AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 2000
REGISTRATION NO. 333-______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SHAMAN PHARMACEUTICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-3095806
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
213 EAST GRAND AVENUE
SOUTH SAN FRANCISCO, CALIFORNIA 94080-4812
(650) 952-7070
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF THE REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
LISA A. CONTE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SHAMAN PHARMACEUTICALS, INC.
213 EAST GRAND AVENUE
SOUTH SAN FRANCISCO, CALIFORNIA 94080-4812
(650) 952-7070
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE OF PROCESS)
COPIES TO:
DONALD C. REINKE
BAY VENTURE COUNSEL, LLP
1999 HARRISON STREET, SUITE 1300
OAKLAND, CALIFORNIA 94612
510-273-8750
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes
effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the Securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Proposed Proposed
Maximum Maximum
Amount Offering Aggregate Amount of
Title of Each Class of to be Price Per Offering Registration
Securities to be Registered Registered(1) Share Price Fee
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common Stock, $.001 par value per share ................................. 75,793,709 $0.255 $19,327,396 $5,102
====================================================================================================================================
</TABLE>
(1)Represents (i) shares of Common Stock issuable upon exercise of Warrants to
purchase shares of Common Stock and (ii) shares of Common Stock issuable upon
conversion of Convertible Promissory Notes.
(2)The price of $0.255 per share, which was the average of the high and low bid
prices of the Common Stock quoted on the OTC Bulletin Board on April 27,
2000, is set forth solely for the purpose of calculating the registration fee
in accordance with Rule 457(c) of the Securities Act of 1933, as amended.
================================================================================
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THE SHARES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PRELIMINARY PROSPECTUS--SUBJECT TO COMPLETION, DATED ________________, 2000
Offered by certain Selling Stockholders
SHAMAN PHARMACEUTICALS, INC.
213 EAST GRAND AVENUE
SOUTH SAN FRANCISCO, CA 94080
(650) 952-7070
We have prepared this prospectus to allow the Selling Stockholders named in
this prospectus under "Principal and Selling Stockholders" to sell up to
75,793,709 Shares of Common Stock, par value $0.001 per share, of Shaman
Pharmaceuticals, Inc., which consist of:
(1) 38,541,835 Shares of Common Stock that we may issue to some of the
Selling Stockholders upon exercise of Warrants that we issued on
February 2000 and April 2000;
(2) 37,251,874 Shares of Common Stock that we will issue to some of
the Selling Stockholders upon conversion of the Convertible Promissory
Note that we issued on February 2000 and April 2000.
This offering is not being underwritten. We will not receive any of the
proceeds from the sale of our stock by the Selling Stockholders named in this
prospectus.
Our Common Stock trades on the Over-the-Counter Electronic Bulletin Board under
the symbol "SHPH". On April 27, 2000, the last sale price for the Common Stock
as quoted on the OTC Bulletin Board was $0.25 per share.
--------------
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON
PAGE 9.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS MAY __, 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE AND ALL CONSENTS HAVE BEEN
OBTAINED FROM THE RELEVANT STATE SECURITIES COMMISSIONS. WE ARE NOT OFFERING TO
SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR TO WHICH
WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS PROSPECTUS MAY ONLY BE
ACCURATE ON THE DATE OF THIS PROSPECTUS.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is only part of a registration statement on Form S-3 that
we have filed with the Securities and Exchange Commission. This prospectus does
not contain all of the information set forth in the registration statement,
certain parts of which are omitted in accordance with the rules and regulations
of the SEC. For further information regarding Shaman, you may refer to the
registration statement, including its exhibits and schedules. The registration
statement may be inspected at the public reference facilities maintained by the
SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of
all or any part of the registration statement may be obtained from the SEC upon
payment of the prescribed fees.
We also file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549, and at the SEC's regional offices located at 75 Park Place, New York, New
York 10007, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. You may also obtain copies of such material by mail from the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. You may also examine our SEC filings through the
SEC's web site at http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference the information we file with
it, which means that we can disclose important information to you by referring
you to these documents. This information incorporated by reference is considered
to be part of this prospectus and later information we file with the SEC will
automatically update and supercede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act. The documents we are
incorporating by reference are:
(a) our Annual Report on Form 10-K for the year ended December 31, 1999.
(b) our Definitive Proxy Statement dated April 30, 1999, filed in
connection with our 1999 Annual Meeting of Stockholders;
(c) the description of our Common Stock contained in our Registration
Statement on Form 8-A, as amended, filed with the SEC on December 18, 1992,
including any amendments or reports filed for the purpose of updating such
description.
You may request a copy of any of these filings at no cost by writing or
telephoning us at the following address: 213 East Grand Avenue, South San
Francisco, California 94080; telephone number (650) 952-7070, Attn: Investor
Relations.
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Provir(TM), SP-303(TM), SB-300(TM), ShamanBotanicals.com(TM), Syndrome X
Diet(TM), and our stylized logo are trademarks of Shaman. Shaman
Pharmaceuticals(R)is a registered U.S. trademark of Shaman Pharmaceuticals, Inc.
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THE COMPANY
The following information is qualified in its entirety by the more
detailed information and financial statements, and notes to financial
statements, appearing elsewhere or incorporated by reference in this Prospectus.
This Prospectus contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act. Actual
results could differ materially from those projected in the forward-looking
statements as a result of certain of the risk factors set forth elsewhere in
this Prospectus. Investors should carefully consider the information set forth
under the heading "Risk Factors."
SHAMAN PHARMACEUTICALS, INC.
OUR BUSINESS, STRATEGY AND PRODUCTS
Current business
We are focused on the discovery, development, and marketing of novel,
proprietary botanical dietary supplements derived from tropical plant sources.
In September 1999, we began implementing our commercialization efforts through
our botanicals division, ShamanBotanicals.com. Our commercialization plans
include the use of community building initiatives on the Internet and other
distribution channels, and is based on marketing our exclusive access to our
proprietary branded products. We also have available for out-licensing a
pipeline of botanical product candidates, as well as novel pharmaceutical
product candidates for major human diseases developed by isolating active
compounds from tropical plants with a history of medicinal use.
New business plan
In the second half of 2000, we intend to collaborate for the
commercialization of our proprietary botanical products and shift our business
focus to the content, education and media business through the main operating
division, Shaman.com. We anticipate that Shaman.com will provide information,
education, and entertainment through community building initiatives over the
channels of the Internet, cable, and television from the perspective of the
knowledgeable and trusted voice of natural products. The goal of this effort is
to bring natural medicine usage and information to the mass market and to
differentially expand the market for high quality products through communication
of this information. Shaman.com will not sell products directly via e-commerce,
therefore retaining objectivity and credibility as a voice of natural products.
Shaman.com will also extend its message to cable and television productions. The
commercialization of all of our proprietary botanical supplements will be
achieved by collaborative efforts, including out-licensing to mass-market
partners and joint promotional efforts in certain retail channels. Product
out-licensing will benefit Shaman.com by providing it with a product royalty
stream, mass market promotion of the Shaman site and television series, and mass
market branding of the Shaman.com name. We anticipate that joint promotional
efforts of our proprietary botanical supplements will boost sales of these
products while simultaneously building the Shaman.com brand.
BOTANICALS
The concept for our botanical division, ShamanBotanicals.com, was
developed in 1998 and became the focus of our operations in 1999. The purpose of
the botanicals business is to discover, develop and market novel, proprietary
botanical dietary supplements derived from tropical plant sources through
community building initiatives on the Internet and other focused marketing
channels. The unique positioning of our botanicals business stems from our prior
experience and efforts in developing pharmaceutical products from tropical plant
sources, including significant financial investment, more than 10 years of
extensive field research by our teams of ethnobotanists and physicians, and
pharmaceutical-level chemical standardization, biological and clinical testing.
In the last decade, we have amassed a large body of information on the health
benefits of thousands of tropical plant species that have a history of human use
and we have organized this information into an extensive relational database.
This database includes over 2,600 tropical plants, many of which have not been
introduced or fully developed in the U.S. dietary supplement market. We have
identified plants with a documented ethnomedical history of use in our library
and database of botanicals for use in key market categories with significant
commercial potential. Because many of these plants reflect the previously
untapped plant diversity of the rainforests, they may represent novel botanical
products that have the opportunity to attain a strong, proprietary market
position. We began marketing our first botanical product, SB-Normal Stool
Formula ("SB-NSF"), in September 1999.
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We have the opportunity to differentiate our product candidates in
consumers' minds relative to those of our competitors. Key points of
differentiation include:
o Novel plants/proprietary products for unmet needs;
o Documented, first-hand field experience with traditional use;
o Rainforest-based plants and products, since most botanical
supplements products currently come from plants found in
temperate areas;
o Our commitment to conservation and reciprocity;
o Sustainable sourcing and supply;
o Quality manufactured, standardized products; and
o Clinically tested products.
Our commercialization strategy is to create high-end branding of the
Shaman name on our propriety products addressing serious unmet healthcare
concerns and to market these proprietary products to specific communities
affected by such healthcare issues.
Our first botanical dietary supplement product is SB-Normal Stool Formula
("SB-NSF") which is designed to relieve diarrhea without causing constipation.
SB-NSF is an extract of Croton lechleri, a plant used by indigenous people for
relief of gastrointestinal symptoms, and contains a chemical activity marker,
SP-303, a patented, clinically proven antidiarrhea agent. SB-NSF also has a
patented formulation. The mechanism of SB-NSF is a desirable anti-secretory
activity, and SB-NSF does not have anti-motility effects such as the side
effects of constipation and cramping associated with the use of immodium and
loperamide. Such anti-motility agents generally cannot be used on a continuous
basis as a result of these side effects.
We began marketing SB-NSF in September 1999, and have focused our
marketing efforts on community building initiatives on the Internet and other
appropriate focused channels of distribution. We have marketed the product
initially to people with HIV/AIDS who suffer from chronic diarrhea and recently
began marketing this product to travelers and others who suffer from acute
episodes of diarrhea. We are also considering developing a pediatric formulation
of SB-NSF, which would complete three distinct commercial product opportunities
from one plant extract, differentiated by formulation, packaging and target
customer/community base.
We are working to develop a second product line based on a diet system to
mitigate Syndrome X symptoms. Syndrome X is the cluster of metabolic disorders
that occur in the face of elevated insulin when an individual is insulin
resistant yet still maintains glucose control and is therefore not diabetic.
This cluster of coronary heart disease risk factors, such as elevated
triglycerides and lower HDL-cholesterol or the "good" cholesterol, are known as
the "silent killers" associated with Syndrome X. Shaman's Sr. Vice President of
Clinical Research, Dr. Gerald Reaven, has developed a trademarked Syndrome X
diet system for persons exhibiting Syndrome X symptoms and has performed over 20
years of clinical research documenting the benefits of this diet system. Dr.
Reaven's direct comparison clinical trial data supports that this diet system
provides superior benefits to those exhibiting Syndrome X symptoms than the low
fat/high carbohydrate diet guidelines recommended by the American Heart
Association. In March 2000 Dr. Reaven published a mass market health book titled
SYNDROME X: OVERCOMING THE SILENT KILLER THAT CAN GIVE YOU A HEART ATTACK (Simon
& Schuster).
Approximately 30% of the US population is insulin resistant and subject to
Syndrome X. Shaman has the exclusive license to diet and nutritional systems
designed to combat Syndrome X as well as the trademarked name for use on related
products and services. We plan to produce several lines of products based on Dr.
Reaven's clinical research. The first will be a line of nutrition bars which
match Dr. Reaven's proprietary nutritional system. The initial bar is expected
to launch mid year 2000. A second bar line that combines the nutritional system
with one or more active ingredients from Shaman's library of 2,600 proprietary
standardized extracts is also in development. Future Syndrome X products will
contain one or more proprietary active ingredients from Shaman's library and may
take the form of foods, beverages and standardized dietary supplements.
Many people with AIDS/HIV who are effectively managing the AIDS virus with
their antiviral therapies are now also demonstrating metabolic abnormalities
consistent with insulin resistance and Syndrome X and progressing to coronary
heart disease and type II diabetes. We intend to leverage the identity we will
work to establish in the AIDS/HIV community through our SB-NSF product to
commence marketing of our Syndrome X diet system in this community.
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We have identified multiple areas of future dietary supplement product
interest and have identified specific priority product candidates. Some of these
proposed product areas include gastrointestinal relief, sexual function aids,
antioxidants/cardiovascular protectors, sleeping aids, calming agents, weight
management and wound healing. All of these potential products are based on plant
material on the FDA's grandfathered old dietary ingredient list, which includes
dietary ingredients that were sold in the United States prior to 1994, allowing
for immediate product introduction without a need for regulatory application or
approval.
NEW BUSINESS PLAN
The desire and demand for natural self-remedies to better manage wellness
and quality of life needs are increasing dramatically. Forty percent (40%) of
all households in the U.S. currently utilize some form of natural remedy and 80%
want to, yet don't know where to find a trusted voice and/or product
recommendation. The growth of the natural health market has been led by
consumers who are interested in complementary, non-pharmaceutical options for
treating symptoms, fulfilling unmet dietary needs and optimizing health, either
as an alternative to, or in conjunction with, more conventional medical
approaches. According to the Journal of the American Medical Association, 70% to
90% of health care is delivered by what would be considered alternative
medicine. Americans spent approximately $27 billion out-of-pocket (not covered
by insurance) on alternative therapies in 1997. We believe that the use of these
products and interest in information about natural health will continue 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.
We intend to shift our business focus to the content, education and media
business through the main operating division, Shaman.com. The concept for our
new business was developed in January 2000, and will become the focus of our
operations in the second half of the year 2000. The purpose of our content,
education and media business is to provide information, education and
entertainment through community building initiatives over the channels of the
Internet, cable and television from the perspective of a knowledgeable and
trusted voice of natural products. We believe that the trusted voice is based on
the credibility of Shaman.com, whose parent, Shaman Pharmaceuticals, Inc., has
invested over ten years and $150 million in pharmaceutical grade research to
verify and demystify traditional natural medicine healing practices with
westernized methodology. Shaman.com will have exclusive access to our
pharmaceutical-grade research and development, which has resulted in a bevy of
intellectual property with respect to stories, events, adventures and a pipeline
of novel proprietary botanical products from first-hand field information in
approximately 70 countries in rainforest areas. We have spent a decade
assembling the leading physicians and health authorities in the area of natural
medicine and wellness who can give important advice and relevant
recommendations.
The Shaman.com web site will include several distinct features, including
advice on selecting natural products and dietary supplements, also original
commentary from relevant experts, chats with relevant experts, with the
opportunity for secure break-off, such as medical and educational professional
break-offs with the relevant experts, and consumer to consumer support group
chats and bulletin board postings.
We intend to differentiate the Shaman.com brand in consumers' minds
relative to those of our competitors. Key points of differentiation include:
o Opportunity to participate in "Phase IV" studies on-line of key
dietary supplements;
o Surveys on commonly used products within the particular community;
o Opportunity for personalization of content and product information,
including that available to advertisers and affliates for
personalized product offerings;
o Community information destinations for those interested in
rainforest topics, conservation, sustainability and
benefit-sharing; and
o Rainforest and conservation education for the young and for
education professionals.
Shaman.com also intends to create collaborations for the commercialization
of our proprietary botanicals supplements, including out-licensing to
mass-market partners and joint promotional efforts in certain retail channels.
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In return for exclusive product license rights, we anticipate that: (i) the
mass-market partners will provide mass-market advertising and promotion of the
Shaman.com site, television series and brand and (ii) joint promotional efforts,
such as celebrity endorsement, that will boost sales while simultaneously
building the Shaman.com brand.
RECENT DEVELOPMENTS
On January 28, 2000, the stockholders approved, and on January 31, 2000,
the Company effected, a 1-for-50 reverse stock split of the Company's
outstanding Common Stock. All common share and per common share amounts have
been restated to reflect the reverse stock split in all periods presented.
On February 1, 2000, the Series R Preferred Stock automatically converted
into a number of shares of Common Stock equal to $15.00 divided by the
conversion price then in effect. The conversion price was equal to the lesser of
(i) $1.00 or (ii) the price that is equal to 10% of the average closing sales
price of Common Stock for the 10 trading days ending three trading days prior to
February 1, 2000. On that day, the conversion price of the Series R Preferred
Stock was $0.497 (taking into effect the 1-for-50 reverse stock split
effectuated on January 31, 2000) and each share of Series R Preferred was
converted into 31 shares of Common Stock. A total of 777,101 shares of Series R
Preferred Stock were converted into 24,090,131 shares of Common Stock.
In February 2000, Shaman and a wholly-owned subsidiary of Shaman (the
"Subsidiary") entered into a convertible note and warrant purchase agreement
(the "Note Agreement") with certain investors (the "Note Holders") in connection
with a bridge loan financing, raising cash proceeds of approximately $3.0
million. Interest is accrued at a rate of 12% per annum. The principal amount
and accrued interest will automatically be converted at sole election of the
Note Holders on April 30, 2000 into (i) shares of Shaman's Common Stock with a
conversion price of $0.497 per share or (ii) capital stock of the Subsidiary
sold in the first equity financing raising at least $5.0 million. If the
Subsidiary does not consummate an equity financing on or prior to April 30, 2000
of at least $5.0 million, the unpaid principal and accrued interest of the note
will convert into shares of Shaman's Common Stock. If converted into Shaman's
Common Stock, the Note Holders will receive warrants to purchase shares of
Common Stock equal to 40% of the dollar value of their loan participation at an
exercise price equal to the conversion price. These warrants are exercisable
through April 2005. In March 2000, Shaman and the Note Holders amended the Note
Agreement to increase the amount of the notes to be issued from $3.0 million to
$4.0 million. In consideration for amending the Note Agreement, we amended the
conversion price of the notes into Shaman's Common Stock from a conversion price
of $0.497 to the lower of (i) $0.497 per share or (ii) 10 days weighted average
price, with a floor of $0.30 per share. In April 2000, Shaman further amended
the Note Agreement to increase the amount of the Note to be issued from $4.0
million to a total of $5.5 million. In consideration for such amendment, we
further reduced the conversion price of the notes such that the unpaid principal
and accrued interest will convert into Shaman's Common Stock with a conversion
price of $0.15 per share. The Note Holders will receive additional warrants to
purchase shares of Common Stock equal to 50% of the dollar value of their loan
participation with an exercise price of $0.10 per share, which warrants are
exercisable through August 30, 2000. Of the $5.5 million raised, we issued
approximately $3.5 million to investors for cash and approximately $2.0 million
to creditors and consultants of Shaman in exchange for services rendered. The
initial sale and subsequent sale of such notes and warrants will give rise to
significant non-cash interest expense. The resale of shares to be issued upon
conversion of such notes or exercise of such warrants by certain Selling
Stockholders is registered in the Registration Statement of which this
Prospectus is a part.
In February 2000, Shaman and the Subsidiary entered into a convertible
promissory note agreement with an existing stockholder in connection with a
bridge loan financing, raising cash proceeds of $500,000. Interest is accrued at
a rate of 12% per annum. The principal amount and accrued interest will
automatically be converted at a 40% discount on April 30, 2000 into capital
stock of the Subsidiary sold in the first equity financing, raising at least
$5.0 million. If the Subsidiary does not consummate an equity financing on or
prior to April 30, the unpaid principal and accrued interest of the note becomes
due and payable. In April 2000, Shaman and the Stockholder amended the agreement
to extend payment terms by an additional 12 months. In consideration for
amending the agreement, we issued warrants to this Stockholder to purchase
5,000,000 shares of Shaman's Common Stock at an exercise price of $0.10 per
share. The warrants are exercisable through April 30, 2001 . The sale of such
notes and warrants will give rise to significant non-cash interest expense. The
resale of shares to be issued upon conversion of these notes or exercise of
these warrants by such Selling Stockholder is registered in the Registration
Statement of which this Prospectus is a part.
In February 2000, we amended the Term Loan Agreement between MMC/GATX
Partnership No. 1 and Shaman Pharmaceuticals, Inc. (the "Loan Agreement") to
permit Shaman to delay principal payments under the Loan Agreement. In
connection with the amendment, we issued warrants to purchase 340,628 shares of
Common
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Stock at an exercise price of $0.48387 per share. These warrants are
exercisable commencing on February 2, 2000 and through the tenth anniversary of
such date. The sale of these warrants will give rise to significant non-cash
interest expense. The resale of shares to be issued upon exercise of these
warrants by such Selling Stockholder is registered in the Registration Statement
of which this Prospectus is a part.
In December 1999, we entered into a note purchase agreement (the "Note")
with an existing stockholder (the "Note Holder'), in which we borrowed $200,000
to purchase inventory for our product, SB-NSF. The loan is due and payable in
May 2000 and the interest is accrued at an annual rate of 10.50%. The Note is
secured by the inventory of our product, SB-NSF. We have an option to extend the
loan for another six months. In April 2000, we exercised our option to extend
the loan for another six months so that the principal and accrued interest is
now due in December 2000. In consideration for extending the loan, we issued to
the Note Holder warrants to purchase 201,207 shares of Common Stock at an
exercise price of $0.497 per share. These warrants are exercisable through the
fourth anniversary of this loan. The resale of shares to be issued upon exercise
of these warrants by certain Selling Stockholders is registered in the
Registration Statement of which this Prospectus is a part.
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RISK FACTORS
This offering involves a high degree of risk. You should carefully
consider the risks described below and the other information in this prospectus
before deciding to invest in shares of our Common Stock. The risks and
uncertainties described below may not be the only ones facing Shaman. Additional
risks and uncertainties not presently known to us may also impair our business.
These risk factors supplement and do not supercede the risk factors contained in
our annual report on Form 10-K for the year ended December 31, 1999 and any
other filings we make with the Securities and Exchange Commission. If any of the
following risks actually occur, our business, operating results and financial
condition and your investment in us could be materially and adversely affected.
In such case, the trading price of our stock, both common and preferred, could
decline and you might lose all or part of your investment.
This prospectus also contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of many factors,
including the risks faced by us described below and elsewhere in this
prospectus.
RISKS ASSOCIATED WITH OUR BUSINESS
IF WE DO NOT RAISE SIGNIFICANT ADDITIONAL CAPITAL, WE WILL BE UNABLE TO FUND
CONTINUING OPERATIONS, AND WILL LIKELY BE FORCED TO CEASE OPERATIONS
We need substantial working capital to fund our operations. As of December
31, 1999, we had cash, cash equivalents and short-term investment balances of
approximately $1.2 million. In February 2000, we raised approximately $3.5
million in connection with a bridge loan financing. Our short and long-term
capital requirements will depend on numerous factors, including among others,
the extent and progress of additional development activities related to the
botanical products, the success of any marketing efforts related to the
botanical products and the success of any out-licensing efforts with respect to
the pharmaceutical programs. Our projections show that cash on hand as of
December 31, 1999, plus $3.5 million raised from the bridge financing in
February 2000, should be sufficient to fund operations at the current level
through the second quarter of 2000. Unless we are successful in our efforts to
sell or out-license our pharmaceutical products or to sell or establish
collaborative agreements to sell our botanical products, we will be unable to
fund our current operations beyond the second quarter of 2000. In addition,
unless we are successful in our efforts to raise additional capital through
offerings of equity securities, to sell or out-license our pharmaceutical
products or to sell or establish collaborative agreements to sell our botanical
products, our cash resources will be used to satisfy our existing liabilities
and we will therefore be unable to fund our operations, which may result in
significant delay of our planned activities or the cessation of operations. Even
if we are successful in these efforts to raise additional funds, such funds may
not be adequate to fund our operations on a long-term basis.
We will need to obtain additional funding through public or private equity
or debt financing, collaborative agreements or from other sources to continue
our research and development activities, fund operating expenses and prepare for
commercialization of products. If we raise additional funds by issuing equity
securities, current stockholders may experience significant dilution. If we
obtain additional funds through collaborative agreements, we may be required to
relinquish rights to certain of our technologies, product candidates, products
or marketing territories that we would otherwise seek to develop or
commercialize ourselves. We may be unable to obtain adequate financing on
acceptable terms, if at all. If we are unable to obtain adequate funds, we may
be required to reduce significantly our spending and delay, scale back or
eliminate one or more of our research, development, or commercialization
programs, or cease operations altogether, which would have a material adverse
effect on our business, financial condition and results of operations. Our
auditors have included a paragraph in their report indicating that substantial
doubt exists as to our ability to continue as a going concern.
WE HAVE A HISTORY OF OPERATING LOSSES, EXPECT CONTINUING LOSSES AND MAY NEVER
ACHIEVE PROFITABILITY
We have incurred significant losses in each year since our founding in
1989 and expect to continue to incur losses for the foreseeable future. We
incurred a net loss of approximately $16.5 million for the year ended December
31, 1999 and additional deemed dividend of $11.7 million incurred in connection
with the issuance of the control notice to holders of Series D Preferred Stock
and the issuance of Series R Preferred Stock. As of December 31, 1999, our
accumulated deficit was approximately $178.6 million.
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If we are to become and remain profitable, we will need to, among other
things, first generate product revenues. We have not generated any significant
product sales to date. We have changed the direction of our operations and are
pursuing a new business model in the botanical dietary supplement industry. In
the second half of 2000, we intend to out-license our proprietary botanical
product to mass-market partners and focus on the content education and media
business. We are also exploring other botanical dietary supplement products for
development and commercial introduction. In order to generate revenues or
profits, we must successfully market SB-NSF and other products or enter into
collaborative agreements with others who can successfully market them. SB-NSF
and any other products we may introduce may not achieve market acceptance and we
may not achieve profitability. Our auditors have included a paragraph in their
report indicating that substantial doubt exists as to our ability to continue as
a going concern.
Our pharmaceutical product candidates and compounds are still in the
research and development stage and we have ceased all our pharmaceutical
operations. In order to generate revenues from these products, we must
out-license these product candidates. It is possible that our out-licensing
efforts may not be successful and that we or our licensees may not obtain
required regulatory approvals. Even if our product candidates are developed and
introduced, they may not be successfully marketed or may not achieve market
acceptance or we may not achieve profitability. Our auditors have included a
paragraph in their report indicating that substantial doubt exists as to our
ability to continue as a going concern.
IF WE ARE NOT SUCCESSFUL IN TRANSITIONING INTO THE BOTANICAL DIETARY BUSINESS,
WE MAY NEVER ACHIEVE REVENUES OR PROFITABILITY
We have transitioned our operations from pharmaceutical product
development to botanical dietary supplement development and commercialization.
We have no experience in this new industry segment and must create a new
business model. Some skills and relationships developed over time may not be
transferable to our new business. While we have been working with natural
products since our inception, we have no prior experience manufacturing or
marketing dietary supplements. We have no experience running a business with
product sales. We may not be successful in these activities and may never
generate revenues or profitability from our botanical business.
Our botanical products are at various stages of development, ranging from
initial research to final formulation. We will need to conduct additional
research and development to move our product candidates toward
commercialization. Our research and development efforts on potential products
may not lead to development of products that we can successfully commercialize.
In addition, we may not be able to produce our products in commercial quantities
at acceptable costs or to market and sell our products successfully. Our
products may also prove to have undesirable or unintended side effects that may
prevent or limit their commercial use. Accordingly, we may curtail, redirect,
suspend or eliminate our product development or commercialization at any time.
IF THIRD PARTY MANUFACTURERS ON WHOM WE RELY FAIL TO PERFORM THEIR SERVICES, OUR
SUPPLY OF PRODUCTS WOULD BE DELAYED AND POSSIBLY DISRUPTED
We currently produce products only in pilot scale quantities and do not
have the staff or facilities necessary to manufacture products in commercial
quantities. Therefore, we must rely on collaborative partners or third party
manufacturing facilities. We may not be successful in entering into third party
manufacturing arrangements on acceptable terms, if at all. In addition, should
we or our third party manufacturers encounter delays or difficulties in
producing, packaging and distributing our finished products, our clinical trials
and market introduction and subsequent sales of our products could be adversely
affected.
Contract manufacturers must conform to certain Good Manufacturing
Practices regulations for foods on an ongoing basis. Our dependence on third
parties for the manufacture of our products may adversely affect our ability to
develop and deliver products on a timely and competitive basis.
SINCE WE HAVE ONLY A LIMITED MARKETING STAFF, WE MAY NEVER ACHIEVE ADEQUATE
SALES AND REVENUES TO ACHIEVE PROFITABILITY
We currently have minimal marketing staff. If we are unable to
successfully establish, execute and finance a complete marketing plan for our
first product, SB-NSF, or subsequent products, we may not achieve a successful
product entry into the marketplace and may fail to achieve adequate sales and
revenues from our botanical products
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to achieve profitability. It is unlikely we would ever achieve profitability if
our first product is not successfully marketed and sold.
IF WE FAIL TO COMPETE IN THE INTENSELY COMPETITIVE BOTANICAL DIETARY SUPPLEMENT
INDUSTRY, WE MAY NEVER ACHIEVE PROFITABILITY
The dietary supplement business is highly competitive and is characterized
by significant pressure on pricing and heavy commitment of marketing resources
for commodity products. Although our products are proprietary, we may face
competition from companies developing and marketing new commercial products that
have or claim to have similar functionality. Our failure to successfully compete
for customers would inhibit our future growth, revenues and profitability.
GOVERNMENT REGULATION OF DIETARY SUPPLEMENTS COULD INCREASE OUR COSTS OR
PROHIBIT OR LIMIT SALES OF OUR PRODUCTS
The manufacturing, processing, formulating, packaging, labeling and
advertising of our botanical dietary supplement products are subject to
regulation in the United States by several federal agencies, including the Food
and Drug Administration, the Federal Trade Commission, the Consumer Product
Safety Commission, the Department of Agriculture and the Environmental
Protection Agency. Our activities are also regulated by various agencies of the
states and localities where we will distribute and sell our products.
The composition and labeling of dietary supplements is most actively
regulated by the FDA under the provisions of the Federal Food, Drug, and
Cosmetic Act. The FFDC Act has been revised in recent years by the Nutrition
Labeling and Education Act of 1990 and by the Dietary Supplement Health and
Education Act of 1994.
Our botanical product candidates are generally regulated as dietary
supplements under the 1994 Dietary Supplement Health and Education Act, and are,
therefore, generally not subject to pre-market approval by the FDA. However,
these product candidates are subject to FDA regulation, particularly relating to
adulteration and misbranding. For instance, we are responsible for ensuring that
all dietary ingredients in a supplement are safe and must notify the FDA in
advance of putting a product containing a new dietary ingredient, defined as an
ingredient not marketed in the United States before October 15, 1994, on the
market and furnish adequate information to provide reasonable assurance of the
ingredient's safety. Currently, we are only pursuing products that are old
dietary ingredients and are therefore not subject to this procedure. Further, if
we make statements about a supplement's effects on the structure or function of
the body, we must, among other things, substantiate that the statements are
truthful and not misleading. In addition, our product labels must bear proper
ingredient and nutritional labeling and we must manufacture our supplements in
accordance with current Good Manufacturing Practices regulations for foods. A
product can be removed from the market if it is shown to pose a significant or
unreasonable risk of illness or injury. Moreover, if the FDA determines that the
"intended use" of any of the our products is for the diagnosis, cure,
mitigation, treatment or prevention of disease, the product would meet the
definition of a drug and would require pre-market approval of safety and
effectiveness prior to its manufacture and distribution. Our failure to comply
with applicable FDA regulatory requirements may result in, among other things,
injunctions, product withdrawals, recalls, product seizures, fines and criminal
prosecution.
In March 1999, new FDA regulations governing the labeling of dietary
supplements took effect. The new rules require that information such as the
complete list of ingredients and levels of vitamins and minerals be included on
product labels. While in our judgment these regulatory changes are generally
favorable to the dietary supplements industry, in the future we may be subject
to additional laws or regulations that could have an adverse effect on the
industry and on our business. In addition, existing laws and regulations may be
repealed and applicable regulatory authorities may interpret them stringently or
unfavorably.
We cannot predict the nature of future laws, regulations, interpretations
or applications, nor can we determine what effect either additional government
regulations or administrative orders, when and if promulgated, or disparate
federal, state and local regulatory schemes would have on our business in the
future. Any change could materially and adversely affect our results of
operations and financial condition.
Governmental regulations in foreign countries where we may commence or
expand sales may prevent or delay entry into the market or prevent or delay the
introduction, or require the reformulation, of our products. Compliance with
such foreign governmental regulations is generally the responsibility of our
partners or distributors in those countries, which distributors are independent
contractors over whom we have limited or no control.
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THE COSTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS, OR OUR
INABILITY OR FAILURE TO COMPLY WITH ENVIRONMENTAL LAWS AND REGULATIONS, COULD
SUBSTANTIALLY INCREASE OUR COSTS OF DOING BUSINESS OR RESULT IN LIABILITY THAT
COULD USE SUBSTANTIAL AMOUNTS OF OUR CASH RESOURCES
In connection with our research and development activities and
manufacturing of materials, we are subject to federal, state and local laws,
rules, regulations and policies governing the use, generation, manufacture,
storage, air emission, effluent discharge, handling and disposal of certain
materials and wastes. Although we believe we comply with these laws and
regulations in all material respects and have not been required to take any
action to correct any noncompliance, we may be required to incur significant
costs to comply with environmental and health and safety regulations in the
future. Our research, development, and manufacturing activities involve the
controlled use of hazardous materials and chemicals. Although we believe that
our safety procedures for handling and disposing of such materials comply with
the standards prescribed by state and federal regulations, we cannot eliminate
the risk of accidental contamination or injury from these materials completely.
In the event of an accident, we could be held liable for any resulting damages.
Although we have secured insurance to mitigate such expense, any such liability
could exceed our insurance coverage and resources. Such liability could require
us to use a large amount of cash, which would then not be available for funding
operations or development and commercialization of our products.
PRODUCT LIABILITY CLAIMS ASSERTED AGAINST US IN THE FUTURE COULD EXCEED OUR
INSURANCE COVERAGE AND RESULT IN SUBSTANTIAL LIABILITY TO SHAMAN
Our business exposes us to potential product liability risks that are
inherent in the development, testing, manufacture, marketing and sale of
pharmaceutical and dietary supplement products. Product liability insurance for
the pharmaceutical and dietary supplement industries generally is expensive. Our
present product liability insurance coverage, which includes coverage for acts
by third parties, including manufacturers of our product candidates, may not be
adequate. We will also need to increase our insurance coverage as we further
develop our products and we may be unable to obtain adequate insurance coverage
against all potential claims at a reasonable cost. Some of our development and
manufacturing agreements contain insurance and indemnification provisions
pursuant to which we could be held accountable for certain occurrences. If we
are subject to product liability claims for which we have inadequate insurance,
we could be required to use a large amount of cash, which would then not be
available for funding operations or development and commercialization of our
products.
SINCE THE DIETARY SUPPLEMENT INDUSTRY IS PARTICULARLY SUSCEPTIBLE TO PUBLIC
PERCEPTION OF ITS PRODUCTS, NEGATIVE PUBLICITY REGARDING THE SAFETY OR QUALITY
OF OUR PRODUCTS COULD ADVERSELY IMPACT OUR SALES OF THESE PRODUCTS
Because we depend on consumers' perception of the safety and quality of
our products as well as similar products distributed by other companies, which
may not adhere to the same quality standards as ours, if our products or a
competitor's similar products were asserted to be harmful to consumers, our
sales and our ability to market our products could be adversely affected by that
negative publicity. In addition, because we depend on perceptions, adverse
publicity associated with illness or other adverse effects resulting from
consumers' failure to use our products as we suggest, other misuse or abuse of
our products or any similar products distributed by other companies could affect
the market acceptance of our products, decrease sales and make it more difficult
to market and sell our products.
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Furthermore, we believe the recent growth experienced by the nutritional
supplement market is based in part on national media attention regarding recent
scientific research suggesting potential health benefits from regular
consumption of certain dietary supplements and other nutritional products. This
research has been described in major medical journals, magazines, newspapers and
television programs. The scientific research to date is preliminary and in the
future scientific results and media attention may contain unfavorable or
inconsistent findings that could decrease sales and make it more difficult to
market and sell our products.
OUR DEPENDENCE ON RAW PLANT MATERIAL FROM LATIN AND SOUTH AMERICA, AFRICA AND
SOUTHEAST ASIA MAKES US PARTICULARLY SUSCEPTIBLE TO THE RISKS OF INTERRUPTIONS
IN OUR SUPPLIES
We currently import all of the plant materials for our products from
countries in Latin and South America, Africa and Southeast Asia. We are
dependent upon a supply of raw plant material to make our products. We do not
have formal agreements in place with all of our suppliers. Continued source of
plant supply risks include:
o unexpected changes in regulatory requirements;
o exchange rates, tariffs and barriers;
o difficulties in coordinating and managing foreign operations;
o political instability; and
o potentially adverse tax consequences.
Interruptions in supply or material increases in the cost of supply could
disrupt or delay sales of our products, inhibit our ability to market our
products and have a material adverse effect on our business, financial condition
and results of operations. If the prices of raw materials rise, we may not be
able to raise prices quickly enough to offset the effect of these increased raw
material costs, if at all.
In addition, tropical rainforests and irreplaceable plant resources found
only in such rainforests are currently threatened with destruction. The
destruction of portions of the rainforests which contain the source material
from which our current or future products are derived could disrupt supplies,
cause the cost of supplies to increase dramatically and materially and adversely
affect our business, financial condition and results of operations.
IF WE FAIL TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, WE COULD LOSE OUR
ABILITY TO STOP COMPETITORS FROM USING OUR TRADEMARKS OR SELLING OUR PRODUCTS
Our success will be substantially dependent on our proprietary technology.
We rely primarily on a combination of patent, copyright and trademark laws,
trade secrets, confidentiality procedures and contractual provisions to protect
our intellectual property. These means of protecting our proprietary rights may
not be adequate. Our trademarks are valuable assets that are very important to
the marketing of our products. Our policy is to pursue registrations for all of
the trademarks associated with our key products. We currently have 21 U.S.
patents issued, 12 U.S. patent applications pending and one international
application filed. The pending patents may never be approved or issued. Any
issued patents may not provide sufficiently broad protection or may not prove
valid or enforceable in actions against alleged infringers. Others may
independently develop similar products, duplicate any of our products or design
around any of our patents. In addition, many foreign countries may not protect
our products and intellectual property rights to the same extent as the laws of
the United States and there is considerable variation between countries as to
the level of protection afforded under patents and other proprietary rights.
Such differences may expose us to increased risks of commercialization in each
foreign country in which we may sell products. We also depend on unpatented
trade secrets. All of our employees have entered into confidentiality
agreements. However, others may independently develop substantially equivalent
information and techniques or otherwise gain access to our trade secrets, our
trade secrets may be disclosed or we may be unable to effectively protect our
rights to unpatented trade secrets. To the extent that we or our consultants or
research collaborators use intellectual property owned by others in their work
for us, disputes also may arise as to the rights in related or resulting
know-how and inventions. Litigation may be necessary in the future to enforce
our intellectual property rights, protect our trade secrets or to determine the
validity and scope of the intellectual property rights of others. In the event
of litigation to determine the validity of any third party's claims, we could be
required to expend significant resources and divert the efforts of our technical
and management personnel, whether or not such litigation is determined in our
favor.
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Our success in outlicensing our pharmaceutical assets depends in large
part on our ability to obtain and maintain patents, protect trade secrets and
operate without infringing upon the proprietary rights of others. The patent
position of companies in the pharmaceutical industry generally is highly
uncertain, involves complex legal and factual questions and has recently been
the subject of much litigation. No consistent policy has emerged from the U.S.
Patent and Trademark Office, or PTO, or the courts regarding the breadth of
claims allowed or the degree of protection afforded under pharmaceutical
patents.
We are currently in a dispute in Europe regarding a patent for our
proanthocyanidin polymer composition, which covers the active ingredient in
SP-303/Provir. The European Patent Office, the French Patent Office, the German
Patent Office and the Australian Patent Office have each granted a patent
containing broad claims to proanthocyanidin polymer compositions and methods of
use of such compositions, which are similar to our specific composition, to Leon
Cariel and the Institut des Substances Vegetales. The effective filing date of
these patents is prior to the effective filing date of our foreign pending
patent application in Europe. Certain of the foreign patents have been granted
in jurisdictions where examination is not rigorous. We have instituted an
Opposition in the European Patent Office against granted European Patent No.
472531 owned by Leon Cariel and Institut des Substances Vegetales. We believe
that the granted claims are invalid and intend to vigorously prosecute the
Opposition. In the United States, the Patent and Trademark Office awarded
judgment to us in an Interference regarding this patent dispute.
We may be unsuccessful in having the granted European patent revoked or
the claims sufficiently narrowed so that our proanthocyanidin polymer
composition and methods of use are not potentially covered. The holders of the
granted European patent may assert against us claims relating to this patent. If
they are successful, we may not be able to obtain a license to this patent at
all or at reasonable cost, or be able to develop or obtain alternative
technology to use in Europe or elsewhere. If we cannot obtain licenses to the
patent, we may not be able to introduce or sell our SP-303/Provir product in
Europe. The earlier effective filing date of this patent could limit the scope
of the patents, if any, that we may be able to obtain or result in the denial of
our patent applications in Europe or elsewhere.
IF A THIRD PARTY WERE TO BRING AN INFRINGEMENT CLAIM AGAINST US, WE WOULD NEED
TO EXPEND SIGNIFICANT RESOURCES IN OUR DEFENSE; IF THE CLAIM WERE SUCCESSFUL, WE
WOULD NEED TO OBTAIN LICENSES OR DEVELOP NON-INFRINGING TECHNOLOGY
The pharmaceutical industry and, to a lesser extent, the dietary
supplement industry, is subject to frequent litigation regarding patent and
other intellectual property rights. Leading companies and organizations in these
industries have numerous patents that protect their intellectual property rights
in these areas. Third parties may assert claims against us with respect to our
existing and future products. In the event of litigation to determine the
validity of any third party's claims, we could be required to expend significant
resources and divert the efforts of our technical and management personnel
whether or not such litigation is determined in our favor. In the event of an
adverse result of any such litigation, among other requirements, we could be
required to develop non-infringing technology or to obtain licenses to the
technology that is the subject of the litigation. We may not be successful in
developing non-infringing technology or in obtaining a license to use the
technology on commercially reasonable terms.
"PENNY STOCK" REGULATIONS MAY IMPOSE RESTRICTIONS ON MARKETABILITY OF OUR
STOCK
The Securities and Exchange Commission has adopted regulations which
generally define "penny stock" to be any equity security that is not traded on a
national securities exchange or Nasdaq and that has a market price of less than
$5.00 per share or an exercise price of less than $5.00 per share, subject to
certain exceptions. Since our securities that are currently included on the OTC
Bulletin Board are trading at less than $5.00 per share at any time, our stock
may become subject to rules that impose additional sales practice requirements
on broker-dealers who sell such securities to persons other than established
customers and accredited investors. Accredited investors generally include
investors that have assets in excess of $1,000,000 or an individual annual
income exceeding $200,000, or, together with the investor's spouse, a joint
income of $300,000. For transactions covered by these rules, the broker-dealer
must make a special suitability determination for the purchase of such
securities and have received the purchaser's written consent to the transaction
prior to the purchase. Additionally, for any transaction involving a
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penny stock, unless exempt, the rules require, among other things, the delivery,
prior to the transaction, of a risk disclosure document mandated by the SEC
relating to the penny stock market and the risks associated therewith. The
broker-dealer must also disclose the commission payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market-maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the penny stock rules may restrict
the ability of broker-dealers to sell our securities and may affect the ability
of stockholders to sell our securities in the secondary market.
OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE HIGHLY VOLATILE
The price of our Common Stock has been particularly volatile and will
likely continue to fluctuate in the future. Announcements of technological
innovations, regulatory matters or new commercial products by us or our
competitors, developments or disputes concerning patent or proprietary rights,
publicity regarding actual or potential product results relating to products
under development by us or our competitors, regulatory developments in both the
United States and foreign countries, public concern as to the safety of
pharmaceutical or dietary supplement products, and economic and other external
factors, as well as period-to-period fluctuations in financial results, may have
a significant impact on the market price of our Common Stock. In addition, from
time to time, the stock market experiences significant price and volume
fluctuations that may be unrelated to the operating performance of particular
companies or industries. The market price of our Common Stock, like the stock
prices of many publicly traded smaller companies, has been and may continue to
be highly volatile.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY INHIBIT
POTENTIAL ACQUISITION BIDS FOR SHAMAN, WHICH MAY ADVERSELY AFFECT THE MARKET
PRICE OF OUR COMMON STOCK AND THE VOTING RIGHTS OF THE HOLDERS OF THE COMMON
STOCK
Certain provisions of our charter documents and Delaware law make it more
difficult for a third party to acquire and may discourage a third party from
attempting to acquire us, even if a change in control would be beneficial to our
stockholders. These provisions could also limit the price that certain investors
might be willing to pay in the future for shares of the Common Stock. The
provisions include the division of our board of directors into two separate
classes, the ability of the board to elect directors to fill vacancies created
by an expansion of the board, the power of the board to amend our bylaws and the
requirement that at least 66% of the outstanding shares are required to call a
special meeting of stockholders. Our board also has the authority to issue up to
493,715 additional shares of preferred stock and to fix the price, rights,
preferences, privileges and restrictions of those shares without any further
vote or action by the stockholders. The rights of the holders of Common Stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued in the future. The issuance of
preferred stock with voting rights could make it more difficult for a third
party to acquire a majority of the outstanding voting stock. Certain provisions
of Delaware law applicable to us could also delay or make more difficult a
merger, tender offer or proxy contest involving Shaman, including Section 203 of
the Delaware General Corporation Law, which prohibits a Delaware corporation
from engaging in any business combination with any interested stockholder for a
period of three years unless certain conditions are met.
RISK ASSOCIATED WITH OUR NEW BUSINESS FOCUS
IF WE ARE NOT SUCCESSFUL IN TRANSITIONING INTO THE CONTENT, EDUCATION AND MEDIA
BUSINESS, WE MAY NEVER ACHIEVE REVENUES OR PROFITABILITY
We have transitioned our operations from pharmaceutical product
development to botanical dietary supplement development and commercialization
and now intend to transition into the content and media business in mid-2000. We
have no experience in this new industry segment and must create a new business
model. Some skills and relationships developed over time may not be transferable
to our new business. We have no experience running the content and media
business. We may not be successful in these activities and may never generate
revenues or profitability from our media business.
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IF WE FACE INTENSE COMPETITION IN PROVIDING OUR INTERNET-BASED HEALTH
INFORMATION SERVICES, WE MAY NOT BE ABLE TO COMPETE EFFECTIVELY
The number of Internet websites offering users healthcare content,
products and services is vast and increasing at a rapid rate. These companies
compete with us for users, advertisers and other sources of online revenue. In
addition, traditional media and healthcare providers compete for consumers'
attention both through traditional means as well as through new Internet
initiatives. We believe that competition for healthcare consumers will continue
to increase as the Internet develops as a communication and commercial medium.
There are a number of competitors delivering online health content who
will also seek advertising revenue and it is likely that more competitors will
emerge in the near future. Such competitors include, among others:
Healtheon/WebMD, drkoop.com, Mediconsult, Medscape and InteliHealth. Many of our
competitors enjoy significant competitive advantages including: greater
resources that can be devoted to the development, promotion and sale of their
products and services; longer operating histories; greater brand recognition;
and larger customer bases.
THE INTERNET INDUSTRY IS HIGHLY COMPETITIVE AND CHANGING RAPIDLY, AND WE MAY
NOT HAVE THE RESOURCES TO COMPETE ADEQUATELY
Many of these competitors have more cash available to spend, longer
operating histories and stronger brand recognition than we do. Some have
internal distribution or other opportunities to support their business that we
neither have nor are able to replicate for a reasonable investment.
COMPETITION FOR HIGHLY-SKILLED PERSONNEL IS INTENSE AND THE SUCCESS OF OUR
BUSINESS DEPENDS ON OUR ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL
Our performance depends on the continued services and performance of our
executive officers and key employees. Our future success also depends on our
ability to identify, attract, hire, train, retain and motivate highly skilled
technical, managerial, editorial, marketing and customer service personnel.
Competition for highly-skilled personnel is intense. In particular, skilled
technical employees are highly sought after in the Silicon Valley area and we
cannot guarantee that we will be able to attract or retain these employees.
WE MAY BE SUBJECT TO LIABILITY FOR INFORMATION RETRIEVED FROM OUR WEB SITE
As a publisher and distributor of online information, we may be subject to
third party claims for defamation, negligence, copyright or trademark
infringement or other theories based on the nature and content of information
supplied on our Web sites. We could also become liable if confidential
information is disclosed inappropriately. These types of claims have been
brought, sometimes successfully, against online service providers in the past.
We could be subject to liability with respect to content that may be accessible
through our Web sites or third party Web sites linked from our Web sites. For
example, claims could be made against us if material deemed inappropriate for
viewing by children could be accessed through our Web sites or if a
professional, patient or consumer relies on healthcare information accessed
through our Web sites to their detriment. Even if any of the kinds of claims
described above do not result in liability to us, we could incur significant
costs in investigating and defending against them and in implementing measures
to reduce our exposure to this kind of liability. Our insurance may not cover
potential claims of this type or may not be adequate to cover all costs incurred
in defense of potential claims or to indemnify us for all liability that may be
imposed.
OUR BUSINESS PROSPECTS DEPEND ON THE CONTINUED GROWTH IN USE OF THE INTERNET
We believe that our future success will require the continued development
and widespread acceptance of the Internet and online services as a medium for
obtaining and distributing healthcare and medical information. Internet
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use is at an early stage of development and may be inhibited by a number of
factors, such as:
o Internet infrastructure which is not able to support the demands
placed on it, or its performance and reliability declining as
usage increases;
o exchange rates, tariffs and barriers;
o security concerns with respect to transmission over the Internet of
confidential information;
o privacy concerns; and
o governmental regulation.
OUR BUSINESS PROSPECTS ARE UNCERTAIN, AS THE MARKET FOR ONLINE HEALTHCARE
INFORMATION AND SERVICES IS STILL DEVELOPING.
The online healthcare information market is in the early stages of
development, is rapidly evolving and is characterized by an increasing number of
market entrants who have introduced competing products and services. As is
typical in the case of a new and rapidly evolving industry, demand and market
acceptance for recently introduced products and services are subject to a high
level of uncertainty and risk. Therefore, it is difficult to predict with any
assurance the size of the market for online healthcare information or its growth
rate. We cannot guarantee consumers will view obtaining healthcare information
through the Internet as an acceptable way to address their healthcare
information needs.
GOVERNMENT REGULATION OF THE INTERNET MAY RESULT IN INCREASED COSTS OF USING THE
INTERNET, WHICH COULD ADVERSELY AFFECT OUR BUSINESS
Currently, there are a number of laws that regulate communications or
commerce on the Internet. Several telecommunications carriers have petitioned
the Federal Communications Commission to regulate Internet service providers and
online service providers in a manner similar to long distance telephone carriers
and to impose access fees on these providers. Regulation of this type, if
imposed, could substantially increase the cost of communicating on the Internet
and adversely affect our business, results of operations and the market price of
our Common Stock.
WE MAY BE SUBJECT TO LIABILITY FOR CLAIMS THAT THE DISTRIBUTION OF MEDICAL
INFORMATION TO CONSUMERS CONSTITUTES PRACTICING MEDICINE OVER THE INTERNET
States and other licensing and accrediting authorities prohibit the
unlicensed practice of medicine. We do not believe that our publication and
distribution of healthcare information online constitutes practicing medicine.
However, we cannot guarantee that one or more states or other governmental
bodies will not assert claims contrary to our belief. Any claims of this nature
could result in our spending a significant amount of time and money to defend
and dispose of them.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of our computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions or engage in similar normal business activities.
We have completed the assessment of all internal information technology
and non-information technology systems that could be significantly affected by
the Year 2000. To date, we have incurred approximately $10,000 related to the
Year 2000 compliance and completed our internal Year 2000 readiness program in
December 1999. We also completed the querying of our significant suppliers and
subcontractors regarding their Year 2000 remediation activities. To date, we are
not aware of any external agent with a Year 2000 Issue that would materially
impact our results of operations, liquidity, or capital resources. However, we
have no means of ensuring that external agents were Year 2000 ready. The
inability of external agents to complete their Year 2000 resolutions to process
in a timely fashion could materially impact us.
17
<PAGE>
We did not experience nor do we currently anticipate any material adverse
effects on our business, results of operations or financial condition as a
result of Year 2000 issues involving its internal use systems, third party
products nor any of its software products. Costs incurred in readying for Year
2000 uncertainties, including contingency planning and remediation efforts were
expensed as incurred. We do not anticipate any material costs remaining in
connection with Year 2000 uncertainties.
USE OF PROCEEDS
All proceeds from any sales of shares of Common Stock offered by the
Selling Stockholders will be received by the Selling Stockholders not by the
Company.
18
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information, as of April 24, 2000,
with respect to the number of shares of Common Stock beneficially owned by each
of the Selling Stockholders both before and after the sale of the Shares offered
hereby.
We sold the Shares being offered by the Selling Stockholders in private
placement transactions. This Prospectus covers the resale by the Selling
Stockholders of up to 75,793,709 Shares, plus, in accordance with Rule 416 under
the Securities Act, such additional number of shares of Common Stock as may be
issued pursuant to the Warrants and the Convertible Promissory Notes resulting
from stock splits, stock dividends and similar transactions. See "Recent
Developments." The Warrants provide for adjustment of the number of shares of
capital stock issuable upon exercise thereof in certain circumstances, including
upon the distribution of certain dividends, upon our reorganization,
reclassification or merger, or upon the division or combination of our Common
Stock.
The number of Shares shown in the following table as being offered by the
Selling Stockholders does not include such presently indeterminate number of
additional shares of Common Stock as may be issuable as a result of stock
splits, stock dividends and similar transactions, but which shares are, in
accordance with Rule 416 under the Securities Act, included in the Registration
Statement of which this Prospectus forms a part.
Any or all of the shares of Common Stock listed below may be offered for
sale pursuant to this Prospectus by the Selling Stockholders from time to time.
Accordingly, no estimate can be given as to the amounts of shares of Common
Stock that will be held by the Selling Stockholders upon consummation of any
such sales. In addition, the Selling Stockholders identified below may have
sold, transferred or otherwise disposed of all or a portion of their shares of
Common Stock since the date on which the information regarding their Common
Stock was provided, in transactions exempt from the registration requirements of
the Securities Act.
Beneficial ownership of the securities held by the Selling Stockholders
after this offering will depend on the number of securities sold by each Selling
Stockholder in this offering. Except as indicated in this Prospectus, none of
the Selling Stockholders has had a material relationship with the Company within
the past three years other than as a result of the ownership of the Shares or
other securities of the Company. See "Plan of Distribution."
The Shares covered by this Prospectus may be offered from time to time by
the Selling Stockholders named below:
<TABLE>
<CAPTION>
NUMBER OF SHARES OWNED
AFTER THE OFFERING
NUMBER OF SHARES OWNED NUMBER OF SHARES --------------------------------
NAME OF SELLING STOCKHOLDERS PRIOR TO THE OFFERING BEING OFFERED NUMBER OF SHARES PERCENT(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Vulcan Ventures, Inc..................... 8,676,476(2) 5,000,000 3,676,476(3) 9.73%
Alcamin Anstalt.......................... 7,087,077(4) 6,632,075 455,002(5) 1.21%
Bradley Resources Co. ................... 1,286,178(6) 1,286,174 4 *
John Lyddon ............................. 4,823,151(7) 4,823,151 0 *
Matt Moses .............................. 321,543(7) 321,543 0 *
William Hitchcock ....................... 1,286,194(8) 1,286,174 20 *
Trust Partnership ....................... 3,215,434(7) 3,215,434 0 *
Tradewinds Offshore Fund, Ltd(9)(13)..... 5,009,151(10) 4,823,151 186,000 *
Tradewinds Debt Strategies, Ltd(9)(13)... 4,664,521(11) 3,858,521 806,000 2.15%
Scott P. Peters(9)....................... 3,987,560(12) 3,408,360 579,200 1.54%
Feehan Partners, LP(13).................. 2,464,007(14) 2,443,730 20,277 *
Robert W. Scannell Roth IRA(13).......... 2,198,992(15) 1,929,260 269,732 *
Leonard J. Jardine....................... 1,371,424(16) 1,286,174 85,250 *
Atlas Defined Contribution Plan(9)....... 900,321(7) 900,321 0 *
Frederick Borden ........................ 767,087(17) 643,087 124,000 *
</TABLE>
19
<PAGE>
SELLING STOCKHOLDERS (CONTINUED)
<TABLE>
<CAPTION>
NUMBER OF SHARES OWNED
AFTER THE OFFERING
NUMBER OF SHARES OWNED NUMBER OF SHARES --------------------------------
NAME OF SELLING STOCKHOLDERS PRIOR TO THE OFFERING BEING OFFERED NUMBER OF SHARES PERCENT(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Earley & Earley, Inc....................... 422,487(7) 422,487 0 *
Charles Limbach ........................... 51,558(18) 51,447 111 *
Dallabrida & Associates, Inc............... 707,395(7) 707,395 0 *
Johannes Koch ............................. 446,259(7) 446,259 0 *
Renee Masi ................................ 51,447(7) 51,447 0 *
Jorge Alvarado Reyes ...................... 90,032(7) 90,032 0 *
Cesar Lozano Dias ......................... 90,032(7) 90,032 0 *
Victor Galarreta .......................... 77,170(7) 77,170 0 *
Jeff Nedelman ............................. 372,990(7) 372,990 0 *
Tom Huzella(19) ........................... 1,150,000(20) 950,000 200,000 *
Practice Solutions, Inc.(19)............... 950,000(7) 950,000 0 *
John Fisher ............................... 950,000(7) 950,000 0 *
David Michael Thomas....................... 677,000(21) 665,000 12,000 *
J&K Investment Co. LP. .................... 380,000(7) 380,000 0 *
R.C. Saints, LP. .......................... 1,330,000(7) 1,330,000 0 *
Bryan Gillette ............................ 209,200(22) 190,000 19,200 *
Timothy Isaac ............................. 580,500(23) 570,000 10,500 *
Mike Noriega .............................. 570,000(7) 570,000 0 *
James Huzella ............................. 190,000(7) 190,000 0 *
Les Alt ................................... 380,000(7) 380,000 0 *
Garrett Bragg ............................. 152,000(7) 152,000 0 *
Naresh Nagpal ............................. 380,000(7) 380,000 0 *
Kelly Hadlock ............................. 123,500(7) 123,500 0 *
Michael Hatten ............................ 95,000(7) 95,000 0 *
Kenneth Gallagher ......................... 316,667(7) 316,667 0 *
David Hayes Enterprises, Inc............... 190,000(7) 190,000 0 *
Dennis Boses .............................. 190,000(7) 190,000 0 *
Mark Baker ................................ 950,000(7) 950,000 0 *
Ray Long .................................. 76,000(7) 76,000 0 *
ArtXChange ................................ 5,256,667(7) 5,256,667 0 *
Marie-Rose Phan-Le ........................ 126,667(7) 126,667 0 *
Atul Khandwala ............................ 59,850(7) 59,850 0 *
Barry Deutch .............................. 544,790(24) 513,000 31,790 *
Lori Wynn ................................. 181,597(25) 171,000 10,597 *
Madalyn T. Ciocca ......................... 8,662,650(26) 8,518,650 144,000 *
Laurie Peltier ............................ 837,054(27) 836,000 1,054 *
Franklin Ayala ............................ 1,583,333(7) 1,583,333 0 *
Carlos Jesus Pariona....................... 443,333(7) 443,333 0 *
ProPharma Partners, Inc. .................. 380,000(7) 380,000 0 *
TriCom Pictures & Production Co, Inc....... 1,900,000(7) 1,900,000 0 *
Jack A. Levine ............................ 950,000(7) 950,000 0 *
Mark A. Alfieri ........................... 1,125,000(28) 950,000 175,000 *
MMC/GATX Partnership No. 1 ................ 490,778(29) 340,628 150,150(30) *
-------------- -------------- ----------
Total..................................... 82,750,072 75,793,709 6,956,363
* Less than 1.0%
</TABLE>
20
<PAGE>
SELLING STOCKHOLDERS (CONTINUED)
(1) Percentage of beneficial ownership is calculated assuming 37,587,704
shares of Common Stock were outstanding as of April 24, 2000. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Shares of Common Stock subject to options, warrants
or convertible promissory notes currently exercisable or convertible, or
exercisable or convertible within 60 days of April 24, 2000, are included
in the number of shares outstanding for computing the percentage of the
person holding such option or warrant but are not included in the number
of shares outstanding for computing the percentage of any other person.
(2) Includes 5,258,323 shares issuable upon exercise of outstanding warrants
within 60 days of April 24, 2000. Does not include 20,000 shares of
Series C Preferred Stock which is convertible to a certain number of
shares of Common Stock, such number which shall be determined in
accordance with Shaman's certificate of incorporation. The certificate of
incorporation prohibits conversion of the Series C Preferred Stock to the
extent such conversion would cause the holder's beneficial ownership of
Common Stock to exceed 4.9% of the outstanding shares of Common Stock.
(3) Includes 258,323 shares issuable upon exercise of outstanding warrants
within 60 days of April 24, 2000.
(4) Includes 6,787,075 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(5) Includes 155,000 shares issuable upon exercise of outstanding warrants
within 60 days of April 24, 2000.
(6) Includes 1,286,174 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(7) Represents shares issuable upon conversion and exercise of outstanding
promissory notes and warrants within 60 days of April 24, 2000.
(8) Includes 1,286,174 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(9) Mr. Scott P. Peters is an affiliate of Tradewinds Offshore Funds, Ltd.,
Tradewinds Debt Strategies Fund and Atlas Defined Contribution Plan with
voting and dispositive power over the shares of such entities. Therefore,
Mr. Peters may be deemed the beneficial owner of such shares.
(10) Includes 4,823,151 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(11) Includes 3,858,521 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(12) Includes 3,408,360 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(13) Mr. Robert W. Scannell is an affiliate of Tradewinds Offshore Fund, Ltd.,
Tradewinds Debt Strategies Fund, Feehan Partners, LP and Robert W.
Scannell Roth IRA with voting and dispositive power over the shares of
such entities. Therefore, Mr. Scannell may be deemed the beneficial owner
of such shares.
(14) Includes 2,443,730 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(15) Includes 1,929,260 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(16) Includes 1,286,174 issuable upon conversion and exercise of outstanding
promissory notes and warrants within 60 days of April 24, 2000.
(17) Includes 643,087 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(18) Includes 51,447 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(19) Mr. Tom Huzella is an affiliate of Practice Solutions, Inc. with voting
and dispositive power over the shares of such entity. Therefore,
Mr. Huzella may be deemed the beneficial owner of such shares.
21
<PAGE>
SELLING STOCKHOLDERS (CONTINUED)
(20) Includes 950,000 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(21) Includes 665,000 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(22) Includes 190,000 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(23) Includes 570,000 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(24) Includes 513,000 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(25) Includes 171,000 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(26) Includes 8,518,650 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(27) Includes 836,000 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(28) Includes 175,000 shares held by Alfien/Eade Family Limited Parterships and
950,000 shares issuable upon conversion and exercise of outstanding
promissory notes and warrants within 60 days of April 24, 2000.
(29) Includes 340,906 shares issuable upon conversion and exercise of
outstanding promissory notes and warrants within 60 days of
April 24, 2000.
(30) Includes 278 shares issuable upon exercise of outstanding warrants within
60 days of April 24, 2000.
The preceding table has been prepared based upon information furnished to
us by the Selling Stockholders. From time to time, additional information
concerning ownership of the shares of Common Stock may rest with certain holders
thereof not named in the preceding table, with whom we believe we have no
affiliation.
22
<PAGE>
PLAN OF DISTRIBUTION
The Selling Stockholders have advised Shaman that they, or their respective
distributees, pledgees, donees, transferees, or other successors in interest,
intend to sell all or a portion of their shares from time to time in one or more
transactions on the Over the Counter Bulletin Board at prices and at terms
prevailing at the time of sale or at prices related to the then-current market
price, or in negotiated transactions. The shares may be sold by one or more of
the following methods:
1. by block trade, in which the broker or dealer so engaged will attempt to
sell the shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;
2. by purchases by a broker or dealer as principal for subsequent resale for
its own account under this prospectus;
3. through an over-the-counter distribution in accordance with the rules of
the OTC Bulletin Board;
4. through ordinary brokerage transactions and transactions in which the
broker solicits purchasers; and
5. in privately negotiated transactions.
The Selling Stockholders shall have the sole and absolute discretion not
to accept any purchase offer or make any sale of Common Stock if they deem the
purchase price to be unsatisfactory at any particular time. Brokers acting as
agents for the Selling Stockholders will receive usual and customary commissions
for brokerage transactions, and market makers and block purchasers purchasing
the Common Stock will do so for their own account and at their own risk.
It is possible that the Selling Stockholders will attempt to sell shares
of Common Stock in block transactions to market makers or other purchasers at a
price per share which may be below the then market price. In addition, the
Selling Stockholders or their successors in interest may enter into hedging
transactions with broker-dealers who may engage in short sales of Common Stock
in the course of hedging the positions they assume with a selling stockholder.
There can be no assurance that all or any of the Common Stock offered by
this prospectus will be issued to, or sold by, the Selling Stockholders. The
Selling Stockholders and any brokers, dealers or agents, upon effecting the sale
of any of the Common Stock offered by this prospectus, may be deemed
"underwriters" as that term is defined under the Securities Act or the Exchange
Act, or the rules and regulations thereunder. Shaman has agreed to pay all
expenses incident to the offering and sale of the shares offered and sold to the
public by this prospectus, other than any underwriting commissions or similar
charges.
The Selling Stockholders and any other persons participating in the sale
or distribution of the Common Stock will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder. These rules may limit
the timing of purchases and sales of any of the Common Stock by the Selling
Stockholders or any other person participating in the distribution. Furthermore,
under Regulation M, persons engaged in a distribution of securities are
prohibited from simultaneously engaging in market making and other market
activities with respect to the Common Stock for a specified period of time
before the distribution begins. These restrictions may reduce the marketability
of the Common Stock.
Shaman has agreed to indemnify the Selling Stockholders under certain
limited circumstances against potentially significant liabilities, including
liabilities under the Securities Act, or to contribute to payments these Selling
Stockholders or their respective pledgees, donees, transferees or other
successors in interest, may be required to make. Conversely, the Selling
Stockholders have agreed to indemnify Shaman and certain related persons under
certain limited circumstances against potentially significant liabilities,
including liabilities under the Securities Act.
Shaman intends to keep the registration statement of which this prospectus
constitutes a part for up to 18 months following the time the registration
statement is declared effective.
23
<PAGE>
LEGAL MATTERS
Bay Venture Counsel, LLP will deliver an opinion to us about the validity
of the issuance of the shares of our Common Stock.
EXPERTS
BDO Seidman LLP, independent certified public accountants, have audited
our financial statements at December 31, 1999 and for the year then ended, as
set forth in their report, which contains an explanatory paragraph describing
conditions that raise substantial doubt about our ability to continue as a going
concern as described in Note 1 to the financial statements. Such financial
statements in this prospectus are incorporated herein by reference in reliance
on BDO Seidman LLP's report, given on their authority as experts in accounting
and auditing.
Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1998 and for each of the two years in the period
ended December 31, 1998, as set forth in their report, which contains an
explanatory paragraph describing conditions that raise substantial doubt about
our ability to continue as a going concern as described in Note 1 to the
financial statements. Such financial statements in this prospectus are
incorporated herein by reference in reliance on Ernst & Young LLP's report,
given on their authority as experts in accounting and auditing.
24
<PAGE>
========================================= ================================
You should rely only on the information [LOGO]
contained in this prospectus or to which
we have referred you. We have not
authorized anyone to provide you with
information that is different. This
document may only be used where it is
legal to sell these securities. The
information in this prospectus may only 75,793,709 SHARES
be accurate on the date of this
prospectus. COMMON STOCK
TABLE OF CONTENTS
Page
----
Available Information............ 3
Incorporation of Certain ---------------
Documents by Reference......... 3
Risk Factors..................... 9 PROSPECTUS
Selling Stockholders............. 19
Plan of Distribution............. 23 ---------------
Legal Matters.................... 24
Experts.......................... 24
May ____, 2000
========================================= ================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses expected to be
incurred by the Registrant in connection with the sale and distribution of the
securities being registered hereby. All amounts are estimated except the
Securities and Exchange Commission registration fee.
SEC registration fee................ $ 5,102
Accounting fees and expenses........ 10,000
Legal fees and expenses............. 10,000
Printing and engraving fees......... 4,000
Miscellaneous fees and expenses..... 898
-------
Total.................. $ 30,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law, as amended (the
"DGCL"), provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding, if
the person acted in good faith and in a manner the person reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. Section 145 further provides that a corporation
similarly may indemnify any such person serving in any such capacity who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor, against expenses actually and reasonably incurred in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Delaware Court of Chancery or such other court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Section 102(b)(7) of the DGCL permits a corporation to include in its
certificate of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such provision
shall not eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL (relating to
unlawful payment of dividends and unlawful stock purchase and redemption) or
(iv) for any transaction from which the director derived an improper personal
benefit.
The Registrant's Amended and Restated Certificate of Incorporation
provides that the Registrant's directors shall not be liable to the Registrant
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent that exculpation from liabilities is not
permitted under the DGCL as in effect at the time such liability is determined.
The Registrant has entered into indemnification agreements with all of its
officers and directors, as permitted by the DGCL.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The exhibits listed in the Exhibit Index are filed as part of this
Registration Statement.
(a) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- --------------------------------------------------------------------------------
5.1* Opinion of Bay Venture Counsel, LLP
10.50* Form of Note Purchase and Warrant Agreement, dated as of
February 2, 2000, by and between the Registrant, the Subsidiary
and the Investors named therein.
10.50A* Amendment No. 1 to Note Purchase and Warrant Agreement, dated as
of March 24, 2000 by and between the Registrant, the Subsidiary
and Investors named in the Note Purchase and Warrant Agreement.
10.50B* Amendment No. 2 to Note Purchase and Warrant Agreement, dated as
of April 19, 2000 by and between the Registrant, the Subsidiary
and Investors named in the Note Purchase and Warrant Agreement.
10.51* Convertible Note Purchase Agreement, dated as of February 2,
2000, by and between the Registrant and Note Purchaser.
10.51A* Amendment No. 1 to Convertible Note Purchase Agreement, dated as
of April 19, 2000 by and between the Registrant and Note
Purchaser.
23.1* Consent of BDO Seidman LLP, Independent Auditors.
23.2* Consent of Ernst & Young LLP, Independent Auditors.
23.3* Consent of Bay Venture Counsel LLP (included in the opinion
filed as Exhibit 5.1).
24.1* Power of Attorney (included under the caption "Signatures").
- -------------------------
* Filed herewith.
(b) FINANCIAL STATEMENT SCHEDULES
No financial statement schedules are included because they are not
required or the required information is included in the financial statements or
notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(A) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(1) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(2) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in the volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement; and
(3) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(B) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
<PAGE>
(C) To remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of South San
Francisco, State of California, on the 28th day of April, 2000.
SHAMAN PHARMACEUTICALS, INC.
By: /s/ Lisa A. Conte
________________________
Lisa A. Conte
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person who signature appears
below constitutes and appoints jointly and severally, Lisa A. Conte and G. Kirk
Raab, or either of them as his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign any and
all amendments to this Registration Statement on Form S-3, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
NAME TITLE DATE
--------- ----- ----
/s/ Lisa A. Conte President, Chief Executive Officer, April 28, 2000
_________________________ Chief Financial Officer and Director
Lisa A. Conte (principal executive and financial officer)
/s/ G. Kirk Raab Chairman of the Board April 28, 2000
_________________________
G. Kirk Raab
/s/ Adrian D.P. Bellamy Director April 28, 2000
__________________________
Adrian D.P. Bellamy
/s/ Jeffrey Berg Director April 28, 2000
__________________________
Jeffrey Berg
/s/ M. David Titus Director April 28, 2000
__________________________
M. David Titus
/s/ Loren D. Israelsen Director April 28, 2000
__________________________
Loren D. Israelsen
II-5
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- --------------------------------------------------------------------------------
5.1* Opinion of Bay Venture Counsel, LLP
10.50* Form of Note Purchase and Warrant Agreement, dated as of
February 2, 2000, by and between the Registrant, the Subsidiary
and the Investors named therein.
10.50A* Amendment No. 1 to Note Purchase and Warrant Agreement, dated as
of March 24, 2000 by and between the Registrant, the Subsidiary
and Investors named in the Note Purchase and Warrant Agreement.
10.50B* Amendment No. 2 to Note Purchase and Warrant Agreement, dated as
of April 19, 2000 by and between the Registrant, the Subsidiary
and Investors named in the Note Purchase and Warrant Agreement.
10.51* Convertible Note Purchase Agreement, dated as of February 2,
2000, by and between the Registrant and Note Purchaser.
10.51A* Amendment No. 1 to Convertible Note Purchase Agreement, dated as
of April 19, 2000 by and between the Registrant and Note
Purchaser.
23.1* Consent of BDO Seidman LLP, Independent Auditors.
23.2* Consent of Ernst & Young LLP, Independent Auditors.
23.3* Consent of Bay Venture Counsel LLP (included in the opinion
filed as Exhibit 5.1).
24.1* Power of Attorney (included under the caption "Signatures").
- -------------------------
* Filed herewith.
II-6
<PAGE>
EXHIBIT 5.1
Bay Venture Counsel, LLP
Lake Merritt Plaza Building
1999 Harrison Street, Suite 1300
Oakland, California 94612
Telephone (510) 273-8750
Facsimile (510) 834-7440
April 28, 2000
Shaman Pharmaceuticals, Inc.
213 East Grand Avenue
South San Francisco, CA 94080-4812
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
As counsel to Shaman Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), we have been asked by the Company to review the Registration
Statement on Form S-3 to be filed by the Company with the Securities and
Exchange Commission on, or about, April 28, 2000 (the "Registration Statement").
This is in connection with the registration under the Securities Act of 1933, as
amended, of up to seventy-five million seven hundred ninety-three thousand seven
hundred nine (75,793,709) shares of the Company's common stock, $0.001 par value
per share (the "Common Stock"), which may be issued by the Company under
currently issued and outstanding warrants and convertible promissory notes held
by selling shareholders identified in the Registration Statement.
As your counsel, we have examined the proceedings and such other documents
as we have deemed necessary relating to the issuance of the warrants described
in the Registration Statement ("warrants") which may be exercised for up to
38,541,835 shares of Common Stock (the "Warrant Shares"), and the convertible
promissory notes described in the Registration Statement ("Notes") which may be
converted into up to 37,251,874 shares of Common Stock (the "Note Shares").
In rendering this opinion, we have assumed, without investigation, the
genuineness of all signatures; the correctness of all certificates; the
authenticity of all documents submitted to us as originals; the conformity to
original documents of all documents submitted to us as certified, photostatic or
facsimile copies and the authenticity of the originals of such copies; and the
accuracy and completeness of all records made available to us by, or on behalf
of, the Company.
In addition, we have assumed, without investigation, the accuracy of the
representations and statements as to factual matters made by the Company, its
officers and employees, and public officials. Nothing has come to our attention,
however, which would lead us to question the accuracy or completeness of such
representations, warranties or statements. In rendering the opinion hereinafter
expressed, we have examined and relied upon such documents and instruments as we
have deemed necessary and appropriate.
It is our opinion that (i) the Warrant Shares, when subsequently issued
upon exercise and full payment of the exercise price therefor in accordance with
the terms of each respective Warrant, and (ii) the Note Shares, when
subsequently issued upon conversion and full payment of the conversion price
therefor in accordance with the terms of each respective Note, will be validly
issued, fully paid and nonassessable.
We are admitted to practice law only in the State of California, and we
express no opinion concerning any law other than the law of the State of
California. This opinion is intended solely for your benefit and is not to be
relied upon by any other person, firm, or entity without our prior written
consent.
We consent to the use of this opinion as an Exhibit to the Registration
Statement, and further consent to all references to this Firm in the
Registration Statement and any amendments thereto.
Very truly yours,
/s/ Bay Venture Counsel, LLP
BAY VENTURE COUNSEL, LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shaman Pharmaceuticals, Inc.
South San Francisco, California
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated March 21,
2000, relating to the financial statements of Shaman Pharmaceuticals, Inc.
appearing in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999. Our report contains an explanatory paragraph regarding the
Company's ability to continue as a going concern.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
San Francisco, California
April 27, 2000
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and related Prospectus of Shaman
Pharmaceuticals, Inc. for the registration of 75,793,709 shares of its Common
Stock and to the incorporation by reference therein of our report dated February
11, 1999 (except for Note 10, as to which the date is June 22, 1999), with
respect to the financial statements of Shaman Pharmaceuticals, Inc. included in
its Annual Report on Form 10-K for the year ended December 31, 1998, filed with
the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Palo Alto, California
April 28, 2000
<PAGE>
EXHIBIT 10.50
CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT
This Convertible Note and Warrant Purchase Agreement (this "Agreement") is
made and entered into as of February 2, 2000 by and among Shaman
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), ShamanBotanicals,
Inc., a Delaware corporation and a wholly owned subsidiary of the Company (the
"Subsidiary"), and the person listed on Exhibit A attached hereto (the
"Purchasers").
The Company desires to issue and sell and the Purchasers desire to
purchase promissory notes in the aggregate principal amount of up to $3,000,000,
in the form attached hereto as Exhibit B (the "Notes"), and warrants to purchase
shares of capital stock of the Subsidiary or the Company in the form attached
hereto as Exhibit C (the "Warrants"), as further described herein.
In consideration of the mutual promises contain herein, the parties agree
as follows:
1. SALE OF NOTES AND WARRANTS:
1.1 Commitment. Subject to the terms and conditions of this Agreement, the
Purchasers agree to purchase from the Company and the Company agrees to sell and
issue to the Purchasers, the Notes and the Warrants. The purchase price of each
Note shall be equal to 100% of the principal amount of such Note as specified on
the Schedule of Purchasers attached hereto as Exhibit A and the purchase price
of the Warrant to be issued to each Purchaser shall be as specified on the
Schedule of Purchasers, for a purchase price for each Warrant of $0.01 per share
issuable upon exercise of the Warrant, which amount the parties have determined
in good faith, after consultation with their advisors, to be the fair value of
each Warrant. For purposes of this Agreement, an "Equity Financing" shall have
the meaning given to it in the Note.
2. PURCHASE OF STOCK:
2.1 Equity Financing. The total amount of the unpaid principal amount of
each Note and any accrued but unpaid interest will automatically be converted
into shares of either (i) the Subsidiary's capital stock sold in the
Equity Financing, or (ii) the Company's common stock, in each case upon the
terms and conditions set forth in the Note. The shares of capital stock into
which the Notes are convertible shall be referred to in his Agreement as the
"New Stock." The Warrants will also be exercisable for New Stock.
2.2 Conditions to Closing. The obligations of the Company to issue shares
of New Stock and the obligations of each Purchaser to purchase such New
Stock as described in Section 2.1 above are subject to the conditions that:
<PAGE>
(a) The Company shall have obtained all requisite approvals of
and made all required filings with applicable federal and state securities and
corporate law authorities;
(b) The Company shall have obtained all appropriate Board and
stockholder consents, waivers and approvals required in connection with the
transaction; and
(c) In the case of the issuance of shares of capital stock of
the Subsidiary upon an Equity Financing, each Purchaser and the Company shall
have executed a stock purchase agreement covering the sale of shares of New
Stock substantially similar to that executed by the other purchasers in the
Equity Financing.
2.3 Best Efforts. The Company and the Purchasers will use their best
efforts promptly to fulfill all of the conditions described in Section 2.2
above.
2.4 Issuance of Securities on Conversion. As soon as practicable after
conversion of each Note, the Subsidiary of the Company, as applicable, at
its expense will cause to be issued in the name of and delivered to the holder
of the Note, a certificate or certificates for the number of duly authorized,
fully paid and non-assessable shares of New Stock to which that holder shall be
entitled on such conversion, together with any other securities and property to
which the holder is entitled on conversion under the terms of this Agreement and
will at all times reserve and keep available, solely for the issuance and
delivery upon the conversion of the New Stock, such shares of capital stock and
other stock, securities and property, as from time to time shall be issuable
upon the conversion of the New Stock. No fractional shares will be issued on
conversion of the Note. If on conversion of the Note a fraction of a share
results, the Subsidiary of the Company, as applicable, will pay the cash value
of that fractional share, calculated on the basis of the applicable conversion
price.
3. REPRESENTATIONS OF THE PURCHASERS:
Each Purchaser hereby represents and warrants, severally and not jointly,
to the Company and the Subsidiary that:
3.1 Authorization. This Agreement, when executed and delivered by the
Purchaser, will constitute valid and legally binding obligations of the
Purchaser, enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors' rights generally, and as limited by laws relating to the availability
of a specific performance, injunctive relief, or other equitable remedies.
3.2 Purchase Entirely for Own Account; Accredited Investor. This Agreement
is made with the Purchaser in reliance upon the Purchaser's representation
to the Company and the Subsidiary, which by the Purchaser's execution of this
Agreement the Purchaser hereby confirms, that (i) the Notes, the Warrants, the
New Stock issuable upon conversion of the Notes and exercise of the Warrants and
the Common Stock or other securities issuable upon conversion of the New Stock
2
<PAGE>
(collectively the "Securities") to be acquired by the Purchaser will be acquired
for investment for the Purchaser'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 the
Purchaser has no present intention of selling, granting any participation in, or
otherwise distributing the same and (ii) that the Purchaser is an "accredited
investor" as such term is defined under Rule 501 of Regulation D promulgated
under the Securities Act. By executing this Agreement, the Purchaser further
represents that the Purchaser does not presently 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. The Purchaser represents that it has full power and authority to
enter into this Agreement. Either (i) the Purchaser has not been formed for the
specific purpose of acquiring the Securities or (ii) if the Purchaser has been
formed for the specific purpose of acquiring the Securities, each person or
entity that has an interest in the Purchaser is an accredited investor.
3.3 Disclosure of Information. The Purchaser has had an opportunity to
discuss the Company's and the Subsidiary's respective businesses, management,
financial affairs and the terms and conditions of the offering of the
Securities with the Company's and the Subsidiary's management and has had an
opportunity to review the Company's and the Subsidiary's facilities. The
Purchaser understands that such discussions, as well as the written information
issued by the Company and the Subsidiary, were intended to describe the aspects
of the Company's and the Subsidiary's business which it believes to be material.
3.4 Restricted Securities. The Purchaser understands that the Securities
have not been registered under the Securities Act, by reason of a specific
exemption from the registration provisions of the Securities Act which depends
upon, among other things, the bona fide nature of the investment intent and the
accuracy of the Purchaser's representations as expressed herein. The Purchaser
understands that the Securities are "restricted securities" under applicable
U.S. federal and state securities laws and that, pursuant to these laws, the
Purchaser must hold the Securities indefinitely unless they are registered with
the Securities and Exchange Commission and qualified by state authorities, or an
exemption from such registration and qualification requirements is available.
3.5 No Public Market. The Purchaser understands that only a limited public
market now exists for the Company's securities, and that no public market now
exists for any of the securities issued by the Subsidiary, and that the Company
and the Subsidiary have made no assurances that a public market will ever exist
for the Securities.
3.6 Legends. The Purchaser understands that the Securities, and any
securities issued in respect of or exchange for the Securities, may bear
one or all of the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
3
<PAGE>
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933."
(b) Any legend required by the Blue Sky laws of any state to the
extent such laws are applicable to the shares represented by the certificate so
legended.
3.7 Legal Advice. The Purchaser has had the opportunity to consult with
his or her counsel regarding the matters relevant to this Agreement and the
transactions contemplated hereby.
4. REPRESENTATIONS OF THE COMPANY: The Company and the Subsidiary hereby
represent and warrant to the Purchaser as follows:
4.1 Corporate Power. Each of the Company and the Subsidiary has all
requisite corporate power to execute and deliver this Agreement and to carry out
and perform its obligations under the terms of this Agreement. The Company and
the Subsidiary are each duly incorporated and validly existing under the laws of
the State of Delaware.
4.2 Authorization. All corporate action on the part of each of the Company
and the Subsidiary, their respective directors and stockholders necessary
for the authorization, execution, delivery and performance of this Agreement and
the Notes and Warrants by the Company and the Subsidiary, and the performance of
the Company's and Subsidiary's respective obligations hereunder, including (x)
the issuance and delivery of the Notes and the Warrants and (y) the
authorization by the Company and the Subsdiairy to use their best efforts to
reserve, as soon as practicable after the filing with the Delaware Secretary of
State of the Certificate of Amendment to the Certificate of Incorporation
authorizing the New Stock, a sufficient number of equity securities issuable
upon conversion of the Notes and the New Stock or exercise of the Warrants, has
been taken or will be taken prior to the Closing or, in respect of the Warrants
and the reservation of the equity securities issuable upon exercise of the
Warrants, prior to the issuance of the Warrants. This Agreement, the Notes and
the Warrants, when executed and delivered by the Company and the Subsidiary,
shall constitute valid and binding obligations of the Company and the
Subsidiary, enforceable in accordance with their terms, subject to laws of
general application relating to bankruptcy, insolvency, the relief of debtors
and, with respect to rights to indemnity, subject to federal and state
securities laws. The New Stock or other equity securities of the Company and the
Subsidiary, when issued in compliance with the provisions of this Agreement, the
Notes or the Warrants, will be duly authorized, validly issued, fully paid and
nonassessable and free of any liens or encumbrances.
4.3 Governmental Consents. All consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with, any governmental authority, required on the part of the
Company and the Subsidiary in connection with the valid execution and delivery
and performance of this Agreement, the offer, sale or issuance of the Notes, the
4
<PAGE>
Warrants and the equity securities issuable upon exercise of the Warrants,
conversion of the Notes or the consummation of any other transaction
contemplated hereby shall have been obtained and will be effective at the
Closing or, in respect of the Warrants, prior to the issuance of the Warrants,
except for notices required or permitted to be filed with certain state and
federal securities commissions, which notices will be filed on a timely basis.
4.4 Offering. Assuming the accuracy of the representations and warranties
of the Purchaser contained in Section 3 hereof, the offer, issue, and sale
of the Notes and Warrants and the equity securities issuable upon conversion of
Notes and exercise of Warrants are and will be exempt from the registration and
prospectus delivery requirements of the Securities Act, and have been registered
or qualified (or are exempt from registration and qualification) under the
registration, permit, or qualification requirements of all applicable state
securities laws.
5. GENERAL PROVISIONS.
5.1 Entire Agreement. This Agreement, together with its exhibits,
represents the entire agreement between the Company, the Subsidiary and the
Purchasers, supersedes all prior agreements and understandings, and this
Agreement and the Notes and Warrants issued hereunder may only be amended in
writing signed by the Company and the holders of over fifty percent (50%) of the
indebtedness represented by the Notes. Furthermore, the terms and provisions of
a Note or Warrant may not be amended in a manner different than any other Note
or Warrant, as applicable, without the written consent of the holder of such
Note or Warrant and that of the holders of over fifty percent (50%) of the
stated principal amount represented by the Notes. Any amendment or waiver of
this Agreement, the Notes or Warrants effected in accordance with this Agreement
shall be binding upon each Purchaser under this Agreement.
5.2 Assignment. This Agreement shall bind and benefit the successors,
assigns, heirs, executors and administrators of the parties (including
without limitation any successor corporation to the Company). The rights of each
Purchaser under this Agreement may not be assigned without the written consent
of the Company and the Subsidiary.
5.3 Governing Law. This Agreement shall be governed by the internal law
and not the law of conflicts of the State of California, and the performance of
the obligations imposed by this Agreement shall be governed by the laws of the
State of California applicable to contracts made and wholly to be performed in
that state.
5.4 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be delivered personally or transmitted
by telex or facsimile, or, if sent within the U.S., mailed by first-class mail,
postage prepaid, addressed (i) if to a Purchaser, at the Purchaser's address set
forth below its signature, or at such other address as the Purchaser shall have
furnished to the Company in writing, or (ii) if to the Company, at its address
set forth below, or at such other address as the Company shall have furnished to
the Purchaser in writing. All notices shall be deemed effectively delivered upon
delivery or transmission or three days after mailing.
5
<PAGE>
5.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[Signature Page Follows]
6
<PAGE>
The parties hereto have executed this Agreement as of the day and year
first set forth above.
COMPANY: PURCHASERS:
SHAMAN PHARMACEUTICALS, INC. ____________________________________
(Name of Entity)
By: /s/ Lisa A. Conte By: /s/ Each Investor
_______________________________ _________________________________
Lisa A. Conte
Chief Executive Officer ____________________________________
(Name and Title)
Address: Address:
213 East Grand Avenue ____________________________________
South San Francisco, CA 94080
Attn: Lisa Conte ____________________________________
____________________________________
(Name of Entity)
Address:
____________________________________
____________________________________
7
<PAGE>
EXHIBIT A
SCHEDULE OF PURCHASERS
NAME DOLLAR AMOUNT OF INVESTMENT
- ---------------------------------- ----------------------------
8
<PAGE>
EXHIBIT B
- --------------------------------------------------------------------------------
THIS SUBORDINATED CONVERTIBLE PROMISSORY NOTE AND THE SECURITIES ISSUABLE
HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE
SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
- --------------------------------------------------------------------------------
$___________________ FEBRUARY 2, 2000
SOUTH SAN FRANCISCO, CA
SHAMAN PHARMACEUTICALS, INC.
AND
SHAMANBOTANICALS, INC.
CONVERTIBLE PROMISSORY NOTE
No. N-
FOR THE VALUE RECEIVED, Shaman Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), promises to pay to _____________________________
("Holder"), the principal sum of $___________________. Interest shall accrue
from the date of this Note on the unpaid principal amount at the rate of twelve
percent (12%) per annum until paid. Such principal amount, together with accrued
but unpaid interest, shall be payable on demand by the Holder of this Note after
April 30, 2000, except as otherwise set forth below or unless earlier converted
in accordance with Section 2 of this Note. Any capitalized term not otherwise
defined herein shall have the meaning given to it in that certain Convertible
Note and Warrant Purchase Agreement ("Purchase Agreement") dated as of the date
hereof.
1. Payment. All payments shall be made in lawful tender of the United
States of America at such place as the Holder hereof may from time to time
designate in writing to the Company. Payment shall be credited first to the
accrued interest then due and payable and the remainder applied to principal.
2. Automatic Conversion. (a) Notwithstanding the foregoing, if
ShamanBotanicals, Inc., a Delaware corporation and a wholly owned subsidiary of
the Company ("the "Subsidiary"), consummates an equity financing after the date
of this Note but on or prior to April 30, 2000 resulting in gross aggregate
proceeds (excluding the amount converted under this Note and any other notes
issued under the Purchase Agreement) to the Subsidiary of at least Five Million
Dollars ($5,000,000) (an "Equity Financing"), then the unpaid principal amount
<PAGE>
of the Note and any accrued but unpaid interest as of the closing date of the
Equity Financing shall be automatically converted into either (i) fully paid and
nonassessable shares of the Subsidiary's capital stock sold in the Equity
Financing, or (ii) fully paid and nonassessable shares of the Company's common
stock (in either case, the "New Stock"). Whether the Note is converted into
capital stock of the Subsidiary or common stock of the Company shall be
determined at the sole election of the Holder, which election shall be delivered
in writing to the Company and Subsidiary at least five business days prior to
the anticipated consummation of the Equity Financing; provided, that the Note
shall convert entirely into the New Stock of one or the other of the Subsidiary
or the Company, not partially into either or both. The Company and Subsidiary
shall give at least ten business days written notice of the consummation of an
Equity Financing to the Holder. If the Holder elects that the Note shall convert
into shares of the Subsidiary's capital stock sold in the Equity Offering, then
the Subsidiary shall promptly deliver to the Holder a certificate representing
the New Stock issuable upon conversion of this Note. The number of shares of New
Stock to be issued upon such automatic conversion into shares of Subsidiary
capital stock under this section 2(a) shall be equal to the quotient obtained by
dividing (x) the unpaid principal amount of this Note plus any accrued but
unpaid interest by (y) an amount equal to three-fifths (0.6) of the price per
share of the shares of New Stock of the Subsidiary sold in the Equity Offering.
Any New Stock of the Subsidiary to be issued to the Holder shall have the same
rights (including but not limited to registration rights and other contractual
rights), preferences and privileges as those applicable to the New Stock of
Subsidiary issued to other purchasers in the Equity Financing. If the Holder
elects that the Note shall convert into shares of the Company's common stock,
then the Company shall promptly deliver to the Holder a certificate representing
the New Stock of the Company issuable upon conversion of this Note. The number
of shares of New Stock of the Company to be issued upon such automatic
conversion under this section 2(a) shall be equal to the quotient obtained by
dividing (x) the unpaid principal amount of this Note plus any accrued but
unpaid interest by (y) which is equal to the per share conversion price of the
Series R Preferred Stock on February 1, 2000, adjusted for any stock splits.
(b) If the Subsidiary does not consummate an Equity Financing on or prior
to April 30, 2000, then on May 1, 2000, the unpaid principal amount of the Note
and any accrued but unpaid interest as of the closing date of the Equity
Financing shall be automatically converted into fully paid and nonassessable
shares of the Company's common stock (which shall also be referred to herein as
"New Stock"), and the Company shall promptly deliver to the Holder a certificate
representing the New Stock issuable upon conversion of this Note. The number of
shares of New Stock to be issued upon such automatic conversion under this
section 2(b) shall be equal to the quotient obtained by dividing (x) the unpaid
principal amount of this Note plus any accrued but unpaid interest by (y) which
is equal to the per share conversion price of the Series R Preferred Stock on
February 1, 2000, adjusted for any stock splits.
3. Acceleration. Notwithstanding the foregoing, if there should occur
any receivership, insolvency, assignment for the benefit of creditors,
bankruptcy, reorganization or arrangements with creditors (whether or not
pursuant to bankruptcy or other insolvency laws), dissolution, liquidation or
2
<PAGE>
any other marshaling of the assets and liabilities of the Company (other than
the transfer of assets anticipated to ShamanBotanicals, Inc.), or if there is an
event of default of the Company with respect to any indebtedness, then the
Holder may declare this Note and accrued interest immediately due and payable.
4. Subordination. The indebtedness evidenced by this Note is hereby
expressly subordinated, to the extent and in the manner hereinafter set
forth, in right of payment to the prior payment in full of all the Company's
Senior Indebtedness, as hereinafter defined.
4.1 Senior Indebtedness. As used in this Note, the term "Senior
Indebtedness" shall mean the principal of and unpaid accrued interest on (i)
indebtedness of the Company or with respect to which the Company is a guarantor,
to banks, insurance companies, lease financing institutions or other financial
institutions regularly engaged in the business of lending money, which is for
money borrowed (or purchase or lease of equipment in the case of lease
financing) by the Company (whether or not secured) in the ordinary course of
business from unaffiliated entities, other than trade payables, and (ii) any
such indebtedness or any debentures, notes or other evidence of indebtedness
issued in exchange for such Senior Indebtedness, or any indebtedness arising
from the satisfaction of such Senior Indebtedness by a guarantor.
4.2 Default on Senior Indebtedness. If there should occur any
receivership, insolvency, assignment for the benefit of creditors, bankruptcy,
reorganization or arrangements with creditors (whether or not pursuant to
bankruptcy or other insolvency laws), dissolution, liquidation or any other
marshaling of the assets and liabilities of the Company (other than the transfer
of assets anticipated to ShamanBotanicals, Inc.), or if this Note shall be
declared due and payable upon the occurrence of an event of default with respect
to any Senior Indebtedness, then (i) no amount shall be paid by the Company in
respect of the principal of or interest on this Note at the time outstanding,
unless and until the principal of and interest on the Senior Indebtedness then
outstanding shall be paid in full, and (ii) no claim or proof of claim shall be
filed with the Company by or on behalf of the Holder of this Note that shall
assert any right to receive any payments in respect of the principal of and
accrued but unpaid interest on this Note, except subject to the payment in full
of the principal of and interest on all of the Senior Indebtedness then
outstanding. If there occurs an event of default that has been declared in
writing with respect to any Senior Indebtedness, or in the instrument under
which any Senior Indebtedness is outstanding, permitting the holder of such
Senior Indebtedness to accelerate the maturity thereof, then, unless and until
such event of default shall have been cured or waived or shall have ceased to
exist, or all Senior Indebtedness shall have been paid in full, no payment shall
be made in respect of the principal of or interest on this Note, unless within
90 days after the happening of such event of default, the maturity of such
Senior Indebtedness shall not have been accelerated.
4.3 Effect of Subordination. Subject to the rights, if any, of the
holders of Senior Indebtedness under this Section 4 to receive cash, securities
or other properties otherwise payable or deliverable to the Holder of this Note,
nothing contained in this Section 4 shall impair, as between the Company and the
Holder, the obligation of the Company, subject to the terms and conditions
hereof, to pay to the Holder the principal hereof and interest hereon as and
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when the same become due and payable, or shall prevent the Holder of this Note,
upon default hereunder, from exercising all rights, powers and remedies
otherwise provided herein or by applicable law.
4.4 Undertaking. This Paragraph 4 is solely for the benefit of
Holder and any holder of Senior Indebtedness and not for the benefit of the
Company or any other party. The provisions of this Paragraph 4 may be amended
only by written instrument signed by Holder and a majority in interest of the
holders of Senior Indebtedness. In the event of any legal action to enforce the
rights of a party under this Paragraph 4, the party prevailing in such action
shall be entitled, in addition to such other relief as may be granted, all
reasonable costs and expenses, including reasonable attorneys' fees, incurred in
such action.
5. Miscellaneous.
5.1 Delay. No extension of time for payment of any amount owing
hereunder shall affect the liability of the Company for payment of the
indebtedness evidenced hereby. No delay by the Holder or any holder hereof in
exercising any power or right hereunder shall operate as a waiver of any power
or right hereunder.
5.2 No Prepayment. This Note may not be prepaid in whole or in
part without the prior written consent of Holder, whose consent shall not be
unreasonably withheld.
5.3 Waiver and Amendment. No waiver or modification of the terms of
this Note shall be valid without the written consent of the holders of over
fifty percent (50%) of the indebtedness represented by this Note and all other
Notes issued by the Company pursuant to the Purchase Agreement; provided,
however, that any such waiver or modification of Paragraph 4 shall require the
written consent of a majority in interest of the holders of Senior Indebtedness
and provided, further, that the terms and provisions of this Note shall not be
amended in a manner different than any other Note without the written consent of
the Holder and of the holders of over fifty percent (50%) of the indebtedness
represented by all Notes issued by the Company pursuant to the Purchase
Agreement.
5.4 Governing Law. This Note shall be governed by the internal law
and not the law of conflicts of the State of California, and the performance of
obligations imposed by this Note shall be governed by the laws of California
applicable to contracts made and wholly to be performed in that state.
5.5 Severability. In case any provision contained herein (or part
thereof) shall for any reason be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or other unenforceability shall not
affect any other provision (or the remaining part of the affected provision)
hereof, but this Note shall be construed as if such invalid, illegal, or
unenforceable provision (or part thereof) had never been contained herein, but
only to the extent that such provision is invalid, illegal, or unenforceable.
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<PAGE>
5.6 Notice. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been duly given on the
date of service if served personally or by facsimile, or five days after the
date of mailing if mailed, by first class mail, registered or certified, postage
prepaid. Notices shall be addressed as follows:
To Holder at:
______________________________
______________________________
To Company
or Subsidiary at: 213 East Grand Avenue
South San Francisco, CA 94080
Attn: Lisa Conte
[Signature Page Follows]
5
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
and delivered by its authorized officer as of the date first above written.
COMPANY: HOLDER:
SHAMAN PHARMACEUTICALS, INC.
By: /s/ Lisa A. Conte
________________________________ ____________________________________
Lisa A. Conte (Name of Entity)
Chief Executive Officer
SUBSIDIARY: BY:/s/ Each Investor
____________________________________
____________________________________
(Name and Title)
SHAMANBOTANICALS, INC.
By: /s/ Lisa A. Conte
________________________________
Lisa A. Conte
Chief Executive Officer
6
<PAGE>
EXHIBIT C
- ------------------------------------------------------------------------------
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
- ------------------------------------------------------------------------------
Warrant No. W- Number of Shares: [See Below]
Date of Issuance: February 2, 2000 Subject To Adjustment in
The Manner Described Below
SHAMAN PHARMACEUTICALS, INC.
STOCK PURCHASE WARRANT
Shaman Pharmaceuticals, Inc., a Delaware corporation (the "Company"), for
value received, hereby certifies that ________________(the "Registered Holder"),
is entitled, subject to the terms set forth below, to purchase from the Company,
at any time after April 30, 2000 and on or before April 30, 2005, that number of
shares of the Company's Common Stock equal to the quotient obtained by dividing
(A) two fifths of the original principal dollar amount represented by the
Registered Holder's Note by (B) the dollar value equal to the per share
conversion price of Series R Preferred Stock. The exercise price for such shares
(the "Purchase Price") shall be equal to the dollar value equal to the per share
conversion price of Series R Preferred Stock. The Purchase Price and the number
and character of shares of Common Stock purchasable under this Warrant are
subject to adjustment from time to time pursuant to the provisions of this
Warrant. The shares of Common Stock purchasable upon exercise of this Warrant
are hereinafter referred to from time to time as the "Warrant Stock".
1. CERTAIN DEFINITIONS. The following definitions shall apply for
purposes of this Warrant:
(a) "Equity Financing" shall have the meaning set forth in the
Notes.
(b) "Notes" shall mean the Convertible Promissory Notes issued and
sold by the Company pursuant to the Purchase Agreement, including the Note
purchased by the Registered Holder.
(c) "Purchase Agreement" shall mean that certain Convertible
Promissory Note and Warrant Purchase Agreement, dated February 2, 2000, by and
among the Company, the Subsidiary and the Registered Holder and certain other
purchasers of the Notes.
<PAGE>
(d) "Subsidiary" shall mean ShamanBotanicals, Inc., a Delaware
corporation and a wholly owned subsidiary of the Company.
2. EXERCISE.
(a) This Warrant may be exercised by the Registered Holder, in whole
or in part, by surrendering this Warrant, with the purchase form appended hereto
as Exhibit A duly executed by such Registered Holder or by such Registered
Holder's duly authorized attorney, at the principal office of the Company, or at
such other office or agency as the Company may designate, accompanied by payment
in full by cash, check or wire transfer of the Purchase Price payable in respect
of the number of shares of Warrant Stock purchased upon such exercise.
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this
Warrant shall have been surrendered to the Company as provided in Section 2(a)
above. At such time, the person or persons in whose name or names any
certificates for Warrant Stock shall be issuable upon such exercise shall be
deemed to have become the holder or holders of record of the Warrant Stock
represented by such certificates.
3. ADJUSTMENTS.
(a) If, after the date hereof, the outstanding shares of the
Company's Common Stock shall be subdivided into a greater number of shares or a
dividend in Common Stock shall be paid in respect of Common Stock, the Purchase
Price in effect immediately prior to such subdivision or at the record date of
such dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of shares of Warrant Stock purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Purchase Price
in effect immediately prior to such adjustment, by (ii) the Purchase Price in
effect immediately after such adjustment.
(b) In case of any reclassification or change of the outstanding
securities of the Company or of any reorganization of the Company (or any other
corporation the stock or securities of which are at the time receivable upon the
exercise of this Warrant) or any similar corporate reorganization on or after
the date hereof, then and in each such case the holder of this Warrant, upon the
exercise hereof at any time after the consummation of such reclassification,
change, reorganization, merger or conveyance, shall be entitled to receive, in
lieu of the stock or other securities and property receivable upon the exercise
hereof prior to such consummation, the stock or other securities or property to
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<PAGE>
which such holder would have been entitled upon such consummation if such holder
had exercised this Warrant immediately prior thereto, all subject to further
adjustment as provided in paragraph (a); and in each such case, the terms of
this Section 3 shall be applicable to the shares of stock or other securities
properly receivable upon the exercise of this Warrant after such consummation.
(c) When any adjustment is required to be made in the Purchase
Price, the Company shall promptly mail to the Registered Holder a certificate
setting forth the Purchase Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Such certificate shall also
set forth the kind and amount of stock or other securities or property into
which this Warrant shall be exercisable following the occurrence of any of the
events specified in Section 3(a) or (b) above.
4. TRANSFERS.
(a) Each holder of this Warrant acknowledges that this Warrant and
the Warrant Stock of the Company have not been registered under the Securities
Act, and agrees not to sell, pledge, distribute, offer for sale, transfer or
otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise
in the absence of (i) an effective registration statement under the Act as to
this Warrant or such Warrant Stock and registration or qualification of this
Warrant or such Warrant Stock under any applicable Blue Sky or state securities
law then in effect, or (ii) an opinion of counsel, satisfactory to the Company,
that such registration and qualification are not required. Each certificate or
other instrument for Warrant Stock issued upon the exercise of this Warrant
shall bear a legend substantially to the foregoing effect.
(b) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when this
warrant is properly assigned in blank, the Company may (but shall not be
required to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
(c) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change such Registered Holder's address as shown on the warrant register by
written notice to the Company requesting such change.
5. NO IMPAIRMENT. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will (subject to Section 13 below) at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.
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<PAGE>
6. TERMINATION. This Warrant (and the right to purchase securities upon
exercise hereof) shall terminate upon the earlier to occur of: (i) April 30,
2005, or (ii) the closing of an Equity Financing by the Subsidiary occurring on
or prior to April 30, 2000.
7. RESERVATION OF STOCK. From and after the date of the issuance of
this Warrant, the Company will at all times reserve and keep available, solely
for the issuance and delivery upon the exercise of this Warrant, such shares of
Warrant Stock and other stock, securities and property, as from time to time
shall be issuable upon the exercise of this Warrant.
8. REGISTRATION OF WARRANT STOCK. The Company agrees that, as soon as
practicable, but no later than June 30, 2000, it shall file a registration
statement to register the shares of Warrant Stock under the Securities Act of
1933, as amended, and that it shall take reasonable efforts to maintain the
effectiveness of such registration statement for a period of one year from the
date of effectiveness of such registration statement.
9. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder of
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 4
hereof, issue and deliver to or upon the order of such Holder, at the Company's
expense, a new Warrant or Warrants of like tenor, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
10. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation
of this Warrant and (in the case of loss, theft or destruction) upon delivery of
an indemnity agreement (with surety if reasonably required) in an amount
reasonably satisfactory to the Company, or (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will issue, in lieu
thereof, a new Warrant of like tenor.
11. MAILING OF NOTICES. Any notice required or permitted pursuant to
this Warrant shall be in writing and shall be deemed sufficient when delivered
personally or sent by telegram or fax or four business days after being
deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, addressed (a) if to the Registered Holder, to the address of the
Registered Holder most recently furnished in writing to the Company and (b) if
to the Company, to the address set forth below or subsequently modified by
written notice to the Registered Holder.
12. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
13. NO FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
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<PAGE>
the product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
14. AMENDMENT OR WAIVER. Any term of this Warrant may be amended or
waived upon written consent of the Company and the Holders of fifty percent
(50%) of the shares issuable pursuant to the Warrants issued pursuant to the
Purchase Agreement.
15. HEADINGS. The headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
16. GOVERNING LAW. This Warrant shall be governed by the internal law
and not the law of conflicts of the State of California, and the performance of
obligations imposed by this Warrant shall be governed by the laws of California
applicable to contracts made and wholly to be performed in that state.
[Signature Page Follows]
5
<PAGE>
SHAMAN PHARMACEUTICALS, INC.
By:
______________________________
Lisa A. Conte
Chief Executive Officer
Address: 213 East Grand Avenue
South San Francisco, CA 94080
6
<PAGE>
EXHIBIT A
PURCHASE FORM
To: Shaman Pharmaceuticals, Inc. Dated: _______________________
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby irrevocably elects to purchase _______ shares of the Common
Stock covered by such Warrant and herewith makes payment of $_________,
representing the full purchase price for such shares at the price per share
provided for in such Warrant.
Signature:_______________________________
Name: _______________________________
Address: _______________________________
7
<PAGE>
EXHIBIT 10.50A
AMENDMENT NO. 1 TO
CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT
This Amendment No. 1 to the Convertible Note and Warrant Purchase
Agreement (the "Note Agreement") dated as of February 2, 2000 (the "Effective
Date") by and between the Investor, Shaman Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), ShamanBotancials, Inc., a Delaware corporation and
a wholly-owned subsidiary of the Company (the "Subsidiary") and the other
investor parties thereto, is made effective as of March 24, 2000. All
"Capitalized" terms not defined herein shall have the meaning established in the
Note Agreement.
WHEREAS, the Company, the Investor and the other investor parties
("Parties") thereto desire to stipulate that the Company desires to increase the
amount to be borrowed from $3.0 million to $4.0 million; and
WHEREAS, in consideration for the Investors to increase the amount to be
borrowed from $3.0 million to $4.0 million, the Company is amending the
conversion terms of the Convertible Promissory Note, that the parties desire to
amend;
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. The aggregate amount of principal under the Note Agreement may be up to
$4.0 million.
2. The sentence of Sections 2(a) and 2(b) of the Convertible Promissory
Note that read "The number of shares of New Stock of the Company to be
issued upon such automatic conversion under this section 2(a) and
section 2(b) shall be equal to the quotient obtained by dividing (x)
the unpaid principal amount of this Note plus any accrued any unpaid
interest by (y) which is equal to the per share conversion price of the
Series R Preferred Stock on February 1, 2000, adjusted for any stock
splits," respectively, shall both be amended to read as follows: "The
number of shares of New Stock of the Company to be issued upon such
automatic conversion under this Section 2(a) and Section 2(b) shall be
equal to the quotient obtained by dividing (x) the unpaid principal
amount of this Note plus any accrued any unpaid interest by (y), which
is equal to the lesser of (i) per share conversion price of the Series
R Preferred Stock on February 1, 2000, adjusted for any stock splits,
or (ii) weighted average closing price of the Company's common stock
for the 10 trading days ending three trading days prior to filing a
Registration Statement, with a floor of $0.30 per share ," respectively.
3. IN WITNESS WHEREOF, the parties have caused this Amendment (which may be
executed in counterparts) to be duly executed as of the day and year first
above written.
SHAMAN PHARMACEUTICALS, INC. INVESTOR:
By: /s/ Lisa A. Conte
______________________________ _______________________________
Lisa A. Conte, President and CEO (Print Name)
/s/ Each Investor
_______________________________
(Signature and Title)
<PAGE>
EXHIBIT 10.50B
AMENDMENT NO. 2 TO
CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT
This Amendment No. 2 (this "Amendment") to the Convertible Note and
Warrant Purchase Agreement dated as of February 2, 2000, and as amended by
Amendment No. 1 thereto dated as of March 24, 2000 (in aggregate, the "Note
Agreement") by and among the Purchasers defined in the Agreement, the New
Purchasers defined hereinbelow, Shaman Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), ShamanBotancials, Inc., a Delaware corporation and
a wholly-owned subsidiary of the Company (the "Subsidiary"), is entered into and
made effective as of April 19, 2000. All "Capitalized" terms not defined herein
shall have the meaning established in the Note Agreement.
WHEREAS, the Company and the Purchasers wish to stipulate that the Company
desires to increase from the previously agreed upon amount of $3,000,000 to
$5,500,000 the amount to be borrowed from the Purchasers and/or certain other
investors (singly, "New Purchaser, and together, "New Purchasers");
WHEREAS, in consideration thereof the Company desires to (i) amend the
terms of the Notes issued under the terms of the Note Agreement, (ii) issue
additional Notes to the New Purchasers which shall be subject to the terms of
the Note Agreement, (iii) issue additional Warrants and amend the terms of the
Warrants thereof, and (iv) issue new warrants to purchase capital stock of the
Subsidiary or Company to the Purchasers and the New Purchasers, as further
described herein and in the form attached hereto as Exhibit D (the "New
Warrants");
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. The aggregate amount of principal to be borrowed by the Company from the
Purchasers and the New Purchasers subject to the terms of the Note Agreement
may be increased up to and including $5,500,000.
2. The sentence of Sections 2(a) and 2(b) of the Note that reads "The number of
shares of New Stock of the Company to be issued upon such automatic
conversion under this section 2(a) and section 2(b) shall be equal to the
quotient obtained by dividing (x) the unpaid principal amount of this Note
plus any accrued any unpaid interest by (y) which is equal to the lesser of
(i) per share conversion price of the Series R Preferred Stock on February 1,
2000, adjusted for any stock splits, or (ii) weighted average closing price
of the Company's common stock for the 10 trading days ending three trading
days prior to filing a Registration Statement, with a floor of $0.30 per
share," respectively, shall both be amended to read as follows: "The number
of shares of New Stock of the Company to be issued upon such automatic
conversion under this Section 2(a) and Section 2(b) shall be equal to the
quotient obtained by dividing (x) the unpaid principal amount of this Note
plus any accrued but unpaid interest by (y), which is equal to $0.15 per
share ," respectively.
3. The sentence in the first paragraph of the Warrant that reads "The exercise
price for such shares (the "Purchase Price") shall be equal to the dollar
value equal to the per share conversion price of Series R Preferred Stock"
shall be amended to read as follows: "The exercise price for such shares (the
"Purchase Price") shall be equal to $0.15 per share.
<PAGE>
4. The Company is issuing to each Purchaser and New Purchaser, subject to the
terms and conditions of the Note Agreement, an additional 50% four months
warrant coverage, with an exercise price of $0.10 per share (the "New
Warrants"); hence, the number of shares in the Stock Purchase Warrant is
determined by dividing the dollar value of the Note by $0.15, then
multiplying by 0.5 (attached as Exhibit D to the Amendment No.2)
5. Each of the New Purchasers under this Amendment shall hereinafter be deemed a
"Purchaser" as defined in the Note Agreement, subject to all terms and
conditions contained therein. Each Purchaser and New Purchaser by signature
below confirms and ratifies each of the representations and warranties made
to the Company and Subsidiary in the Note Agreement, and specifically in
Section 3 thereof.
6. The Company hereby confirms and ratifies each of the representations and
warranties made to Purchasers in the Note Agreement, and specifically in
Section 4 thereof.
7. IN WITNESS WHEREOF, the parties have caused this Amendment (which may be
executed in counterparts) to be duly executed as of the day and year first
above written.
SHAMAN PHARMACEUTICALS, INC. PURCHASER OR NEW PURCHASER
By: /s/ Lisa A. Conte
________________________________ ____________________________________
Lisa A. Conte, President and CEO (Print Name)
/s/ Each Investor
____________________________________
(Signature and Title)
2
<PAGE>
EXHIBIT D
NEW WARRANT
<PAGE>
EXHIBIT D
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THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
- ------------------------------------------------------------------------------
Warrant No. Number of Shares: [See Below]
Date of Issuance: April 30, 2000 Subject To Adjustment in
The Manner Described Below
SHAMAN PHARMACEUTICALS, INC.
STOCK PURCHASE WARRANT
Shaman Pharmaceuticals, Inc., a Delaware corporation (the "Company"), for
value received, hereby certifies that ___________________ (the "Registered
Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company, at any time after April 30, 2000 and on or before August 30, 2000,
that number of shares of the Company's Common Stock equal to the quotient
obtained by dividing (A) 50% of the original principal dollar amount represented
by the Registered Holder's Note by (B) $0.15. The exercise price for such shares
(the "Purchase Price") shall be equal to $0.10 per share. The Purchase Price and
the number and character of shares of Common Stock purchasable under this
Warrant are subject to adjustment from time to time pursuant to the provisions
of this Warrant. The shares of Common Stock purchasable upon exercise of this
Warrant are hereinafter referred to from time to time as the "Warrant Stock".
1. CERTAIN DEFINITIONS. The following definitions shall apply for
purposes of this Warrant:
(a) "Equity Financing" shall have the meaning set forth in the
Notes.
(b) "Notes" shall mean the Convertible Promissory Notes issued and
sold by the Company pursuant to the Purchase Agreement, including the Note
purchased by the Registered Holder.
(c) "Purchase Agreement" shall mean that certain Convertible
Promissory Note and Warrant Purchase Agreement, dated February 2, 2000, by and
among the Company, the Subsidiary and the Registered Holder and certain other
purchasers of the Notes.
<PAGE>
(d) "Subsidiary" shall mean ShamanBotanicals, Inc., a Delaware
corporation and a wholly owned subsidiary of the Company.
2. EXERCISE.
(a) This Warrant may be exercised by the Registered Holder, in whole
or in part, by surrendering this Warrant, with the purchase form appended hereto
as Exhibit A duly executed by such Registered Holder or by such Registered
Holder's duly authorized attorney, at the principal office of the Company, or at
such other office or agency as the Company may designate, accompanied by payment
in full by cash, check or wire transfer of the Purchase Price payable in respect
of the number of shares of Warrant Stock purchased upon such exercise.
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this
Warrant shall have been surrendered to the Company as provided in Section 2(a)
above. At such time, the person or persons in whose name or names any
certificates for Warrant Stock shall be issuable upon such exercise shall be
deemed to have become the holder or holders of record of the Warrant Stock
represented by such certificates.
3. ADJUSTMENTS.
(a) If, after the date hereof, the outstanding shares of the
Company's Common Stock shall be subdivided into a greater number of shares or a
dividend in Common Stock shall be paid in respect of Common Stock, the Purchase
Price in effect immediately prior to such subdivision or at the record date of
such dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of shares of Warrant Stock purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Purchase Price
in effect immediately prior to such adjustment, by (ii) the Purchase Price in
effect immediately after such adjustment.
(b) In case of any reclassification or change of the outstanding
securities of the Company or of any reorganization of the Company (or any other
corporation the stock or securities of which are at the time receivable upon the
exercise of this Warrant) or any similar corporate reorganization on or after
the date hereof, then and in each such case the holder of this Warrant, upon the
exercise hereof at any time after the consummation of such reclassification,
change, reorganization, merger or conveyance, shall be entitled to receive, in
lieu of the stock or other securities and property receivable upon the exercise
hereof prior to such consummation, the stock or other securities or property to
which such holder would have been entitled upon such consummation if such holder
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had exercised this Warrant immediately prior thereto, all subject to further
adjustment as provided in paragraph (a); and in each such case, the terms of
this Section 3 shall be applicable to the shares of stock or other securities
properly receivable upon the exercise of this Warrant after such consummation.
(c) When any adjustment is required to be made in the Purchase
Price, the Company shall promptly mail to the Registered Holder a certificate
setting forth the Purchase Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Such certificate shall also
set forth the kind and amount of stock or other securities or property into
which this Warrant shall be exercisable following the occurrence of any of the
events specified in Section 3(a) or (b) above.
4. TRANSFERS.
(a) Each holder of this Warrant acknowledges that this Warrant and
the Warrant Stock of the Company have not been registered under the Securities
Act, and agrees not to sell, pledge, distribute, offer for sale, transfer or
otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise
in the absence of (i) an effective registration statement under the Act as to
this Warrant or such Warrant Stock and registration or qualification of this
Warrant or such Warrant Stock under any applicable Blue Sky or state securities
law then in effect, or (ii) an opinion of counsel, satisfactory to the Company,
that such registration and qualification are not required. Each certificate or
other instrument for Warrant Stock issued upon the exercise of this Warrant
shall bear a legend substantially to the foregoing effect.
(b) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when this
warrant is properly assigned in blank, the Company may (but shall not be
required to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
(c) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change such Registered Holder's address as shown on the warrant register by
written notice to the Company requesting such change.
5. NO IMPAIRMENT. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will (subject to Section 13 below) at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.
6. TERMINATION. This Warrant (and the right to purchase securities
upon exercise hereof) shall terminate on August 30, 2000.
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<PAGE>
7. RESERVATION OF STOCK. From and after the date of the issuance of
this Warrant, the Company will at all times reserve and keep available,
solely for the issuance and delivery upon the exercise of this Warrant, such
shares of Warrant Stock and other stock, securities and property, as from time
to time shall be issuable upon the exercise of this Warrant.
8. REGISTRATION OF WARRANT STOCK. The Company agrees that, as soon as
practicable, but no later than June 30, 2000, it shall file a registration
statement to register the shares of Warrant Stock under the Securities Act of
1933, as amended, and that it shall take reasonable efforts to maintain the
effectiveness of such registration statement for a period of one year from the
date of effectiveness of such registration statement.
9. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder of
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 4
hereof, issue and deliver to or upon the order of such Holder, at the Company's
expense, a new Warrant or Warrants of like tenor, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
10. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of
an indemnity agreement (with surety if reasonably required) in an amount
reasonably satisfactory to the Company, or (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will issue, in lieu
thereof, a new Warrant of like tenor.
11. MAILING OF NOTICES. Any notice required or permitted pursuant to
this Warrant shall be in writing and shall be deemed sufficient when delivered
personally or sent by telegram or fax or four business days after being
deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, addressed (a) if to the Registered Holder, to the address of the
Registered Holder most recently furnished in writing to the Company and (b) if
to the Company, to the address set forth below or subsequently modified by
written notice to the Registered Holder.
12. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
13. NO FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
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14. AMENDMENT OR WAIVER. Any term of this Warrant may be amended or
waived upon written consent of the Company and the Holders of fifty percent
(50%) of the shares issuable pursuant to the Warrants issued pursuant to the
Purchase Agreement.
15. HEADINGS. The headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
16. GOVERNING LAW. This Warrant shall be governed by the internal law
and not the law of conflicts of the State of California, and the performance of
obligations imposed by this Warrant shall be governed by the laws of California
applicable to contracts made and wholly to be performed in that state.
[Signature Page Follows]
5
<PAGE>
SHAMAN PHARMACEUTICALS, INC.
By: _____________________________
Lisa Conte
Chief Executive Officer
Address: 213 East Grand Avenue
South San Francisco, CA 94080
6
<PAGE>
EXHIBIT A
PURCHASE FORM
To: Shaman Pharmaceuticals, Inc. Dated: _________________________
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby irrevocably elects to purchase _______ shares of the Common
Stock covered by such Warrant and herewith makes payment of $_________,
representing the full purchase price for such shares at the price per share
provided for in such Warrant.
Signature: __________________________________
Name: __________________________________
Address: __________________________________
7
<PAGE>
EXHIBIT 10.51
CONVERTIBLE NOTE PURCHASE AGREEMENT
This Convertible Note Agreement (this "Agreement") is made and entered
into as of February 2, 2000 by and among Shaman Pharmaceuticals, Inc., a
Delaware corporation (the "Company"), ShamanBotanicals, Inc., a Delaware
corporation and a wholly owned subsidiary of the Company (the "Subsidiary"), and
the person listed on Exhibit A attached hereto (the "Purchaser").
The Company desires to issue and sell and the Purchaser desire to purchase
promissory notes in the aggregate principal amount of up to $500,000, in the
form attached hereto as Exhibit B (the "Notes").
In consideration of the mutual promises contain herein, the parties agree
as follows:
1. SALE OF NOTES:
1.1 Commitment. Subject to the terms and conditions of this Agreement, the
Purchasers agree to purchase from the Company and the Company agrees to sell and
issue to the Purchaser, the Notes. The purchase price of each Note shall be
equal to 100% of the principal amount of such Note as specified on the Schedule
of Purchaser attached hereto as Exhibit A. For purposes of this Agreement, an
"Equity Financing" shall have the meaning given to it in the Note.
2. PURCHASE OF STOCK OR REPAYMENT OF NOTE:
2.1 Equity Financing. The total amount of the unpaid principal amount of
each Note and any accrued but unpaid interest will automatically be converted
into shares of the Subsidiary's capital stock sold in the Equity Financing.
The shares of capital stock into which the Notes are convertible shall be
referred to in his Agreement as the "New Stock."
2.2 Conditions to Closing. The obligations of the Company to issue shares
of New Stock and the obligations of each Purchaser to purchase such New
Stock as described in Section 2.1 above are subject to the conditions that:
(a) The Company shall have obtained all requisite approvals of and
made all required filings with applicable federal and state securities and
corporate law authorities;
(b) The Company shall have obtained all appropriate Board and
stockholder consents, waivers and approvals required in connection with the
transaction; and
(c) In the case of the issuance of shares of capital stock of
the Subsidiary upon an Equity Financing, each Purchaser and the Company shall
<PAGE>
have executed a stock purchase agreement covering the sale of shares of New
Stock substantially similar to that executed by the other purchasers in the
Equity Financing.
2.3 Best Efforts. The Company and the Purchaser will use their best
efforts promptly to fulfill all of the conditions described in Section 2.2
above.
2.4 Issuance of Securities on Conversion. As soon as practicable after
conversion of each Note, the Subsidiary of the Company, at its expense will
cause to be issued in the name of and delivered to the holder of the Note, a
certificate or certificates for the number of duly authorized, fully paid and
non-assessable shares of New Stock to which that holder shall be entitled on
such conversion, together with any other securities and property to which the
holder is entitled on conversion under the terms of this Agreement and will at
all times reserve and keep available, solely for the issuance and delivery upon
the conversion of the New Stock, such shares of capital stock and other stock,
securities and property, as from time to time shall be issuable upon the
conversion of the New Stock. No fractional shares will be issued on conversion
of the Note. If on conversion of the Note a fraction of a share results, the
Subsidiary of the Company, will pay the cash value of that fractional share,
calculated on the basis of the applicable conversion price.
2.5 Repayment of Note. If the Subsidiary does not consummate an Equity
Financing of at least $5.0 million on or prior to April 30, 2000, then on May 1,
2000, the unpaid principal amount of the Note and any accrued but unpaid
interest as of the closing date of the Equity Financing shall be remitted to the
Holder by the Company.
3. REPRESENTATIONS OF THE PURCHASER:
Each Purchaser hereby represents and warrants, severally and not jointly,
to the Company and the Subsidiary that:
3.1 Authorization. This Agreement, when executed and delivered by the
Purchaser, will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors' rights generally, and as limited by laws relating to the availability
of a specific performance, injunctive relief, or other equitable remedies.
3.2 Purchase Entirely for Own Account; Accredited Investor. This Agreement
is made with the Purchaser in reliance upon the Purchaser's representation to
the Company and the Subsidiary, which by the Purchaser's execution of this
Agreement the Purchaser hereby confirms, that (i) the Notes and the New Stock
issuable upon conversion of the Notes (collectively the "Securities") to be
acquired by the Purchaser will be acquired for investment for the Purchaser'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 the Purchaser has no present
2
<PAGE>
intention of selling, granting any participation in, or otherwise distributing
the same and (ii) that the Purchaser is an "accredited investor" as such term is
defined under Rule 501 of Regulation D promulgated under the Securities Act. By
executing this Agreement, the Purchaser further represents that the Purchaser
does not presently 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. The Purchaser represents
that it has full power and authority to enter into this Agreement. Either (i)
the Purchaser has not been formed for the specific purpose of acquiring the
Securities or (ii) if the Purchaser has been formed for the specific purpose of
acquiring the Securities, each person or entity that has an interest in the
Purchaser is an accredited investor.
3.3 Disclosure of Information. The Purchaser has had an opportunity to
discuss the Company's and the Subsidiary's respective businesses, management,
financial affairs and the terms and conditions of the offering of the Securities
with the Company's and the Subsidiary's management and has had an opportunity to
review the Company's and the Subsidiary's facilities. The Purchaser understands
that such discussions, as well as the written information issued by the Company
and the Subsidiary, were intended to describe the aspects of the Company's and
the Subsidiary's business which it believes to be material.
3.4 Restricted Securities. The Purchaser understands that the Securities
have not been registered under the Securities Act, by reason of a specific
exemption from the registration provisions of the Securities Act which depends
upon, among other things, the bona fide nature of the investment intent and the
accuracy of the Purchaser's representations as expressed herein. The Purchaser
understands that the Securities are "restricted securities" under applicable
U.S. federal and state securities laws and that, pursuant to these laws, the
Purchaser must hold the Securities indefinitely unless they are registered with
the Securities and Exchange Commission and qualified by state authorities, or an
exemption from such registration and qualification requirements is available.
3.5 No Public Market. The Purchaser understands that only a limited public
market now exists for the Company's securities, and that no public market now
exists for any of the securities issued by the Subsidiary, and that the Company
and the Subsidiary have made no assurances that a public market will ever exist
for the Securities.
3.6 Legal Advice. The Purchaser has had the opportunity to consult with
his or her counsel regarding the matters relevant to this Agreement and the
transactions contemplated hereby.
4. REPRESENTATIONS OF THE COMPANY: The Company and the Subsidiary hereby
represent and warrant to the Purchaser as follows:
4.1 Corporate Power. Each of the Company and the Subsidiary has all
requisite corporate power to execute and deliver this Agreement and to carry out
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<PAGE>
and perform its obligations under the terms of this Agreement. The Company and
the Subsidiary are each duly incorporated and validly existing under the laws of
the State of Delaware and in good standing.
4.2 Authorization. All corporate action on the part of each of the Company
and the Subsidiary, their respective directors and stockholders necessary for
the authorization, execution, delivery and performance of this Agreement and the
Notes by the Company and the Subsidiary, and the performance of the Company's
and Subsidiary's respective obligations hereunder, including (x) the issuance
and delivery of the Notes and (y) the authorization by the Company and the
Subsdiairy to use their best efforts to reserve, as soon as practicable after
the filing with the Delaware Secretary of State of the Certificate of Amendment
to the Certificate of Incorporation authorizing the New Stock, a sufficient
number of equity securities issuable upon conversion of the Notes and the New
Stock, has been taken or will be taken prior to the Closing. This Agreement, the
Notes and the Warrants, when executed and delivered by the Company and the
Subsidiary, shall constitute valid and binding obligations of the Company and
the Subsidiary, enforceable in accordance with their terms, subject to laws of
general application relating to bankruptcy, insolvency, the relief of debtors
and, with respect to rights to indemnity, subject to federal and state
securities laws. The New Stock or other equity securities of the Company and the
Subsidiary, when issued in compliance with the provisions of this Agreement, the
Notes, will be duly authorized, validly issued, fully paid and nonassessable and
free of any liens or encumbrances.
4.3 Governmental Consents. All consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with, any governmental authority, required on the part of the Company
and the Subsidiary in connection with the valid execution and delivery and
performance of this Agreement, the offer, sale or issuance of the Notes,
conversion of the Notes or the consummation of any other transaction
contemplated hereby shall have been obtained and will be effective at the
Closing or, in respect of the Warrants, prior to the issuance of the Warrants,
except for notices required or permitted to be filed with certain state and
federal securities commissions, which notices will be filed on a timely basis.
4.4 Offering. Assuming the accuracy of the representations and warranties
of the Purchaser contained in Section 3 hereof, the offer, issue, and
sale of the Notes and the equity securities issuable upon conversion of Notes
will be exempt from the registration and prospectus delivery requirements of the
Securities Act, and have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit, or qualification
requirements of all applicable state securities laws.
5. GENERAL PROVISIONS.
5.1 Entire Agreement. This Agreement, together with its exhibits,
represents the entire agreement between the Company, the Subsidiary and the
Purchaser, supersedes all prior agreements and understandings, and this
Agreement and the Notes issued hereunder may only be amended in a writing signed
by the Company and the Purchaser of the indebtedness represented by the Notes.
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<PAGE>
Furthermore, the terms and provisions of a Note may not be amended in a manner
different than any other Note, as applicable, without the written consent of the
holder of such Note.
5.2 Assignment. This Agreement shall bind and benefit the successors,
assigns, heirs, executors and administrators of the parties (including without
limitation any successor corporation to the Company). The rights of each
Purchaser under this Agreement may not be assigned without the written consent
of the Company and the Subsidiary.
5.3 Governing Law. This Agreement shall be governed by the internal law
and not the law of conflicts of the State of California, and the performance of
the obligations imposed by this Agreement shall be governed by the laws of the
State of California applicable to contracts made and wholly to be performed in
that state.
5.4 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be delivered personally or transmitted
by telex or facsimile, or, if sent within the U.S., mailed by first-class mail,
postage prepaid, addressed (i) if to a Purchaser, at the Purchaser's address set
forth below its signature, or at such other address as the Purchaser shall have
furnished to the Company in writing, or (ii) if to the Company, at its address
set forth below, or at such other address as the Company shall have furnished to
the Purchaser in writing. All notices shall be deemed effectively delivered upon
delivery or transmission or three days after mailing.
5.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[Signature Page Follows]
5
<PAGE>
The parties hereto have executed this Agreement as of the day and year
first set forth above.
COMPANY: PURCHASER:
SHAMAN PHARMACEUTICALS, INC. VULAN VENTURE, INC.
________________________________
(Name of Entity)
By: /s/ Lisa A. Conte By: /s/ William D. Savoy
______________________________ ________________________________
Lisa Conte William D. Savoy
Chief Executive Officer Vice President
Address: Address:
213 East Grand Avenue ____________________________________
South San Francisco, CA 94080
Attn: Lisa Conte ____________________________________
____________________________________
(Name of Entity)
Address:
____________________________________
____________________________________
6
<PAGE>
EXHIBIT A
SCHEDULE OF PURCHASER
NAME DOLLAR AMOUNT OF INVESTMENT
- ---------------------------------- -----------------------------
$500,000
7
<PAGE>
EXHIBIT 10.51A
AMENDMENT NO. 1 TO
CONVERTIBLE NOTE PURCHASE AGREEMENT
This Amendment No. 1 to the Convertible Note Purchase Agreement (the "Note
Agreement") dated as of February 2, 2000, by and between the Purchaser, Shaman
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), ShamanBotancials,
Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (the
"Subsidiary"), is made effective as of April 19, 2000. All "Capitalized" terms
not defined herein shall have the meaning established in the Note Agreement.
WHEREAS, the Company and the Investor thereto desire to amend certain
terms of the Convertible Note Purchase Agreement;
NOW, THEREFORE, THE PURCHASER AGREES AS FOLLOWS:
1. The first sentence of Section 2(a) of the Convertible Promissory Note
(attached as Exhibit B to the Note Agreement) shall be amended to read
in its entirety as follows: "Notwithstanding the foregoing, if
ShamanBotanicals, Inc., a Delaware corporation and a wholly owned
subsidiary of the Company ("the "Subsidiary"), consummates an equity
financing after the date of this Note but on or prior to April 30, 2001
resulting in gross aggregate proceeds (excluding the amount converted
under this Note and any other notes issued under the Purchase
Agreement) to the Subsidiary of at least Five Million Dollars
($5,000,000) (an "Equity Financing"), then the unpaid principal amount
of the Note and any accrued but unpaid interest as of the closing date
of the Equity Financing shall be automatically converted into fully
paid and nonassessable shares of the Subsidiary's capital stock sold in
the Equity Financing, (the "New Stock").
2. Section 2.5 of the Convertible Note Purchase Agreement and Section 2(b)
of the Convertible Promissory Note (attached as Exhibit B to the Note
Agreement) shall both be amended in its entirety to read as follows:
"If the Subsidiary does not consummate an Equity Financing on or prior
to April 30, 2001 of at least $5.0 million, then on May 1, 2001, the
unpaid principal amount of the Note and any accrued but unpaid interest
as of the closing date of the Equity Financing shall be remitted to the
Holder by the Company," respectively.
3. The Company shall on the date hereof, issue to the Purchaser a warrant to
purchase 5,000,000 shares of the Company's Common Stock at an exercise
price of $0.10 per share, which warrant shall remain exercisable until May
1, 2001.
4. IN WITNESS WHEREOF, the parties have caused this Amendment (which may be
executed in counterparts) to be duly executed as of the day and year first
above written.
SHAMAN PHARMACEUTICALS, INC. INVESTOR:
By: /s/ Lisa A. Conte VULCAN VENTURE, INC.
_______________________________ ___________________________________
Lisa A. Conte, President and CEO (Print Name)
/s/ William D. Savoy
___________________________________
William D. Savoy
Vice President
<PAGE>
EXHIBIT C
- ------------------------------------------------------------------------------
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL FOR THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
- ------------------------------------------------------------------------------
Warrant No. Number of Shares: [See Below]
Date of Issuance: April 30, 2000 Subject To Adjustment in
The Manner Described Below
SHAMAN PHARMACEUTICALS, INC.
STOCK PURCHASE WARRANT
Shaman Pharmaceuticals, Inc., a Delaware corporation (the "Company"), for
value received, hereby certifies that VULCAN VENTURES, INC. (the "Registered
Holder"), is entitled, subject to the terms set forth below, to purchase from
the Company, at any time after April 30, 2000 and on or before August 30, 2000,
that number of shares of the Company's Common Stock equal to the quotient
obtained by dividing (A) 100% of the original principal dollar amount
represented by the Registered Holder's Note by (B) $0.10. The exercise price for
such shares (the "Purchase Price") shall be equal to $0.10. The Purchase Price
and the number and character of shares of Common Stock purchasable under this
Warrant are subject to adjustment from time to time pursuant to the provisions
of this Warrant. The shares of Common Stock purchasable upon exercise of this
Warrant are hereinafter referred to from time to time as the "Warrant Stock".
1. CERTAIN DEFINITIONS. The following definitions shall apply for
purposes of this Warrant:
(a) "Equity Financing" shall have the meaning set forth in the
Notes.
(b) "Notes" shall mean the Convertible Promissory Notes issued and
sold by the Company pursuant to the Purchase Agreement, including the Note
purchased by the Registered Holder.
(c) "Purchase Agreement" shall mean that certain Convertible
Promissory Note and Warrant Purchase Agreement, dated February 2, 2000, by and
among the Company, the Subsidiary and the Registered Holder and certain other
purchasers of the Notes.
<PAGE>
(d) "Subsidiary" shall mean ShamanBotanicals, Inc., a Delaware
corporation and a wholly owned subsidiary of the Company.
2. EXERCISE.
(a) This Warrant may be exercised by the Registered Holder, in whole
or in part, by surrendering this Warrant, with the purchase form appended hereto
as Exhibit A duly executed by such Registered Holder or by such Registered
Holder's duly authorized attorney, at the principal office of the Company, or at
such other office or agency as the Company may designate, accompanied by payment
in full by cash, check or wire transfer of the Purchase Price payable in respect
of the number of shares of Warrant Stock purchased upon such exercise.
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this
Warrant shall have been surrendered to the Company as provided in Section 2(a)
above. At such time, the person or persons in whose name or names any
certificates for Warrant Stock shall be issuable upon such exercise shall be
deemed to have become the holder or holders of record of the Warrant Stock
represented by such certificates.
3. ADJUSTMENTS.
(a) If, after the date hereof, the outstanding shares of the
Company's Common Stock shall be subdivided into a greater number of shares or a
dividend in Common Stock shall be paid in respect of Common Stock, the Purchase
Price in effect immediately prior to such subdivision or at the record date of
such dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of shares of Warrant Stock purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Purchase Price
in effect immediately prior to such adjustment, by (ii) the Purchase Price in
effect immediately after such adjustment.
(b) In case of any reclassification or change of the outstanding
securities of the Company or of any reorganization of the Company (or any other
corporation the stock or securities of which are at the time receivable upon the
exercise of this Warrant) or any similar corporate reorganization on or after
the date hereof, then and in each such case the holder of this Warrant, upon the
exercise hereof at any time after the consummation of such reclassification,
change, reorganization, merger or conveyance, shall be entitled to receive, in
lieu of the stock or other securities and property receivable upon the exercise
hereof prior to such consummation, the stock or other securities or property to
which such holder would have been entitled upon such consummation if such holder
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<PAGE>
had exercised this Warrant immediately prior thereto, all subject to further
adjustment as provided in paragraph (a); and in each such case, the terms of
this Section 3 shall be applicable to the shares of stock or other securities
properly receivable upon the exercise of this Warrant after such consummation.
(c) When any adjustment is required to be made in the Purchase
Price, the Company shall promptly mail to the Registered Holder a certificate
setting forth the Purchase Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment. Such certificate shall also
set forth the kind and amount of stock or other securities or property into
which this Warrant shall be exercisable following the occurrence of any of the
events specified in Section 3(a) or (b) above.
4. TRANSFERS.
(a) Each holder of this Warrant acknowledges that this Warrant and
the Warrant Stock of the Company have not been registered under the Securities
Act, and agrees not to sell, pledge, distribute, offer for sale, transfer or
otherwise dispose of this Warrant or any Warrant Stock issued upon its exercise
in the absence of (i) an effective registration statement under the Act as to
this Warrant or such Warrant Stock and registration or qualification of this
Warrant or such Warrant Stock under any applicable Blue Sky or state securities
law then in effect, or (ii) an opinion of counsel, satisfactory to the Company,
that such registration and qualification are not required. Each certificate or
other instrument for Warrant Stock issued upon the exercise of this Warrant
shall bear a legend substantially to the foregoing effect.
(b) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes; provided, however, that if and when this
warrant is properly assigned in blank, the Company may (but shall not be
required to) treat the bearer hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.
(c) The Company will maintain a register containing the names and
addresses of the Registered Holders of this Warrant. Any Registered Holder may
change such Registered Holder's address as shown on the warrant register by
written notice to the Company requesting such change.
5. NO IMPAIRMENT. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will (subject to Section 13 below) at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.
6. TERMINATION. This Warrant (and the right to purchase securities
upon exercise hereof) shall terminate on August 30, 2000.
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7. RESERVATION OF STOCK. From and after the date of the issuance of
this Warrant, the Company will at all times reserve and keep available, solely
for the issuance and delivery upon the exercise of this Warrant, such shares of
Warrant Stock and other stock, securities and property, as from time to time
shall be issuable upon the exercise of this Warrant.
8. REGISTRATION OF WARRANT STOCK. The Company agrees that, as soon as
practicable, but no later than June 30, 2000, it shall file a registration
statement to register the shares of Warrant Stock under the Securities Act of
1933, as amended, and that it shall take reasonable efforts to maintain the
effectiveness of such registration statement for a period of one year from the
date of effectiveness of such registration statement.
9. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder of
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 4
hereof, issue and deliver to or upon the order of such Holder, at the Company's
expense, a new Warrant or Warrants of like tenor, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
10. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation
of this Warrant and (in the case of loss, theft or destruction) upon delivery of
an indemnity agreement (with surety if reasonably required) in an amount
reasonably satisfactory to the Company, or (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will issue, in lieu
thereof, a new Warrant of like tenor.
11. MAILING OF NOTICES. Any notice required or permitted pursuant to
this Warrant shall be in writing and shall be deemed sufficient when delivered
personally or sent by telegram or fax or four business days after being
deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, addressed (a) if to the Registered Holder, to the address of the
Registered Holder most recently furnished in writing to the Company and (b) if
to the Company, to the address set forth below or subsequently modified by
written notice to the Registered Holder.
12. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
13. NO FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
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14. AMENDMENT OR WAIVER. Any term of this Warrant may be amended or
waived upon written consent of the Company and the Holders of fifty percent
(50%) of the shares issuable pursuant to the Warrants issued pursuant to the
Purchase Agreement.
15. HEADINGS. The headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
16. GOVERNING LAW. This Warrant shall be governed by the internal law
and not the law of conflicts of the State of California, and the performance of
obligations imposed by this Warrant shall be governed by the laws of California
applicable to contracts made and wholly to be performed in that state.
[Signature Page Follows]
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SHAMAN PHARMACEUTICALS, INC.
By: ______________________________
Lisa Conte
Chief Executive Officer
Address: 213 East Grand Avenue
South San Francisco, CA 94080
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EXHIBIT A
PURCHASE FORM
To: Shaman Pharmaceuticals, Inc. Dated:__________________________
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby irrevocably elects to purchase _______ shares of the Common
Stock covered by such Warrant and herewith makes payment of $_________,
representing the full purchase price for such shares at the price per share
provided for in such Warrant.
Signature: _______________________________
Name: _______________________________
Address: _______________________________
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