 people, or 65% of its workforce. As of February 8, 1999, the Company had 36
employees. Of these employees, 12 are dedicated to closing down the Company's
pharmaceutical activities and will remain employed only until such activities
are accomplished. The remaining employees will be offered positions at Shaman
Botanicals.
COMPLETE DESCRIPTION OF THE COMPANY
A complete description of the Company as of December 31, 1997 is set forth
in its Annual Report on Form 10-K/A for the year ended December 31, 1997, as
filed with the Securities and Exchange Commission. Additional information as of
September 30, 1998 is set forth in the Company's Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 1998, as filed with the Securities
and Exchange Commission. The status of the Company and its business have
substantially changed since the date of such Reports, and statements in such
Reports are modified or superseded, for purposes hereof, to the extent that a
statement contained in this Proxy Statement modifies or supersedes such
statements.
4
<PAGE> 9
RECENT DEVELOPMENTS
In addition to the events discussed in this Proxy Statement, the following
significant events occurred at Shaman Pharmaceuticals since September 30, 1998:
- On December 10, 1998, Shaman Pharmaceuticals issued an aggregate of 4,784
shares of the Company's Series D Convertible Preferred Stock in exchange
for the cancelation of an aggregate of $4.8 million (including accrued
interest) of the Company's Senior Subordinated Convertible Notes due
August 29, 2000. The holders of shares of Series D Preferred Stock are
entitled to cumulative dividends of $55 per share per annum when and if
declared by the Board of Directors. The first quarterly dividend payment
was due on February 1, 1999. A full description of the Series D
Convertible Preferred Stock is included in the Company's Special Report
on Form 8-K filed with the SEC on December 11, 1998.
- Effective with the close of business on February 1, 1999, the Company's
Common Stock was delisted from The Nasdaq National Market and moved to
The Nasdaq Bulletin Board effective February 2, 1999.
- The delisting of the Company's Common Stock from The Nasdaq National
Market constituted an Optional Redemption Event (as defined in the
Company's Certificate of Designation of Series D Preferred Stock) for the
Company's Series D Preferred Stock. In connection therewith, on February
4, 1999, the Company issued a Control Notice (as defined in the Company's
Certificate of Designation of Series D Preferred Stock) that prevented
the redemption of the Series D Preferred Stock. This Control Notice will
remain in effect for as long as the Company is not listed on any of The
Nasdaq National Market, The Nasdaq SmallCap Market, the American Stock
Exchange or the New York Stock Exchange. Delivery of the Control Notice
had the effect of increasing the annual dividend to $180 per share and
adjusting the conversion price of the Series D Preferred Stock to 80% of
the amount the conversion price would otherwise be without regard to any
adjustments under the Certificate of Designation of Series D Preferred
Stock.
Unaudited balance sheet data for the Company at December 31, 1998, is as
follows:
<TABLE>
<CAPTION>
(UNAUDITED,
IN THOUSANDS)
-------------
<S> <C>
Cash, cash equivalents and short-term investments........... $ 9,165
Current assets.............................................. 9,897
Total assets...................................... 13,139
Current liabilities......................................... 8,726
Long-term liabilities....................................... 2,303
Senior Convertible Notes.................................... --
Capital account............................................. 151,997
Accumulated deficit......................................... (149,887)
Total stockholders' equity........................ 2,110
</TABLE>
As of December 31, 1998, the Company had cash, cash equivalents and
short-term investments of approximately $9.2 million. Unless the Company is
successful in its efforts to sell or outlicense the clinical research programs,
the Company's cash resources will be substantially used in satisfying its
current liabilities.
If the Company is unable to secure a significant source of financing, the
Company's independent auditors are likely to issue an audit opinion on the
Company's consolidated financial statement as of and for the year ended December
31, 1998 which contains explanatory language for an uncertainty regarding the
Company's ability to continue as a going concern.
5
<PAGE> 10
RESTRUCTURING PLAN
On February 1, 1999, the Company announced and initiated implementation of
a restructuring plan which will result in the closing down of the operations of
its pharmaceutical business. The Company will focus its efforts on the
operations of its botanicals business through Shaman Botanicals. The
restructuring plan includes the following:
- Cessation of the Company's pharmaceutical research and related
operations;
- Sale or outlicensing of all of the Company's current pharmaceutical
research programs;
- Reduction in force of approximately 60 of the Company's employees, or 65%
of its workforce, which occurred on February 1, 1999;
- Dedication of 12 employees to closing down the Company's pharmaceutical
operations, which employees will be terminated upon completion of the
restructuring activities;
- Termination of the Company's current research and development agreement
with Lipha/Merck, which was the only ongoing research and development
agreement in place at February 1, 1999;
- Settlement of the Company's outstanding long-term equipment financing
obligations;
- Sale or disposal of all of the Company's fixed assets that are not
transferred to Shaman Botanicals; and
- Sublease or termination of a significant portion of the Company's
facility leases.
The Company is in the process of determining an estimate of the costs of
the restructuring that will be recorded in the first quarter of 1999. The
Company expects that such costs will range from $10,000,000 to $15,000,000.
INFORMATION ABOUT SHAMAN BOTANICALS, INC.
GENERAL
Shaman Botanicals was incorporated in the State of Delaware in December
1998. Shaman Botanicals is a private, wholly-owned subsidiary of Shaman
Pharmaceuticals. Shaman Botanicals' principal executive offices are currently
located at 213 East Grand Avenue, South San Francisco, California, 94080-4812,
and its telephone number is (650) 952-7070.
Shaman Botanicals was formed to discover, develop and market botanical
dietary supplements derived from tropical plant sources. Shaman Botanicals has
identified four proprietary near-term product opportunities currently existing
within Shaman Pharmaceuticals, but which are not appropriate for pharmaceutical
development. In addition, Shaman Botanicals has identified at least five key
market categories with significant commercial potential. Plants with a
documented ethnomedical history of use in each of these market categories have
been identified in the Shaman Pharmaceuticals library and database of
botanicals. With a staff of approximately 24 individuals, Shaman Botanicals
intends to pursue development and marketing of these plants as dietary
supplements. Shaman Botanicals intends to commercialize these product candidates
through existing retail channels, including mass market (food/drug/mass stores),
multi-level marketing and the Internet. Where appropriate, Shaman Botanicals
will seek specific partners by channel to maximize the commercial opportunity.
BUSINESS AND GOVERNMENT REGULATION
"Botanical dietary supplement" ("BDS") is a specific term meaning "an herb
or other botanical or a concentrate, constituent, extract or combination of any
botanical that is intended for ingestion as a tablet, capsule, or in liquid form
and is not represented for use as a conventional food or as a sole item of a
meal or the diet and is labeled as a dietary supplement." This definition comes
from the 1994 Dietary Supplement Health and Education Act ("DSHEA"), which
specifically outlines how botanical products are to be regulated and treated.
Some commonly known BDS products include ginseng, gingko biloba, St. John's wort
and echinacea. This statutory definition also differentiates BDSs, vitamins and
minerals from conventional
6
<PAGE> 11
foods and food additives. Under the law, botanicals can be sold as dietary
supplements with claims as to their effect on the structure or function of the
human body, providing the manufacturer has adequate documentation for the claim.
BDSs are under the purview of the FDA. However, some BDS products require no
review or approval to enter the market (see ODIs below), while others need only
submit safety data prior to marketing (see NDIs below). Hence, the oversight by
the FDA in the BDS industry is much less rigorous than in the pharmaceutical
industry, allowing for much faster market introduction.
One of the unique provisions of DSHEA is the distinction between new
dietary ingredients ("NDI") and old dietary ingredients ("ODI"), which had a
history of being marketed in the United States prior to DSHEA. These products
have been "grandfathered" under the law, hence allowing them to be
commercialized without FDA review. Shaman Botanicals, as part of its exclusive
license with Shaman Pharmaceuticals, has access to numerous botanical candidates
that are ODIs, including several near-term product candidates. Shaman Botanicals
also has numerous NDI candidates.
THE MARKET
In 1997, the U.S. dietary supplement market was $12.9 billion. Of this,
nearly $4.0 billion were herbal or botanical dietary supplements. In 1998, this
number is projected to reach $5 billion, with a compounded yearly growth rate of
15 to 25%. In 1997, 24% of U.S. households reported using BDSs. The use of these
products is continuing to expand based upon the aging of the population,
increasing scientific evidence and acceptance by the conventional medical
establishment, and the recent entrance of powerful consumer companies which
provide greater product confidence, while growing the base of consumer users.
BACKGROUND ON SHAMAN BOTANICALS
Shaman Botanicals will initiate operations by virtue of exclusive access to
near-term product candidates and the botanical library of Shaman
Pharmaceuticals. This library of plants has been built through the knowledge and
expertise of Shaman's ethnobotanist and physician teams who conduct first-hand
field investigation in tropical areas with traditional healers to identify
effective traditional medicinal uses of plants. Because these plants reflect the
previously untapped plant diversity of the rain forests, many represent novel
botanical product candidates that have the opportunity to attain proprietary
positioning. This proprietary position, and hence differentiation, may result
from the unique ethnobotanical method of discovery, knowledge of the traditional
method of preparation and use due to first-hand field experience, patents or
standardization of product, quality scientific/clinical testing and sustainable
supply and sourcing.
POTENTIAL PRODUCTS
Shaman Botanicals has identified four proprietary near-term product
opportunities currently existing within the Shaman Pharmaceuticals botanical
library, but which are not economically appropriate for pharmaceutical
development. All of these near-term product candidates are aimed at providing
health benefits and include a proprietary, enhanced formulation of one of the
world's leading phytomedicines; a gastrointestinal product candidate to treat a
currently unmet medical need; a product candidate made from a unique combination
of plant materials to support normal bowel function; and a topical herpes/cold
sore product candidate. All of these product candidates are based on plant
material on the ODI list, allowing for rapid product introduction without
regulatory review.
For future products, Shaman Botanicals has identified five key market
categories based upon their significant commercial potential and opportunity for
providing acute symptomatic relief. These categories include: energy boosters,
aphrodisiacs, sleeping aids, anti-anxiety or calming aids, and weight loss or
appetite suppressants. Plants with a documented ethnomedical history of use in
each of these market categories have been identified in the Shaman
Pharmaceuticals library and database of botanicals.
To meet the fast-paced environment of the dietary supplement market, Shaman
Botanicals has created a model for product development that would allow for a
new product introduction every three to six months, with as many as nine novel
product introductions within the first two years of operation. Shaman Botanicals
is preparing to launch its first product as early as the second quarter of 1999.
7
<PAGE> 12
RESEARCH AND DEVELOPMENT
Shaman Botanicals intends to set its own standard for quality and product
standardization. This will include safety, and where appropriate, human clinical
testing of product candidates.
COMMERCIALIZATION, COMPETITION AND CHANNELS OF DISTRIBUTION
Shaman Botanicals intends to commercialize its potential products through
existing retail channels, including mass market (food/drug/mass stores),
multi-level marketing and the Internet. Where appropriate, Shaman Botanicals
will seek specific partners by channel to maximize the commercial opportunity,
while retaining the opportunity to directly access specific market opportunities
through the Internet. For Shaman Botanicals, each of the established players in
this market also represents a potential marketing partner.
Competition in the BDS market differs by channel of distribution.
Historically, competition within the health food channel was fragmented and made
up of over 200 small, mostly privately held companies. More recently, several
large pharmaceutical company-owned consumer products companies have opened up
the mass-market channel, including American Home Products Corp. with its
Centrum(R) Herbal brand, Bayer Group's introduction of botanical ingredients in
their One-A-Day(R) line, and Warner-Lambert Company's introduction of its
Quanterra(R) brand. Overall, the entrance of these companies is expected to
broaden consumer acceptance of botanical products and grow the total BDS market,
with mass market becoming the largest, fastest-growing channel. Shaman
Botanicals plans to seek a premier partner with extensive experience to enter
this key channel. Shaman Botanicals believes that a partner in this channel will
value the quality and scientific rigor behind Shaman Botanicals' product
candidates.
In the multi-level marketing channel, key players include Shaklee
Corporation, NuSkin Enterprises, Inc. and Usana, Inc. Again, Shaman Botanicals
intends to partner with a top-tier partner in this channel. Shaman Botanicals
believes that partners in this channel will appreciate the novel product
candidates Shaman Botanicals has to offer and the compelling stories of their
rainforest and traditional use origins.
The Internet channel does not currently have an established leader,
although several web sites exist, including AllHerb.com and Greentree.com.
Shaman Botanicals intends to start its own site within this channel, with the
unique attraction of it own, novel products available on the site. The Internet
domain name "ShamanBotanicals.com" has been reserved.
A final channel opportunity is specialty or niche retail. Building on the
recognition of the Shaman Pharmaceuticals name and Shaman Pharmaceuticals'
unique story, Shaman Botanicals believes that it could partner and co-brand
specialty products with high-end retailers such as Eddie Bauer, the Body Shop or
Disney.
Regardless of the channel, since Shaman Botanicals intends to seek to
create novel, proprietary products, it will not compete within the
"commodity-like" atmosphere of some existing botanical product categories, where
multiple brands of the same product are sold. Shaman Botanicals believes that
its products will be further differentiated by their origins, their quality, and
Shaman Botanicals' commitment to sustainability and conservation.
8
<PAGE> 13
COMPANY STRUCTURE AND MANAGEMENT
Approximately 24 full-time employees (previously employees of Shaman
Pharmaceuticals) will become employees of Shaman Botanicals. The following
persons will be officers, directors or key management who will be joining Shaman
Botanicals with the following titles:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Loren D. Israelsen......... 43 Interim Chief Executive Officer and Director
Lisa A. Conte.............. 39 President, Chief Operating Officer and Director
Steven R. King............. 41 Senior Vice President, Ethnobotany and
Conservation, and Director
Thomas Carlson, M.D........ 42 Vice President, Medical Ethnobotany
John Chow.................. 46 Vice President, Technical Operations
J.D. Haldeman.............. 33 Vice President, Commercial Development
Gerald Reaven, M.D. ....... 70 Medical/Clinical Advisor (part-time)
G. Kirk Raab............... 63 Chairman of the Board of Directors
Adrian D. P. Bellamy....... 56 Director
Jeffrey Berg............... 51 Director
Herbert M. McDade, Jr. .... 71 Director
</TABLE>
Loren D. Israelsen has been President of LDI Group, a consulting firm
specializing in dietary supplement and phytomedicine issues, since 1997. From
1990 to 1997, Mr. Israelsen practiced law at a private firm. From 1981 to 1990,
Mr. Israelsen served in various positions at Murdock International Corp.,
including President from 1989 to 1990, Vice President of Strategic Development
from 1986 to 1989 and General Counsel from 1981 to 1986. While acting as Vice
President of Strategic Development, he identified and negotiated several license
agreements to bring the world's leading phytomedicines, including Ginkgo biloba
extract, milk thistle extract, echinacea, evening primrose oil, and saw palmetto
extract, to the United States. Mr. Israelsen has served as General Counsel/Vice
President to the American Herbal Products Association, Co-counsel to the
European American Phytomedicine Coalition, industry liaison to FDA's expert
advisory committee on Ephedra and advisor to the Natural Products Quality
Assurance Alliance, the Office of Technology Assessment and the Office of
Dietary Supplements. Since 1992, he has served as Executive Director of the Utah
Natural Products Alliance, which was instrumental in developing and passing the
Dietary Supplement Health and Education Act of 1994. Mr. Israelsen holds a B.S.
in Political Science from Utah State University and a J.D. from Brigham Young
University.
A complete biography for the other individuals listed above is set forth in
Shaman Pharmaceuticals Annual Report on Form 10-K/A for the year ended December
31, 1997, as filed with the Securities and Exchange Commission.
SUMMARY OF THE TERMS OF THE ASSET PURCHASE AGREEMENT
GENERAL
Pursuant to an asset purchase agreement dated February 10, 1999, a copy of
which is attached as Exhibit A to this Proxy Statement (the "Asset Purchase
Agreement"), the Company has agreed to transfer to Shaman Botanicals certain of
the Company's assets (the "Assets") in exchange for an aggregate of 720,000
shares of Shaman Botanicals' Series A Preferred Stock, par value $0.001 per
share (the "Series A Preferred Stock") each share of Series A Preferred Stock
having a value of $1.00. The shares of Series A Preferred Stock are deemed to
have a fair market value equal to the net book value of the Assets. The Assets
will include, but may not be limited to, the following:
- Exclusive license to the botanical library and archives, both actual
plant material, and information residing in the relational database, and
other informational sources, for development as dietary supplements and
other non-pharmaceutical applications;
- Exclusive license to the Company's trademarks and logos;
9
<PAGE> 14
- Exclusive license to the Company's patents relating to plants, compounds,
formulations, and combinations of products to be developed as dietary
supplements and other non-pharmaceutical applications;
- Products developed, or currently in development for non-pharmaceutical
applications;
- Existing raw material supply for products to be developed as dietary
supplements;
- Non-exclusive sub-license to rights under contracts, including material
supply agreements and consulting agreements;
- Capital equipment, furniture, materials, and supplies necessary to carry
out development and commercialization activities; and
- Contribution for use of facilities including office space, utilities, and
maintenance.
The closing of the Proposed Transaction (the "Closing") will take place
following the satisfaction or waiver of all conditions specified in the Asset
Purchase Agreement, including approval by the Company's stockholders of the
Proposed Transaction. In addition, although the Company does not believe that
the Proposed Transaction will affect the Company's rights and obligations under
material contracts with its creditors or other third parties, the Company may be
required to seek approval from such creditors or other third parties in order to
effect the Proposed Transaction. The Company intends to obtain such approvals
prior to the Closing. Prior to the Closing, the Asset Purchase Agreement may be
terminated by mutual consent of the Company and Shaman Botanicals, or by either
party following the occurrence of certain conditions or events, including the
conditions to Closing not being satisfied or waived by September 30, 1999.
OTHER AGREEMENTS
The License Agreement. The License Agreement currently is being negotiated
and is anticipated to provide for the payment to Shaman Pharmaceuticals of 10%
royalty on net sales sold directly by Shaman Botanicals of the Company's first
gastrointestinal product. This royalty will be used to satisfy previously
announced royalties committed to by Shaman Pharmaceuticals. Shaman Botanicals
anticipates that there will be no royalty requirement for other potential
products.
The Services Agreement. The Services Agreement currently is being
negotiated and is anticipated to provide that, for a transitional period, the
Company will perform certain transitional services for Shaman Botanicals,
including but not limited to product development services for Shaman Botanicals,
including clinical inventory management, accounting, human resources and the
like.
The Sublicenses. The Sublicense Agreements currently are being negotiated
and are anticipated to provide for the grant to Shaman Botanicals of
substantially all of the Company's rights under certain license and consulting
agreements and for the assumption by Shaman Botanicals of the Company's
obligations thereunder, including payment of all royalties, annual maintenance
fees and other required payments.
SERIES A PREFERRED STOCK
The following is a summary of the terms of the Series A Preferred Stock to
be issued to the Company in connection with the Proposed Transaction as set
forth in the Amended and Restated Certificate of Incorporation of Shaman
Botanicals, a copy of which is attached hereto as Exhibit B.
Dividends. The holders of the Series A Preferred Stock will be entitled to
receive non-cumulative dividends thereon at the rate of eight percent per share
per annum as and when declared by the Board of Directors, before any dividend or
distribution is declared, set apart for, or paid upon the Common Stock, which
dividend will be payable in cash or additional Series A Preferred Stock.
Conversion. Each share of Series A Preferred Stock will be convertible,
without the payment of any additional consideration by the holder thereof and at
the option of the holder thereof, initially into that number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $1.00 by the
"Conversion Price" in effect at the time of conversion. The "Conversion Price"
initially will be $1.00, and is subject to adjustment for dilutive events,
including a subdivision or combination of the outstanding shares of
10
<PAGE> 15
Common Stock, a stock split, stock dividend, cash dividend or other distribution
with respect to Shaman Botanicals' outstanding securities, or a reorganization,
reclassification, merger, consolidation or sale of substantially all of Shaman
Botanicals' assets.
Each share of Series A Preferred Stock automatically will be converted into
shares of Common Stock at the then effective Conversion Price (i) upon the
written election of the holders of at least a majority in voting power of the
then outstanding Series A Preferred Stock or (ii) immediately prior to the
effective date of an initial public offering of Shaman Botanicals' capital stock
having an aggregate value in excess of $10,000,000.
Liquidation Preference. In the event of any liquidation, dissolution or
winding up of the affairs of Shaman Botanicals, whether voluntary or
involuntary, the holders of Series A Preferred Stock will be entitled to be paid
first out of the assets of Shaman Botanicals available for distribution to
holders of Shaman Botanicals' capital stock of all classes, before payment or
distribution of any of such assets to the holders of any other class of Shaman
Botanicals' capital stock, an amount equal to $1.00 per share of Series A
Preferred Stock (the "Liquidation Preference"), which amount will be subject to
equitable adjustment whenever there is a stock dividend, stock split,
combination of shares, reclassification or other similar event affecting such
shares, and will include any accrued but unpaid dividends. After payment is made
in full to the holders of Series A Preferred Stock or funds necessary for such
payment have been set aside by Shaman Botanicals in trust for the account of the
holders of Series A Preferred Stock to be available for such payment, the
remaining assets of Shaman Botanicals will be distributed ratably to the holders
of Common Stock and Preferred Stock, determined on an as-converted basis. If the
assets of Shaman Botanicals are insufficient to permit the payment in full to
the holders of Series A Preferred Stock of all amounts distributable to them,
then the entire assets of Shaman Botanicals available for such distribution will
be distributed ratably among the holders of Series A Preferred Stock in
proportion to the full preferential amount each such holder is otherwise
entitled to receive.
A consolidation or merger of Shaman Botanicals with or into another
unaffiliated corporation or a sale of all or substantially all of the assets of
Shaman Botanicals will be regarded as a liquidation, dissolution or winding up
of the affairs of Shaman Botanicals.
Voting Rights. Except as otherwise required by law, the holders of Series A
Preferred Shares will be entitled to vote on all matters submitted to a vote of
the stockholders of Shaman Botanicals on an as-converted basis. Currently, each
holder of Shaman Botanicals Common Stock is entitled to one vote per share of
Common Stock. Notwithstanding the foregoing, without the affirmative vote or
written consent of the holders of a majority of the then issued and outstanding
Series A Preferred Stock, Shaman Botanicals will not be permitted to: (i)
subject to certain exceptions, redeem, purchase or otherwise acquire (or pay
into or set aside for a sinking fund for such purpose), any of Shaman
Botanicals' Common Stock; (ii) authorize or issue, or obligate itself to issue,
any other equity security (including any security convertible into or
exercisable for any equity security) senior to or on a parity with the Series A
Preferred Stock as to dividend rights, redemption rights or liquidation
preferences; (iii) effect any sale, lease, assignment, transfer, or other
conveyance of all or substantially all of the assets of Shaman Botanicals or any
of its subsidiaries, or any consolidation or merger involving Shaman Botanicals
or any of its subsidiaries, or any reclassification or other change of any
stock, or any recapitalization of Shaman Botanicals; (iv) permit any subsidiary
to issue or sell, or obligate itself to issue or sell, except to Shaman
Botanicals or any wholly owned subsidiary, any stock of such subsidiary; (v)
increase or decrease (other than by redemption or conversion) the total number
of authorized shares of Preferred Stock; or (vi) otherwise amend its Certificate
of Incorporation in such a way that would adversely affect any of the rights,
preferences or privileges provided for herein for the benefit of any shares of
the Series A Preferred Stock.
Miscellaneous. The Series A Preferred Stock is not subject to any mandatory
redemption or sinking fund provisions, nor are the holders thereof entitled to
any preemptive rights to subscribe for or to purchase any shares or securities
of any class that may at any time be issued, sold or offered for sale by Shaman
Botanicals.
11
<PAGE> 16
REASONS FOR THE PROPOSED TRANSACTION
The Board of Directors of Shaman Pharmaceuticals (the "Board") has
carefully considered the benefits and risks of the Proposed Transaction and
believes that the Company will benefit from the diversification of business, the
near-term potential for revenue generation, and employment of currently
underutilized assets, taking into account that the transferee of the assets
(Shaman Botanicals) is a wholly-owned subsidiary of the transferor of the assets
(Shaman Pharmaceuticals). As such, at present, 100% of the value generated by
Shaman Botanicals is captured as value for the stockholders of Shaman
Pharmaceuticals.
The Board believes that Shaman Botanicals' near-term operations will better
thrive in the simpler private company structure, unencumbered by the costs and
complexities of being a public entity. By so doing, Shaman Botanicals feels it
can better focus its employees on its botanicals business. Shaman Botanicals
also believes a sole focus on botanicals will allow for simpler negotiations in
corporate partnering, better coverage and valuation by analysts focused on the
dietary supplement industry, and for the possibility of Shaman Botanicals
becoming a publicly-traded company.
The Board's interest is in building value and gaining liquidity for Shaman
Pharmaceuticals stockholders. Currently, as a wholly-owned subsidiary, 100% of
the value created in Shaman Botanicals flows back to the Shaman Pharmaceuticals
stockholders. However, in the near term, Shaman Botanicals will need to seek
outside funding to support the ongoing Botanicals business. In such a situation,
to maximize the value of the ownership retained by Shaman Pharmaceuticals
stockholders, the Company wishes to increase the valuation of Shaman Botanicals
prior to such outside funding. The most expeditious way to do this is through
the transfer of certain assets from Shaman Pharmaceuticals to Shaman Botanicals.
The Proposed Transaction brings several critical assets to Shaman
Botanicals: (1) exclusive access to the botanical library and archives of
tropical plants with a documented history of medicinal use, including novel
botanicals; (2) exclusive access to botanicals with proprietary positions
including patents; (3) near-term product candidates with potential for near-term
commercialization and revenue generation; (4) exclusive access to the expertise
of Shaman Pharmaceuticals' Scientific Strategy Team and other established
contacts in the ethnobotanical, botanical and medicinal fields; (5) access to
established supply and manufacturing channels; (6) added commercial, scientific,
and management expertise; (7) capital equipment, furniture, materials and
supplies necessary to carry out development and commercialization activities.
The foregoing discussion of the information and factors considered and
given weight by the Company's Board is not intended to be exhaustive, but is
believed to include the material factors considered by the Board. In addition,
in reaching the determination to approve the Proposed Transaction, in view of
the wide variety of factors considered in connection with its evaluation, the
Board did not find it practical to, and did not, quantify or otherwise attempt
to assign any relative or specific weights to the foregoing factors, and
individual directors may have given differing weights to different factors.
MATERIAL DIFFERENCES IN THE RIGHTS OF PHARMACEUTICALS' STOCKHOLDERS FOLLOWING
THE PROPOSED TRANSACTION
The Proposed Transaction will not change the ownership rights of Shaman
Pharmaceuticals stockholders in Shaman Pharmaceuticals. Each Shaman
Pharmaceuticals stockholder will still own shares of the Common Stock or
Preferred Stock, as the case may be, of Shaman Pharmaceuticals. However, the
Proposed Transaction will effect a change in the nature of each Shaman
Pharmaceuticals stockholder's ownership of the assets of Shaman Pharmaceuticals.
Prior to the Proposed Transaction, Shaman Pharmaceuticals will have directly
owned all of its assets. By transferring specified assets to Shaman Botanicals,
a wholly-owned subsidiary of Shaman Pharmaceuticals, Shaman Pharmaceuticals
stockholders will now indirectly own such assets through Shaman Pharmaceuticals'
ownership of Shaman Botanicals. Any future increases in value of the assets
transferred to Shaman Botanicals will flow through to the Shaman Pharmaceuticals
stockholders to the extent of their stock ownership in Shaman Botanicals.
In the future, Shaman Pharmaceuticals stockholders could experience
dilution in their ownership of Shaman Botanicals. Currently, Shaman Botanicals
is a wholly-owned subsidiary of Shaman Pharmaceuticals. Therefore, the
stockholders of Shaman Pharmaceuticals indirectly own all of the outstanding
capital stock of
12
<PAGE> 17
Shaman Botanicals. However, Shaman Botanicals will need to obtain additional
financing through private equity or debt financings or from other sources or may
enter into collaborative arrangements that involve either sales of its capital
stock or transactions involving an exchange of shares of its capital stock for
shares of the third party's capital stock or shares of Shaman Botanicals'
capital stock for certain of the third party's assets. If additional funds are
raised by issuing equity securities, Shaman Pharmaceuticals will no longer own
all of the outstanding capital stock of Shaman Botanicals, and the ownership
percentage of Shaman Pharmaceuticals' stockholders will correspondingly
decrease. Additionally, as employees are hired for Shaman Botanicals, such
employees may receive options to acquire shares of Shaman Botanicals Common
Stock. Any such issuance of options, and the subsequent exercise thereof, would
dilute the Shaman Pharmaceuticals stockholders' ownership interest in Shaman
Botanicals.
ACCOUNTING AND TAX TREATMENT OF THE PROPOSED TRANSACTION
The Assets will be transferred to, and recorded by, Shaman Botanicals at
Shaman Pharmaceuticals' net book value. The Proposed Transaction will be a
non-taxable event for federal and state income tax purposes.
VOTE REQUIRED FOR STOCKHOLDER APPROVAL
The affirmative vote of a majority of all shares of Common Stock, including
all shares of Preferred Stock on an as-converted to common stock basis,
outstanding at the time of voting is required for approval of the transfer of
certain designated assets of Shaman Pharmaceuticals to Shaman Botanicals in
exchange for shares of Series A Preferred Stock of Shaman Botanicals.
RECOMMENDATION OF THE BOARD OF DIRECTORS
In view of the factors discussed above and such other matters as it deemed
relevant, the Board approved the Proposed Transaction, the Asset Purchase
Agreement and Other Agreements as deemed in best interest of the Company's
stockholders. Accordingly, the Board recommends that the stockholders vote IN
FAVOR OF the transfer of certain designated assets of Shaman Pharmaceuticals to
Shaman Botanicals in exchange for shares of Series A Preferred Stock of Shaman
Botanicals.
13
<PAGE> 18
FINANCIAL INFORMATION
UNAUDITED CONDENSED BALANCE SHEETS -- BASIS OF PRESENTATION
The following unaudited condensed balance sheets give effect to (i) the
transfer of tangible assets from Shaman Pharmaceuticals to Shaman Botanicals at
the net book value recorded by Shaman Pharmaceuticals to Shaman Botanicals prior
to the transfer and (ii) the issuance by Shaman Botanicals of 720,000 shares of
Series A Preferred Stock to Shaman Pharmaceuticals. These unaudited condensed
balance sheets should be read in conjunction with the historical financial
statements and notes thereto of Shaman Pharmaceuticals, which are included in
its Annual Report on Form 10-K/A for the year ended December 31, 1997 and
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.
The Shaman Pharmaceuticals unaudited condensed balance sheets at October
31, 1998 are presented on an unconsolidated basis and therefore, do not include
the assets, liabilities or stockholders' equity of Shaman Botanicals. If these
unaudited condensed balance sheets had been presented on a consolidated basis,
Shaman Pharmaceuticals investment in Shaman Botanicals would have been
eliminated against Shaman Botanicals' equity accounts.
The unaudited information is presented for illustrative purposes only and
is not necessarily indicative of the financial position that would have resulted
had the transfer actually occurred on October 31, 1998.
14
<PAGE> 19
SHAMAN PHARMACEUTICALS, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 31, TRANSFER OCTOBER 31,
1998 ADJUSTMENTS 1998
------------- ----------- -----------------
HISTORICAL(1) (AS ADJUSTED)(2)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 4,513,158 $ -- $ 4,513,158
Short-term investments......................... 2,029,705 -- 2,029,705
Amounts due from related parties............... 462,164 -- 462,164
Prepaid expenses and other current assets...... 842,850 -- 842,850
Investment in Shaman Botanicals, Inc........... -- 720,000 720,000
------------- --------- -------------
Total current assets............................. 7,847,877 720,000 8,567,877
Property and equipment, net...................... 3,143,413 (720,000) 2,423,413
Other assets..................................... 584,224 -- 584,224
------------- --------- -------------
Total assets..................................... $ 11,575,514 $ -- $ 11,575,514
============= ========= =============
</TABLE>
<TABLE>
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL
DEFICIENCY)
Current liabilities:
Accounts payable and other accrued expenses.... $ 1,460,153 $ -- $ 1,460,153
Accrued clinical trial costs................... 2,829,890 -- 2,829,890
Accrued professional fees...................... 734,230 -- 734,230
Accrued compensation........................... 428,158 -- 428,158
Advances -- contract research.................. 218,750 -- 218,750
Current installments of long-term
obligations................................. 2,595,620 -- 2,595,620
------------- --------- -------------
Total current liabilities........................ 8,266,801 -- 8,266,801
Long-term obligations, excluding current
installments................................... 3,179,911 -- 3,179,911
Senior convertible notes......................... 5,294,035 -- 5,294,035
Stockholders' equity (net capital deficiency):
Preferred stock................................ 515 -- 515
Common stock................................... 22,688 -- 22,688
Additional paid-in capital..................... 137,843,110 -- 137,843,110
Deferred compensation and other adjustments.... (47,237) -- (47,237)
Accumulated deficit............................ (142,984,309) -- (142,984,309)
------------- --------- -------------
Total stockholders' equity (net capital
deficiency).................................... (5,165,233) -- (5,165,233)
------------- --------- -------------
Total liabilities and stockholders' equity (net
capital deficiency)............................ $ 11,575,514 $ -- $ 11,575,514
============= ========= =============
</TABLE>
- ---------------
(1) The Shaman Pharmaceuticals unaudited condensed balance sheets at October 31,
1998 are presented on an unconsolidated basis and therefore, do not include
the assets, liabilities or stockholders' equity of Shaman Botanicals. If
these unaudited condensed balance sheet had been presented on a consolidated
basis, Shaman Pharmaceuticals' investment in Shaman Botanicals would have
been eliminated against Shaman Botanicals' equity accounts.
(2) Adjusted to reflect the transfer of $720,000 of capital equipment at net
book value from Shaman Pharmaceuticals to Shaman Botanicals.
15
<PAGE> 20
SHAMAN BOTANICALS, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 31, TRANSFER OCTOBER 31,
1998 (1)(2) ADJUSTMENTS 1998
------------ ----------- -----------------
(AS ADJUSTED)(3)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ -- $ -- $ --
Short-term investments............................ -- -- --
Prepaid expenses and other current assets......... -- -- --
-------- -------- --------
Total current assets................................ -- -- --
Property and equipment, net......................... -- 720,000 720,000
-------- -------- --------
Total assets........................................ $ -- $720,000 $720,000
======== ======== ========
</TABLE>
<TABLE>
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued expenses....... $ -- $ -- $ --
Current installments of long-term obligations..... -- -- --
-------- -------- --------
Total current liabilities........................... -- -- --
Long-term obligations............................... -- -- --
Stockholders' equity(4):
Preferred stock................................... -- -- 720
Common stock...................................... -- -- --
Additional paid-in capital........................ -- -- 719,280
-------- -------- --------
Total stockholders' equity.......................... -- -- 720,000
-------- -------- --------
Total liabilities and stockholders' equity.......... $ -- $ -- $720,000
======== ======== ========
</TABLE>
- ---------------
(1) The Shaman Botanicals, Inc. unaudited condensed balance sheet at October 31,
1998 are presented on an unconsolidated basis.
(2) Shaman Botanicals was not incorporated at October 31, 1998.
(3) Adjusted to reflect the transfer of $720,000 of capital equipment at net
book value from Shaman Pharmaceuticals to Shaman Botanicals.
(4) The authorized capital of Shaman Botanicals at the date of incorporation is
10,000,000 shares of Common Stock, $0.001 par value per share.
16
<PAGE> 21
OTHER MATTERS
The Company knows of no other matters that will be presented for
consideration at the Special Meeting. If any other matters properly come before
the Special Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board may recommend.
Discretionary authority with respect to such other matters is granted by the
execution of the enclosed Proxy.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission (the "SEC") allows the Company to
incorporate by reference the information it files with the SEC. The information
incorporated by reference is considered to be part of this Proxy Statement and
later information that the Company files with the SEC will automatically update
and supersede this information. The Company incorporates 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 of 1934, as amended. The documents
incorporated by reference are:
(a) The Company's 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) The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998, filed with the SEC on May 15, 1998 and amended on each of May 28, 1998
and July 9, 1998;
(c) The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1998, filed with the SEC on August 14, 1998;
(d) The Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998, filed with the SEC on November 13, 1998.
THE BOARD OF DIRECTORS
Dated: February 24, 1999
17
<PAGE> 22
EXHIBIT A TO
PROXY STATEMENT
ASSET PURCHASE AGREEMENT
BETWEEN
SHAMAN BOTANICALS, INC.
AS PURCHASER
AND
SHAMAN PHARMACEUTICALS, INC.
AS SELLER
DATED AS OF FEBRUARY 10, 1999
<PAGE> 23
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEFINITIONS...................................................... 1
Section
1.01 Certain Defined Terms....................................... 1
ARTICLE II PURCHASE AND SALE............................................... 2
Section
2.01 Assets to Be Sold........................................... 2
Section
2.02 Assumption of Liabilities................................... 2
Section
2.03 Purchase Price.............................................. 3
Section
2.04 Closing..................................................... 3
Section
2.05 Closing Deliveries by Seller................................ 3
Section
2.06 Closing Deliveries by Purchaser............................. 3
ARTICLE III REPRESENTATIONS AND WARRANTIES................................. 3
Section
3.01 Organization, Authority and Qualification of Seller......... 3
Section
3.02 No Conflict................................................. 4
Section
3.03 Governmental Consents and Approvals......................... 4
Section
3.04 Litigation.................................................. 4
Section
3.05 Compliance with Laws........................................ 4
Section
3.06 Material Contracts.......................................... 4
Section
3.07 Assets...................................................... 4
Section
3.08 Intellectual Property....................................... 4
Section
3.09 Full Disclosure............................................. 5
Section
3.10 Brokers..................................................... 5
ARTICLE IV REPRESENTATIONS AND WARRANTIES.................................. 5
Section
4.01 Organization and Authority of Purchaser..................... 5
Section
4.02 No Conflict................................................. 5
Section
4.03 Governmental Consents and Approvals......................... 5
Section
4.04 Valid Issuance of Preferred and Common Stock................ 6
Section
4.05 Purchase Entirely for Own Account........................... 6
Section
4.06 Reliance Upon Seller's Representations...................... 6
Section
4.07 Receipt of Information...................................... 6
Section
4.08 Restricted Securities....................................... 6
Section
4.09 Legends..................................................... 6
ARTICLE V ADDITIONAL AGREEMENTS............................................ 7
Section
5.01 Access to Information....................................... 7
Section
5.02 Notice of Developments...................................... 7
Section
5.03 Further Action.............................................. 7
ARTICLE VI CONDITIONS TO CLOSING........................................... 7
Section
6.01 Conditions to Obligations of Seller......................... 7
Section
6.02 Conditions to Obligations of Purchaser...................... 8
ARTICLE VII TERMINATION AND WAIVER......................................... 8
Section
7.01 Termination................................................. 8
Section
7.02 Effect of Termination....................................... 8
Section
7.03 Waiver...................................................... 9
</TABLE>
i
<PAGE> 24
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE VIII MISCELLANEOUS................................................. 9
Section
8.01 Expenses.................................................... 9
Section
8.02 Conveyance Taxes............................................ 9
Section
8.03 Notices..................................................... 9
Section
8.04 Headings.................................................... 9
Section
8.05 Severability................................................ 10
Section
8.06 Entire Agreement............................................ 10
Section
8.07 Assignment.................................................. 10
Section
8.08 No Third Party Beneficiaries................................ 10
Section
8.09 Amendment................................................... 10
Section
8.10 Governing Law............................................... 10
Section
8.11 Counterparts................................................ 10
Section
8.12 Specific Performance........................................ 10
</TABLE>
ii
<PAGE> 25
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of February 10, 1999 (as hereafter
amended, modified or supplemented, this "Agreement"), between Shaman Botanicals,
Inc., a Delaware corporation ("Purchaser"), and Shaman Pharmaceuticals, Inc., a
Delaware corporation ("Seller").
WITNESSETH:
WHEREAS, Seller was engaged in the business of discovering and developing
novel pharmaceutical products for major human diseases by isolating and
optimizing active compounds found in tropical plants with a history of medicinal
use (the "Business");
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, all right, title and interest of Seller in and to the
Assets (as defined in Section 1.01 below), all upon the terms and subject to the
conditions set forth herein;
WHEREAS, in connection with the acquisition of the Assets, the parties have
agreed that Purchaser shall assume only those liabilities of the Seller
expressly assumed herein, as set forth in Section 2.02(a); and
WHEREAS, as an inducement to the acquisition of the Assets, Seller has
agreed to enter into a license agreement, pursuant to which seller would receive
a royalty on certain products developed from certain of the Assets.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth and other good an valuable consideration,
the sufficiency of which is hereby acknowledged, and intending to be legally
bound hereby, Purchaser and Seller hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Defined Terms. Unless the context otherwise requires,
the following terms, when used in this Agreement, shall have the respective
meanings specified below:
"Action" shall mean any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Agreement" or "this Agreement" shall mean this Asset Purchase Agreement,
dated as of February 10, 1999 between Seller and Purchaser (including the
Exhibits hereto and the Disclosure Schedule) and all amendments hereto made in
accordance with the provisions of Section 8.10.
"Ancillary Agreements" shall mean the Bill of Sale, the Assumption
Agreement, the Sublicense Agreements and the License Agreement.
"Assets" shall mean those assets set forth on Annex A hereto, as may be
amended from time to time by written consent of both parties hereto.
"Assumption Agreement" shall mean the Assumption Agreement to be executed
by Purchaser on or before the Closing Date, substantially in the form attached
hereto as Exhibit A.
"Bill of Sale" shall mean the Bill of Sale and Assignment to be executed by
Seller on or before the Closing Date substantially in the form attached hereto
as Exhibit B.
"Business" shall have the meaning specified in the recitals to this
Agreement.
"Closing" shall have the meaning specified in Section 2.04.
"Closing Date" shall have the meaning specified in Section 2.04.
"Disclosure Schedule" shall mean the Disclosure Schedule attached hereto,
dated as of the date hereof, and forming a part of this Agreement.
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<PAGE> 26
"Effective Date" shall mean , 1999.
"Governmental Authority" shall mean any national, federal, state, municipal
or local or other government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
"Governmental Order" shall mean any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Law" shall mean any national, federal, state, municipal or local or other
statute, law, ordinance, regulation, rule, code, order, other requirement or
rule of law.
"Liabilities" shall mean any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law, Action or Governmental Order and those arising under any contract,
agreement, arrangement, commitment or undertaking.
"License Agreement" shall mean the License Agreement, the form of which
shall be negotiated prior to the Closing Date.
"Material Adverse Effect" shall mean any circumstance, change in, or effect
on, the Business or the Assets that, individually or in the aggregate with any
other circumstances, changes in, or effects on, the Assets (i) is, or could be,
materially adverse to the Business, customer relationships, prospects or the
condition (financial or otherwise) of the Assets or the Business or (ii) could
materially adversely affect the ability of Purchaser to operate or conduct the
Assets or the Business in the manner in which it is currently operated or
conducted by Seller.
"Material Contracts" shall mean those agreements listed as material
contracts in the exhibits to the SEC Reports.
"Purchase Price" shall have the meaning specified in Section 2.03.
"SEC Reports" means Seller's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, as amended, Seller's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 1998, as amended, Seller's Quarterly Report
on Form 10-Q for the fiscal quarter ended June 30, 1998, Seller's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1998, in each
case as filed with the SEC, Seller's Registration Statement on Form S-2
(Registration No. 333-61261), as declared effective by the SEC and as
supplemented to date, and Seller's Special Report on Form 8-K dated December 10,
1998, as filed with the SEC on December 11, 1998, Seller's Special Report on
Form 8-K dated December 3, 1998, as filed with the SEC on December 15, 1998, and
Seller's Special Report on Form 8-K dated January 4, 1999, as filed with the SEC
on January 11, 1999.
"Sublicense Agreements" shall mean the Sublicense Agreements, the form of
which shall be negotiated prior to the Closing Date.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01 Assets to Be Sold. On the terms and subject to the conditions
of this Agreement, Seller shall, on the Closing Date, sell, convey and assign to
Purchaser, free and clear of all claims, liens and interests except as is
provided for herein, all of Seller's right, title and interest in and to the
Assets.
SECTION 2.02 Assumption of Liabilities.
(a) Purchaser shall assume the obligations of Seller under the Assets
arising on and after the Effective Date. Purchaser shall assume no other
obligations of Seller.
2
<PAGE> 27
(b) Seller shall retain, and shall be responsible for paying, performing
and discharging when due, and Purchaser shall not assume or have any
responsibility for, all other Liabilities of Seller, including, without
limitation:
(i) all Taxes now or hereafter owed by Seller or any Affiliate of
Seller, or attributable to the Assets or the Business, relating to any
period, or any portion of any period;
(ii) Liabilities and obligations relating to the Assets with respect
to litigation commenced before or related to acts, events or omissions
prior to the Effective Date; and
(iii) tortious or negligent acts.
SECTION 2.03 Purchase Price. The purchase price (the "Purchase Price") for
the Assets shall be Seven Hundred Twenty Thousand (720,000) shares of
Purchaser's Series A Preferred Stock, par value $0.001 per share (the "Series A
Preferred").
SECTION 2.04 Closing. Subject to the terms and conditions of this
Agreement, the sale and purchase of the Assets contemplated by this Agreement
shall take place at a closing (the "Closing") to be held at the offices of
Brobeck, Phleger & Harrison LLP, Two Embarcadero Place, 2200 Geng Road, Palo
Alto, California at 10:00 A.M. California time on the earlier to occur of (i)
March 31, 1999 or (ii) the second business day following the satisfaction or
waiver of all conditions to the obligations of the parties set forth in Article
VI, or at such other place or at such other time or on such other date as Seller
and Purchaser may mutually agree upon in writing (the day on which the Closing
takes place being the "Closing Date").
SECTION 2.05 Closing Deliveries by Seller. At the Closing, Seller shall
deliver or cause to be delivered to Purchaser:
(a) the Bill of Sale, and such other instruments, in form and
substance satisfactory to Purchaser, as may be requested by Purchaser to
transfer the Assets to Purchaser or evidence such transfer on the public
records;
(b) a receipt for the Purchase Price; and
(c) the certificates and other documents required to be delivered
pursuant to Section 6.02.
SECTION 2.06 Closing Deliveries by Purchaser. At the Closing, Purchaser
shall deliver to Seller:
(a) a stock certificate representing the Purchase Price; and
(b) the certificates and other documents required to be delivered
pursuant to Section 6.01.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Purchaser to enter into this Agreement, Seller hereby
represents and warrants to Purchaser, except as may be disclosed in the
Disclosure Schedule by specific reference to the applicable Section set forth
below, as follows:
SECTION 3.01 Organization, Authority and Qualification of Seller. Seller
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all necessary corporate power and
authority to enter into this Agreement and the Ancillary Agreements, to carry
out its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. Seller is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the properties
owned or leased by it or the operation of its business makes such licensing or
qualification necessary. The execution and delivery of this Agreement and the
Ancillary Agreements by Seller, the performance by Seller of its obligations
hereunder and thereunder and the consummation by Seller of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
action on the part of Seller. This Agreement has been, and upon their execution
the Ancillary Agreements will be, duly executed and delivered by Seller, and
(assuming due authorization, execution and delivery by Purchaser) this Agreement
constitutes,
3
<PAGE> 28
and upon their execution the Ancillary Agreements will constitute, legal, valid
and binding obligations of Seller enforceable against Seller in accordance with
their respective terms.
SECTION 3.02 No Conflict. The execution, delivery and performance of this
Agreement and the Ancillary Agreements by Seller do not and will not (a)
violate, conflict with or result in the breach of any provision of the charter
or bylaws (or similar organizational documents) of Seller, (b) conflict with or
violate (or cause an event which could have a Material Adverse Effect as a
result of) any Law or Governmental Order applicable to Seller or any of its
assets, properties or businesses, including, without limitation, the Assets and
the Business, or (c) conflict with, result in any breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, require any consent under, or give to others any
rights of termination, amendment, acceleration, suspension, revocation or
cancellation of, or result in the creation of any encumbrance on any of the
assets or properties of Seller pursuant to, any note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license, permit, franchise or
other instrument or arrangement to which Seller is a party or by which any of
such assets or properties is bound or affected.
SECTION 3.03 Governmental Consents and Approvals. Other than the consent
of Seller's stockholders, the execution, delivery and performance of this
Agreement and each Ancillary Agreement by Seller do not and will not require any
consent, approval, authorization or other order of, action by, filing with or
notification to, any Governmental Authority or any third party.
SECTION 3.04 Litigation. There are no Actions by or against Seller, or
affecting any of the Assets or the Business, pending before any Governmental
Authority (or, to the best knowledge of Seller after due inquiry, threatened to
be brought by or before any Governmental Authority) that has had or could have a
Material Adverse Effect or could affect the legality, validity or enforceability
of this Agreement or any Ancillary Agreement or the consummation of the
transactions contemplated hereby or thereby. Neither Seller nor any of its
assets or properties, including, without limitation, the Assets, is subject to
any Governmental Order (nor, to the best knowledge of Seller after due inquiry,
are there any such Governmental Orders threatened to be imposed by any
Governmental Authority).
SECTION 3.05 Compliance with Laws. Seller has conducted and continues to
conduct the Business in accordance with all Laws and Governmental Orders
applicable to Seller or any of its properties or assets, including, without
limitation, the Assets and the Business, and Seller is not in violation of any
such Law or Governmental Order.
SECTION 3.06 Material Contracts. Each Material Contract: (i) is legal,
valid and binding on the respective parties thereto and is in full force and
effect and (ii) is freely and fully assignable to Purchaser without penalty or
other adverse consequences. To Seller's knowledge, no other party to any
Material Contract is in breach thereof or default thereunder.
SECTION 3.07 Assets.
(a) Seller owns, leases or has the legal right to use all the Assets.
Seller has good and marketable title to all the Assets, free and clear of all
encumbrances.
(b) Seller has the complete and unrestricted power and unqualified right to
sell, assign, transfer, convey and deliver the Assets to Purchaser without
penalty or other adverse consequences. Following the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements and the
execution of the instruments of transfer contemplated by this Agreement and the
Ancillary Agreements, Purchaser will own, with good, valid and marketable title
in the Assets, free and clear of any encumbrances and without incurring any
penalty or other adverse consequence, including, without limitation, any
increase in rentals, royalties, license or other fees imposed as a result of, or
arising from, the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements.
SECTION 3.08 Intellectual Property. Except as disclosed in the SEC
Reports, the Company owns, or possesses adequate rights to use, all patents,
patent rights, inventions, trade secrets, know-how, proprietary techniques,
including processes and substances, trademarks, service marks, trade names and
copyrights described or referred to in the SEC Reports or owned or used by it or
which are necessary for the conduct of
4
<PAGE> 29
its business as it is presently conducted or proposed to be conducted. Except as
disclosed in the SEC Reports, the Company has not received any notice of, and is
not aware of, any infringement of or conflict with asserted rights of others
with respect to, any patents, patent rights, inventions, trade secrets,
know-how, proprietary techniques, including processes and substances,
trademarks, service marks, trade names or copyrights or allegations with respect
thereto which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could have a material adverse effect on the
business, properties, operations, condition (financial or other), results of
operations or prospects of the Company.
SECTION 3.09 Full Disclosure.
(a) Seller is not aware of any facts pertaining to the Assets which affect
adversely the Assets or which are likely in the future to affect adversely the
Assets and which have not been disclosed in this Agreement or the Disclosure
Schedule or otherwise disclosed to Purchaser by Seller in writing.
(b) No representation or warranty of Seller in this Agreement, nor any
statement or certificate furnished or to be furnished to Purchaser pursuant to
this Agreement, or in connection with the transactions contemplated by this
Agreement, contains or will contain any untrue statement of a material fact.
SECTION 3.10 Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement or the Ancillary Agreements based
upon arrangements made by or on behalf of Seller.
ARTICLE IV
Representations and Warranties of Purchaser
As an inducement to Seller to enter into this Agreement, Purchaser hereby
represents and warrants to Seller as follows:
SECTION 4.01 Organization and Authority of Purchaser. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all necessary corporate power and authority to
enter into this Agreement and the Ancillary Agreements, to carry out its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Ancillary Agreements by Purchaser, the performance by Purchaser of its
obligations hereunder and thereunder and the consummation by Purchaser of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite action on the part of Purchaser. This Agreement has been, and upon
their execution the Ancillary Agreements will be, duly executed and delivered by
Purchaser, and (assuming due authorization, execution and delivery by Seller)
this Agreement constitutes, and upon their execution the Ancillary Agreements
will constitute, legal, valid and binding obligations of Purchaser, enforceable
against Purchaser in accordance with their respective terms.
SECTION 4.02 No Conflict. Except as may result from any facts or
circumstances relating solely to Seller, the execution, delivery and performance
of this Agreement and the Ancillary Agreements by Purchaser, do not and will not
(a) violate, conflict with or result in the breach of any provision of the
charter or bylaws (or other organizational documents) of Purchaser, (b) conflict
with or violate any Law or Governmental Order applicable to Purchaser or (c)
conflict with, or result in any breach of, constitute a default (or event which
with the giving of notice or lapse of time, or both, would become a default)
under, require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result in
the creation of any encumbrance on any of the assets or properties of Purchaser
pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease,
sublease, license, permit, franchise or other instrument or arrangement to which
Purchaser is a party or by which any of such assets or properties is bound or
affected, which would have a material adverse effect on the ability of Purchaser
to consummate the transactions contemplated by this Agreement or by the
Ancillary Agreements.
SECTION 4.03 Governmental Consents and Approvals. The execution, delivery
and performance of this Agreement and each Ancillary Agreement to which it is a
party by Purchaser do not and will not require
5
<PAGE> 30
any consent, approval, authorization or other order of, action by, filing with,
or notification to, any Governmental Authority.
SECTION 4.04 Valid Issuance of Preferred and Common Stock. The Series A
Preferred Stock, when issued, sold and delivered in accordance with the terms of
this Agreement for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable, and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and under
applicable state and federal securities laws. The Common Stock issuable upon
conversion of the Series A Preferred Stock has been duly and validly reserved
for issuance and, upon issuance in accordance with the terms of the Purchaser's
Amended and Restated Certificate of Incorporation, will be duly and validly
issued, fully paid and nonassessable and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and under
applicable state and federal securities laws.
SECTION 4.05 Purchase Entirely for Own Account. Seller confirms that the
Series A Preferred to be purchased by Seller and the Common Stock issuable upon
conversion thereof (collectively, the "Securities") will be acquired for
investment for Seller's own account not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and that Seller has no
present intention of selling, granting any participation in, or otherwise
distributing the same. Seller further represents that Seller does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Securities.
SECTION 4.06 Reliance Upon Seller's Representations. Seller understands
that the Series A Preferred Stock is not, and any Common Stock acquired on
conversion thereof at the time of issuance may not be, registered under the
Securities Act of 1933, as amended (the "Securities Act"), on the ground that
the sale provided for in this Agreement and the issuance of securities hereunder
is exempt from registration under the Securities Act, and that Purchaser's
reliance on such exemption is predicated on Seller's representations set forth
herein. Seller realizes that the basis for the exemption may not be present if,
notwithstanding such representations, Seller has in mind merely acquiring shares
of the Series A Preferred for a fixed or determinable period in the future, or
for a market rise, or for sale if the market does not rise. Seller has no such
intention.
SECTION 4.07 Receipt of Information. Seller represents that it has had an
opportunity to ask questions and receive answers from Purchaser regarding the
business, properties, prospects and financial condition of Purchaser and to
obtain additional information (to the extent Purchaser possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to it or to which
it had access.
SECTION 4.08 Restricted Securities. Seller understands that the Series A
Preferred (and any Common Stock issued on conversion thereof) may not be sold,
transferred, or otherwise disposed of without registration under the Securities
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Series A Preferred (or the Common Stock
issued on conversion thereof) or an available exemption from registration under
the Securities Act, the Series A Preferred (and any Common Stock issued on
conversion thereof) must be held indefinitely. In particular, Seller is aware
that the Series A Preferred (and any Common Stock issued on conversion thereof)
may not be sold pursuant to Rule 144 promulgated under the Securities Act unless
all of the conditions of that Rule are met. Among the conditions for use of Rule
144 is the availability of current information to the public about Purchaser.
Such information is not now available and Purchaser has no present plans to make
such information available.
SECTION 4.09 Legends. To the extent applicable, each certificate or other
document evidencing any of the Series A Preferred Stock or any Common Stock
issued upon conversion thereof shall be endorsed with the legends set forth
below, and Seller covenants that, except to the extent such restrictions are
waived by Purchaser, Seller shall not transfer the shares represented by any
such certificate without complying with the restrictions on transfer described
in the following legend under the Act endorsed on such certificate:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
6
<PAGE> 31
SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED
UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED."
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01 Access to Information. From the date hereof until the
Closing, upon reasonable notice, Seller shall and shall cause each of Seller's
officers, directors, employees, agents, accountants and counsel to: (i) afford
the officers, employees and authorized agents, accountants, counsel, financing
sources and representatives of Purchaser reasonable access, during normal
business hours, to the offices, properties, plants, other facilities, books and
records of Seller relating to the Business and to those officers, directors,
employees, agents, accountants and counsel of Seller who have any knowledge
relating to Seller or the Business and (ii) furnish to the officers, employees
and authorized agents, accountants, counsel, financing sources and
representatives of Purchaser such additional financial and operating data and
other information regarding the Business and the assets, properties and goodwill
of Seller as Purchaser may from time to time reasonably request.
SECTION 5.02 Notice of Developments. Prior to the Closing, Seller shall
promptly notify Purchaser in writing of (a) all events, circumstances, facts and
occurrences arising subsequent to the date of this Agreement which could result
in any breach of a representation or warranty or covenant of Seller in this
Agreement or which could have the effect of making any representation or
warranty of Seller in this Agreement untrue or incorrect in any respect and (b)
all other material developments affecting the Assets, business, financial
condition, operations, results of operations, customer or supplier relations,
employee relations, projections or prospects of the Assets or the Business.
SECTION 5.03 Further Action. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things necessary, proper or advisable under applicable
Laws, and execute and deliver such documents and other papers, as may be
required to carry out the provisions of this Agreement and consummate and make
effective the transactions contemplated by this Agreement.
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.01 Conditions to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment, at or prior to the Closing, of each of the following
conditions:
(a) Representations, Warranties and Covenants. The representations and
warranties of Purchaser contained in this Agreement shall have been true
and correct when made and shall be true and correct in all material
respects as of the Closing, with the same force and effect as if made as of
the Closing Date, other than such representations and warranties as are
made as of another date, the covenants and agreements contained in this
Agreement to be complied with by Purchaser on or before the Closing shall
have been complied with in all material respects, and Seller shall have
received a certificate from Purchaser to such effect signed by a duly
authorized officer thereof;
(b) No Proceeding or Litigation. No Action shall have been commenced
by or before any Governmental Authority against either Seller or Purchaser,
seeking to restrain or materially and adversely alter the transactions
contemplated by this Agreement which, in the reasonable, good faith
determination of Seller, is likely to render it impossible or unlawful to
consummate such transactions; and
7
<PAGE> 32
(c) Stockholder Approval. Seller shall have obtained the approval of a
majority of the outstanding shares for the sale of Assets pursuant to this
Agreement and the Ancillary Agreements, and for Seller's execution and
delivery of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby.
(d) Ancillary Agreements. Purchaser shall have executed and delivered
to Seller each of the Ancillary Agreements to which it is a party.
SECTION 6.02 Conditions to Obligations of Purchaser. The obligations
of Purchaser to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of each of
the following conditions:
(a) Representations, Warranties and Covenants. The representations and
warranties of Seller contained in this Agreement shall have been true and
correct when made and shall be true and correct as of the Closing with the
same force and effect as if made as of the Closing, other than such
representations and warranties as are made as of another date, the
covenants and agreements contained in this Agreement to be complied with by
Seller on or before the Closing shall have been complied with, and
Purchaser shall have received a certificate of Seller to such effect signed
by a duly authorized officer thereof;
(b) No Proceeding or Litigation. No Action shall have been commenced
or threatened by or before any Governmental Authority against either Seller
or Purchaser, seeking to restrain or materially and adversely alter the
transactions contemplated hereby which Purchaser believes, in its sole and
absolute discretion, is likely to render it impossible or unlawful to
consummate the transactions contemplated by this Agreement or otherwise
render inadvisable Purchaser's role and absolute discretion the
consummation by Purchaser of the transactions contemplated by this
Agreement;
(c) Stockholder Approval. Seller shall have obtained the approval of a
majority of the outstanding shares for the sale of Assets pursuant to this
Agreement and the Ancillary Agreements, and for Seller's execution and
delivery of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby.
(d) Consents and Approvals. Purchaser and Seller shall have received,
each in form and substance satisfactory to Purchaser in its sole and
absolute discretion, all authorizations, consents, orders and approvals of
all Governmental Authorities and officials and all third party consents and
estoppel certificates which Purchaser in its sole and absolute discretion
deems necessary or desirable for the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements;
(e) Ancillary Agreements. Purchaser shall have received executed
counterparts to each of the Ancillary Agreements to which it is a party.
ARTICLE VII
TERMINATION AND WAIVER
SECTION 7.01 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual consent of Seller and Purchaser; or
(b) by either Seller or Purchaser if the Closing shall not have
occurred by September 30, 1999; or
(c) by either Purchaser or Seller in the event that any Governmental
Authority shall have issued an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and nonappealable.
SECTION 7.02 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.01, this Agreement shall forthwith become
void and there shall be no liability on the part of either party hereto except
as set forth in Section 8.01.
8
<PAGE> 33
SECTION 7.03 Waiver. Either party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered by the other party
pursuant hereto or (c) waive compliance with any of the agreements or conditions
of the other party contained herein. Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party to be bound
thereby. Any waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term or condition,
or a waiver of any other term or condition, of this Agreement. The failure of
any party to assert any of its rights hereunder shall not constitute a waiver of
any of such rights.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Expenses. Except as otherwise specified in this Agreement,
all costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses, whether or not the Closing shall have
occurred.
SECTION 8.02 Conveyance Taxes. Each of Seller and Purchaser shall be
liable for an amount equal to half of the sales, use and transfer taxes, any
transfer, recording, registration, and other fees, and any similar Taxes which
become payable in connection with the transactions contemplated by this
Agreement and the Ancillary Agreements.
SECTION 8.03 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by cable, by telecopy, by telegram, by telex or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
9.03):
(a) if to Seller:
Shaman Pharmaceuticals, Inc.
213 East Grand Avenue
South San Francisco, California 94080
Telecopy No.: (650) 873-8367
Attn: President
with a copy to:
Brobeck, Phleger & Harrison, LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
Telecopy No.: (650) 496-2885
Attn: J. Stephan Dolezalek, Esq.
(b) if to the Purchaser:
Shaman Botanicals, Inc.
213 East Grand Avenue
South San Francisco, California 94080
Telecopy No.: (650) 873-8367
Attn: President
SECTION 8.04 Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning, construction or interpretation of this Agreement.
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<PAGE> 34
SECTION 8.05 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 8.06 Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, representations, undertakings and
understandings, both written and oral, between Seller and Purchaser with respect
to the subject matter hereof.
SECTION 8.07 Assignment. This Agreement may not be assigned by operation
of Law or otherwise without the express written consent of Seller and Purchaser
(which consent may be granted or withheld in the sole discretion of Seller and
Purchaser); provided, however, that Purchaser may assign this Agreement to an
Affiliate of Purchaser without the consent of Seller.
SECTION 8.08 No Third Party Beneficiaries. This Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other person, including, without limitation, any union or any employee
or former employee of Seller, any legal or equitable right, benefit or remedy of
any nature whatsoever, including, without limitation, any rights of employment
for any specified period, under or by reason of this Agreement.
SECTION 8.09 Amendment. This Agreement may not be amended, modified or
supplemented except (a) by an instrument in writing signed by, or on behalf of,
Seller and Purchaser or (b) by a waiver in accordance with Section 7.03.
SECTION 8.10 Governing Law. In all respects, including all matters of
construction, validity and performance, this Agreement and the obligations of
each party arising hereunder shall be governed by, and construed and enforced in
accordance with, the laws of the State of California applicable to contracts
executed in and to be performed entirely within such state, without regard to
the principles thereof regarding conflict of laws, and any applicable laws of
the United States of America.
SECTION 8.11 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 8.12 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at Law or equity, without the necessity of demonstrating the inadequacy
of money damages.
[remainder of page intentionally left blank]
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<PAGE> 35
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
SHAMAN BOTANICALS, INC.
By: /s/ Loren D. Israelsen
------------------------------------
Name: Loren D. Israelsen
Title: Interim Chief Executive
Officer
SHAMAN PHARMACEUTICALS, INC.
By: /s/ Lisa A. Conte
------------------------------------
Name: Lisa A. Conte
Title: President and Chief Executive
Officer
[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]
<PAGE> 36
ANNEX A
ASSETS
- Exclusive license to the botanical library and archives, both actual
plant material, and information residing in the relational database, and
other informational sources, for development as dietary supplements and
other non-pharmaceutical applications;
- Exclusive license to the Company's trademarks and logos;
- Exclusive license to the Company's patents relating to plants, compounds,
formulations, and combinations of products to be developed as dietary
supplements and other non-pharmaceutical applications;
- Products developed, or currently in development for non-pharmaceutical
applications;
- Existing raw material supply for products to be developed as dietary
supplements;
- Non-exclusive sub-license to rights under contracts, including material
supply agreements and consulting agreements;
- Capital equipment, furniture, materials, and supplies necessary to carry
out development and commercialization activities; and
- Contribution for use of facilities including office space, utilities, and
maintenance.
<PAGE> 37
EXHIBIT A
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT is entered into on , 1999, by and
between Shaman Pharmaceuticals, Inc., a Delaware corporation (the "Seller"), and
Shaman Botanicals, Inc., a Delaware corporation (the "Purchaser"). Unless
otherwise defined herein, capitalized terms shall be used herein as defined in
the Asset Purchase Agreement (as defined below).
WITNESSETH:
WHEREAS, Seller and Purchaser have entered into an Asset Purchase
Agreement, dated as of February 10, 1999 for the sale and purchase of certain of
the assets of Seller (the "Asset Purchase Agreement"); and
WHEREAS, pursuant to the Asset Purchase Agreement, Purchaser has agreed to
assume certain obligations of Seller as set forth in Section 2.02 of the Asset
Purchase Agreement with respect to the Assets; and
WHEREAS, the execution and delivery of this Assumption Agreement by
Purchaser is a condition to the obligations of Seller to consummate the
transactions contemplated by the Asset Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants set forth herein and in the Asset Purchase Agreement, and
intending to be legally bound hereby, Purchaser and Seller hereby agree as
follows:
1. Subject to Section 2 hereof, Purchaser hereby assumes the obligations
as set forth in Section 2.02(a) of the Asset Purchase Agreement as of the
Effective Date (the "Assumed Liabilities").
2. The Assumed Liabilities shall not include the Liabilities of Seller
as set forth in Section 2.02(b) of the Asset Purchase Agreement.
3. Nothing contained herein shall require Purchaser to pay or discharge
any liabilities or obligations assumed hereby as long as Purchaser in good faith
shall contest or cause to be contested the amount of validity thereof, and
Purchaser hereby undertakes to indemnify and hold Seller harmless in respect of
any such liabilities or obligations.
4. Other than as specifically stated above or in the Asset Purchase
Agreement, Purchaser assumes no liability or obligation of Seller by this
Assumption Agreement.
5. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given or made (and shall be deemed to
have been duly given or made upon receipt) by delivery in person, or by courier
service, cable, telecopy, telegram, or registered or certified mail (postage
prepaid, return receipt requested) to the respective parties hereto at their
addresses set forth on the signature pages to the Asset Purchase Agreement (or
at such other address for a party hereto as shall be specified in a notice given
in accordance with Section 8.03 of the Asset Purchase Agreement).
6. If any term or other provision of this Assumption Agreement is
invalid, illegal or incapable of being enforced by any Law or public policy, all
other terms and provisions of this Assumption Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Assumption Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
7. This Assumption Agreement and the Asset Purchase Agreement constitute
the entire agreement of the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements,
A-1
<PAGE> 38
representations, undertakings and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
8. This Assumption Agreement may not be assigned by operation of law or
otherwise without the express written consent of Seller and Purchaser (which
consent may be granted or withheld in the sole discretion of Seller and
Purchaser); provided, however, that Purchaser may assign this Assumption
Agreement to an affiliate of Purchaser without the consent of Seller.
9. This Assumption Agreement shall be binding upon and inure solely to
the benefit of the parties hereto and their permitted assigns and nothing
herein, express or implied, is intended to or shall confer upon any other
Person, including, without limitation, any union or any employee or former
employee of Seller, any legal or equitable right, benefit or remedy of any
nature whatsoever, including, without limitation, any rights of employment for
any specified period, under or by reason of this Assumption Agreement.
10. This Assumption Agreement may not be amended, modified or
supplemented except by an instrument in writing signed by, or on behalf of,
Seller and Purchaser.
11. In all respects, including all matters of construction, validity and
performance, this Assumption Agreement and the obligations of each party arising
hereunder shall be governed by, and construed and enforced in accordance with,
the laws of the State of California applicable to contracts executed in and to
be performed entirely within such state, without regard to the principles
thereof regarding conflict of laws, and any applicable laws of the United States
of America.
12. This Assumption Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
A-2
<PAGE> 39
IN WITNESS WHEREOF, Seller and Purchaser have caused this Assumption
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
SHAMAN BOTANICALS, INC.
By:
------------------------------------
Name:
Title:
SHAMAN PHARMACEUTICALS, INC.
By:
------------------------------------
Name:
Title:
<PAGE> 40
EXHIBIT B
BILL OF SALE AND ASSIGNMENT
BILL OF SALE AND ASSIGNMENT, dated as of , 1999 (this
"Bill of Sale and Assignment"), from Shaman Pharmaceuticals, Inc., a Delaware
corporation (the "Seller"), to Shaman Botanicals, Inc., a Delaware corporation
(the "Purchaser"). Unless otherwise defined herein, capitalized terms shall be
used herein as defined in the Asset Purchase Agreement (as defined below).
WITNESSETH:
WHEREAS, Seller and Purchaser have entered into an Asset Purchase
Agreement, dated as of February 10, 1999 for sale and purchase of certain assets
of Seller (the "Asset Purchase Agreement"); and
WHEREAS, the execution and delivery of this Bill of Sale and Assignment by
Seller is a condition to the obligations of Purchaser to consummate the
transactions contemplated by the Asset Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration to Seller, receipt of
which is hereby acknowledged, and pursuant to the Asset Purchase Agreement,
Seller, intending to be legally bound hereby, does hereby agree as follows:
1. Seller does hereby sell, assign, transfer, convey, grant, bargain,
set over, release, deliver, vest and confirm unto Purchaser, its successors and
assigns, forever, the entire right, title and interest of Seller in and to the
property and assets as defined in the Asset Purchase Agreement and further set
forth in Annex A to the Asset Purchase Agreement (the "Assets"):
2. The sale, assignment, transfer, conveyance and delivery of the Assets
under this Bill of Sale and Assignment is subject to and in accordance with the
provisions of the Asset Purchase Agreement.
3. Seller shall, from time-to-time after the delivery of this Bill of
Sale and Assignment, at Purchaser's request and without further consideration,
do, execute, acknowledge and deliver or cause to be done, executed, acknowledged
and delivered, all such other instruments of conveyance and transfer, consents,
bills of sale, assignments, releases, powers of attorney and assurances
presented by Purchaser and reasonably necessary to more effectively transfer or
convey to Purchaser any of the Assets.
4. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given or made (and shall be deemed to
have been duly given or made upon receipt) by delivery in person, or by courier
service, cable, telecopy, telegram, or registered or certified mail (postage
prepaid, return receipt requested) to the respective parties hereto at their
addresses set forth on the signature pages to the Asset Purchase Agreement (or
at such other address for a party hereto as shall be specified in a notice given
in accordance with Section 8.03 of the Asset Purchase Agreement).
5. If any term or other provision of this Bill of Sale and Assignment is
invalid, illegal or incapable of being enforced by any Law or public policy, all
other terms and provisions of this Bill of Sale and Assignment shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Bill of Sale and Assignment so as
to effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
6. This Bill of Sale and Assignment and the Asset Purchase Agreement
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements, representations,
undertakings and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
7. This Bill of Sale and Assignment may not be assigned by operation of
Law or otherwise without the express written consent of Seller and Purchaser
(which consent may be granted or withheld in the sole
B-1
<PAGE> 41
discretion of Seller and Purchaser); provided, however, that Purchaser may
assign this Bill of Sale and Assignment to an Affiliate of Purchaser without the
consent of Seller.
8. This Bill of Sale and Assignment shall be binding upon and inure
solely to the benefit of the parties hereto and their permitted assigns and
nothing herein, express or implied, is intended to or shall confer upon any
other person, including, without limitation, any union or any employee or former
employee of Seller, any legal or equitable right, benefit or remedy of any
nature whatsoever, including, without limitation, any rights of employment for
any specified period, under or by reason of this Bill of Sale and Assignment.
9. This Agreement may not be amended, modified or supplemented except by
an instrument in writing signed by, or on behalf of, Seller and Purchaser.
10. In all respects, including all matters of construction, validity and
performance, this Bill of Sale and Assignment and the obligations of each party
arising hereunder shall be governed by, and construed and enforced in accordance
with, the laws of the State of California applicable to contracts executed in
and to be performed entirely within such state, without regard to the principles
thereof regarding conflict of laws, and any applicable laws of the United States
of America.
11. This Bill of Sale and Assignment may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
B-2
<PAGE> 42
IN WITNESS WHEREOF, Seller has caused this Bill of Sale and Assignment to
be executed as of the date first written above by its officer thereunto duly
authorized.
SHAMAN BOTANICALS, INC.
By:
------------------------------------
Name:
Title:
Accepted and agreed:
SHAMAN PHARMACEUTICALS, INC.
By:
------------------------------------
Name:
Title:
[SIGNATURE PAGE TO BILL OF SALE]
<PAGE> 43
EXHIBIT B TO
PROXY STATEMENT
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SHAMAN BOTANICALS, INC.
SHAMAN BOTANICALS, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware DOES HEREBY CERTIFY:
FIRST: The original Certificate of Incorporation of Shaman Botanicals, Inc.
was filed with the Secretary of State of Delaware on December 8, 1998.
SECOND: The Amended and Restated Certificate of Incorporation of Shaman
Botanicals, Inc. in the form attached hereto as Exhibit A has been duly adopted
in accordance with the provisions of Sections 245 and 242 of the General
Corporation Law of the State of Delaware by the directors and stockholders of
the Corporation.
THIRD: The Amended and Restated Certificate of Incorporation so adopted
reads in full as set forth in Exhibit A attached hereto and is hereby
incorporated herein by this reference.
IN WITNESS WHEREOF, Shaman Botanicals, Inc. has caused this Certificate to
be signed by the President of the Corporation thereunto duly authorized as of
this th day of , 1999.
SHAMAN BOTANICALS, INC.
By:
------------------------------------
Lisa A. Conte, President
<PAGE> 44
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SHAMAN BOTANICALS, INC.
ARTICLE I
The name of the corporation is Shaman Botanicals, Inc. (the "Corporation").
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent in the State of Delaware at such address is The
Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE IV
A. This Corporation is authorized to issue two classes of shares to be
designated "Preferred Stock" and "Common Stock." The total number of shares of
capital stock that the Corporation is authorized to issue is twelve million
(12,000,000). Ten million (10,000,000) shares shall be designated as Common
Stock, par value $0.001 per share, and two million (2,000,000) shall be
designated as Preferred Stock, par value $0.001 per share.
B. The Preferred Stock shall be divided into series. The first series shall
consist of seven hundred twenty thousand (720,000) shares and is designated
"Series A Preferred Stock." The rights, preferences, privileges, and
restrictions granted to and imposed on the Series A Preferred Stock are as set
forth in Article IV(C).
The remaining shares of Preferred Stock may be issued from time to time in
one or more series without further stockholder approval. The Board of Directors
of the Corporation (the "Board of Directors") is expressly authorized to provide
for the issuance of all or any of the remaining shares of the Preferred Stock in
one or more series, and to fix the number of shares and to determine or alter,
for each such series, such voting powers, full or limited, or no voting powers,
and such designations, preferences, and relative, participating, optional, or
other rights and such qualifications, limitations, or restrictions thereof, as
shall be stated and expressed in the resolution or resolutions adopted by the
Board of Directors providing for the issuance of such shares (a "Preferred Stock
Designation") and as may be permitted by the General Corporation Law of the
State of Delaware. The Board of Directors is also expressly authorized to
increase or decrease (but not below the number of shares of such series then
outstanding) the number of shares of any series other than the Series A
Preferred Stock subsequent to the issue of shares of that series. In case the
number of shares of any such series shall be so decreased, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
C. The powers, preferences, rights, restrictions, and other matters
relating to the series a preferred stock are as follows:
1. Dividends.
a. The holders of the Series A Preferred Stock shall be entitled to
receive dividends at the rate of $0.08 per share (as adjusted for any stock
dividends, combinations or splits with respect to such shares) per annum,
respectively, payable out of funds legally available therefor. Such dividends
shall be payable only when, as, and if declared by the Board of Directors and
shall be non-cumulative.
1
<PAGE> 45
No dividends (other than those payable solely in the Common Stock of the
Corporation) shall be paid on any Common Stock of the Corporation during any
fiscal year of the Corporation until dividends in the total amount of $0.08 per
share (as adjusted for any stock dividends, combinations or splits with respect
to such shares) on the Series A Preferred Stock shall have been paid or declared
and set apart during that fiscal year and any prior year in which dividends
accumulated but remain unpaid, and no dividends shall be paid on any share of
Common Stock unless a dividend (including the amount of any dividends paid
pursuant to the above provisions of this Section D.l) is paid with respect to
all outstanding shares of Series A Preferred Stock in an amount for each such
share of Series A Preferred Stock equal to or greater than the aggregate amount
of such dividends for all shares of Common Stock into which each such share of
Series A Preferred Stock could then be converted.
Except as otherwise provided herein with respect to the Series A Preferred
Stock, no right shall accrue to holders of shares of Series A Preferred Stock by
reason of the fact that dividends on said shares are not declared in any prior
year, nor shall any undeclared or unpaid dividend bear or accrue any interest.
b. In the event the Corporation shall declare a distribution payable in
securities of other persons, evidences of indebtedness issued by the Corporation
or other persons, assets (excluding cash dividends) or options or rights to
purchase any such securities or evidences of indebtedness, then, in each such
case the holders of the Series A Preferred Stock shall be entitled to a
proportionate share of any such distribution as though the holders of the Series
A Preferred Stock were the holders of the number of shares of Common Stock of
the Corporation into which their respective shares of Series A Preferred Stock
are convertible as of the record date fixed for the determination of the holders
of Common Stock of the Corporation entitled to receive such distribution.
2. Liquidation Preference.
a. In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Series A
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Common Stock by reason of their ownership thereof, an amount
equal to the sum of (A) $1.00 per share (as adjusted for any stock dividends,
combinations or splits with respect to such shares) plus (B) all accrued or
declared but unpaid dividends on such share for each share of Series A Preferred
Stock then held by them. If upon the occurrence of such event, the assets and
funds thus distributed among the holders of the Series A Preferred Stock shall
be insufficient to permit the payment to such holders of the full aforesaid
preferential amount, then the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably among the holders of the
Series A Preferred Stock in proportion to the preferential amount each such
holder is otherwise entitled to receive.
b. After payment to the holders of the Series A Preferred Stock of the
amounts set forth in Section C.2(a) above, the entire remaining assets and funds
of the Corporation legally available for distribution, if any, shall be
distributed among the holders of the Common Stock and the Series A Preferred
Stock in proportion to the shares of Common Stock then held by them and the
shares of Common Stock which they then have the right to acquire upon conversion
of the shares of Series A Preferred Stock then held by them.
c. For purposes of this Section C.2, (i) any acquisition of the
Corporation by means of merger or other form of corporate reorganization in
which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring corporation
or its subsidiary (other than a mere reincorporation transaction) or (ii) a sale
of all or substantially all of the assets of the Corporation, shall be treated
as a liquidation, dissolution or winding up of the Corporation and shall entitle
the holders of Series A Preferred Stock to receive at the closing in cash,
securities or other property (valued as provided in Section C.2(d) below)
amounts as specified in Sections C.2(a) above.
d. Whenever the distribution provided for in this Section C.2 shall be
payable in securities or property other than cash, the value of such
distribution shall be the fair market value of such securities or other property
as determined in good faith by the Board of Directors.
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3. Redemption. The Series A Preferred Stock is not redeemable.
4. Voting Rights. Each holder of shares of the Series A Preferred Stock
shall be entitled to the number of votes equal to the number of shares of Common
Stock into which such shares of Series A Preferred Stock could be converted and
shall have voting rights and powers equal to the voting rights and powers of the
Common Stock (except as otherwise expressly provided herein or as required by
law, voting together with the Common Stock as a single class) and shall be
entitled to notice of any stockholders' meeting in accordance with the Bylaws of
the Corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Series A Preferred Stock held by each holder could
be converted) shall be rounded to the nearest whole number (with one-half being
rounded upward). Each holder of Common Stock shall be entitled to one (l) vote
for each share of Common Stock held.
5. Conversion. The holders of the Series A Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
a. Right to Convert. Each share of Series A Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share and on or prior to the fifth day prior to the Redemption
Date, if any, as may have been fixed in any Redemption Notice with respect to
the Series A Preferred Stock, at the office of the Corporation or any transfer
agent for such stock, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing $2.00 by the Conversion Price
applicable to such share, determined as hereinafter provided, in effect on the
date the certificate is surrendered for conversion. The price at which shares of
Common Stock shall be deliverable upon conversion of shares of the Series A
Preferred Stock (the "Series A Conversion Price") shall initially be $2.00 per
share of Common Stock. Such initial Series A Conversion Price shall be adjusted
as hereinafter provided.
b. Automatic Conversion. Each share of Series A Preferred Stock shall
automatically be converted into shares of Common Stock at the then-effective
Series A Conversion Price upon the earlier of (i) the date specified by written
consent or agreement of holders of at least a majority of the then outstanding
shares of Series A Preferred Stock or (ii) immediately upon the closing of the
sale of the Corporation's Common Stock in a firm commitment, underwritten public
offering registered under the Securities Act of 1933, as amended (the
"Securities Act") other than a registration relating solely to a transaction
under Rule 145 under such Act (or any successor thereto) or to an employee
benefit plan of the Corporation, at a public offering price (prior to
underwriters' discounts and expenses) equal to or exceeding $3.00 per share of
Common Stock (as adjusted for any stock dividends, combinations or splits with
respect to such shares) and the aggregate proceeds to the Corporation (after
deduction for underwriters' discounts and expenses relating to the issuance,
including without limitation fees of the Corporation's counsel) of which exceed
$10,000,000.
c. Mechanics of Conversion.
(i) Before any holder of Series A Preferred Stock shall be entitled
to convert the same into shares of Common Stock, he shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for such stock, and shall give written
notice to the Corporation at such office that he elects to convert the same and
shall state therein the name or names in which he wishes the certificate or
certificates for shares of Common Stock to be issued. The Corporation shall, as
soon as practicable thereafter, issue and deliver at such office to such holder
of Series A Preferred Stock, a certificate or certificates for the number of
shares of Common Stock to which he shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of surrender of the shares of Series A Preferred Stock to
be converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.
(ii) If the conversion is in connection with an underwritten offering
of securities pursuant to the Securities Act, the conversion may, at the option
of any holder tendering shares of Series A Preferred Stock for conversion, be
conditioned upon the closing with the underwriters of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive the
Common Stock upon conversion of the
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Series A Preferred Stock shall not be deemed to have converted such Series A
Preferred Stock until immediately prior to the closing of such sale of
securities.
d. Adjustments to Conversion Prices for Stock Dividends and for
Combinations or Subdivisions of Common Stock. In the event that this Corporation
at any time or from time to time after the Original Issue Date shall declare or
pay, without consideration, any dividend on the Common Stock payable in Common
Stock or in any right to acquire Common Stock for no consideration, or shall
effect a subdivision of the outstanding shares of Common Stock into a greater
number of shares of Common Stock (by stock split, reclassification or otherwise
than by payment of a dividend in Common Stock or in any right to acquire Common
Stock), or in the event the outstanding shares of Common Stock shall be combined
or consolidated, by reclassification or otherwise, into a lesser number of
shares of Common Stock, then the Conversion Price for any series of Preferred
Stock in effect immediately prior to such event shall, concurrently with the
effectiveness of such event, be proportionately decreased or increased, as
appropriate. In the event that this Corporation shall declare or pay, without
consideration, any dividend on the Common Stock payable in any right to acquire
Common Stock for no consideration then the Corporation shall be deemed to have
made a dividend payable in Common Stock in an amount of shares equal to the
maximum number of shares issuable upon exercise of such rights to acquire Common
Stock.
e. Adjustments for Reclassification and Reorganization. If the Common
Stock issuable upon conversion of the Series A Preferred Stock shall be changed
into the same or a different number of shares of any other class or classes of
stock, whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares provided for in Section C.5(e) above
or a merger or other reorganization referred to in Section C.2(c) above), the
Series A Conversion Price then in effect shall, concurrently with the
effectiveness of such reorganization or reclassification, be proportionately
adjusted so that the Series A Preferred Stock shall be convertible into, in lieu
of the number of shares of Common Stock which the holders would otherwise have
been entitled to receive, a number of shares of such other class or classes of
stock equivalent to the number of shares of Common Stock that would have been
subject to receipt by the holders upon conversion of the Series A Preferred
Stock immediately before that change.
f. No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section C.5 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock against impairment.
g. Certificates as to Adjustments. Upon the occurrence of each
adjustment or readjustment of any Conversion Price pursuant to this Section C.5,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock a certificate executed by the Corporation's
President or Chief Financial Officer setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price for such series of Preferred Stock at
the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversion of the Series A Preferred Stock.
h. Notices of Record Date. In the event that the Corporation shall
propose at any time: (i) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus; (ii)
to offer for subscription pro rata to the holders of any class or series of its
stock any additional shares of stock of any class or series or other rights;
(iii) to effect any reclassification or recapitalization of its Common Stock
outstanding involving a change in the Common Stock; or (iv) to merge or
consolidate with or into any other corporation, or sell, lease or convey all or
substantially all of its assets, or to liquidate, dissolve or wind up;
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Then, in connection with each such event, the Corporation shall send to the
holders of Series A Preferred Stock: (1) at least twenty (20) days prior written
notice of the date on which a record shall be taken for such dividend,
distribution or subscription rights (and specifying the date on which the
holders of Common Stock shall be entitled thereto) or for determining rights to
vote, if any, in respect of the matters referred to in (iii) and (iv) above; and
(2) in the case of the matters referred to in (iii) and (iv) above, at least
twenty (20) days prior written notice of the date when the same shall take place
(and specifying the date on which the holders of Common Stock shall be entitled
to exchange their Common Stock for securities or other property deliverable upon
the occurrence of such event).
i. Issue Taxes. The Corporation shall pay any and all issue and other
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of shares of Series A Preferred Stock pursuant
hereto; provided, however, that the Corporation shall not be obligated to pay
any transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.
j. Reservation of Stock Issuable Upon Conversion. The Corporation shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series A
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose, including, without limitation, engaging in best efforts to obtain the
requisite stockholder approval of any necessary amendment to this Certificate.
k. Fractional Shares. No fractional share shall be issued upon the
conversion of any share or shares of Series A Preferred Stock. All shares of
Common Stock (including fractions thereof) issuable upon conversion of more than
one share of Series A Preferred Stock by a holder thereof shall be aggregated
for purposes of determining whether the conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined in good
faith by the Board of Directors).
l. Notices. Any notice required by the provisions of this Section C.5 to
be given to the holders of shares of Series A Preferred Stock shall be deemed
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of the Corporation.
6. Restrictions and Limitations.
a. So long as any shares of Preferred Stock remain outstanding, the
Corporation shall not, without the vote or written consent by the holders of at
least a majority of the then outstanding shares of the Series A Preferred Stock,
voting as a class:
(i) Redeem, purchase or otherwise acquire (or pay into or set aside
for a sinking fund for such purpose), any of the Common Stock, provided,
however, that this restriction shall not apply to the repurchase of shares of
Common Stock from employees, officers, directors, consultants or other persons
performing services for the Company or any subsidiary pursuant to agreements
under which the Company has the option to repurchase such shares at cost upon
the occurrence of certain events, such as the termination of employment;
(ii) Authorize or issue, or obligate itself to issue, any other
equity security (including any security convertible into or exercisable for any
equity security) senior to or on a parity with the Series A Preferred Stock as
to dividend rights or redemption rights or liquidation preferences;
(iii) Effect any sale, lease, assignment, transfer, or other
conveyance of all or substantially all of the assets of the Corporation or any
of its subsidiaries, or any consolidation or merger involving the
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<PAGE> 49
Corporation or any of its subsidiaries, or any reclassification or other change
of any stock, or any recapitalization of the Corporation;
(iv) Permit any subsidiary to issue or sell, or obligate itself to
issue or sell, except to the Corporation or any wholly owned subsidiary, any
stock of such subsidiary;
(v) Increase or decrease (other than by redemption or conversion) the
total number of authorized shares of Preferred Stock; or
(vi) Otherwise amend its Certificate of Incorporation in such a way
that would adversely affect any of the rights, preferences or privileges
provided for herein for the benefit of any shares of the Series A Preferred
Stock.
7. No Reissuance of Series A Preferred Stock. No share or shares of Series
A Preferred Stock acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
cancelled, retired and eliminated from the shares which the Corporation shall be
authorized to issue.
ARTICLE V
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors shall have the power, both before and after receipt of any payment
for any of the Corporation's capital stock, to adopt, amend, alter, repeal and
rescind any or all of the bylaws of the Corporation without any action on the
part of the stockholders.
ARTICLE VI
The number of directors of the corporation shall be fixed from time to time
by, or in the manner provided in, the bylaws of the corporation or amendment
thereof duly adopted by the board of directors or by the stockholders of the
corporation.
ARTICLE VI
Elections of directors need not be by written ballot unless the bylaws of
the Corporation shall so provide.
ARTICLE VII
Meetings of stockholders may be held within or without the State of
Delaware, as the bylaws of the corporation may provide. The books of the
corporation may be kept (subject to any provision contained in the statutes)
outside the State of Delaware at such place or places as may be designated from
time to time by the board of directors or in the bylaws of the corporation.
ARTICLE VIII
A director of the Corporation shall, to the full extent permitted by the
Delaware General Corporation Law as it now exists or as it may hereafter be
amended, not be liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation law, or (iv) for any transaction from which the
director derived any improper personal benefit.
Any repeal or modification of the foregoing provisions of this Article VIII
by the stockholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
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ARTICLE VIII
To the fullest extent permitted by applicable law, this corporation is also
authorized to provide indemnification of (and advancement of expenses to) such
agents (and any other persons to which Delaware law permits this corporation to
provide indemnification) through bylaw provisions, agreements with such agents
or other persons, vote of stockholders or disinterested directors or otherwise,
in excess of the indemnification and advancement otherwise permitted by Section
145 of the Delaware General Corporation Law, subject only to limits created by
applicable Delaware law (statutory or non-statutory), with respect to actions
for breach of duty to this corporation, its stockholders, and others.
Any repeal or modification of any of the foregoing provisions of this
Article XI shall not adversely affect any right or protection of a director,
officer, agent or other person existing at the time of, or increase the
liability of any director of this corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to such repeal or
modification.
ARTICLE V
Except as otherwise provided in this Certificate of Incorporation, the
Corporation reserves the right to adopt, repeal, rescind or amend in any respect
any provisions contained in this Amended and Restated Certificate of
Incorporation in the manner now or hereafter prescribed by applicable law, and
all rights conferred on stockholders herein are granted subject to this
reservation.
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SHAMAN PHARMACEUTICALS, INC.
PROXY
Special Meeting of Stockholders, March 24, 1999
This Proxy is Solicited on Behalf of the Board of Directors of
Shaman Pharmaceuticals, Inc.
The undersigned revokes all previous proxies, acknowledges receipt of
the Notice of the Special Meeting of Stockholders to be held on March 24, 1999
and the Proxy Statement and appoints Lisa A. Conte and G. Kirk Raab, and each of
them, the Proxy of the undersigned, with full power of substitution, to vote all
shares of Common Stock or Preferred Stock of Shaman Pharmaceuticals, Inc. (the
"Company") which the undersigned is entitled to vote, either on his or her own
behalf or on behalf of any entity or entities, at the Special Meeting of
Stockholders of the Company to be held at The Embassy Suites, 250 Gateway
Boulevard, South San Francisco, California, 94080 on Wednesday, March 24, 1999
at 9:00 A.M. Pacific Time (the "Special Meeting"), and at any adjournment or
postponement thereof, with the same force and effect as the undersigned might or
could do if personally present thereat. The shares represented by this Proxy
shall be voted in the manner set forth on the reverse side.
1. [ ] FOR [ ] AGAINST [ ] ABSTAIN To approve the transfer of
certain designated assets of Shaman Pharmaceuticals, Inc. to
Shaman Botanicals, Inc. in exchange for shares of Series A
Preferred Stock of Shaman Botanicals, Inc.
2. In accordance with the discretion of the proxy holders, to act
upon all matters incident to the conduct of the meeting and upon
other matters as may properly come before the meeting.
The Board of Directors recommends a vote IN FAVOR OF each of the
proposals listed above. This Proxy, when properly executed, will be voted as
specified above. If no specification is made, this Proxy will be voted IN FAVOR
OF each of the proposals listed above.
Please print the name(s) appearing on each share certificate(s) over
which you have voting authority:___________________________________
(Print name(s) on certificate)
Please sign your name:________________________________ Date: ___________
(Authorized Signature(s))
<PAGE> 1
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Proxy Statement of
Shaman Pharmaceuticals, Inc. dated February 24, 1999 of our report dated
January 29, 1998, with respect to the financial statements of Shaman
Pharmaceuticals, Inc. included in its Annual Report (Form 10-K/A) for the year
ended December 31, 1997, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
February 19, 1999
Palo Alto, California
