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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-K
For Annual and Transition Reports
Pursuant to Sections 13 or 15(d) of the
Securities and Exchange Act of 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-21022
Shaman Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
Delaware 94-3095806
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
213 East Grand Avenue, South San Francisco, California 94080
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: 650-952-7070
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
COMMON STOCK $.001 PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant based upon the closing sales price of the Common Stock on the
Nasdaq OTC Bulletin Board on March 17, 2000 was $23,676,687*
The number of shares of the Registrant's Common Stock outstanding was
36,960,174 as of March 17, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Definitive Proxy Statement to be filed with the
Commission pursuant to Regulation 14A in connection with the Company's 2000
Annual Meeting are incorporated herein by reference into Part III of this
Report.
- - ----------
*...Excludes 174,581 shares of the Registrant's Common Stock held by
executive officers, directors and affiliated parties at March 17, 2000.
Exclusion of such shares should not be construed to indicate that any such
person possesses the power, direct or indirect, to direct or cause the direction
of the management or policies of the Registrant or that such person is
controlled by or under common control with the Registrant.
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PART I
ITEM 1. BUSINESS
In addition to historical information, this report contains predictions,
estimates and other forward-looking statements that involve a number of risks
and uncertainties that are described more fully in "Risk Factors." While this
outlook represents our judgment on the current and future direction of the
business, these risks and uncertainties are only some of the factors that may
ultimately affect the success of Shaman Pharmaceuticals, Inc. Actual results may
differ significantly from any future performance suggested in this report.
All information contained in this Report on Form10-K reflects a 1-for-20
reverse stock split of the common stock effected on June 22, 1999 and a 1-for-50
reverse stock split of the common stock effected on January 31, 2000.
BUSINESS
Overview of 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
includes 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.
Overview of our 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 a wholly-owned
subsidiary. We intend to transfer all of our assets and liabilities to this
wholly-owned subsidiary in exchange for shares of its common stock. A more
detailed discussion of this transfer can be found in our Definitive Proxy
Statement filed with the Securities and Exchange Commission on February 16,
2000. We anticipate that the name of the wholly-owned subsidiary will be
Shaman.com. Shaman.com will provide information, education, and entertainment
through community building initiatives over the channels of the Internet, cable,
and television. We anticipate that Shaman.com will become a full-fledged natural
medicine content site and target various health communities anchored by original
content, recognized advice, and personalized services. 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 build the
Shaman.com brand.
BOTANICALS
Background
In 1997, the U.S. dietary supplement market was $12.9 billion. Of this,
over $4.0 billion were herbal or botanical dietary supplements. In 1998, this
number was projected to reach $5.0 billion, with a compounded yearly growth rate
of approximately 35%. In 1997, 24% of U.S. households reported using herbal or
botanical dietary supplements. The growth of this 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. We believe that the use of these products 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 believe that room exists for significant continuing growth of the
dietary supplement market and expect the two key drivers of market growth to be
(1) growth in the number and breadth of consumers utilizing these products; and
(2) continuing effective product innovation to fuel both trial and repurchase.
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Growth in the number and breadth of consumers utilizing these products has
already begun, and is based in part upon the entrance of the large consumer
healthcare companies into the botanical dietary supplements market. These
companies have increased the visibility of botanical dietary supplements,
placing them not only in local health food stores but also in neighborhood
grocery stores, drug stores, and mass merchandisers. Additionally, these
companies are spending money on large direct-to-consumer advertising campaigns,
placing advertisements during primetime television and in mainstream newspapers
and magazines. Consumer surveys show this advertising has resulted in a broader
base of consumers being made aware of, trying and utilizing dietary supplements.
Finally, as more consumers have entered the dietary supplement market,
they have also begun to demand better quality, more consistency and
standardization of products, and scientific evidence regarding the safety and
efficacy of products. Increased demand has also strained the supply of natural
plant material for some popular products. Not all companies in the industry have
proven capable of meeting these consumer demands.
Strategy
The concept for our botanical division, ShamanBotanicals.com, was
developed in 1998, and has become 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.
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.
Product Discovery and Development Process
We build on the knowledge and expertise of ethnobotanist and physician
teams who work with traditional healers to identify effective treatments in the
therapeutic areas that we have targeted. These teams gather comparative data on
traditional medicinal and health uses of plants from geographically diverse
tropical areas and prioritize plant candidates based on common use among
cultures and other factors. The prioritization process includes cross-checking
field-derived information against the results of literature searches as to
chemical constituents, previously discovered biological activity and other
reported medicinal uses. This process is integral to both our pharmaceutical and
dietary supplement discovery and development programs.
We were able to initiate our botanicals business by further exploring the
botanical library and pipeline we have developed over the past 10 years. In the
last decade, we have amassed a large body of information on the healing benefits
of thousands of tropical plant species that have a history of human use and have
organized this information into an extensive relational database. This database
includes information on over 2,600 tropical plants, many of which have not been
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introduced or fully developed in the U.S. dietary supplement market. Currently,
most dietary supplements are derived from plants from temperate regions. 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.
We intend to differentiate ourselves within the botanical dietary
supplement marketplace by backing proprietary products and promotion with
quality research, development and manufacturing, a carry-over from our
pharmaceutical culture and skill base. We intend to develop standardization
processes for the ingredients in all our products, including safety verification
and, where appropriate, human clinical testing of potential products. Once
completed, published clinical data can be utilized for educational purposes with
consumers and retailers seeking more information about our products. This
distribution of "third party" literature for education and promotional sales can
be particularly effective with Internet purchases. We believe that these
elements, along with unique formulations and existing and future patents, should
add to the proprietary position of our products.
Products and Product Candidates
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 began marketing this
product to travelers and others who suffer from acute episodes of diarrhea in
the fourth quarter of 1999. 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. The 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, the "good" cholesterol, are 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. 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 of 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. Our botanical division, ShamanBotanicals.com, 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.
ShamanBotanicals.com plans 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 ingredient 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, and intend
to initially target this community.
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Future Product Candidates
We have strategically identified multiple areas of dietary supplement
product interest and have identified specific priority product candidates for
the future based on four criteria:
o key market categories with significant commercial potential;
o the needs of an aging demographic in the U.S. population;
o areas where quick, symptomatic relief could be observed; and
o areas where we have first-hand ethnomedical experience and where
sustainable supply of raw materials exists.
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.
We believe our current and prior research and development efforts would
allow us to introduce up to two products per year, including human clinical
testing. We believe that all of these product areas offer significant
opportunity for growth.
Sales and Marketing
We launched our first product SB-NSF in July 1999, and began marketing
this product in September 1999. SB-NSF is a botanical dietary supplement that
relieves diarrhea without causing constipation. SB-NSF has initially been
targeted to people with AIDS/HIV who suffer from chronic diarrhea. We are
marketing SB-NSF via the Internet, 1-800 direct telephone response advertising,
advertising in major metropolitan newspapers and in magazines targeted to the
HIV/AIDS community, limited storefront access in major market cities, and
focused mail order opportunities. In addition, Shaman is working with several
leading treatment activists to have them feature the introduction of this
product in their regional organizations' newsletters. We are also closely
working with Medicine Shoppe to promote SB-NSF in their 1,100 retail store
chain.
We believe that targeting travelers on the Internet presents an attractive
marketing opportunity for SB-NSF since two primary uses of the Internet are
currently healthcare information and travel. In the fourth quarter of 1999, we
began marketing SB-NSF to travelers and others suffering from acute episodes of
diarrhea. We are marketing SB-NSF for traveler's via banner advertising at
affiliate travel web sites, sample programs to adventure travel and tour
companies, and other highly focused target customer programs.
In marketing a diet system product line to address Syndrome X symptoms, we
intend to leverage the identity we will work to establish in the AIDS/HIV arena
through sales of SB-NSF, and will initially target this community. Similarly to
SB-NSF, we believe we will be able to implement efficient and focused promotion
and distribution to the AIDS/HIV community, and then expand our marketing
efforts to focus on mass market indications.
Thus, our initial customer base communities will include:
o people with AIDS/HIV suffering from chronic diarrhea;
o travelers to high-risk diarrhea destinations;
o people with AIDS/HIV exhibiting Syndrome X symptoms; and
o the Syndrome X population at large.
Both diarrhea and Syndrome X appear to be under-served and
under-recognized on most Internet healthcare sites. We believe that the features
to be offered on our web site relating to information on these health issues,
together with the exclusive access of our web site to our proprietary products,
presents an opportunity for our web site to become one of the definitive sites
for the communities affected by these health concerns for complementary medical
alternatives. An example of trade of "content" is already occurring with
Heart.com.
Customers and Partners
In the fourth quarter of 1999, we secured the customer Cardinal
Distribution, a division of Cardinal Health, Inc. to distribute SB-NSF, our
first line of clinically tested supplements. In addition, Medicine Shoppe
International or MSI became a partner, being the first retail chain of
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pharmacies to carry SB-NSF, nationwide. We have also secured several individual
pharmacy stores to sell SB-NSF prior to signing an exclusivity deal with
Medicine Shoppe International. These stores include CVS ProCare, Statscript, APP
and Statlanders. Once the exclusivity deal ends with MSI in June of 2000, we
believe there will be further expansion into the former mentioned pharmacy
chains.
The market for dietary supplements in the United States is growing. In
recent consumer surveys, 25% to 30% of consumers report having utilized a
botanical dietary supplement, and 36% report moderate to heavy use of
complementary medicine.
We believe that our botanicals business has two key initial classes of
customers:
o consumers, primarily in the HIV/AIDS community, the traveler's
market, and Syndrome X; and
o mass market companies that are interested in licensing or partnering
with us for the commercialization of our products.
Potential SB-NSF customers
Diarrhea in people with HIV and AIDS is a devastating syndrome. In 1997 in
the United States, there were an estimated 225,000 people with AIDS and between
650,000 and 900,000 individuals in the United States were believed to be
infected with HIV. While fewer people are dying of AIDS, new cases of AIDS and
HIV are still increasing and people are now living longer with both AIDS and
HIV. Sources indicate that, of the combined HIV and AIDS population in the
United States, approximately 20% to 40% suffer from diarrhea at any given time,
with an average duration of 90 days per year. Although protease inhibitors and
highly active antiretroviral therapy have improved the prognosis for people
living with HIV and AIDS, the problem of diarrhea persists. In the majority of
cases the symptom is thought to be related to the anti-viral drugs. Diarrhea
therefore remains a serious problem that has not been adequately addressed.
Diarrhea not only compromises the health and quality of life of
individuals with AIDS and HIV but also has been shown to increase dramatically
the cost of these individuals' medical care. Furthermore, people with chronic
diarrhea are forced to restrict their daily activities to accommodate the
disruptions caused by this condition because current symptomatic therapies
provide either poor relief or undesirable side-effects.
We believe that a product that normalizes water flow in the bowel and
promotes stool formation represents a large, focused and untapped market
opportunity. We believe that the competitive promotional response may be limited
in this discrete market because no specific dietary supplements or
over-the-counter antidiarrheals have targeted this population to date, likely
because there are no indication or studies in this patient population and the
mechanism of action of anti-motility products is counter-indicated for chronic
diarrhea. Further, we hope eventually to build a niche market position by
catering specifically to the needs of the HIV/AIDS community with a full product
line.
For the traveler's market, SB-NSF provides a natural alternative to
currently available treatments which have unpleasant side effects, such as
constipation and rebound diarrhea. More than 35 million individuals travel
annually to countries that present the risk of traveler's diarrhea.
Mass Market
The entrance of large healthcare and consumer products companies into the
dietary supplement industry has fueled the expanded placement of botanical
dietary supplements beyond local health food stores and into neighborhood
grocery stores, drug stores and mass merchandisers. To promote this placement,
these companies are spending huge sums on advertising and promotion relative to
previous marketing budgets for dietary supplements that rarely topped $1
million. For example, in 1998, American Home Products Corporation spent an
estimated $12 million on its Centrum(R) line, Bayer Corporation spent an
estimated $35 million on its One-A-Day(R) line of eight products, and
Warner-Lambert Company spent an estimated $15 million on its Quanterra(R) line
of two products. Such large promotional expenditures are relatively recent
because historically sales of single products or even lines of products rarely
passed the single-digit million mark. However, industry analysts now report much
higher sales figures. For example, American Home Products, Bayer and
Warner-Lambert are forecasting combined first year sales of over $100 million
for their botanical lines, largely a result of significant promotion. Through
increased promotional budgets, companies such as these are educating more
consumers about the benefits of herbal and botanical products, thereby
increasing consumer trial and repurchase. If these trends continue, the growth
of the botanical dietary supplement market could far surpass growth in the past.
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We believe that another key driver of continued growth will be the
introduction of new botanical dietary supplement products. Introduction of new
products has in the past not only brought new consumers into the market but also
fueled the purchase of other existing botanicals. The large healthcare and
consumer products companies are currently tapping into the commonly known
commodity botanical products, primarily of European origin. Once growth of these
products is maximized, novel proprietary products will be needed, and we believe
we are uniquely positioned to meet this need in certain market areas.
Competition
Competition in the botanical dietary supplement market differs by channel
of distribution. Historically, competition within the health food channel was
fragmented and made up of over 200 small, mostly privately held companies. More
recently, several large consumer healthcare companies have opened up the
mass-market channel, including American Home Products with its Centrum(R) Herbal
brand, Bayer's introduction of botanical ingredients in their One-A-Day(R) line,
and Warner-Lambert's introduction of their Quanterra(R) brand. Overall, the
entrance of these companies is expected to broaden consumer acceptance of
botanical products and grow the total botanical dietary supplement market, with
the mass market becoming the largest, fastest-growing distribution channel. In
order to enter this key channel, we intend to partner with a company with direct
to consumer promotional capabilities and extensive experience in this market. We
believe that a partner in this channel will value the quality and scientific
rigor behind our products.
We face competition for our first product, SB-NSF, from other
over-the-counter anti-diarrhea products such as Immodium ID and Pepto Bismol.
Government Regulation
The term "botanical dietary supplement" is defined by the 1994 Dietary
Supplement Health and Education Act or DSHEA as "an herb or other botanical or a
concentrate, constituent, extract or combination of any botanical that is
intended for ingestion as a tablet, capsule, or in liquid form and is not
represented for use as a conventional food or as a sole item of a meal or the
diet and is labeled as a dietary supplement." The 1994 Dietary Supplement Health
and Education Act specifically outlines how botanical products are to be
regulated and treated. Some commonly known commodity botanical dietary
supplement products include ginseng, gingko biloba, St. John's wort, and
echinacea. This statutory definition also differentiates botanical dietary
supplements, vitamins and minerals from conventional foods or food additives.
Under the law, botanicals may be sold as dietary supplements with claims as to
their effect on the structure or function of the human body, providing the
seller has adequate documentation for the claims. Botanical dietary supplements
are regulated by the FDA. However, some botanical dietary supplement products
require no review or approval to enter the market, while some new products may
require the submission of basic safety data prior to marketing. As a result, the
FDA regulatory process in the botanical dietary supplement industry is much less
rigorous than in the pharmaceutical industry, allowing for much faster market
introduction.
One of the unique provisions of DSHEA is the distinction between new
dietary ingredients and old dietary ingredients, which had a history of being
marketed in the United States prior to DSHEA. Old dietary ingredients have been
"grand-fathered" under the law, allowing them to be commercialized without
further FDA review. Our pipeline includes more than 400 botanical candidates
that are old dietary ingredients, including several near-term product
candidates, and numerous new dietary ingredients candidates.
PHARMACEUTICALS
Background
Pharmaceutical companies continually search for innovative products
available for in-license to enhance their existing product portfolios. Products
that have an entirely different approach or means of accomplishing the desired
therapeutic effect than products currently available are particularly in demand.
In addition, companies are looking to develop or in-license products that may be
more effective and/or less costly than those currently available, or those that
could offer an alternative to other, more invasive forms of medical treatment
and address the self-medication and quality of life issues of the current aging
consumer population.
Strategy
Until December 1998, we were primarily focused on discovering and
developing novel pharmaceutical products for major human diseases by isolating
and optimizing active compounds found in tropical plants with a history of
medicinal use. We have conducted human clinical trials with our three lead
product candidates -- SP-303/Provir (Phase III/II), nikkomycin Z (Phase I) and
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SP-134101 (Phase I) -- targeting five indications. Due to unforeseen delays and
costs necessary to complete additional trials for our lead compound,
SP-303/Provir for the treatment of diarrhea in people with AIDS, we have chosen
to discontinue all pharmaceutical development, manufacturing and marketing
activities. We now intend to out-license worldwide marketing rights to our
pharmaceutical assets and completed the first such transaction last year with
Metabolex, Inc. (See - "Partners").
Product Discovery and Development Process
In our efforts to develop pharmaceutical products, we previously focused on
drugs extracted from plants with a long history of medicinal use. Through this
process, we successfully identified and developed a number of pharmaceutical
candidates, particularly through the preclinical and early clinical stages.
These efforts have produced a portfolio of product candidates for out-license.
Product Candidates
We conducted human clinical trials with our three leading product
candidates -- SP-303/Provir (Phase III/II), nikkomycin Z (Phase I), and
SP-134101 (Phase I) -- targeting five indications. We have discontinued all
pharmaceutical development, manufacturing and marketing activities and plan to
out-license all of the pharmaceutical applications of our technology.
The following table describes the major therapeutic areas in which we have
had active product development and research. Efforts are being made to
out-license all of these pharmaceutical products:
<TABLE>
<CAPTION>
Product Indication Status Commercial Rights
- - ------- ---------- ------ -----------------
<S> <C> <C> <C>
Provir AIDS-associated Completed Phase III Shaman
diarrhea study in Q4, 1998.
Completed a Phase II
efficacy study in Q4, 1997
Provir Watery diarrhea Completed two Phase II Shaman
efficacy trials in Q3,
1998. Completed
initial Phase II
efficacy studies in
1996 & 1997
Provir Pediatric Formulation to be Shaman
diarrhea developed
Nikkomycin Z Endemic mycoses Completed Phase I study Shaman
in Q2, 1997.
Nikkomycin Z Azole-resistant Initiation of clinical Shaman
and Azoles Candida program pending pre-
clinical development
by Pfizer
SP-134101 Type II Diabetes Completed Phase I study Shaman
in Q1, 1998
Oral Type II Diabetes Preclinical, Ono; Lipha/Merck;
antihyperglycemic 29 compounds and Shaman. Shaman
compounds receives royalties
on sales outside
the U.S. and
profit sharing in
the U.S.
</TABLE>
Sales and Marketing
We intend to out-license worldwide marketing rights to our pharmaceutical
assets.
Partners
We continue to pursue discussions for the out-licensing of our
pharmaceutical assets.
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In August 1999, we entered into a License and Sale Agreement with
Metabolex, Inc. whereby Metabolex, Inc. has licensed certain rights to Shaman's
library of extracts and compounds for research, development, and
commercialization purposes. We have received a payment of $350,000 for a
perpetual license of certain technology and an additional $65,000 for services
rendered. We will receive royalties on any resulting products commercialized.
Metabolix, Inc. also has an option to acquire licenses to further technology in
exchange for additional consideration over the initial four-month period. In
October 1999, we received an additional $250,000 payment from Metabolex, for
which Metabolex exercised its option to acquire a perpetual license to other
technology.
In September 1996, we entered into a five-year collaborative agreement with
Lipha S.A. to develop jointly our antihyperglycemic drugs. In February 1999, we
discontinued all research and development work related to this collaborative
agreement when we restructured our business to focus on the research and
development of botanical dietary supplements. In August 1999, we issued 133,334
shares of Series R Preferred Stock, having a value of $2.0 million, to Lipha
S.A. in partial settlement of claims made by Lipha S.A. in connection with the
pharmaceutical research and development agreement between Shaman and Lipha S.A.
In December 1999, we entered into a settlement agreement with Lipha S.A. for the
discontinuation of the Research Agreement. We will receive no further payments
for research and development from Lipha S.A.
In May 1995, we entered into a collaborative agreement with Ono
Pharmaceutical Co. Ltd. providing for, among other things, three years of
funding for the research and development of compounds for the treatment of Type
II diabetes. Although the on-going research funding period under such agreement
has expired, Ono continues to have contractual obligations to us for the
potential payment of milestones and royalties. There can be no assurance that
such milestones will be attained or that we will receive any future milestone
payments or royalties from Ono.
Competition
The out-licensing of pharmaceuticals is a competitive enterprise. Although
many companies consider licensing opportunities, they often investigate multiple
opportunities before settling on a select few. While Shaman is subject to this
competition, we have had significant interest in our products based upon their
novelty, safety, efficacy, and advanced stages of development. We are actively
seeking to out-license our products and we have multiple on-going discussions.
To date, these discussions have resulted in one out-licensing agreement.
NEW BUSINESS PLAN
Background
The desire and demand for natural self-remedies to better manage wellness
and quality of life needs are increasing dramatically. 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.
Strategy
We intend to shift our business focus to the content, education and media
business through a wholly-owned subsidiary, 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
<PAGE>
8
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 the 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 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. 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.
Product Discovery & Development Process
We intend to differentiate ourselves by forming partnership opportunities
driven by our proprietary products developed over the past decade. Shaman.com
may form exclusive relationships with voices in the world of natural healing for
the generation of original content on the web, cable, and television. Some of
these relationships may include scientists who have been long-time advisors to
Shaman Pharmaceuticals, and in most cases have participated in the generation of
the proprietary database and pipeline through their field investigation
sponsored by us. Shaman.com also intends to form exclusive relationships in all
three channels with physicians whose expertise lies in the wellness or disease
states of the products and communities developed by it.
Sales & Marketing
We intend to include a promotion agreement in all out-licensing agreements.
We anticipate that the promotion arrangements will allow Shaman.com to achieve
mass branding of its name and site wherever the product resides and whenever the
licensee promotes it. A mass-market partner will be expected to promote the
Shaman.com web site, television series, and name through its mass-market
promotion including national print, radio, and television advertising campaigns.
Joint promotional efforts may include celebrity endorsement of our products in
certain retail channels. We also expect such efforts to build the Shaman.com
brand.
9
<PAGE>
Competition
Although there is currently no established leader in the natural
wellness arena that has all of the breath of services Shaman.com intends to
provide, we will likely compete with other Internet-based health information
websites. Such competitors include WholeHealth MD, Healthshop.com,
Healtheon/WebMD, drkoop.com, Mediconsult and Medscape.
Government Regulation
Currently, there are a number of laws that regulate communications or
commerce on the Internet. Federal, state, local and foreign governments and
agencies are considering laws and regulations that address issues such as user
privacy, pricing, online content regulation, taxation and the characteristics
and quality of online products and services. In addition, 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.
Internet user privacy has become an issue both in the United States and
abroad. The Federal Trade Commission and government agencies in some states and
countries have been investigating certain Internet companies regarding their use
of personal information. Any regulations imposed to protect the privacy of
Internet users may affect the way in which we currently collect and use personal
information.
It may take years to determine the extent to which existing laws related
to issues such as intellectual property ownership and infringement, libel,
obscenity and personal privacy are applicable to the Internet and for new laws
to be adopted. Any new laws or regulations relating to the Internet, or the
application or interpretation of existing laws, could slow the growth in the use
of the Internet, decrease demand for our Web sites or otherwise materially
adversely affect our business.
PATENTS AND PROPRIETARY RIGHTS
Proprietary protection for our product candidates, processes and know-how
is important to our business. Our policy is to file patent applications to
protect technology, inventions and improvements that are considered commercially
important to the development of our business. We also rely upon trade secrets,
know-how and continuing technological innovation to develop and maintain our
competitive position. We aggressively prosecute and defend our patents and
proprietary technology.
We have 21 U.S. patents issued to date. In addition, we currently have 12
U.S. patent applications pending with the U.S. Patent and Trademark Office and
multiple applications filed under the Patent Cooperation Treaty. We do not know
whether any of these applications will result in the issuance of any patents or,
if any patents are issued, whether any issued patent will provide significant
proprietary protection or will be circumvented or invalidated.
We have been issued a U.S. patent related to our specific proanthocyanidin
polymer compositions designated SP-303/Provir. Specifically, the patent contains
composition of matter claims related to SP-303/Provir contained in our
SP-303/Provir product. We have also filed foreign applications corresponding to
our issued U.S. patents relating to our proanthocyanidin polymer composition. We
have been granted patents in Australia, Mexico and New Zealand and have patent
applications pending in Canada, Europe, Japan, the Republic of Korea and
Singapore.
We have also filed a U.S. patent application directed to new formulations
and methods of using our specific proanthocyanidin polymer composition for
treatment of watery diarrhea. These formulations are contained in our
SP-303/Provir product.
We have 10 issued U.S. patents relating to compositions and methods for
treating Type II diabetes, as well as reducing hyperglycemia associated with
other etiologies. We also have eight additional U.S. patent applications pending
that relate to compositions and methods for treating Type II diabetes, as well
as reducing hyperglycemia associated with other etiologies. We have filed 11
international applications under the Patent Cooperation Treaty designating a
number of foreign countries, as well as applications in Taiwan, corresponding to
eleven U.S. applications and plan to file additional corresponding foreign
applications within the relevant convention periods.
10
<PAGE>
We also have one issued U.S. patent and corresponding international patent
applications in a number of foreign countries relating to methods for
administering and sustained release formulations for anti-fungal agents like
nikkomycin Z. The methods and compositions are useful for treatment of fungal
infections, particularly candidiasis, the most frequently encountered
life-threatening mycoses. We have licensed several patents from Bayer AG
relating to the use of nikkomycin Z and the composition and use of nikkomycin Z
in combination with other antifungal compounds for the development of antifungal
agents.
There can be no assurance that our pending patent applications will result
in patents being issued or that, if issued, patents will afford protection
against competitors with similar technology; nor can there be any assurance that
others will not obtain patents that we would need to license or circumvent. See
"Risk Factors--Uncertainty Regarding Patents and Proprietary Rights; Current
Legal Proceedings Regarding Patents and Proprietary Rights."
COMMUNITY COMMITMENT
The Healing Forest Conservancy
In January 1990, we formed The Healing Forest Conservancy, a California
not-for-profit public benefit corporation which is dedicated to maintaining
global biocultural diversity. The Conservancy focuses on conserving plants that
have been used traditionally for medicinal and health purposes and conserving
the knowledge of cultures that utilize them. We plan to donate funds to the
Conservancy's endowment fund when we have achieved profits from product sales,
if any, to provide benefits to indigenous peoples in the countries where our
source plants are obtained.
The Shaman HIV Investment Trust
In 1998, we made a commitment to create the Shaman HIV Investment Trust,
which provides funding for charitable causes within the HIV/AIDS Community,
including services, education and research. We have committed to the Trust a
royalty on the first five years of U.S. product net sales of SB-NSF which are
sold in the HIV/AIDS market. We intend to pay this in SB-NSF product. The Trust
will be administered independently by a committee of HIV/AIDS community leaders.
The Living With AIDS Initiative
As part of Shaman's Living with AIDS reciprocity initiative, we are
supporting the Trekking with AIDS Dawn Averitt program. Dawn is a 30 year-old
woman who has been living with the HIV virus for 11 years. She is an
internationally known treatment activist supporting grass-roots efforts to
provide education, empowerment, and treatment for all people with AIDS and HIV.
She is recently on a five month trek of the Appalachian trail to promote
awareness for the challenging quality of life issues associated with living with
HIV and AIDS.
Direct Relief
In January of 2000, Shaman created a new program to provide relief
assistance to help people in disaster areas remain healthy. The consumer
supported program provides SB-Normal Stool Formula to people who are the victims
of natural disasters, civil unrest and chronic poverty around the world.
Consumers participate in the program when they purchase SB-Normal Stool Formula
through Shaman's web site, www.ShamanBotanicals.com. For each bottle
purchased, Shaman donates a bottle of the same size to Direct Relief
International. We are committed to donating a minimum of 6,000 tablets per month
regardless of consumer participation. The SB-NSF that we donate is distributed
through Direct Relief International (www.directrelief.org), a relief
organization that provides medical supplies and equipment to people in countries
around the globe who are victims of natural and man-made disasters.
EMPLOYEES
In February 1999, we ceased operations in our pharmaceuticals business and
downsized by approximately 60 employees, or 65% of our workforce. As of March
17, 2000, we had 36 full time employees. These employees focus their activities
primarily on the botanicals business.
For information with respect to the Executive Officers of the Company, see
the section entitled "Election of Directors" appearing in the Company's Proxy
Statement in connection with its 2000 Annual Meeting, which is incorporated
herein by reference.
11
<PAGE>
ITEM 2. PROPERTIES
The Company's headquarters are located in South San Francisco, California.
We lease approximately 73,000 square feet for offices, laboratories, pilot
manufacturing and storage in three adjacent buildings. The lease on these spaces
expires February 28, 2003, and we have an option to renew the lease for two
additional five-year periods. The South San Francisco facility serves as the
principal site for research, clinical trial management, process development,
quality assurance and quality control, regulatory and commercialization
activities. We believe that our current facilities are suitable and adequate to
meet our needs for the foreseeable future. In fact, as a result of our recent
restructuring, we have sub-leased a portion of our facilities.
ITEM 3. LEGAL PROCEEDINGS
In February 1990, we entered into a License Agreement with Dr. Michael
Tempesta. The maximum royalty claimed made by Dr. Tempesta is two percent on net
sales of a certain antiviral agent. In November 1996, a demand for arbitration
was filed by Shaman to address a claim by Dr. Tempesta over the scope and
coverage, if any, of the License Agreement. On June 2, 1999, the Company and Dr.
Tempesta entered into a Settlement Agreement and Release pursuant to which,
among other things, Shaman agreed to pay certain royalties on sales of certain
pharmaceutical products derived from SP-303, under the License Agreement dated
February 8, 1990 between the Company and Dr. Tempesta, and (2) issued 16,667
shares of our Series R Preferred Stock to Dr. Tempesta in compromise of
attorneys fees and costs incurred by Dr. Tempesta in connection with the
arbitration proceeding. There currently exists a dispute with Dr. Tempesta over
the scope and coverage of botanicals product derived from SP-303, if any, of the
Settlement Agreement and Release.
Ms. Jacqueline Cossmon, Shaman's former Vice President of Investor and
Public Relations filed a complaint against us with the Superior Court of the
State of California, County of San Mateo on December 31, 1997 for wrongful
termination, seeking monetary damages. Pursuant to a confidential settlement
agreement reached between the parties, this matter was dismissed in 1999.
With the exception of the patent opposition proceeding in Europe and
arbitration against Dr. Tempesta, we are not a party to any other material legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
No matters were submitted to a vote of securities holders during the fourth
quarter of the fiscal year ended December 31, 1999.
12
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Since February 2, 1999, Shaman's common stock has been traded on the OTC
Bulletin Board of the National Association of Securities Dealers, Inc. and is
traded under the symbol "SHPH". Our common stock was traded on the Nasdaq Stock
Market from our initial public offering on January 26, 1993 until February 1,
1999.
Set forth below is the range of high and low closing sale prices for
Shaman's common stock for the periods indicated, as reported by the OTC Bulletin
Board or The Nasdaq Stock Market, as applicable, and as adjusted for the
1-for-20 reverse stock split effected on June 22, 1999 and the 1-for-50 reverse
stock split effected on January 31, 2000:
<TABLE>
<CAPTION>
<S> <C> <C>
HIGH LOW
---- ---
Fiscal Year 1998
First Quarter Ended March 31, 1998............. $5,500.00 $4,130.00
Second Quarter Ended June 30, 1998............. $5,000.00 $4,410.00
Third Quarter Ended September 30, 1998......... $4,000.00 $3,190.00
Fourth Quarter Ended December 31, 1998......... $3,310.00 $1,090.00
Fiscal Year 1999
First Quarter Ended March 31, 1999............. $2,030.00 $ 170.00
Second Quarter Ended June 30, 1999............. $ 234.50 $ 36.00
Third Quarter Ended September 30, 1999......... $ 106.50 $ 4.50
Fourth Quarter Ended December 31, 1999......... $ 4.50 $ 0.50
Fiscal Year 2000
First Quarter Ending March 31, 2000
(through March 17, 2000)....... $ 7.90 $ 0.45
</TABLE>
DIVIDEND POLICY
We have paid no cash dividends on the common stock since our inception and
do not anticipate paying any dividends in the foreseeable future. Our loan
agreement with MMC/GATX Partnership No. 1 restricts the payment of cash
dividends on any equity security so long as any amount remains outstanding under
such loan agreement. In addition, Shaman's charter requires that Shaman pay all
required dividends to the holders of Series C Preferred Stock and Series D
Preferred Stock prior to the payment of dividends to the holders of our common
stock. At December 31, 1999, we had an accumulated deficit of $178.6 million
and, until this deficit is eliminated, we will be prohibited from paying cash
dividends except out of net profits.
13
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Revenues:
Product sales ......................... $ 501 $ -- $ -- $ -- $ --
Less sales returns and allowance....... (116) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net product sales..................... 385 -- -- -- --
Collaborative agreements .............. 665 2,660 3,500 3,406 2,210
----------- ----------- ----------- ----------- -----------
Total revenues ........................... 1,050 2,660 3,500 3,406 2,210
Operating expenses:
Cost of goods sold ...................... 173 -- -- -- --
Research and development ................ 6,450 32,393 24,140 19,138 17,635
Marketing, general and administrative ... 6,682 5,565 4,833 3,537 3,705
Restructuring costs ..................... 2,178 -- -- -- --
----------- ----------- ----------- ----------- -----------
Total operating expenses ................. 15,483 37,958 28,973 22,675 21,340
----------- ----------- ----------- ----------- -----------
Loss from operations ..................... (14,433) (35,298) (25,473) (19,269) (19,130)
Interest income .......................... 151 550 1,218 1,082 1,695
Interest expense ......................... (1,816) (2,033) (5,033) (603) (569)
Other expense ............................ (393) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net loss ................................. (16,491) (36,781) (29,288) (18,790) (18,004)
Preferred Stock dividend (1) ............. (11,694) (1,742) -- -- --
----------- ----------- ----------- ----------- -----------
Net loss applicable to common stockholders $ (28,185) $ (38,523) $ (29,288) $ (18,790) $ (18,004)
=========== =========== =========== =========== ===========
Basic and diluted net loss per
Common Share (2) ....................... $ (140.71) $ (1,916.60) $ (1,722.82) $ (1,342.14) $(1,384.92)
Shares used in calculation of basic and
diluted net loss per Common Share (2) ... 200 20 17 14 13
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents, and investments ... $ 1,172 $ 9,165 $ 21,421 $ 16,533 $ 26,665
Working capital ........................... (2,968) 1,043 14,547 9,641 22,850
Total assets .............................. 5,636 13,139 26,753 22,377 33,810
Long-term obligations, including
current installments.................... 3,122 5,219 6,802 4,816 6,041
Senior convertible notes .................. -- -- 9,967 -- --
Accumulated deficit .................. (178,618) (150,434) (111,910) (82,622) (63,832)
Total stockholders' equity (deficiency) ... $ (2,036) $ 2,110 $ 5,148 $ 11,977 $ 24,205
</TABLE>
(1) Includes in 1999 deemed dividends on Preferred Stock of $11,663,876 and
dividends paid on Preferred Stock of $29,307.
(2) Basic and diluted net loss per share is based on the weighted average number
of Common Shares outstanding during the period. We have not paid any cash
dividends on our capital stock since inception.
14
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
OVERVIEW OF CURRENT BUSINESS
The Company, through the main operating division of ShamanBotancials.com
is 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. 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.
Until December 1998, we were solely focused on developing pharmaceutical
products derived from tropical plant sources. Our pharmaceutical business model
was dependent upon our ability to launch our first pharmaceutical product in
1999. As a result of the U.S. Food and Drug Administration response to our
proposed fast-track New Drug Application package for our leading pharmaceutical
product candidate, SP-303/Provir, and insufficient resources to continue the
costly process of conducting a second pivotal trial which would have created
significant delays, we restructured our business to focus on the development and
marketing of dietary supplements.
OVERVIEW OF THE 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 a wholly-owned
subsidiary. We anticipate that the name of the wholly-owned subsidiary will be
Shaman.com. Shaman.com will provide information, education, and entertainment
through community building initiatives over the channels of the Internet, cable,
and television. Shaman.com will become a full-fledged natural medicine content
site and target various health communities anchored by original content,
recognized advice, and personalized services. 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 build the
Shaman.com brand.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
The results of operations for the years ended December 31, 1998 and 1997
were related to our pharmaceutical operations. Since we ceased operations of our
pharmaceutical business and focused our efforts in our botanical business
starting February 1999, our results of operations for the year ended December
31, 1999 and future periods are not comparable to the same periods for the last
two years.
Net sales from our first botanical dietary supplement product, SB-Normal
Stool Formula ("SB-NSF") were $501,000 (sales at the suggested retail price were
$907,000) for the year ended December 31, 1999. The product was available
starting July 30, 1999, however the Company did not start promoting this product
until late September 1999. We recorded cost of goods sold of $173,000 for the
SB-NSF product and an allowance for sales returns and allowances of $116,000.
We recorded collaborative revenues of $665,000, $2.7 million and $3.5
million for 1999, 1998, and 1997, respectively. Revenues for the year ended
December 31, 1999 resulted from the License and Sale Agreement with Metabolex,
Inc. Revenues for 1998 resulted from research funding from our collaboration
with Lipha S.A., a wholly-owned subsidiary of Merck KgaA, Darmstadt, Germany
("Lipha S.A.") and research funding from our collaboration with Ono
Pharmaceutical Co. Ltd. of Osaka, Japan ("Ono"), which expired in May 1998.
Revenues for 1997 also resulted from research funding from our collaboration
with Lipha S.A. and Ono.
In December 1998, we renegotiated the terms of the existing pharmaceutical
research and development agreement between Shaman and Lipha S.A. (the "Research
Agreement"). Under the new terms, we forgave $6.0 million in aggregate payments
due over the remaining term of the original agreement in exchange for a one-time
up-front payment of an aggregate of $2.0 million, consisting of a $1.0 million
15
<PAGE>
research payment and a $1.0 million equity investment. We discontinued all
research and development work related to this Research Agreement when we
restructured our business to focus on the development and marketing of dietary
supplements in February 1999. In August 1999, we issued 133,334 shares of Series
R Preferred Stock, having a value of $2.0 million, to Lipha S.A. in partial
settlement of claims made by Lipha S.A. in connection with the Research
Agreement. Out of the $2.0 million, we applied $969,000 to the previously
recorded deferred revenue and the balance to restructuring expenses. In December
1999, we entered into a settlement agreement with Lipha S.A. for the
discontinuation of the Research Agreement. We will receive no further payments
for research and development from Lipha S.A.
We incurred research and development expenses of $6.4 million in 1999 (of
which $4.2 million was related to the research and development of the botanicals
division), $32.4 million and $24.1 million in 1998 and 1997, respectively. These
expenses include salaries for scientific personnel, clinical development costs,
laboratory supplies, patent protection and consulting fees, travel, plant
collections, facilities expenses and other expenditures relating to research and
product development. Research and development expenses decreased $26.0 million
in 1999 compared with 1998, and increased $8.3 million in 1998 compared with
1997. The decrease in 1999 was primarily attributable to the closing down of our
pharmaceutical business as of February 1, 1999. The increases in 1998 were
primarily attributable to the completion of a $7.0 million Phase III human
clinical trial for SP-303/Provir for the treatment of diarrhea in people with
AIDS and a $2.4 million of manufacturing scale-up and to increased scientific
salaries of $1.2 million, which were partially offset by a reduction of costs
associated with our diabetes program of $2.8 million.
We incurred marketing, general and administrative expenses of $6.7
million, $5.6 million and $4.8 million for 1999, 1998 and 1997, respectively.
These expenses include administrative salaries, consulting, advertising, legal,
travel and other operating expenses. Marketing, general and administrative
expenses increased $1.1 million in 1999 compared to 1998, and increased $700,000
in 1998 compared to 1997. The increase in 1999 over 1998 was primarily
attributable to the marketing expenses related the launch of our first botanical
product, SB-NSF. The increase in 1998 over 1997 was primarily attributable to
additional costs, including an increase in compensation, consulting expenses and
commercial development activities of $530,000, related to the development of
SP-303/Provir.
Interest income was $200,000, $600,000 and $1.2 million for 1999, 1998 and
1997, respectively. Interest income decreased $400,000 in 1999 compared with
1998 and decreased $600,000 in 1998 compared with 1997. Interest income
fluctuations have been consistent with changes in average cash and investment
balances with which we substantially funded our operations in 1999, 1998 and
1997. The balances of cash, cash equivalents and investments were $1.2 million,
$9.2 million and $21.4 million at December 31, 1999, 1998 and 1997,
respectively.
Interest expense was $1.8 million, $2.0 million and $5.0 million for 1999,
1998 and 1997, respectively. Interest expense decreased in 1999 compared with
1998 principally due to lower average debt balances, partially offset by a $1.1
million non-cash interest charge related to the issuance of warrants. Interest
expense decreased in 1998 compared with 1997 principally due to a $3.7 million
non-cash interest charge related to the issuance of senior convertible notes in
June 1997, offset by interest expense related to capital lease agreements and
the secured debt financing. Interest expense in the future will be dependent in
part on our capacity to finance future operating and equipment needs.
At December 31, 1999, we had federal net operating loss carryforwards of
approximately $155.6 million. The federal net operating loss carryforwards will
expire at various dates beginning in 2004 through 2019, if not sooner utilized.
Utilization of the net operating losses and credits is subject to a substantial
annual limitation due to the "change in ownership" provisions of the Internal
Revenue Code of 1986, as amended. The annual limitation may result in the
expiration of net operating losses and credits before utilization. We have
recorded a 100% reserve against our deferred tax assets because we believe
sufficient uncertainty exists regarding its realizability. As a result of this
reserve, our effective tax rate differs from the statutory tax rate.
RESTRUCTURING EXPENSES
On February 1, 1999, we initiated a restructuring plan in which we closed
down the operations of our pharmaceutical business. We now intend to out-license
worldwide marketing rights to all of our pharmaceutical compounds and focus our
efforts on the development and commercialization of botanical dietary
supplements. The restructuring plan included: cessation of pharmaceutical
research and development activities and related operations; outlicensing of all
of our current pharmaceutical research programs; reduction in force of
approximately 60 employees (65% of workforce); sale or disposal of all of our
fixed assets that are not needed for our botanicals business; and sub-lease of a
portion of our facility.
16
<PAGE>
The termination of 60 employees occurred on February 1, 1999. The
following table summarizes Shaman's restructuring activities as of December 31,
1999 (in thousands).
<TABLE>
<CAPTION>
Total Net Cash Accrued
Restructuring Outflow Non-Cash Balance at
Category Charges (Inflow) Items December 31, 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Severance and related charges .............. $ 325 $ 325 $ -- $ --
Cancellation of contracts .................. 1,310 300 -- 1,010
Lipha S.A. settlement of claims ............ 1,031 1,031 -- --
Gain on disposal of fixed assets ........... (38) (38) -- --
Reversal of estimated liabilities
related to pharmaceutical operations ..... (450) -- (450) --
-------- -------- -------- --------
$ 2,178 $ 1,618 $ (450) $ 1,010
======== ======== ======== ========
</TABLE>
At June 30, 1999 we had approximately $969,000 recorded as deferred
revenue in connection with the advanced payment received in December 1998, which
we had not yet earned. In August 1999, we issued 133,334 shares of Series R
Preferred Stock, having a value of $2.0 million, to Lipha S.A. in partial
settlement of claims made by Lipha S.A. in connection with the Research
Agreement. Out of the $2.0 million, we applied $969,000 to deferred revenue and
the balance to restructuring expenses. In December 1999, we entered into a
settlement agreement with Lipha S.A. for the discontinuation of the Research
Agreement. We will receive no further payments for research and development from
Lipha S.A.
DELISTING OF OUR COMMON STOCK FROM NASDAQ NATIONAL MARKET
The delisting of our common stock from The Nasdaq National Market on
February 2, 1999 constituted an optional redemption event for our Series D
Preferred Stock. Since we do not have adequate resources to pay to redeem the
Series D Preferred Stock, we issued a notice to the holders of the Series D
Preferred Stock as required under our charter that prevented the redemption of
the Series D Preferred Stock. Under the terms of our charter, the effect of
preventing this redemption event by issuing the notice was to increase the
annual cumulative dividend payable to the Series D Preferred Stock holders to
$180 per share and to adjust the conversion price of the Series D Preferred
Stock to 72% of the lowest trading price for a designated period prior to the
conversion. The notice preventing the redemption of the Series D Preferred Stock
will remain in effect for as long as our securities are not listed on any of The
Nasdaq National Market, The Nasdaq SmallCap Market, the American Stock Exchange
or the New York Stock Exchange. In connection with the issuance of such notice,
we recorded a deemed dividend charge in the amount of $2,273,614 in the first
quarter of 1999. We do not believe we will be listed on any of these markets or
exchanges in the foreseeable future. As of February 2000, all shares of Series D
Preferred Stock had been converted into common stock.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999, our cash, cash equivalents, and investments
totaled approximately $1.2 million, compared with $9.2 million at December 31,
1998. We invest excess cash according to our investment policy that provides
guidelines with regard to liquidity, type of investment, credit ratings and
concentration limits.
Cash used in operating activities for the year ended December 31, 1999 of
$12.6 million was due primarily to the net loss of $16.4 million, offset by the
interest expense related to the issuance of warrants of $1.1 million and
issuance of Series R Preferred Stock to consultants and contractors for service
rendered and settlement of claims of $3.9 million. Cash used in investing
activities for the year ended December 31, 1999 of $3.9 million was due
primarily to sales of available-for-sale investments of $3.3 million. Cash
provided by financing activities for the year ended December 31, 1999 of $4.0
million was due primarily to sale of Series R Preferred Stock and proceeds from
the issuance of the convertible promissory notes of $6.7 million, offset by
payments on long-term obligations of $2.9 million.
In August 1999, we completed the Series R Preferred Stock rights offering.
In the rights offering, we issued 717,149 shares of Series R Convertible
Preferred Stock at $15.00 per share to Shaman's common stockholders of record on
July 14, 1999, raising net cash proceeds of approximately $5.7 million. Of the
717,149 shares issued, 175,968 shares of Series R Preferred Stock were delivered
in payment of expenses to consultants and contractors and 133,334 shares were
delivered to Lipha S.A. in partial settlement of claims. The remaining 407,847
shares of Series R Preferred Stock generated the $5.6 million proceeds.
17
<PAGE>
In August 1999, we entered into a License and Sale Agreement with
Metabolex, Inc. whereby Metabolex, Inc. has licensed certain rights to Shaman's
library of extracts and compounds for research, development, and
commercialization purposes. We have received a payment of $350,000 for a
perpetual license of certain technology and an additional $65,000 for service
rendered. We will receive royalties on any resulting products commercialized.
Metabolex, Inc. also has an option to acquire a license to further technology
for additional consideration over the initial four-month period. In October
1999, we received an additional $250,000 payment from Metabolex, for which
Metabolex exercised its option to acquire a perpetual license to other
technology.
In April 1999, we entered into a credit facility and note purchase
agreement with certain investors, stockholders, key executives and members of
the board of directors, pursuant to which we borrowed approximately $1.0 million
in July 1999. The convertible promissory notes issued pursuant to the credit
agreement were due and payable on the earlier of (i) 30 days subsequent to the
completion of the public rights offering, or (ii) December 31, 1999. Interest on
the convertible promissory notes was accrued at an annual rate of 12%. The
convertible promissory notes were secured by certain assets of Shaman and were
convertible into shares of Series R Preferred Stock, or into common stock if no
public offering occurs prior to December 31, 1999. In connection with the credit
agreement, we issued warrants to purchase shares of Series R Preferred Stock.
The number of shares subject to these warrants is equal to 50% of the debt
amount divided by $15, which was the per share sale price of the Series R
Preferred Stock. These warrants are exercisable, on a cashless basis, commencing
on April 5, 1999, and through the third anniversary date of the public offering.
The conversion price of the convertible promissory notes and the exercise price
of the warrants was $15, which was the per share offering price of the Series R
Preferred Stock. In September 1999, a total of $649,275 of principal and
interest under these notes was converted into 43,285 shares of Series R
Preferred Stock and a total of $374,816 of principal and interest under these
notes was repaid to the note holders. The fair value of the warrants granted of
approximately $396,015 was recorded as interest expense in 1999.
The delisting of our common stock from The Nasdaq National Market
constituted an Optional Redemption Event, as defined in our Certificate of
Incorporation, for the Series D Preferred Stock. In connection therewith, on
February 4, 1999, we issued a Control Notice, as defined in the Certificate of
Incorporation, that prevented the redemption of the Series D Preferred Stock.
This Control Notice will remain in effect for as long as we are not listed on
any of The Nasdaq National Market, The Nasdaq SmallCap Market, the American
Stock Exchange or the New York Stock Exchange. Delivery of the Control Notice
had the effect of increasing the annual dividend to $180 per share and adjusting
the conversion price of the Series D Preferred Stock to 72% of the low trading
price during a designated time period prior to the conversion. As of February
2000 all shares of Series D Preferred Stock had been converted into common
stock.
In December 1998, we completed a private sale of 4,812 shares of common
stock for aggregate net proceeds of approximately $7.1 million. In connection
with this offering, we have committed a five-year, 3.6% royalty on net sales of
SP-303/Provir, if any, in the United States for distribution to HIV/AIDS
charities. We intend to honor this royalty payment through the sale of our first
botanical product, SB-NSF.
In December 1998, we issued 747 shares of common stock to consultants for
services rendered. We recorded an expense of approximately $1.1 million in
conjunction with the consulting services.
In October 1998, we completed the sale to the public of an aggregate of
140,880 shares of our Series C Convertible Preferred Stock for aggregate gross
proceeds of $14.1 million. Each share of Series C Preferred Stock is entitled to
receive cumulative dividends paid semi-annually to the holders of record of such
shares as follows: (1) an annual stock-on-stock dividend, paid in arrears, in
shares of common stock, calculated as the quotient of $10.00 divided by 85% of
the average closing price of the common stock for the 10-day trading period
ending three trading days prior to the date the dividend is paid; plus (2) a
cash amount equaling 0.00005% of our U.S. net sales of our SP-303/Provir product
for the treatment of diarrhea, if any, for the preceding two calendar quarters
less $5.00. If, under Delaware law, we are unable to pay the cash portion of the
dividends, then the cash portion will be paid in shares of common stock valued
at 85% of the average closing price of the common stock for the 10-day trading
period ending three trading days prior to the date on which the dividend is
paid. We intend to honor this royalty portion of the dividend through the sale
of our first botanical product, SB-NSF. Each share of the Series C Preferred
Stock was convertible for a period of 30 days after August 18, 1998, and will be
convertible again commencing 12 months after the initial issuance date at the
election of each holder, and automatically on the sixth anniversary of the
initial issuance date into the greater of (1) 0.0167 shares of common stock or
(2) such number of shares of common stock as equals $100, which was the price
paid per share of Series C Preferred Stock, divided by 85% of the average
closing price of the common stock reported by Nasdaq for the 10-day trading
period ending three trading days prior to the date of conversion. The common
stock is currently trading on the OTC Bulletin Board. In connection with the
issuance of the Series C Preferred Stock, we recognized a non-cash charge in the
amount of $679,000. As of December 31, 1999, a total of 41,203 shares of the
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<PAGE>
Series C Preferred Stock were converted into an aggregate of 907,021 shares of
common stock.
In June 1998, we entered into stock purchase agreements with certain of
our stockholders pursuant to which we acquired the right to sell to these
stockholders, subject to certain conditions up to an aggregate of 7,000 shares
of Series B Custom Convertible Preferred Stock for an aggregate purchase price
of $7,000,000. The stock purchase agreements were terminated upon the closing of
the Series C Convertible Preferred Stock financing in October 1998. As
consideration for entering into the stock purchase agreements, we issued to
these stockholders warrants to purchase an aggregate of 350 shares of common
stock. The warrants are exercisable for a period of five years at an exercise
price per share equal to 115% of the average trading price of the common stock
during specified measurement periods. We have attributed a value of $1.5 million
to these warrants.
In June 1997, we issued $10.4 million of senior convertible notes. The
notes mature in August 2000 and bear interest at a rate of 5.5% per annum.
Interest on the notes was payable in common stock or cash at our option.
Initially, the notes were convertible into common stock at 100% of the low
trading price during a designated time period prior to conversion provided that
the conversion price would not be less than $5,500.00 per share. Starting in
November 1997, the notes were convertible into common stock at a 10% discount
from the low trading price during a designated time period prior to the
conversion, with a floor of $5,500.00 through March 31, 1998, pursuant to a
November 1997 understanding with the note holders to revise the terms of the
notes (see next paragraph). Of the notes issued, $400,000 was issued to the
placement agent as part of the placement fee. We paid the placement agent an
additional $300,000 in cash. The placement fees and other offering costs were
capitalized in other assets as deferred issuance costs and were amortized to
interest expense over the life of the notes to the extent the notes were not
converted to common stock. The net proceeds totaled approximately $9.5 million
after the placement agent's fees and other offering expenses.
In March 1998, Shaman and the purchasers of the notes entered into an
amendment agreement with the purchasers of the notes in order to avoid
conversion of the notes at a price that would be unduly dilutive to our existing
stockholders. As consideration for entering into the amendment agreement, we
issued to the purchasers of the notes warrants to purchase an aggregate of 138
shares of common stock. The warrants are exercisable through March 18, 2001 at
an exercise price of $7,500.00 per share. We have attributed a value of $309,000
to these warrants. An aggregate principal balance of $5.6 million of the notes
was converted into an aggregate of 2,571 shares of common stock. On December 10,
1998, we issued to the note holders an aggregate of 4,784 shares of the Series D
Convertible Preferred Stock in exchange for the cancellation of an aggregate of
$4.8 million, including accrued interest, of the notes. Each share of Series D
Convertible Preferred Stock is entitled to receive, when, as, and if declared by
the Board of Directors out of funds legally available for such purpose,
cumulative dividends at the rate of $55 per annum. Dividends on the Series D
Preferred Stock are payable in cash or shares of common stock or any combination
of cash and shares of common stock, at our option and are payable quarterly on
February 1, May 1, August 1 and November 1 of each year. Each share of Series D
Preferred Stock is convertible, at any time, into the common stock at the lesser
of (1) $1,125.00 per share or (2) 90% of the low trading price during a
designated time period prior to the conversion. In addition, the holders
received an aggregate of 767 warrants to purchase additional shares of common
stock in exchange for surrendering the redemption rights previously held by them
under the notes. The warrants were priced at 150% of the average closing price
for the month of December 1998. We have attributed a value of $943,680 to these
warrants.
In May 1997, we obtained a $5.0 million term loan to payoff pre-existing
debt, finance capital asset acquisitions and finance continued research and
clinical development. The loan is payable in thirty-six equal monthly
installments and the interest rate is 14.58%. The lender was granted warrants to
purchase 200 shares of common stock at $6,250.00 per share, which are
exercisable over a ten-year period. We have attributed a value of $648,000 to
these warrants. This amount has been recorded as a discount on the related debt
and is being amortized as interest expense over the term of the loan.
In April 1999, we amended the agreement to permit us to issue the
convertible promissory notes (discussed above) and delay principal payments
under the terms until we closed the Series R Preferred Stock rights offering in
August 1999. In connection with the amendment, we issued a warrant to purchase
39,512 shares of Series R Preferred Stock at $15.00 per share. This warrant is
exercisable commencing on August 23, 1999 and through the seventh anniversary of
such date. The warrant is exercisable in common stock after February 1, 2000 and
each share of Series R Preferred Stock was converted into 31 shares of common
stock. We have attributed a value of $498,000 to the new warrants issued in 1999
and recorded this amount as interest expense in 1999.
In April 1997, we sold 1,600 shares of common stock at $4,970.00 per share
in a registered direct public offering, which yielded gross proceeds of $7.95
million. The net proceeds of approximately $7.8 million from this offering were
used for the continued research and clinical development of our product
candidates.
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<PAGE>
In January 1997, we sold 2,000 shares of common stock in a registered
direct public offering for gross proceeds of $9.0 million. The net proceeds of
approximately $8.1 million from this offering were used for the continued
research and clinical development of our product candidates.
In September 1996, we entered into a five-year collaborative agreement
with Lipha S.A. to jointly develop our antihyperglycemic drugs. Upon signing
the collaboration, we received an annual research fee of $1.5 million which was
amortized to revenue over twelve months, as work was performed. We also received
approximately $3.0 million for 389 shares of common stock priced at $7,710.00
per share, representing a 20% premium to the weighted average price of the
common stock at the time of purchase. In exchange for development and marketing
rights in all countries except Japan, South Korea, and Taiwan, which countries
are covered under an earlier agreement between Shaman and Ono, Lipha S.A.
agreed to provide up to $9.0 million in research payments and up to $10.5
million in equity investments priced at a 20% premium to a multi-day volume
weighted average price of the common stock at the time of purchase. The
agreement also provided for additional preclinical and clinical milestone
payments to us in excess of $10.0 million per compound for each
antihyperglycemic drug developed and commercialized. Lipha S.A. agreed to bear
all pre-clinical, clinical, regulatory and other development expenses associated
with the compounds selected under the agreement. In addition, as products are
commercialized, we would receive royalties on all product sales outside the
United States and up to 50% of the profits, if we exercised our co-promotion
rights, or royalties on all product sales in the United States. Certain of the
milestone payments would be credited against future royalty payments, if any,
due to us from sales of products developed pursuant to the agreement.
In December 1998, we renegotiated the terms of the existing pharmaceutical
research and development agreement between Shaman and Lipha S.A. (the "Research
Agreement"). Under the new terms, we forgave $6.0 million in aggregate payments
due over the remaining term of the original agreement in exchange for a one-time
up-front payment of an aggregate of $2.0 million, consisting of a $1.0 million
research payment and a $1.0 million equity investment. We discontinued all
research and development work related to this Research Agreement when we
restructured our business to focus on the development and marketing of dietary
supplements in February 1999. In August 1999, we issued 133,334 shares of Series
R Preferred Stock, having a value of $2.0 million, to Lipha S.A. in partial
settlement of claims made by Lipha S.A. in connection with the Research
Agreement. Out of the $2.0 million, we applied $969,000 to deferred revenue and
the balance to restructuring expenses. In December 1999, we entered into a
settlement agreement with Lipha S.A. for the discontinuation of the Research
Agreement. We will receive no further research payments from Lipha S.A.
For the year ended December 31, 1999, we recognized no revenue from this
Research Agreement. For the year ended December 31, 1998, we recognized $1.9
million in revenue from the Lipha S.A. collaboration. In addition, we received
a total $2.5 million for issuance of 1,155 shares of common stock, of which 813
shares were priced at $1,850.00 per share in September 1998 and 342 shares were
priced at $2,920.00 per share in December 1998, each representing a 20% premium
to the weighted average price of the common stock at the time of purchase.
We expect to continue to incur losses through 2000. 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 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.
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<PAGE>
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.
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.
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<PAGE>
RISK FACTORS AND CAUTIONARY STATEMENTS
This Report on Form 10-K contains, in addition to historical information,
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, that involve risks and uncertainties. Words such as "may",
"believe", "estimate", "expect", "plan", "intend", "project", "anticipate",
"continues", "could", "potential", "predict" and similar expressions may
identify forward-looking statements. Our actual results could differ materially
from the results discussed in the forward-looking statements. Factors that could
cause or contribute to such differences include those below and elsewhere in
this Form 10-K.
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.
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 shift our business focus on a newly form
wholly owned subsidiary, Shaman.com. 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.
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<PAGE>
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.
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 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.
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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.
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
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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.
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,
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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.
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
26
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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 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
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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.
IF WE FACE INTENSE COMPETITION IN PROVIDING OUR INTERNET-BASED HEALTH
INFORMATION SERVICES AND 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
can not 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.
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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 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;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 can not 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 can not 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.
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ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk, including changes to interest rates. A
discussion of our accounting policies for financial instruments and further
disclosures relating to financial instruments is included in the Summary of
Significant Accounting Policies in the Notes to Financial Statements.
We monitor the risks associated with interest rates and foreign
currency exchange risks and have established policies and business practices to
protect against these and other exposures. We place our investments in
instruments that meet high credit quality standards, as specified in our
investment policy guidelines; the policy also limits the amount of credit
exposure to any one issue, issuer, or type of instrument and does not permit
derivative financial instruments in our investment portfolio. As a result, we do
not expect any material loss with respect to our investment portfolio.
The following table provides information about our financial instruments
that are sensitive to changes in interest rates. For investment securities, the
table presents principal cash flows and related weighted-average interest rates
by expected maturity dates.
<TABLE>
<CAPTION>
Fair
value
at
ASSETS 2000 2001 2002 2003 2004 Thereafter Total 12/31/99
--------------------- ---- ---- ---- ---- ---- ---------- ----- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Equivalents $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
Weighted average interest rate -- -- -- -- -- -- -- --
Short-term investments -- -- -- -- -- -- -- --
Weighted average interest rate -- -- -- -- -- -- -- --
LIABILITIES
----------------------
(In thousands)
Long-term debt, including current portion
Fixed rate $1,739 $ 540 $ 540 -- -- -- $ 2,819 $1,568
Weighted average interest rate 13.07% 12.00% 12.00% -- -- -- -- --
</TABLE>
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index Page
- - ----- ----
Report of Independent Public Accountants ............................ 32
Report of Independent Auditors ...................................... 33
Balance Sheets as of October 31, 1999 and 1998 ...................... 34
Statements of Operations for the Years Ended
December 31, 1999, 1998 and 1997 ................................. 35
Statements of Stockholders' Equity for the
Years Ended December 31, 1997, 1998 and 1999 ........................ 36
Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 .................................... 39
Notes to Financial Statements ....................................... 40
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INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT
To the Board of Directors and Stockholders of Shaman Pharmaceuticals, Inc.
We have audited the accompanying balance sheet of Shaman Pharmaceuticals,
Inc. as of December 31, 1999, and the related statement of operations,
stockholders' equity and cash flows for the year ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial
statements. We believe that our audit provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Shaman Pharmaceuticals, Inc.
at December 31, 1999, and the results of its operations and its cash flows for
the year ended December 31, 1999 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has sustained recurring losses from
operations, has net capital deficiencies and negative working capital at
December 31, 1999. These conditions raise substantial doubt about the ability of
the Company to continue as a going concern. Management's plans as to these
matters are also discussed in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
BDO SEIDMAN, LLP
San Francisco, California
March 21, 2000
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REPORT OF ERNST & YOUNG, LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders of
Shaman Pharmaceuticals, Inc.
We have audited the accompanying balance sheets of Shaman Pharmaceuticals,
Inc. as of December 31, 1998, and the related statements of operations,
stockholders' equity, and cash flows for each of the two years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Shaman Pharmaceuticals, Inc.
at December 31, 1998, and the results of our operations and our cash flows for
each of the two years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully described in Note 1, the
Company had cash, cash equivalents and short-term investments at December 31,
1998 aggregating $9.2 million which are not sufficient to enable the Company to
pay its existing liabilities and to fund its operations through December 31,
1999. The Company has incurred recurring operating losses and has total
liabilities at December 31, 1998 in excess of its available cash resources.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 1. The financial statements referred to above do not include
any adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
ERNST & YOUNG LLP
Palo Alto, California
February 11, 1999
33
<PAGE>
<TABLE>
<CAPTION>
SHAMAN PHARMACEUTICALS, INC.
BALANCE SHEETS
DECEMBER 31,
---------------------------------------
1999 1998
---------------------------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents .................................................... $ 1,171,798 $ 5,887,496
Short-term investments ....................................................... -- 3,277,197
Accounts receivable (net of $116,000 allowance in 1999)....................... 337,537 --
Inventory .................................................................... 1,718,491 --
Amounts due from employees ................................................... 153,392 208,898
Prepaid expenses and other current assets .................................... 127,662 283,804
-------------- --------------
Total current assets ................................................. 3,508,880 9,657,395
Property and equipment:
Laboratory equipment ....................................................... 1,095,738 6,336,564
Computer equipment and furniture ........................................... 382,560 1,474,914
Leasehold improvements ..................................................... 7,179,564 7,266,066
-------------- --------------
8,657,862 15,077,544
Less: accumulated depreciation and amortization .............................. 6,839,150 11,963,876
-------------- --------------
1,818,712 3,113,668
Other assets ................................................................... 308,080 368,080
-------------- --------------
Total assets ......................................................... $ 5,635,672 $ 13,139,143
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable and other accrued expenses .................................. $ 1,528,746 $ 1,238,931
Accrued clinical trial costs ................................................. 585,040 2,051,134
Accrued professional fees .................................................... 888,553 948,374
Accrued compensation ......................................................... 202,207 326,797
Accrued interest ............................................................. 334,863 276,299
Accrued restructuring costs .................................................. 1,010,000 --
Advances-- contract research ................................................. -- 968,750
Current installments of long-term obligations ................................ 1,927,366 2,803,861
-------------- --------------
Total current liabilities ............................................ 6,476,775 8,614,146
Long-term obligations, excluding current installmetns .......................... 1,194,991 2,415,137
Stockholders' equity (deficiency):
Preferred stock, $0.001 par value; issuable in series; 2,000,000 shares and
1,000,000 shares authorized at December 31, 1999 and December 31, 1998,
respectively; 877,968 and 519,533 convertible shares issued and
outstanding at December 31, 1999 and 1998, respectively (Liquidation
preference at December 31, 1999 and 1998 -- $11,118,800 and $18,429,310,
respectively) ............................................................. 877 520
Common stock, $0.001 par value; 220,000,000 and 40,000,000 shares authorized
at December 31, 1999 and 1998, respectively; 1,583,602 and 30,383 shares
issued and outstanding at December 31, 1999, and 1998, respectively)....... 1,584 30
Additional paid-in capital ................................................... 176,594,549 152,728,933
Deferred compensation and other adjustments .................................. (14,691) (185,850)
Accumulated deficit .......................................................... (178,618,413) (150,433,773)
-------------- --------------
Total stockholders' equity (deficiency) .............................. (2,036,094) 2,109,860
-------------- --------------
Total liabilities and stockholders' equity (deficiency)............... $ 5,635,672 $ 13,139,143
============== ==============
</TABLE>
See accompanying notes to financial statements
34
<PAGE>
<TABLE>
<CAPTION>
SHAMAN PHARMACEUTICALS, INC.
STATEMENTS OF OPERATIONS
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Product sales ......................................... $ 501,016 $ -- $ --
Less sales returns and allowances...................... (116,000) -- --
-------------- -------------- --------------
Net product sales.................................... 385,116 -- --
Collaborative agreements .............................. 665,000 2,659,856 3,500,000
-------------- -------------- --------------
Total revenues ........................................... 1,050,016 2,659,856 3,500,000
Operating expenses:
Cost of goods sold ..................................... 173,406 -- --
Research and development ............................... 6,449,503 32,393,374 24,140,246
Marketing, general and administrative .................. 6,682,444 5,565,066 4,833,489
Restructuring costs .................................... 2,177,975 -- --
-------------- -------------- --------------
Total operating expenses........................ 15,483,328 37,958,440 28,973,735
-------------- -------------- --------------
Loss from operations ..................................... (14,433,312) (35,298,584) (25,473,735)
Interest income .......................................... 151,016 550,227 1,217,884
Interest expense ......................................... (1,816,404) (2,033,004) (5,032,684)
Other expense ............................................ (392,757) -- --
-------------- -------------- --------------
Net loss ................................................. (16,491,457) (36,781,361) (29,288,535)
Preferred Stock dividends (1)............................. (11,693,183) (1,742,241) --
-------------- -------------- --------------
Net loss applicable to common stockholders ............... $ (28,184,640) $ (38,523,602) $ (29,288,535)
============== ============== ==============
Basic and diluted net loss per common share (2) .......... $ (140.71) $ (1,916.60) $ (1,722.86)
============== ============== ==============
Shares used in calculation of basic and diluted net
loss per common share (2) ............................. 200,300 20,100 17,000
============== ============== ==============
</TABLE>
(1) Includes in 1999 deemed dividends on Preferred Stock of $11,663,876 and
dividends paid on Preferred Stock of $29,307.
(2) Basic and diluted net loss per share is based on the weighted average number
of Common Shares outstanding during the period. We have not paid any cash
dividends on our capital stock since inception.
See accompanying notes to financial statements.
35
<PAGE>
<TABLE>
<CAPTION>
SHAMAN PHARMACEUTICALS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
DEFERRED
CONVERTIBLE ADDITIONAL COMPENSATION TOTAL
PREFERRED COMMON PAID-IN AND OTHER ACCUMULATED STOCKHOLDERS'
STOCK STOCK CAPITAL ADJUSTMENTS DEFICIT EQUITY
----------- -------- ------------- --------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 $ 400 $ 14 $ 94,618,362 $ (20,250) $ (82,621,636) $ 11,976,890
Issuance of 20 shares of
common stock upon the
exercise of stock options..... -- -- 64,156 -- -- 64,156
Issuance of 2,000 shares of
common stock in connection
with a registered Direct
public offering in January
1997, net of issuance costs
of $.93 million............... -- 2 8,070,408 -- -- 8,070,410
Issuance of 1,600 shares of
common stock in connection
with a registered Direct
public offering in April
1997, net of issuance costs
of $.13 million............... -- 2 7,824,252 -- -- 7,824,254
Issuance of 201 shares of
common stock in connection
with Lipha/Merck collaboration.. -- -- 1,492,539 -- -- 1,492,539
Issuance of 56 shares of
common stock upon conversion
of senior convertible notes
notes in November 1997......... -- -- 223,163 -- -- 223,163
Unrealized loss on available- --
for-sale securities............ -- -- -- (9,720) -- (9,720)
Deferred compensation related
to granting of options to
non-employees, net of
amortization and reversals..... -- -- 240,282 (94,940) -- 145,342
Value ascribed to warrants
issued in conjunction with
secured loan................... -- -- 648,000 -- -- 648,000
Value ascribed to in-the-money
conversion option of senior
convertible notes.............. -- -- 3,692,140 -- -- 3,692,140
Value ascribed to warrants
issued in conjunction with
convertible notes.............. -- -- 309,000 -- -- 309,000
Net loss applicable to common
stockholders................... -- -- -- -- (29,288,535) (29,288,535)
----- ----- ------------- ------------ ------------- --------------
Balance at December 31, 1997...... $ 400 $ 18 $ 117,182,302 $ (124,910) $(111,910,171) $ 5,147,639
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
SHAMAN PHARMACEUTICALS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (continued)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
DEFERRED
CONVERTIBLE ADDITIONAL COMPENSATION TOTAL
PREFERRED COMMON PAID-IN AND OTHER ACCUMULATED STOCKHOLDERS'
STOCK STOCK CAPITAL ADJUSTMENTS DEFICIT EQUITY
----------- -------- ------------- --------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997...... $ 400 $ 18 $ 117,182,302 $ (124,910) $(111,910,171) $ 5,147,639
Issuance of 16 shares of
common stock upon the
exercise of stock options...... -- -- 21,715 -- -- 21,715
Issuance of 63 shares of
common stock to employess
from the 1998 special
issuance plan.................. -- -- 80,759 -- -- 80,759
Issuance of 748 shares of
common stock to consultants
for consulting services
rendered....................... -- -- 1,074,110 -- -- 1,074,110
Sale of 1,156 shares of
common stock in connection with
Lipha/Merck collaboration...... -- 1 2,499,999 -- -- 2,500,000
Deferred compensation related
to granting of options to
non-employees, net of
amortization and reversals..... -- -- 162,464 (75,849) -- 86,615
Change in unrealized gain/loss
on available-for-sale
securities..................... -- -- -- 14,909 -- 14,909
Value ascribed to Warrants
issued in conjunction with
Series B Convertible
Preferred Stock ($1,462,860).. -- -- -- -- -- --
Issuance of 202 shares of
common stock in connection
with senior convertible notes
quarterly interest payments.... -- -- 650,541 -- -- 650,541
Issuance of 1,077 shares of
common stock upon the
conversion of 1,209 shares
of Series D Convertible Stock.. (1) 1 -- -- -- --
Issuance of 2,572 shares of
common stock upon the
conversion of senior
convertible notes.............. -- 3 5,453,181 -- -- 5,453,184
Sale of 140,880 shares of
convertible preferred stock
in connection with the Series
C Convertible Preferred Stock
Offering, net of issuance
costs of $1.5 million.......... 141 -- 12,598,553 -- -- 12,598,694
Value ascribed to in-the-money
conversion option of Series C
Convertible Preferred Stock.... -- -- 678,636 -- -- 678,636
Issuance of 1,862 shares of
common stock upon conversion
of 24,922 shares of Series C
Convertible Preferred Stock.... (25) 2 23 -- -- --
Issuance of 84 shares of
common stock in payment of
Dividends on Series C
Convertible Preferred Stock.... -- -- -- -- -- --
Sale of 4,813 shares of
common stock in connection
with the private placement
offering in December 1998,
net of issuance costs of
$.13 million................... -- 5 7,086,939 -- -- 7,086,944
Issuance of 4,784 shares of
Series D Convertible
Preferred Stock in exchange
for cancellation of senior
convertible notes.............. 5 -- 4,176,106 -- -- 4,176,111
Value ascribed to in-the-money
conversion option of Series D
Convertible Preferred Stock.... -- -- 1,063,605 -- -- 1,063,605
Value ascribed to Warrants
issued in conjuction with
Series D Convertible
Preferred Stock ($943,680)..... -- -- -- -- -- --
Net loss applicable to common
stockholders................... -- -- -- -- (38,523,602) (38,523,602)
----- ----- ------------- ------------ ------------- --------------
Balance at December 31, 1998...... $ 520 $ 30 $ 152,728,933 $ (185,850) $(150,433,773) $ 2,109,860
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
SHAMAN PHARMACEUTICALS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY) (continued)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
DEFERRED
CONVERTIBLE ADDITIONAL COMPENSATION TOTAL
PREFERRED COMMON PAID-IN AND OTHER ACCUMULATED STOCKHOLDERS'
STOCK STOCK CAPITAL ADJUSTMENTS DEFICIT EQUITY
----------- -------- ------------- --------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998...... $ 520 $ 30 $ 152,728,933 $ (185,850) $(150,433,773) $ 2,109,860
Issuance of 1 shares of
common stock upon the
exercise of stock options...... -- -- 160 -- -- 160
Issuance of 544 shares of
common stock upon the
conversion of 400,000 shares
of Series A Convertible
Preferred Stock................ (400) -- 400 -- -- --
Issuance of 61,362 shares of
common stock upon the
conversion of 2,387 shares
of Series D Convertible
Preferred Stock and payment of
accrued interest on unpaid
dividends...................... (2) 62 33,719 -- -- 33,779
Issuance of 905,160 shares of
common stock upon the conversion
of 16,281 shares of Series C
Convertible Preferred Stock.... (16) 906 (890) -- -- --
Issuance of 585,752 shares of
common stock in payment of
Dividends on Series C
Convertible Preferred Stock.... -- 586 28,701 -- -- 29,287
Payment for the value of
fractional shares from the
conversion of senior
convertible notes into Series
D Convertible Preferred Stock.. -- -- (2,225) -- -- (2,225)
Issuance of 404 shares of
common stock in payment of
Dividends on Series D
Convertible Preferred Stock.... -- -- 20 -- -- 20
Issuance of 16,667 shares of
Series R Convertible Preferred
Stock in connection with
settlement of litigation....... 16 -- 249,989 -- -- 250,005
Issuance of 407,847 shares of
Series R Convertible Preferred
Stock in connection with a
rights offering, net of
issuance costs of $452,000..... 407 -- 5,665,355 -- -- 5,665,762
Issuance of 175,968 shares of
Series R Convertible
Preferred Stock to conultants
and contractors for service
rendered....................... 176 -- 2,639,344 -- -- 2,639,520
Issuance of 133,334 shares of
Series R Convertible Preferred
Stock to Lipha S.A. in partial
settlement of claims........... 133 -- 1,999,877 -- -- 2,000,010
Issuance of 43,285 shares of
Series R Convertible Preferred
upon conversion of convertible
promissory notes............... 43 -- 649,232 -- -- 649,275
Value ascribed to the
in-the-money conversion option
of Series D Convertible
Preferred Stock................ -- -- 2,273,614 -- -- 2,273,614
Value ascribed to the
in-the-money conversion option
of Series R Convertible
Preferred Stock............... -- -- 9,390,262 -- -- 9,390,262
Deferred compensation related
to granting of options to
non-employees, net of
amortization and reversals.... -- -- 43,797 156,095 -- 199,892
Value ascribed to warrants
issued in conjunction with
convertible promissory
notes and secured loan........ -- -- 894,261 -- -- 894,261
Change in unrealized gain/loss
on available-for-sale
securities.................... -- -- -- 15,064 -- 15,064
Net loss applicable to common
stockholders.................. -- -- -- -- (28,184,640) (28,184,640)
----- ------ ------------- ------------ ------------- --------------
Balance at December 31, 1999 $ 877 $1,584 $ 176,594,549 $ (14,691) $(178,618,413) $ (2,036,094)
===== ====== ============= ============ ============= ==============
</TABLE>
See accompanying notes to financial statements.
38
<PAGE>
<TABLE>
<CAPTION>
SHAMAN PHARMACEUTICALS, INC.
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
YEARS ENDED DECEMBER 31,
------------ ------------ ------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss ..................................................................... $(16,491,457) $(36,781,361) $(29,288,535)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation ............................................................... 746,442 1,214,139 1,718,167
Amortization of warrants and deferred equity costs.......................... 415,890 286,664 390,729
Allowance for sales returns and allowances.................................. 116,000 -- --
(Gain) loss on disposal of fixed assets.................................... (43,285) 19,834 --
Interest expense on issuance of senior convertible notes ................... -- -- 3,692,140
Interest expense on convertible promissory notes and secured loan........... 894,261 -- --
Issuance of common stock to consultants for services rendered .............. -- 1,074,110 --
Issuance of Series R Preferred Stock to consultants and
contractors for services rendered......................................... 2,639,520 -- --
Issuance of Series R Preferred Stock in connection with settlement of
litigation................................................................ 250,005 -- --
Issuance of Series R Preferred Stock to Lipha S.A. in partial
settlement of claims...................................................... 1,031,260 -- --
Issuance of note for legal services......................................... 9,148 -- --
Other compensation ......................................................... -- 80,759 --
Payment of interest in common stock......................................... 33,779 328,743 --
Changes in operating assets and liabilities:
Trade accounts receivable ................................................ (453,537) -- --
Inventory ................................................................ (1,718,491) -- --
Prepaid expenses, current assetsand other assets.......................... 216,142 755,280 628,198
Accounts payable, accrued professional fees, accrued compensation,
accrued clinical trial costs, accrued restructuring costs and
contract research advances.............................................. (292,126) 974,423 (748,327)
------------- ------------- -------------
Net cash used in operating activities.......................................... (12,646,449) (32,047,409) (23,607,628)
------------- ------------- -------------
INVESTING ACTIVITIES:
Purchases of available-for-sale investments................................... -- (5,255,947) (14,562,627)
Maturities of available-for-sale investments.................................. -- 5,032,892 4,954,640
Sales of available-for-sale investments....................................... 3,292,262 7,040,710 --
Proceeds on sale of fixed assets due to restructuring ........................ 694,544 -- --
Capital expenditures ......................................................... (102,746) (375,501) (913,382)
Employee loans, net of repayments ............................................ 55,506 (256,347) --
------------- ------------- -------------
Net cash provided by (used in) investing activities ........................... 3,939,566 6,185,807 (10,521,369)
------------- ------------- -------------
FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock, net................................ 5,663,699 12,598,694 --
Proceeds from issuance of common stock, net................................... -- 9,608,659 17,446,683
Issuance of convertible promissory notes...................................... 1,008,010 -- --
Proceeds from issuance of long-term obligations.............................. -- -- 5,000,000
Proceeds from issuance of senior convertible notes, net....................... -- -- 9,479,039
Principal payments on long-term obligations and convertible promissory notes. (2,880,524) (2,310,080) (2,936,297)
Proceeds from asset financing arrangements.................................... 200,000 511,123 429,023
------------- ------------- -------------
Net cash provided by financing activities...................................... 3,991,185 20,408,396 29,418,448
------------- ------------- -------------
Net decrease in cash and cash equivalents....................................... (4,715,698) (5,453,206) (4,710,549)
Cash and cash equivalents at beginning of year.................................. 5,887,496 11,340,702 16,051,251
------------- ------------- -------------
Cash and cash equivalents at end of year........................................ $ 1,171,798 $ 5,887,496 $ 11,340,702
============= ============= =============
SUPPLEMENTAL INFORMATION
Interest paid ................................................................. $ 462,018 $ 605,069 $ 538,891
============= ============= =============
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
SHAMAN PHARMACEUTICALS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Overview of current business
Shaman Pharmaceuticals, Inc., through the main operating division of
ShamanBotancials.com, is focused on the discovery, development, and marketing of
novel, proprietary botanical dietary supplements derived from tropical plant
sources. The Company was incorporated in Delaware on December 21, 1992 and
maintains its offices in South San Francisco, California. In September 1999, we
began implementing our commercialization efforts through our botanicals
division. 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.
Until December 1998, we were solely focused on developing pharmaceutical
products derived from tropical plant sources. Our pharmaceutical business model
was dependent upon our ability to launch our first pharmaceutical product in
1999. As a result of the U.S. Food and Drug Administration response to our
proposed fast-track New Drug Application package for our leading pharmaceutical
product candidate, SP-303/Provir, and insufficient resources to continue the
costly process of conducting a second pivotal trial which would have created
significant delays, we restructured our business to focus on the development and
marketing of dietary supplements.
MATTERS AFFECTING ONGOING OPERATIONS
The accompanying financial statements have been prepared assuming that we
will continue as a going concern. We have cash, cash equivalents and short-term
investments at December 31, 1999 aggregating $1.2 million which are not
sufficient to enable us to pay existing liabilities and fund our operations
through December 31, 2000. We have total liabilities in excess of our available
cash resources at December 31, 1999. We have had recurring net losses, including
a net loss applicable to common stockholders of $28.2 million in the year ended
December 31, 1999, and have an accumulated deficit of $178.6 million at December
31, 1999. These conditions raise substantial doubt about our ability to continue
as a going concern.
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 a wholly-owned
subsidiary of Shaman. We anticipate that the name of the wholly-owned subsidiary
will be Shaman.com. 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. Shaman.com will become a full-fledged natural
medicine content site, and target various health communities anchored by
original content, recognized advice, and personalized services. Shaman.com will
not sell products directly via e-commerce, therefore retaining objectivity and
credibility as the trusted voice of natural products. Shaman.com will also
extend its trusted message to cable and television productions. The
commercialization 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
provide 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 will boost sales while simultaneously
build the Shaman.com brand.
In February 2000, we raised approximately $3.5 million in connection with a
bridge loan financing (see Notes 12 - Subsequent Events). However, 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 beyond the second quarter of 2000. In addition, we
anticipate generating revenues from profit sharing and royalties as we enter
into collaborative agreements to commercialize our proprietary botanical
products and advertising fees and affiliate fees on the Shaman.com web site.
REVENUE RECOGNITION
Revenue under our collaborative research agreements is recognized ratably
as costs are incurred by us in accordance with the performance requirements of
the agreements. Non-refundable payments that are not dependent on future
40
<PAGE>
performance under collaborative agreements and represent the culmination of an
earnings process are recognized as revenue when received. Payments received
which are still subject to future performance requirements are deferred until
earned. Revenues from achievement of milestone events are recognized when the
funding party agrees that the scientific or clinical results stipulated in the
agreement have been met. Product sales revenue is recognized when product is
shipped and no significant uncertanties remain as to pricing and collectibility.
RESEARCH AND DEVELOPMENT EXPENSE
Research and development expense consists of independent research and
development costs and the costs associated with work performed under
collaborations. Research and development costs include direct and
research-related overhead expenses and are expensed as incurred.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards, "Accounting for Stock-Based
Compensation" ("SFAS 123") encourages, but does not require, companies to record
compensation expense for stock-based employee compensation plans at fair value.
We have elected to follow the disclosure requirements of SFAS 123 for the years
ended December 31, 1999, 1998 and 1997 and to continue to measure stock-based
compensation to employees in accordance with APB Opinion No. 25, "Accounting for
Stock Issued to Employees." Note 9 contains a summary of the pro forma effects
to reported net loss applicable to common stockholders and net loss per common
share for 1999, 1998 and 1997 as if we had elected to recognize compensation
expense based on the fair value of options granted as described by SFAS 123.
We grant stock options to employees and directors for a fixed number of
shares with an exercise price equal to the fair market value of shares at the
date of grant. We account for stock option grants to employees and directors in
accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees
and, accordingly, recognize no compensation expense for the stock option grants
to employees and directors.
PER SHARE DATA
Net loss per share is computed using the weighted average number of shares
of common stock outstanding. The impact of stock options and other common stock
equivalents have been excluded from the computation in all years presented as
they are antidilutive. At December 31, 1999, we had substantial options,
convertible preferred stock and convertible warrants outstanding which will
further dilute our stockholders' loss per share.
COMPREHENSIVE LOSS
As of January 1, 1998, we adopted Financial Accounting Standards Board
("FASB") Statement No. 130, Reporting Comprehensive Income ("SFAS 130"). SFAS
130 established new rules for the reporting and displaying of comprehensive
income and its components; however, the adoption of this statement had no impact
on our net loss or total stockholders' equity. SFAS 130 requires unrealized
gains or losses on our available for sale securities, which prior to adoption
were reported in stockholder's equity, to be included in other comprehensive
income (loss). Since our loss is approximately $28.2 million, our comprehensive
loss was not significantly different from our net loss applicable to common
stockholders in 1999, 1998 and 1997.
CASH, CASH EQUIVALENTS, INVESTMENTS AND CONCENTRATION OF CREDIT RISK
We consider all highly liquid investments with remaining maturities of
three months or less at time of purchase to be cash equivalents. Investments
with maturities of less than one year from the balance sheet date and with
original maturities greater than 90 days are considered short-term investments.
Investments with maturities greater than one year from the balance sheet date
are considered long-term investments. Investments consist primarily of
commercial paper, investments in government securities, corporate bonds and
asset-backed securities. These investments typically bear minimal risk. This
diversification of risk is consistent with our policy to maintain high liquidity
and ensure safety of principal. We maintain our cash, cash equivalents and
investments in accounts with several United States banks and brokerage houses.
We determine the appropriate classification of debt securities at the time
of purchase and re-evaluate such determination as of each balance sheet date. As
of December 31, 1999 and 1998, we have classified our entire investment
41
<PAGE>
portfolio as available-for-sale. Available-for-sale securities are carried at
fair value, with the unrealized gains and losses, net of tax, included in other
comprehensive income. The amortized cost of debt securities in this category is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization is included in interest income. Realized gains and losses and
declines in value judged to be other-than-temporary on available-for-sale
securities are included in interest income or expense. The cost of securities
sold is based on the specific identification method. Interest and dividends on
securities classified as available-for-sale are included in interest income.
INVENTORIES
Inventory is stated at the lower of cost (first-in, first-out basis) or
market. Cost includes raw materials and contracted costs for the manufacturing
of the product.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of equipment and
furniture is provided on a straight-line basis over the estimated useful lives
of the respective assets, which range from three (computer equipment and
furniture) to five (laboratory equipment) years. Equipment held under capital
leases is amortized using the straight-line method over the shorter of the lease
term or estimated useful life of the asset. Leasehold improvements are amortized
on a straight-line basis over the remaining life of the lease.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CARRYING VALUE OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
In accordance with Financial Accounting Standards Board Statement No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long Lived Assets to
be Disposed Of," we record impairment losses on long-lived assets when events
and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amounts of those assets. Based on our estimate of future
undiscounted cash flows, we expect to recover the carrying amounts of our
long-lived assets. Nonetheless, it is reasonably possible that the estimate of
undiscounted cash flows may change in the near term resulting in the need to
write-down those assets to fair value.
SEGMENT REPORTING
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information ("FAS131"). SFAS 131 establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports. It also establishes standards for related disclosures about products
and services, geographic areas, and major customers. We have determined that in
1999, 1998 and 1997, we operated in only one segment.
ADVERTISING COSTS
Advertising costs are expensed as incurred. For the year ended December 31,
1999, we incurred $521,332 in advertising costs. For the year ended December 31,
1998, we incurred no advertising costs.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform to the
current year's presentation.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities." SFAS 133 establishes new standards of accounting and reporting for
42
<PAGE>
derivative instruments and hedging activities. SFAS 133 will be effective for
fiscal years beginning in 2000. We do not have derivative or hedging instruments
and as such do not expect adoption of SFAS 133 to have a significant effect on
our operations or financial position.
2. RESTRUCTURING PLAN
On February 1, 1999, we announced and initiated implementation of a
restructuring plan which resulted in us closing down of the operations of our
pharmaceutical business. We now intend to out-license worldwide marketing rights
to all our pharmaceutical compounds and will focus our efforts on the
development and commercialization of botanical dietary supplements through our
botanicals division. The restructuring plan includes: cessation of
pharmaceutical research and development activities and related operations; sale
or outlicensing of all of our current pharmaceutical research programs;
reduction in force of approximately 60 employees (65% of our workforce);
termination of the research and development contract with Lipha S.A.; settlement
of outstanding long-term equipment financing obligations; sale or disposal of
all of our fixed assets that are not needed for our botanicals business; and
sub-leased of a portion of the facility.
The termination of 60 employees occurred on February 1, 1999. The
following table summarizes Shaman's restructuring activities as of December 31,
1999 (in thousands).
<TABLE>
<CAPTION>
Accrued
Total Net Cash Balance at
Restructuring Outflow Non-Cash December 31,
Category Charges (Inflow) Items 1999
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Severance and related charges...................... $ 325 $ 325 $ -- $ --
Cancellation of contracts ......................... 1,310 300 -- 1,010
Lipha S.A. settlement of claims.................... 1,031 1,031 -- --
Gain on disposal of fixed assets................... (38) (38) -- --
Reversal of estimated liabilities
related to pharmaceutical operations............. (450) -- (450) --
-------- -------- ------- -------
$ 2,178 $ 1,618 $ (450) $ 1,010
======== ======== ======= =======
</TABLE>
3. COLLABORATIVE RELATIONSHIPS
In August 1999, we entered into a License and Sale Agreement with
Metabolex, Inc. whereby Metabolex, Inc. has licensed certain rights to
Shaman's library of extracts and compounds for research, development, and
commercialization purposes. We have received a payment of $350,000 for a
perpetual license of certain technology and an additional $65,000 for an
option fee to specific technology. We will receive royalties on any
resulting products commercialized. Metabolex, Inc. also has an option to
license further compound and technology for additional consideration over an
initial four-month period. In October 1999, we received an additional
$250,000 payment from Metabolex, for which Metabolex exercised its option to
acquire a perpetual license to additional technology. Revenues from
Metabolex, Inc. accounted for 100% of the contact revenues in 1999.
In September 1996, we entered into a five-year collaborative agreement
with Lipha S.A. to jointly develop Shaman's antihyperglycemic drugs. Upon
signing the collaboration, we received an annual research fee of $1.5 million
which was amortized to revenue over twelve months as the work was performed. We
also received approximately $3 million for 389 shares of common stock priced at
$7,710 per share, representing a 20% premium to the weighted average price of
the common stock at the time of purchase. In exchange for development and
marketing rights in all countries except Japan, South Korea, and Taiwan (which
are covered under an earlier agreement between Shaman and Ono Pharmaceutical Co.
Ltd. Osaka, Japan ("Ono"), Lipha S.A. agreed to provide up to $9.0 million in
research payments and up to $10.5 million in equity investments priced at a 20%
premium to a multi-day volume weighted average price of common stock at the time
of purchase. The research payments were recognized as revenue ratably as the
related costs were incurred by us in the performance of our obligations to
perform certain research and clinical trial activities. The agreement also
provided for additional preclinical and clinical milestone payments to us in
excess of $10.0 million per compound for each antihyperglycemic drug developed
and commercialized. Lipha S.A. agreed to bear all pre-clinical, clinical,
regulatory and other development expenses associated with the compounds selected
under the agreement. Preclinical and clinical milestone payments would be
recognized as revenue as certain preclinical hurdles were met and as certain
phases of the clinical trials and the FDA approval process were completed. In
addition, as products were commercialized, Shaman would receive royalties on all
product sales outside the United States and up to 50% of the profits (if we
exercise our co-promotion rights) or royalties on all product sales in the
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<PAGE>
United States. Certain of the milestone payments would be credited against
future royalty payments, if any, due to us from sales of products developed
pursuant to the agreement.
In December 1998, we renegotiated the terms of the existing pharmaceutical
research and development agreement between Shaman and Lipha S.A. (the "Research
Agreement"). Under the new terms, we forgave $6.0 million in aggregate payments
due over the remaining term of the original agreement in exchange for a one-time
up-front payment of an aggregate of $2.0 million, consisting of a $1.0 million
research payment and a $1.0 million equity investment. We discontinued all
research and development work related to this Research Agreement when we
restructured our business to focus on the development and marketing of dietary
supplements in February 1999. In August 1999, we issued 133,334 shares of Series
R Preferred Stock, having a value of $2.0 million, to Lipha S.A. in partial
settlement of claims made by Lipha S.A. in connection with the Research
Agreement. Out of the $2.0 million, we applied $969,000 to deferred revenue and
the balance to restructuring expenses. In December 1999, we entered into a
settlement agreement with Lipha S.A. for the discontinuation of the Research
Agreement. There will be no further research payments from Lipha S.A.
For the year ended December 31, 1999, we recognized no revenue from this
Research Agreement as we discontinued all research and development activities
related to this Research Agreement in February 1999. For the year ended December
31, 1998, we recognized $1.9 million in revenue from Lipha S.A. collaboration.
In addition, we received a total $2.5 million for issuance of 1,155 shares of
common stock, of which 813 shares were priced at $1,850.00 per share in
September 1998 and 342 shares were priced at $2,920 per share in December 1998,
each representing a 20% premium to the weighted average price of the common
stock at the time of purchase. Revenues from Lipha S.A. accounted for 0%, 70%
and 43% of total revenues earned in 1999, 1998 and 1997, respectively.
In May 1995, we entered into a collaborative agreement with Ono providing
for, among other things, three years of funding for the research and development
of compounds for the treatment of Type II diabetes. Under the agreement, Shaman
was obligated to screen 100 diabetes-specific plants per year in vivo, isolate
and identify active compounds, and participate in any medicinal chemistry
modification. In turn, Ono provided us with access to Ono's preclinical and
clinical development capabilities through proprietary in vitro assays and
medicinal chemistry effort. Ono's development and commercialization rights are
for the countries of Japan, South Korea and Taiwan. Under the terms of the
agreement, Ono provided $7.0 million in collaborative research funding and will
pay preclinical and clinical milestone payments of $4.0 million per compound for
each antidiabetic drug that is commercialized.
We received an additional $1.0 million payment (beyond the $7.0 million
commitment) in December 1996 for enhanced access rights to these compounds. For
the years ended December 31, 1999, 1998 and 1997, Shaman recognized $0,
$790,000, and $2.0 million, respectively in revenue from the Ono collaboration.
Revenues from Ono accounted for 0%, 30% and 57% of total revenues earned in
1999, 1998 and 1997, respectively.
In May 1998, our collaborative agreement with Ono, and the ongoing
research and development funding received pursuant thereto, expired under the
original terms thereof and was not renewed. Under the agreement, Ono will
continue to provide milestone payments and royalties to us on any resulting
products Ono develops from compounds identified during the three-year term of
the agreement.
Costs associated with revenue from these collaborations was minimal for the
year ended December 31, 1999. Costs associated with revenue from these
collaborations totaled $8.2 million and $11.4 million for the year ended
December 31, 1998 and 1997, respectively, and are included in research and
development expenses in the accompanying financial statements.
44
<PAGE>
4. INVESTMENTS
The following is a summary of available-for-sale securities (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1999
--------------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------------------------------------------------
<S> <C> <C> <C> <C>
U.S. corporate commercial paper and other $ 70 $ - $ - $ 70
--------------------------------------------------
Total $ 70 $ - $ - $ 70
==================================================
Above amounts are included in the balance sheet as follows:
Cash and cash equivalents --------------------------------------------------
$ 70 $ - $ - $ 70
--------------------------------------------------
Total $ 70 $ - $ - $ 70
==================================================
DECEMBER 31, 1999
--------------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------------------------------------------------
U.S. Treasury securities and government obligations $2,255 $ - $(5) $2,250
U.S. corporate bonds 1,000 - - 1,000
U.S. corporate commercial paper and other 4,984 - (10) 4,974
--------------------------------------------------
Total $8,239 $ - $(15) $8,224
==================================================
Above amounts are included in the balance sheet as follows:
Cash and cash equivalents $4,957 $ - $(10) $4,947
Short-term investments 3,282 - (5) 3,277
--------------------------------------------------
Total $8,239 $ - $(15) $8,224
==================================================
</TABLE>
The portfolio was classified as cash and cash equivalents as of December
31, 1999. The average remaining maturity of the portfolio was approximately less
than one month as of December 31, 1998.
The estimated fair value amounts have been determined by us using
available market information and appropriate valuation methodologies.
5. INVENTORIES
As of December 31, 1999, we have substantial excess inventory on hand. We
have built up this additional inventory with the expectation that we will sell
it off to our new collaborative partner.
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
1999 1998
--------- ----------
<S> <C> <C>
Raw materials $ 1,587 $ -
Finished goods 131 -
--------- ----------
Total $ 1,718 $ -
========= ==========
</TABLE>
6. LONG-TERM OBLIGATIONS
At December 31, 1999, long-term obligations consist of secured and
unsecured term loans and secured borrowings used to acquire property and
equipment, capital lease arrangements and a leasehold improvement financing
obligation.
In May 1997, we obtained a $5.0 million term loan to payoff pre-existing
debt, finance capital asset acquisitions and finance continued research and
45
<PAGE>
clinical development. The loan is payable in thirty-six equal monthly
installments and the interest rate is 14.58%. The loan is secured by equipment
and intellectual properties of Shaman. The lender was granted warrants to
purchase 200 shares of common stock at $6,250.00 per share, which are
exercisable over a ten-year period. We have attributed a value of $648,000 to
these warrants. This amount has been recorded as a discount on the related debt
and is being amortized as interest expense over the term of the loan.
In April 1999, we amended the agreement to permit us to issue the
convertible promissory notes and delay principal payments under the terms until
we closed the Series R Preferred Stock rights offering in August 1999. In
connection with the amendment, we issued a warrant to purchase 39,512 shares of
Series R Preferred Stock at $15.00 per share. These warrants are exercisable
commencing on August 23, 1999 and through the seventh anniversary of such date.
The warrant is exercisable in common stock after February 1, 2000 and each share
of Series R Preferred Stock was converted into 31 shares of common stock. We
have attributed a value of $498,000 to the new warrants issued in 1999 and
recorded this amount as interest expense in 1999.
In June 1997, we issued $10.4 million of senior convertible notes with an
original maturity of August 2000. Interest, at 5.5% per annum, on the notes was
payable in common stock or cash at our option. Initially, the notes were
convertible into common stock at 100% of the low trading price during a
designated time period prior to conversion provided that the conversion price
would not be less than $5,500.00 per share. Starting in November 1997, the notes
were convertible into common stock at a 10% discount from the low trading price
during a designated time period prior to the conversion, with a floor of
$5,500.00 through March 31, 1998, pursuant to a March 1998 amendment agreement
with the note holders whereby we issued to the note holders three-year warrants
to purchase an aggregate of 138 shares of common stock at an exercise price of
$7,500.00 per share as consideration for entering into the amendment agreement.
We have attributed a value of $309,000 to these warrants. This amount was
recorded as a discount on the related debt and was amortized as interest expense
over the term of the loan. Of the notes issued, $400,000 was issued to the
placement agent as part of the placement fee. We paid the placement agent an
additional $300,000 in cash. The placement fees and other offering costs have
been capitalized in other assets as deferred issuance costs and were amortized
to interest expense over the life of the notes to the extent the notes were not
converted to common stock. The net proceeds totaled approximately $9.5 million
after the placement agent's fees and other offering expenses. In connection with
the issuance of the notes, we recognized a non-cash charge in the amount of
$3,692,000, representing the value attributed to the in-the-money conversion
feature of the senior convertible notes.
Through December 9, 1998, an aggregate principal balance of approximately
$5.6 million of the Senior Convertible Notes was converted into an aggregate of
2,571 shares of common stock. On December 10, 1998, we issued to the note
holders an aggregate of 4,784 shares of our Series D Convertible Preferred Stock
in exchange for the cancellation of an aggregate of $4.8 million (including
accrued interest) of the notes.
In December 1999, we entered into a note purchase agreement with an
existing stockholder, pursuant to 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 consideration for extending the loan, we shall issue to
the note holder warrants to purchase 201,207 shares of common stock at an
exercise price of $0.497 per share. These warrants may be exercised at anytime
on or before the fourth anniversary of this loan.
We also acquired certain equipment and furniture pursuant to capital lease
arrangements. The gross amount of equipment and furniture and the related
accumulated amortization recorded under capital leases included in property and
equipment are as follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
At December 31,
Equipment and furniture $ 1,343,691 $ 2,401,286
Less accumulated amortization (1,237,282) (1,668,460)
------------ ------------
$ 106,409 $ 732,826
============ ============
</TABLE>
Amortization of assets acquired under capital leases is included in
depreciation and amortization expense.
In connection with the facility lease described in Note 6, we entered into
an agreement with the former tenant of the facility to acquire approximately
$1.5 million of tenant improvements by making annual payments to the former
tenant, including accrued interest of $540,000 in 2000 through 2002. The 1999
payment has not yet been made.
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<PAGE>
7. FAIR VALUE OF LONG-TERM OBLIGATIONS
The fair values of our long-term obligations are estimated using
discounted cash flow analyses based on our current incremental borrowing rate
for similar types of borrowing arrangements. The carrying amounts and fair
values of long-term obligations consisted of the following at December 31, 1999:
<TABLE>
<CAPTION>
CARRYING VALUE FAIR VALUE
-------------- ----------
<S> <C> <C>
Leasehold improvements financings ........ $1,765,156 $ 977,809
Secured Loan ............................. $ 723,104 $ 589,776
</TABLE>
At December 31, 1999, future payments on long-term obligations are as
follows:
<TABLE>
<CAPTION>
LEASEHOLD
SECURED CAPITAL IMPROVEMENT INVENTORY
LOAN LEASES FINANCING FINANCING TOTAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
2000........................................ $ 723,104 $ 281,333 $1,016,341 $ 221,000 $ 2,241,778
2001........................................ -- 270,635 540,000 -- 810,635
2002........................................ -- 60,673 540,000 -- 600,673
2003........................................ -- -- -- -- --
2004........................................ -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Total minimum payments....................... 723,104 612,641 2,096,341 221,000 3,653,086
Less amount representing interest
(at rates ranging from 9.5% to 14.58%)..... (97,434) (81,109) (331,186) (21,000) (530,729)
----------- ----------- ----------- ----------- -----------
625,670 531,532 1,765,155 200,000 3,122,357
Less current installments ................... (625,670) (241,049) (860,647) (200,000) (1,927,366)
----------- ----------- ----------- ----------- -----------
Long-term obligations, excluding
current installments ..................... $ -- $ 290,483 $ 904,508 $ -- $ 1,194,991
=========== =========== =========== =========== ===========
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
We lease our research and office facility in South San Francisco,
California under a noncancellable agreement expiring 2003, with options to renew
for a total of ten years. We are required to pay operating costs, including
property taxes, utilities, insurance and maintenance.
At December 31, 1999, the minimum noncancellable future rental payments
under our operating leases are:
<TABLE>
<CAPTION>
<S> <C>
2000 $ 1,544,000
2001 1,591,000
2002 1,639,000
2003 281,000
------------
5,055,000
Less: Future sublease payments (1,248,000)
------------
$ 3,807,000
============
</TABLE>
Rent expense for each of the three years ended December 31, 1999, 1998 and
1997 was approximately $961,000, $1,189,000 and $1,154,000, respectively. Rental
expenses are net of sublease income of which $486,000 was recognized in 1999.
In February 1990, we entered into a License Agreement with Dr. Michael
Tempesta. The maximum royalty claimed made by Dr. Tempesta is two percent on net
sales of a certain antiviral agent. In November 1996, a demand for arbitration
was filed by Shaman to address a claim by Dr. Tempesta over the scope and
coverage, if any, of the License Agreement. On June 2, 1999, Shaman and Dr.
Tempesta entered into a Settlement Agreement and Release pursuant to which,
among other things, Shaman agreed to pay certain royalties on sales of certain
pharmaceutical products derived from SP-303, under the License Agreement dated
February 8, 1990 between Shaman and Dr. Tempesta, and (2) issued 16,667 shares
of our Series R Preferred Stock to Dr. Tempesta in compromise of attorneys fees
and costs incurred by Dr. Tempesta in connection with the arbitration
47
<PAGE>
proceeding. There currently exists a dispute with Dr. Tempesta over the scope
and coverage of botanicals product derived from SP-303, if any, of the
Settlement Agreement and Release.
We are involved in a litigation and disputes which are incidental to our
business. While it is not possible to predict or determine the outcome of such
litigation and disputes, or to provide an estimate of the losses, if any, that
may arise, we believe the costs associated with all of these actions will not
have a significant effect on our consolidated financial position or liquidity,
but could possibly be significant to the consolidated results of operations.
Further, product liability claims may be asserted in the future relative
to events not known to management at the present time. We have insurance
coverage, which we believe is adequate to protect against such product liability
losses as could materially affect our financial position.
9. CONTRACTUAL AGREEMENTS
We have entered into license, clinical trial and supply agreements with
research organizations and commercial companies. Certain of these agreements
require payments of royalties on future sales of resulting products and may
subject us to minimum annual payments to our contract partners. In addition, we
signed an agreement in 1995, which could result in the payment of milestone
installments if certain development objectives are achieved. To date, payments
under these agreements have not been significant and, at December 31, 1999,
related noncancellable commitments are insignificiant.
10. STOCKHOLDERS' EQUITY
Preferred Stock
We are authorized to issue 2,000,000 shares of preferred stock (877,968
shares of which are issued and outstanding at December 31, 1999). Our Board of
Directors may set the rights and privileges of any preferred stock issued.
In August 1999, we completed the Series R Preferred Stock rights offering.
In the rights offering, we issued 717,149 shares of Series R Convertible
Preferred Stock at $15.00 per share to Shaman's common stockholders of record on
July 14, 1999, raising net cash proceeds of approximately $5.7 million. Of the
717,149 shares issued, 175,968 shares of Series R Preferred Stock were delivered
in payment of expenses to consultants and contractors and 133,334 shares were
delivered to Lipha S.A. in partial settlement of claims. Each share of Series R
Preferred Stock will automatically convert on February 1, 2000 into shares of
common stock at a conversion price equal to the lesser of (i) $5.00 or (ii) the
price that is equal to 10% of the average closing sales price of our common
stock for the 10 trading days ending three trading days prior to February 1,
2000. 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 Stock converted into 31 shares of common
stock on February 1, 2000.
In November 1996, a demand for arbitration was filed by Shaman to address a
claim made by Dr. Tempesta over the scope and coverage, if any, of the license
agreement entered into in February 1990. On June 2, 1999, Shaman and Michael
Tempesta entered into a Settlement Agreement and Release pursuant to which,
among other things, Shaman (1) agreed to pay certain royalties on sales of
certain pharmaceutical products derived from SP-303, under the License Agreement
dated February 8, 1990 between Shaman and Dr. Tempesta, and (2) issued 16,667
shares of Series R Convertible Preferred Stock to Dr. Tempesta in compromise of
attorneys fees and costs incurred by Dr. Tempesta in connection with the
arbitration proceeding.
In April 1999, we entered into a credit facility and note purchase
agreement with certain investors, stockholders, key executives and members of
the board of directors, pursuant to which we borrowed approximately $1.0 million
in July 1999. The convertible promissory notes issued pursuant to the credit
agreement were due and payable on the earlier of (i) 30 days subsequent to the
completion of the public rights offering, or (ii) December 31, 1999. Interest on
the convertible promissory notes was accrued at an annual rate of 12%. The
convertible promissory notes were secured by certain assets of Shaman and were
convertible into shares of Series R Preferred Stock, or into common stock if no
public offering occurred prior to December 31, 1999. In connection with the
credit agreement, we issued warrants to purchase shares of Series R Preferred
Stock. The number of shares subject to these warrants is equal to 50% of the
debt amount divided by $15, which was the per share sale price of the Series R
Preferred Stock. These warrants are exercisable, on a cashless basis, commencing
on April 5, 1999, and through the third anniversary date of the public offering.
The conversion price of the convertible promissory notes and the exercise price
of the warrants was $15, which was the per share offering price of the Series R
Preferred Stock. In September 1999, a total of $649,275 of principal and
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<PAGE>
interest under these notes was converted into 43,285 shares of Series R
Preferred Stock and a total of $374,816 of principal and interest under these
notes was repaid to the note holders.
On December 10, 1998, Shaman and certain institutional investors exchanged
an aggregate of $4.8 million (including accrued interest) of the Senior
Convertible Notes (the "Notes") for an aggregate of 4,784 shares of our Series D
Convertible Preferred Stock. Each share of Series D Convertible Preferred Stock
is entitled to receive, when, as, and if declared by the Board of Directors out
of funds legally available for such purpose, cumulative dividends at the rate of
$55 per annum. Dividends on the Series D Preferred Stock are payable in cash or
shares of our common stock or any combination of cash and shares of common
stock, at our option and are payable quarterly on February 1, May 1, August 1
and November 1 of each year. Each share of Series D Preferred Stock is
convertible, at any time, into common stock at the lesser of (a) $1,125.00 per
share or (b) 90% of the low trading price during a designated time period prior
to the conversion. In addition, the holders received an aggregate of 767
warrants to purchase additional shares of common stock in exchange for
surrendering the redemption rights previously held by them under the Notes. The
warrants were priced at 150% of the average closing price for the month of
December 1998. We have attributed a value of $943,680 to these warrants. In
connection with the issuance of the Series D Preferred Stock, we also recognized
a non-cash charge in the amount of $1,063,605, representing the value attributed
to the in-the-money conversion feature of the Series D Preferred Stock.
The delisting of our common stock from The Nasdaq National Market
constituted an Optional Redemption Event (as defined in the Certificate of
Designation of Series D Preferred Stock) for the Series D Preferred Stock. In
connection therewith, on February 4, 1999, we issued a Control Notice (as
defined in the Certificate of Designation of Series D Preferred Stock) that
prevented the redemption of the Series D Preferred Stock. This Control Notice
will remain in effect for as long as we are not listed on any of The Nasdaq
National Market, The Nasdaq SmallCap Market, the American Stock Exchange or the
New York Stock Exchange. Delivery of the Control Notice had the effect of
increasing the annual dividend to $180 per share and adjusting the conversion
price of the Series D Preferred Stock to 80% of the amount the conversion price
would otherwise be.
In October 1998, we completed the sale to the public of an aggregate of
140,880 shares of our Series C Convertible Preferred Stock for aggregate gross
proceeds of $14.1 million. Each share of Series C Preferred Stock is entitled to
receive cumulative dividends paid semi-annually to the holders of record of such
shares as follows: (i) an annual stock-on-stock dividend, paid in arrears, in
shares of common stock (calculated as the quotient of $10.00 divided by 85% of
the average closing price of the common stock for the 10-day trading period
ending three trading days prior to the date the dividend is paid); plus (ii) a
cash amount equaling 0.00005% of our U.S. net sales of our SP-303/Provir product
for the treatment of diarrhea, if any, for the preceding two calendar quarters
less $5.00. If, under Delaware law, we are unable to pay the cash portion of the
dividends, then the cash portion will be paid in shares of common stock (valued
at 85% of the average closing price of the common stock for the 10-day trading
period ending three trading days prior to the date on which the dividend is
paid). We intend to honor this royalty portion of the dividend through the sale
of our first botanical product, if any. Each share of the Series C Preferred
Stock was convertible for a period of 30 days after the first issuance and will
be convertible again commencing 12 months after the initial issuance date
(August 18, 1998) at the election of each holder, and automatically on the sixth
anniversary of the initial issuance date into greater of (a) 0.0167 shares of
common stock or (b) such number of shares of common stock as equals $100 (the
price paid per share of Series C Preferred Stock) divided by 85% of the average
closing price of the common stock reported by Nasdaq for the 10-day trading
period ending three trading days prior to the date of conversion. The common
stock is currently trading on The Nasdaq OTC Bulletin Board. In connection with
the issuance of the Series C Preferred Stock, we recognized a non-cash charge in
the amount of $678,636. As of December 31, 1999, a total of 41,203 shares of the
Series C Preferred Stock were converted into an aggregate of 907,021 shares of
common stock. The holder of Series C Preferred Stock is entitled to a
liquidation preference of $100 per share.
In June 1998, we entered into Stock Purchase Agreements with certain of
our stockholders pursuant to which we acquired the right to sell to these
stockholders, subject to certain conditions up to an aggregate of 7,000 shares
of Series B Custom Convertible Preferred Stock for an aggregate purchase price
of $7,000,000. The stock purchase agreements were terminated upon the closing of
the Series C Convertible Preferred Stock Financing in October 1998. As
consideration for entering into the stock purchase agreements, we issued to
these stockholders warrants to purchase an aggregate of 350 shares of common
stock. The warrants are exercisable for a period of five years at an exercise
price per share equal to 115% of the average trading price of the common stock
during specified measurement periods. We have attributed a value of $1.5 million
to these warrants.
In July 1996, we closed a private placement pursuant to Regulation S under
the Securities Act of 1933, as amended, in which we received gross proceeds of
$3.3 million for the sale of 400,000 shares of Series A Convertible Preferred
Stock and for the issuance of a six-year warrant to purchase 550 shares of
common stock at an exercise price of $10,180 per share. The Preferred Stock does
not carry a dividend obligation and will convert into common stock no later than
49
<PAGE>
July 23, 1999 at a price per share between $6,000.00 and $8,150.00, depending on
the market value of common stock during the period prior to conversion. On July
23, 1999, we issued 543 shares of common stock upon the conversion of 400,000
shares of Series A Preferred Stock.
Stock Options
ADOPTION OF SERIES R PREFERRED STOCK OPTION PLAN
In September 1999, the Board of Directors of Shaman adopted the Series R
Preferred Stock Option Plan (the "Series R Plan"). A total of 286,790 shares of
Series R Preferred Stock have been reserved for issuance under the Series R
Plan. The Series R Plan shall terminate in December 2009. Any options
outstanding under the Series R Plan at the time of its termination shall remain
outstanding until they expire by their terms. The purposes of the Series R Plan
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive for employees,
directors and consultants of the Company and to promote the success of Shaman's
business. Options granted under the Series R Plan may be either incentive stock
options or non-statutory options, with a maximum term of 10 years. The plan
administrator has full power to select, from among the employees, directors and
consultants of the Company eligible for grants, the individuals to whom options
will be granted, and to determine the specific terms and conditions of each
grant, including the number of shares subject to each option, to amend the terms
of outstanding options granted under the Series R Plan. The plan also provides
for automatic acceleration of the exercise period in the event of certain
corporate transactions, including a merger, asset sale or change in control of
the Company.
A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------------------------------
AT GRANT
WEIGHTED DATE
AVERAGE WEIGHTED
NUMBER PRICE PER EXERCISE AVERAGE
OF SHARES SHARE PRICE FAIR VALUE
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE AT JANAURY 1, 1999................. -- $ -- $ --
Granted at fair value of stock........ 255,814 10.25 10.25 $ 7.85
Exercised ............................ -- -- --
Forfeited ............................ -- -- --
---------- ---------- -----------
BALANCE AT DECEMBER 31, 1999............... 255,814 $ 10.25 $ 10.25
</TABLE>
At December 31, 1999, 123,537 shares under options were exercisable at a
weighted average exercise price of $10.25 per share. Each share of Series R
Preferred Stock was converted into 31 shares of common stock, such that these
options are currently exercisable in shares of common stock commencing on
February 1, 2000 and the exercise price is $0.3396 per share.
The following table summarizes information regarding Series R Preferred
Stock options outstanding at December 31, 1999:
<TABLE>
<CAPTION>
SHARES UNDER
OPTIONS EXERCISABLE
OPTION SHARES WEIGHTED AT DECEMBER 31, 1999
OUTSTANDING AVERAGE -----------------------------
RANGE OF AT REMAINING WEIGHTED WEIGHTED
EXERCISE DECEMBER 31, CONTRACTUAL LIFE AVERAGE AVERAGE
PRICES 1999 (YEARS) EXERCISE PRICE NUMBER EXERCISE PRICE
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 10.25 255,814 9.95 $ 10.25 123,537 $ 10.25
------- -------
$ 10.25 255,814 9.95 $ 10.25 123,537 $ 10.25
======= =======
</TABLE>
COMMON STOCK OPTION PLAN
In December 1992, we adopted the 1992 Stock Option Plan (the "Plan") as
the successor plan to our 1990 Stock Option Plan. The Plan was amended in June
1999. The Plan will terminate on the earlier of December 31, 2008 or the date on
which all shares available for issuance under the Plan have been issued or
canceled. The Plan provides for two separate components: the Discretionary
Option Grant Program and the Automatic Option Grant Program.
50
<PAGE>
Under the Discretionary Option Grant Program, options granted may either
be incentive options or non-statutory options. Incentive options may be granted
to employees at a price not less than the fair market value of common stock on
the grant date. Non-statutory options may be granted at a price determined by
the plan administrator. Each option granted is exercisable as determined by the
plan administrator, with a term not to exceed ten years. The Plan also allows
for the granting of options with repurchase rights and stock appreciation rights
at the discretion of the plan administrator.
Under the Automatic Option Grant Program, each individual who becomes a
non-employee board member on or after the effective date of the Plan is
automatically granted a non-statutory stock option to purchase number of shares
of common stock equal to one half of one percent (0.5%) of the number of voting
shares of Shaman's capital stock outstanding as of February 1, 2000.
On September 18, 1998, the Plan Administrator implemented an option
cancellation/regrant program for all employees of the Company, including our
executive officers. Pursuant to that program, each such employee was given the
opportunity to surrender his or her outstanding options under the Plan with
exercise prices in excess of $1,281.00 per share in return for a new option
grant for the same number of shares but with an exercise price of $1,281.00 per
share, the closing selling price per share of common stock as reported on the
Nasdaq National Market on the September 18, 1998 grant date of the new option.
Options for a total of 1,855 shares with a weighted average exercise price of
$5,275.00 per share were surrendered for cancellation, and new options for the
same number of shares were granted with the $1,281.00 per share exercise price.
To the extent the higher-priced option was exercisable for any option shares on
the September 18, 1998 cancellation date, the new option granted in replacement
of that option will become exercisable for those shares in a series of twelve
(12) successive equal monthly installments upon the optionee's completion of
each month of service over the one (1) year period measured from the September
18, 1998 grant date. The option will become exercisable for the remaining option
shares in one or more installments over the optionee's period of continued
service, with each such installment to vest on the same vesting date in effect
for that installment under the cancelled higher-priced option.
On October 20, 1998, the Plan Administrator implemented an option
cancellation/regrant program for the non-employee Board members (excluding the
Plan Administrator) and certain key independent consultants holding options
under the Plan. Pursuant to the October program, each such individual was given
the opportunity to surrender his or her outstanding options under the Plan with
exercise prices in excess of $1,437.50 per share in return for a new option
grant for the same number of shares but with an exercise price of $1,437.50 per
share, the closing selling price per share of common stock as reported on the
Nasdaq National Market on the October 20, 1998 grant date of the new option.
Options for a total of 585 shares with a weighted average exercise price of
$6,123.00 per share were surrendered for cancellation, and new options for the
same number of shares were granted with the $1,437.50 per share exercise price.
To the extent the higher-priced option was exercisable for any option shares on
the October 20, 1998 cancellation date, the new option granted in replacement of
that option will become exercisable for those shares in a series of twelve (12)
successive equal monthly installments upon the optionee's completion of each
month of service over the one (1) year period measured from the October 20, 1998
grant date. The option will become exercisable for the remaining option shares
in one or more installments over the optionee's period of continued service,
with each such installment to vest on the same vesting date in effect for that
installment under the cancelled higher-priced option.
Both programs provide for automatic acceleration of the exercise period in
the event of certain corporate transactions, including a merger, asset sale or
change in control of the Company.
The 1990 Stock Option Plan provided for the granting of incentive and
non-statutory stock options. Both types of options were immediately exercisable
and expire ten years from the date of grant. Vesting of optioned shares was
determined by the board of directors and generally occurred over a two- to
four-year period from the date of grant. At December 31, 1999, all options to
purchase common stock issued under this plan were vested.
51
<PAGE>
A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------------------------------------------
AT GRANT
WEIGHTED DATE
AVERAGE WEIGHTED
NUMBER EXERCISE PRICE EXERCISE AVERAGE
OF SHARES PER SHARE PRICE FAIR VALUE
--------- ---------------------- ---------- ----------
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1997................ 2,102 $ 60.00 - $13,250.00 $5,480.00
Granted at fair value .................. 951 4,130.00 - 6,810.00 5,410.00 $3,460.00
Exercised .............................. (19) 24.00 - 5,880.00 3,290.00
Forfeited .............................. (242) 3,500.00 - 13,250.00 6,400.00
------
BALANCE AT DECEMBER 31, 1997.............. 2,792 60.00 - 13,250.00 5,400.00
Granted at fair value .................. 4,420 1,281.00 - 4,937.50 1,489.50 $1,490.50
Exercised .............................. (16) 60.00 - 3,500.00 1,370.50
Forfeited .............................. (2,783) 1,281.00 - 13,250.00 5,542.00
------
BALANCE AT DECEMBER 31, 1998.............. 4,413 60.00 - 10,750.00 1,406.50
Granted at fair value .................. 21 1,680.00 1,688.00 $1,688.00
Exercised .............................. (1) 240.00 240.00
Forfeited .............................. (4,106) 60.00 - 10,750.00 1,403.00
------
BALANCE AT DECEMBER 31, 1999.............. 327 $60-$10,750.00 $1,466.00
</TABLE>
At December 31, 1999, 310 shares under options were exercisable at a
weighted average exercise price of $1,467.50 per share.
PRO FORMA INFORMATION
We have elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25"), and related interpretations
in accounting for our employee stock options because, as discussed below, the
alternative fair value accounting provided for under SFAS 123 requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of our employee stock
options equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
Pro forma information regarding net loss and net loss per share is
required by SFAS 123, and has been determined as if we had accounted for our
employee stock options granted subsequent to December 31, 1994 under the fair
value method of SFAS 123. The fair value for these options was estimated at the
date of grant using the Black-Scholes option pricing model. The fair value for
these options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ----------- ---------
<S> <C> <C> <C>
Risk-free interest rate ............ 6.04% 4.57% 6.27%
Dividend yield ..................... 0 0 0
Volatility factor .................. 1.46 .75 .75
Weighted average expected life ..... 2.68 years 3.84 years 5 years
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because our employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of our employee stock options.
52
<PAGE>
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to pro-forma net loss over the options' vesting periods.
Our pro forma information follows (in thousands, except for net loss per share
information):
<TABLE>
<CAPTION>
1999 1998 1997
----------- ------------ ------------
<S> <C> <C> <C>
Net loss applicable to common stockholders
Historical ..................................... $ (28,185) $ (38,524) $ (29,289)
Pro forma ...................................... $ (29,407) $ (40,647) $ (31,101)
Net loss per common share
Historical ..................................... $ (140.71) $ (1,916.60) $ (1,722.86)
Pro forma ...................................... $ (146.81) $ (2,025.00) $ (1,827.00)
</TABLE>
RESERVED SHARES
At December 31, 1999, we did not have enough shares available for the
conversion of outstanding Series C, Series D and Series R Preferred Stock and
for issuance upon exercise of outstanding options, warrants and options
available for future grant. At the Special Meeting held on January 28, 2000, the
stockholders approved an increase of Shaman's authorized common stock by
280,000,000 shares, to a total of 500,000,000 shares and approved the
authorization for the Board of Directors to effect any one of five different
reverse stock splits of the Shaman's Common Stock in a ratio of from
one-for-fifty to up to one-for-one thousand. On January 31, 2000, Shaman
effected a 1-for-50 reverse stock split.
WARRANTS
A summary of outstanding warrants to purchase common stock at December 31,
1999 is as follows:
<TABLE>
<CAPTION>
TERM
DESCRIPTION NUMBER OF IN
WARRANTS EXERCISE PRICE YEARS EXPIRATION
-------------------------------------------- ------------ --------------------- --------- --------------
<S> <C> <C> <C> <C>
Lease financing arrangements................ 92 $ 2,400.00 - $10,830.00 5 - 7 2000 - 2002
Series A Convertible Preferred Stock........ 550 10,184.00 6 2002
Secured term loan .......................... 200 6,250.00 10 2007
Senior convertible notes ................... 138 7,500.00 3 2001
Series B Convertible Preferred Stock........ 350 2,650.00 - 4,820.00 5 2003
Series D Convertible Preferred Stock........ 767 3,070.00 5 2003
---------
2,097
=========
</TABLE>
In addition, there were 73,109 shares of Series R Preferred Stock warrants
issued in connection with issuance of the bridge loan financing and amending the
secured term loan agreement in 1999. These warrants expire in year 2003 and year
2006. Each share of Series R Preferred Stock was converted on February 1, 2000
into 31 shares of common stock, such that these warrants are currently
exercisable for 2,266,379 shares of common stock at an exercise price of $0.488
per share (taking into effect the 1-for-50 reverse stock split effectuated on
January 31, 2000).
11. TAXES
As of December 31, 1999, we had federal net operating loss carryforwards
of approximately $155.6 million. The net operating loss and credit carryforwards
will expire at various dates beginning in 2004 through 2019, if not sooner
utilized.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and the amounts used for income tax purposes.
53
<PAGE>
Significant components of our deferred tax assets and liabilities for
federal and state income taxes as of December 31, 1999 and 1998 are as follows
(in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards ................. $ 54,200 $ 48,600
Research credits (expiring in 2004-- 2019)........ 3,000 3,900
Capitalized research and development costs....... 7,000 6,400
Other ............................................ 200 (1,200)
-------- --------
Total deferred tax assets.................... 64,400 57,700
Valuation allowance for deferred tax assets ...... (64,400) (57,700)
-------- --------
Net deferred tax asset ........................... $ -- $ --
======== ========
</TABLE>
The net valuation allowance increased by $6.7 million during the year
ended December 31, 1999.
Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the "change in ownership" provisions of the
Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization. The increase is primarily because management believes that
based on a number of factors, the available objective evidence creates
sufficient uncertainty regarding the realizability of these assets.
Reconciliation between the expected tax rate of 34% and actual tax
rate is primarily due to the change of the valuation allowance and state taxes.
12. SUBSEQUENT EVENTS
REVERSE STOCK SPLIT
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.
CONVERSION OF SERIES R PREFERRED STOCK
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) $5.00 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.
CONVERTIBLE PROMISSORY NOTE
In February 2000, Shaman and a wholly-owned subsidiary of Shaman which we
intend to name Shaman.com, have entered into a convertible promissory note
agreement with certain stockholders in connection with a bridge loan financing,
raising approximately $3.5 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 note holders at a discount 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 Shaman.com 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, $500,000 of the unpaid
principal and accrued interest of the note becomes due and the remaining amount
of the unpaid principal and accrued interest will convert into shares of the
Company's common stock. Shaman is currently negotiating with holders of the Note
to amend the conversion price of the Note into Shaman's common stock from a
conversion price of $0.497 per share to the lower of (i) $0.497 per share or 10
days weighted average price, with a floor of $0.30 per share.
54
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On February 15, 2000, Ernst & Young LLP was dismissed as Shaman's
independent auditors. The reports of Ernst & Young on the financial statements
for December 31, 1998 and 1997 (the two most recent audited fiscal years)
contained no adverse opinion or disclaimer of opinion. The report of Ernst &
Young for the year ended December 31, 1998 contains an explanatory paragraph
with respect to the Company's ability to continue as a going concern as
mentioned in Note 1 of the notes to the financial statements. Shaman's Board of
Directors participated in and approved the decision to hire new independent
accountants. In connection with its audits for December 31, 1998 and 1997 (the
two most recent audited fiscal years) and subsequent interim periods through
February 15, 2000, there have been no disagreements with Ernst & Young on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of Ernst & Young would have caused them to make reference thereto
in their report on the financial statements for such years.During December 31,
1998 and 1997 (the two most recent audited fiscal years) and subsequent interim
periods through February 15, 2000, there have been no reportable events (as
defined in Regulation S-K Item 304 (a) (l)(iv). Shaman has furnished Ernst &
Young with a copy of the disclosure made in the Form 8-K filed with the
Commission in connection with the change in its Certified Public Accountants
("Form 8-K"). Ernst & Young furnished the Company with a letter addressed to the
SEC stating whether or not it agrees with the statements made in the Form 8-K. A
copy of such letter, dated February 18, 2000, is filed as Exhibit 16 to the Form
8-K.
The Company has elected BDO Seidman, LLP as its new independent accountants
as of February 15, 2000. During the two most recent fiscal years and through
February 15, 2000, the Registrant has not consulted with BDO Seidman, LLP
regarding either (i) the application of accounting principles to a specified
transaction, either completed or proposed; or the type of audit opinion that
might be rendered on the Registrant's financial statements, and either a written
report was provided to the Registrant or oral advice was provided that BDO
Seidman, LLP concluded was an important factor considered by the Registrant in
reaching a decision as to the accounting, auditing or financial reporting
issued; or (ii) any matter that was either the subject of a disagreement, as
that term is defined in Item 304 (a)(I)(iv) of Regulation S-K and the related
instructions to Item 304 of Regulation S-K, or a reportable event, as that term
is defined in Item 304 (a)(l)(iv) of Regulation S-K.
55
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
The information required by this Item 10 concerning the directors and
executive officers of the Company is incorporated by reference from the
information under the captions "Proposal One -- Election of Directors --
Information With Respect to Nominees" and "Executive Compensation and Other
Information -- Directors and Executive Officers" in the our Definitive Proxy
Statement to be filed with the Commission pursuant to Regulation 14A in
connection with our 2000 Annual Meeting of Stockholders (the "Proxy Statement").
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The information required by this Item 10 as to compliance with Section
16(a) of the Securities Exchange Act of 1934 is incorporated by reference from
the information under the caption "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated by reference from
the information under the caption "Executive Compensation and Other Information"
in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is incorporated by reference from
the information under the caption "Security Ownership of Management and Certain
Beneficial Owners" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item 13 is incorporated by reference from the
information under the caption "Executive Compensation and Other Information --
Certain Relationships and Related Transactions" in the Proxy Statement.
56
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
The following Financial Statements together with the Report of Independent
Auditors are filed as part of this Form 10-K under Item 8 above:
Report of Independent Auditors
Balance Sheets at December 31, 1999 and 1998
Statements of Operations for each of the years ended December 31, 1999,
1998 and 1997
Statements of Stockholders' Equity for each of the years ended December
31, 1999, 1998 and 1997
Statements of Cash Flows for each of the years ended December 31, 1999,
1998 and 1997
Notes to Financial Statements
(a) (2) 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.
(b) Reports on Form 8-K
A Report on Form 8-K, as amended, was filed on March 3, 2000 containing
information required by Item 4, Change in Registrant's Certifying
Accountant.
(c) Exhibits
EXHIBIT
NUMBER DESCRIPTION
---------- ----------------------------------------------------------------
3.1(22) Amended and Restated Certificate of Incorporation, as filed with
the Delaware Secretary of State on June 22, 1999.
3.2(9) Amended and Restated Bylaws, as amended March 29, 1996.
4.1(22) Certificate of Designation of Preferences of Series R Preferred
Stock of the Registrant, as filed with the Delaware Secretary of
State of July 19, 1999.
4.2(21) Form of warrant, dated April 5, 1999, issued to certain
investors of the Registrant.
4.3(21) Form of warrant, dated April 30, 1999, issued to MMC/GATX
Partnership No.1
10.1(1)(19) 401(k) Plan.
10.2(1)(19) Form of Stock Purchase Agreement.
10.3(1) Form of Indemnification Agreement.
10.4(1) Form of Agreement with Scientific Strategy Team Members.
10.5(1) Form of Proprietary Information and Inventions
Agreement-Employees.
10.6(1) Form of Proprietary Information and Inventions
Agreement-Consultants.
10.7(1)(18) License Agreement dated February 8, 1990, between Shaman and Dr.
Michael Tempesta.
10.12(1) Industrial Lease Agreement dated January 1, 1993, between Shaman
and Grand/Roebling Investment Company.
10.14(4) Common Stock Warrant dated September 30, 1993, issued to
MMC/GATX Partnership No. I.
10.15(4) Common Stock Warrant dated October 5, 1993, issued to Meier
Mitchell & Co.
10.16(6)(18) Joint Research and Product Development Agreement, dated May 24,
1995, by and between Ono Pharmaceutical Co., Ltd. and
Registrant.
10.17(a)(10) Amendment Agreement, dated December 4, 1996, to the Joint
Research and Product Development Agreement by and between Ono
57
<PAGE>
Pharmaceutical Co., Ltd. and Registrant.
10.18(6)(18) License Agreement, dated June 8, 1995, by and between Bayer AG
and Registrant.
10.20(9)(18) Subscription Agreement dated July 25, 1996 by and between the
Registrant and Fletcher International Limited.
10.21(10)(18)Joint Research and Product Development and Commercialization
Agreement dated September 23, 1996, by and between Lipha,
Lyonnaise Industrielle Pharmaceutique S.A. and the Registrant.
10.22(10)(18)Stock Purchase Agreement dated September 23, 1996, by and
between Lipha, Lyonnaise Industrielle Pharmaceutique S.A. and
the Registrant.
10.23(11)(19)Shaman Pharmaceuticals, Inc. 1992 Stock Option Plan (as Amended
and Restated on February 14, 1997).
10.24(3)(19) Form of Notice of Grant with Stock Option Agreement.
10.25(3)(19) Form of Addendum to Stock Option Agreement (Special Tax
Elections).
10.26(3)(19) Form of Addendum to Stock Option Agreement (Limited Stock
Appreciation Rights).
10.27(11)(19)Form of Non-Employee Director Automatic Stock Option Agreement.
10.28(12) Masopracol License Agreement, dated as of March 19, 1997, by and
between Access Pharmaceuticals, Inc. and the Registrant.
10.29(12)(18)Amended and Restated Masopracol License Agreement, dated as of
April 1997, by and between Access Pharmaceuticals, Inc. and the
Registrant.
10.30(12) Loan and Security Agreement, dated as of May 7, 1997, between
MMC/GATX Partnership I and Registrant.
10.30A(12) Amendment No. 1 to Loan and Security Agreement, dated as of
June 30, 1997, by and between Registrant and MMC/GATX
Partnership No. I.
10.30B(15) Waiver letter dated July 16, 1998, executed by Shaman
Pharmaceuticals, Inc. and approved by MMC/GATX Partnership No. I
as to the payment of dividends on the Series C Preferred Stock.
10.30C(21) Amendment No. 2 to Loan and Security Agreement, dated as of
April 30, 1999, by and between the Registrant and MMC/GATX
Partnership No.1.
10.31(12) Secured Promissory Note, dated May 16, 1997, issued in favor of
MMC/GATX Partnership No. I.
10.32(12) Warrant, granted May 7, 1997, in favor of MMC/GATX Partnership
No. I.
10.33(12) Amendment to Warrants, dated May 7, 1997, MMC/GATX Partnership
No. I and Registrant.
10.34(12) Engagement Agreement, dated April 7, 1997, by and between
Registrant and Diaz & Altschul Capital, LLC.
10.35(12) Amended Engagement Agreement, dated June 30, 1997, by and
between Registrant and Diaz & Altschul Capital, LLC.
10.36(12) Form of Note Purchase Agreement, dated as of June 30, 1997, by
and between Registrant and certain investors.
10.37(13) Master Lease Agreement, dated September 15, 1997, between
Registrant and Transamerica Business Credit Corporation, with
related schedules.
10.38(13) Amendment to Note Purchase Agreement, dated as of June 30, 1997,
by and between Registrant and Certain investors.
10.39(14) Amendment Agreement, dated as of March 18, 1998, by and between
the Registrant and certain investors.
10.40(14) Form of Common Stock Purchase Warrant, dated as of March 18,
1998, issued to certain investors.
10.41(14) Second Amendment Agreement, dated as of June 10, 1998, by and
between the Registrant and certain investors.
10.42(17) Exchange Agreement, dated as of December 10, 1998, by and
between Registrant and certain entities.
10.43(19) Common Stock Purchase Agreement dated as of November 18, 1998.
10.44(19)(20)Employment Agreement dated as of April 1, 1998, by and between
Registrant and John W.S. Chow.
10.45(19)(20)Promissory Note dated as of June 17, 1998, by and between
Registrant and John W.S. Chow.
10.47(21) Form of Credit Facility and Note Purchase Agreement, dated as of
April 5, 1999, by and between the Registrant and the Investors
named therein.
10.47A(21) Amendment No. 1 to Credit Facility and Note Purchase Agreement,
dated as of April 13, 1999 by and between the Registrant and
Investors named in the Credit and Facility Note Purchase
Agreement.
10.47B(21) Amendment No. 2 to Credit Facility and Note Purchase Agreement,
dated as of April 30, 1999 by and between the Registrant and the
Investors named in the Credit Facility and Note Purchase
Agreement.
10.48*+ License and Sale Agreement dated as of August 10, 1999, by and
58
<PAGE>
between Registrant and Metabolex, Inc.
10.49*+ Settlement Agreement dated as of December 30, 1999, by and
between Registrant and Lipha S.A.
23.1* Consent of BDO Seidman LLP, Independent Auditors.
23.2* Consent of Ernst & Young LLP, Independent Auditors.
27.1* Financial Data schedule for the period ended December 31, 1999.
- - -------------------------
* Filed herewith.
+ We have sought confidential treatment with the Commission for the
selected portion of this exhibit. The omitted portion will be
separately filed with the Commission pursuant to Rule 24b-2.
(1) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-1, File No. 33-55892 which was declared
effective January 26, 1993.
(2) Intentionally omitted.
(3) Incorporated by reference to exhibits filed on July 23, 1993 with
Registrant's Registration Statement on Form S-8, File No. 33-66450.
(4) Incorporated by reference to exhibits filed on November 10, 1993 with
Registrant's Registration Statement on Form S-1, File No. 33-71506.
(5) Intentionally omitted.
(6) Incorporated by reference to exhibits filed with Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995, as amended.
(7) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995.
(8) Intentionally omitted.
(9) Incorporated by reference to exhibits filed with Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996, as amended.
(10) Incorporated by reference to exhibits filed with Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996, as amended.
(11) Incorporated by reference to exhibits filed on June 30, 1997 with
Registrant's Registration Statement on Form S-8, File No. 333-30365.
(12) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form S-3, File No. 333-31843.
(13) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1997.
(14) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form S-3, File No. 333-49025.
(15) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form S-2, File No. 333-59053.
(16) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form S-3, File No. 333-67023.
(17) Incorporated by reference to exhibits filed on December 11, 1998 with
Registrant's Current Report on Form 8-K.
(18) Confidential treatment has been granted with respect to certain portions
of these agreements.
(19) Management contract or compensation plan.
(20) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1998.
(21) Incorporated by reference to exhibits filed with Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
(22) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-1, File No. 333-78115, which was
declared effective on July 16, 1999.
59
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 30, 2000 SHAMAN PHARMACEUTICALS, INC.
By: /s/ Lisa A. Conte
----------------------------------
Lisa A. Conte
President, Chief Executive Officer
and Chief Financial Officer
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 Report on Form 10-K, 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 Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Lisa A. Conte President, Chief Executive Officer, March 30, 2000
____________________ Chief Financial Officer and Director
Lisa A. Conte (principal executive and financial officer)
/s/ Adrian D.P. Bellamy Director March 30, 2000
________________________
Adrian D.P. Bellamy
/s/ Jeffrey Berg Director March 30, 2000
______________________
Jeffrey Berg
/s/ Herbert H. McDade, Jr. Director March 30, 2000
__________________________
Herbert H. McDade, Jr.
/s/ G. Kirk Raab Chairman of the Board March 30, 2000
______________________
G. Kirk Raab
/s/ M. David Titus Director March 30, 2000
_____________________
M. David Titus
/s/ Loren D. Israelsen Director March 30, 2000
_____________________
Loren D. Israelsen
60
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
---------- ----------------------------------------------------------------
3.1(22) Amended and Restated Certificate of Incorporation, as filed with
the Delaware Secretary of State on June 22, 1999.
3.2(9) Amended and Restated Bylaws, as amended March 29, 1996.
4.1(22) Certificate of Designation of Preferences of Series R Preferred
Stock of the Registrant, as filed with the Delaware Secretary of
State of July 19, 1999.
4.2(21) Form of warrant, dated April 5, 1999, issued to certain
investors of the Registrant.
4.3(21) Form of warrant, dated April 30, 1999, issued to MMC/GATX
Partnership No.1
10.1(1)(19) 401(k) Plan.
10.2(1)(19) Form of Stock Purchase Agreement.
10.3(1) Form of Indemnification Agreement.
10.4(1) Form of Agreement with Scientific Strategy Team Members.
10.5(1) Form of Proprietary Information and Inventions
Agreement-Employees.
10.6(1) Form of Proprietary Information and Inventions
Agreement-Consultants.
10.7(1)(18) License Agreement dated February 8, 1990, between Shaman and Dr.
Michael Tempesta.
10.12(1) Industrial Lease Agreement dated January 1, 1993, between Shaman
and Grand/Roebling Investment Company.
10.14(4) Common Stock Warrant dated September 30, 1993, issued to
MMC/GATX Partnership No. I.
10.15(4) Common Stock Warrant dated October 5, 1993, issued to Meier
Mitchell & Co.
10.16(6)(18) Joint Research and Product Development Agreement, dated May 24,
1995, by and between Ono Pharmaceutical Co., Ltd. and
Registrant.
10.17(a)(10) Amendment Agreement, dated December 4, 1996, to the Joint
Research and Product Development Agreement by and between Ono
Pharmaceutical Co., Ltd. and Registrant.
10.18(6)(18) License Agreement, dated June 8, 1995, by and between Bayer AG
and Registrant.
10.20(9)(18) Subscription Agreement dated July 25, 1996 by and between the
Registrant and Fletcher International Limited.
10.21(10)(18)Joint Research and Product Development and Commercialization
Agreement dated September 23, 1996, by and between Lipha,
Lyonnaise Industrielle Pharmaceutique S.A. and the Registrant.
10.22(10)(18)Stock Purchase Agreement dated September 23, 1996, by and
between Lipha, Lyonnaise Industrielle Pharmaceutique S.A. and
the Registrant.
10.23(11)(19)Shaman Pharmaceuticals, Inc. 1992 Stock Option Plan (as Amended
and Restated on February 14, 1997).
10.24(3)(19) Form of Notice of Grant with Stock Option Agreement.
10.25(3)(19) Form of Addendum to Stock Option Agreement (Special Tax
Elections).
10.26(3)(19) Form of Addendum to Stock Option Agreement (Limited Stock
Appreciation Rights).
10.27(11)(19)Form of Non-Employee Director Automatic Stock Option Agreement.
10.28(12) Masopracol License Agreement, dated as of March 19, 1997, by and
between Access Pharmaceuticals, Inc. and the Registrant.
10.29(12)(18)Amended and Restated Masopracol License Agreement, dated as of
April 1997, by and between Access Pharmaceuticals, Inc. and the
Registrant.
10.30(12) Loan and Security Agreement, dated as of May 7, 1997, between
MMC/GATX Partnership I and Registrant.
10.30A(12) Amendment No. 1 to Loan and Security Agreement, dated as of
June 30, 1997, by and between Registrant and MMC/GATX
Partnership No. I.
10.30B(15) Waiver letter dated July 16, 1998, executed by Shaman
Pharmaceuticals, Inc. and approved by MMC/GATX Partnership No. I
as to the payment of dividends on the Series C Preferred Stock.
10.30C(21) Amendment No. 2 to Loan and Security Agreement, dated as of
April 30, 1999, by and between the Registrant and MMC/GATX
Partnership No.1.
10.31(12) Secured Promissory Note, dated May 16, 1997, issued in favor of
MMC/GATX Partnership No. I.
10.32(12) Warrant, granted May 7, 1997, in favor of MMC/GATX Partnership
No. I.
10.33(12) Amendment to Warrants, dated May 7, 1997, MMC/GATX Partnership
No. I and Registrant.
10.34(12) Engagement Agreement, dated April 7, 1997, by and between
61
<PAGE>
Registrant and Diaz & Altschul Capital, LLC.
10.35(12) Amended Engagement Agreement, dated June 30, 1997, by and
between Registrant and Diaz & Altschul Capital, LLC.
10.36(12) Form of Note Purchase Agreement, dated as of June 30, 1997, by
and between Registrant and certain investors.
10.37(13) Master Lease Agreement, dated September 15, 1997, between
Registrant and Transamerica Business Credit Corporation, with
related schedules.
10.38(13) Amendment to Note Purchase Agreement, dated as of June 30, 1997,
by and between Registrant and Certain investors.
10.39(14) Amendment Agreement, dated as of March 18, 1998, by and between
the Registrant and certain investors.
10.40(14) Form of Common Stock Purchase Warrant, dated as of March 18,
1998, issued to certain investors.
10.41(14) Second Amendment Agreement, dated as of June 10, 1998, by and
between the Registrant and certain investors.
10.42(17) Exchange Agreement, dated as of December 10, 1998, by and
between Registrant and certain entities.
10.43(19) Common Stock Purchase Agreement dated as of November 18, 1998.
10.44(19)(20)Employment Agreement dated as of April 1, 1998, by and between
Registrant and John W.S. Chow.
10.45(19)(20)Promissory Note dated as of June 17, 1998, by and between
Registrant and John W.S. Chow.
10.47(21) Form of Credit Facility and Note Purchase Agreement, dated as of
April 5, 1999, by and between the Registrant and the Investors
named therein.
10.47A(21) Amendment No. 1 to Credit Facility and Note Purchase Agreement,
dated as of April 13, 1999 by and between the Registrant and
Investors named in the Credit and Facility Note Purchase
Agreement.
10.47B(21) Amendment No. 2 to Credit Facility and Note Purchase Agreement,
dated as of April 30, 1999 by and between the Registrant and the
Investors named in the Credit Facility and Note Purchase
Agreement.
10.48*+ License and Sale Agreement dated as of August 10, 1999, by and
between Registrant and Metabolex, Inc.
10.49*+ Settlement Agreement dated as of December 30, 1999, by and
between Registrant and Lipha S.A.
23.1* Consent of BDO Seidman LLP, Independent Auditors.
23.2* Consent of Ernst & Young LLP, Independent Auditors.
27.1* Financial Data schedule for the period ended December 31, 1999.
- - -------------------------
* Filed herewith.
+ We have sought confidential treatment with the Commission for the
selected portion of this exhibit. The omitted portion will be
separately filed with the Commission pursuant to Rule 24b-2.
(1) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-1, File No. 33-55892 which was declared
effective January 26, 1993.
(2) Intentionally omitted.
(3) Incorporated by reference to exhibits filed on July 23, 1993 with
Registrant's Registration Statement on Form S-8, File No. 33-66450.
(4) Incorporated by reference to exhibits filed on November 10, 1993 with
Registrant's Registration Statement on Form S-1, File No. 33-71506.
(5) Intentionally omitted.
(6) Incorporated by reference to exhibits filed with Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995, as amended.
(7) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995.
(8) Intentionally omitted.
(9) Incorporated by reference to exhibits filed with Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996, as amended.
(10) Incorporated by reference to exhibits filed with Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996, as amended.
(11) Incorporated by reference to exhibits filed on June 30, 1997 with
Registrant's Registration Statement on Form S-8, File No. 333-30365.
(12) Incorporated by reference to exhibits filed with Registrant's
62
<PAGE>
Registration Statement on Form S-3, File No. 333-31843.
(13) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1997.
(14) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form S-3, File No. 333-49025.
(15) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form S-2, File No. 333-59053.
(16) Incorporated by reference to exhibits filed with Registrant's
Registration Statement on Form S-3, File No. 333-67023.
(17) Incorporated by reference to exhibits filed on December 11, 1998 with
Registrant's Current Report on Form 8-K.
(18) Confidential treatment has been granted with respect to certain portions
of these agreements.
(19) Management contract or compensation plan.
(20) Incorporated by reference to exhibits filed with Registrant's Annual
Report on Form 10-K for the year ended December 31, 1998.
(21) Incorporated by reference to exhibits filed with Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
(22) Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-1, File No. 333-78115, which was
declared effective on July 16, 1999.
63
<PAGE>
EXHIBIT 10.48
LICENSE AND SALE AGREEMENT
METABOLEX, INC.
AND
SHAMAN PHARAMACEUTICALS, INC.
DATED AS OF AUGUST 10, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
1. DEFINITIONS.............................................................1
1.1 "Compounds".......................................................1
1.2 "Confidential Information"........................................1
1.3 "Derivative"......................................................1
1.4 "Diabetes Program"................................................1
1.5 "Dietary Supplements".............................................1
1.6 "Extracts"........................................................1
1.7 "Intellectual Property Rights"....................................1
1.8 "Licensed Product"................................................2
1.9 "LIPHA Compounds".................................................2
1.10 "LIPHA Extracts"..................................................2
1.11 "LIPHA Plants"....................................................2
1.12 "Metabolex Compound"..............................................2
1.13 "Metabolex Derivative"............................................2
1.14 "Metabolic Disease Field".........................................2
1.15 "Metabolex Extract"...............................................2
1.16 "Net Sales".......................................................2
1.17 "Non-LIPHA Compound"..............................................3
1.18 "Non-LIPHA Plants"................................................3
1.19 "Nutritional Area"................................................3
1.20 "Ono Compounds"...................................................3
1.21 "Patents".........................................................3
1.22 "Pharmaceutical Area".............................................3
1.23 "Purchased Materials".............................................3
1.24 "SP-*********Technology"..........................................4
1.25 "Technology"......................................................4
1.26 "Valid Claim".....................................................4
2. LICENSE GRANTS..........................................................4
2.1 Pharmaceutical Area License Grants................................4
2.2 Pharmaceutical and Nutritional Area License Grants................5
i
<PAGE>
2.3 Nutritional Area License Grants...................................5
2.4 Sublicensees......................................................7
3. PURCHASE OF MATERIALS...................................................8
3.1 Purchase..........................................................8
3.2 Delivery..........................................................8
3.3 Intellectual Property Rights......................................8
3.4 Taxes.............................................................9
3.5 No Warranty.......................................................9
3.6 Purchase of Additional Materials; Return of Materials.............9
3.7 Audits...........................................................10
4. ADDITIONAL AGREEMENTS..................................................11
4.1 Plant Database...................................................11
4.2 Technical Information Assets.....................................11
4.3 Shaman Covenant..................................................11
5. PAYMENT AND ROYALTIES..................................................11
5.1 Payment..........................................................11
5.2 Royalties........................................................11
5.3 Royalty Duration.................................................12
5.4 Limitation on Royalties..........................................12
5.5 Single Royalty...................................................12
5.6 Reduction in Royalty for In-License..............................13
5.7 Reports; Payment of Royalty......................................13
5.8 Audits of Metabolex..............................................13
5.9 Payment Exchange Rate............................................13
5.10 Taxes; Income Tax Withholding....................................14
6. TERM AND TERMINATION...................................................14
6.1 Term.............................................................14
6.2 Termination......................................................14
6.3 Survival.........................................................14
7. LIMITATIONS............................................................14
ii
<PAGE>
8. INTELLECTUAL PROPERTY..................................................14
8.1 Patent Prosecution...............................................14
8.2 Enforcement of Patents...........................................15
8.3 Defense of Third Party Infringement Claims.......................16
8.4 Defense of Patents...............................................16
8.5 Cooperation of Parties...........................................17
9. REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; LIABILITIES...........17
9.1 Representations and Warranties...................................17
9.2 Shaman Representations and Warranties............................17
9.3 Indemnification by Metabolex.....................................18
9.4 Indemnification by Shaman........................................18
9.5 Limitation on Liabilities........................................19
9.6 Survival of Representations and Warranties.......................19
10. CONFIDENTIALITY........................................................19
10.1 Confidentiality Obligation.......................................19
10.2 Confidential Information Defined.................................19
10.3 Authorized Disclosure............................................20
11. METABOLEX OPTIONS......................................................20
11.1 ************.....................................................20
11.2 Purchase of Non-LIPHA Extracts...................................21
11.3 exclusive Rights for Metabolex in Nutritional Area...............22
12. DISPUTE RESOLUTION.....................................................22
12.1 Arbitration......................................................22
12.2 Procedure........................................................23
12.3 Confidentiality..................................................23
12.4 Authority of U.S. District Court.................................24
12.5 Provisional Remedies.............................................24
13. MISCELLANEOUS..........................................................24
13.1 Assignment.......................................................24
13.2 Entire Agreement.................................................24
13.3 Waiver...........................................................24
13.4 Notice...........................................................24
13.5 Severability.....................................................25
13.6 Governing Law....................................................25
13.7 Force Majeure....................................................25
13.8 Bankruptcy Rights................................................25
13.9 Counterparts.....................................................26
iii
<PAGE>
LICENSE AND SALE AGREEMENT
THIS LICENSE AND SALE AGREEMENT (the "Agreement") is made as of the 10th
day of August, 1999 (the "Effective Date"), by and between METABOLEX, INC., a
Delaware corporation ("Metabolex"), having a principal place of business at 3876
Bay Center Place, Hayward, California 94545, and SHAMAN PHARMACEUTICALS, INC., a
Delaware corporation ("Shaman"), having a principal place of business at 213
East Grand Avenue, South San Francisco, CA 94080. Metabolex and Shaman are
sometimes referred to herein individually as a "Party" and collectively as the
"Parties."
BACKGROUND
Shaman has developed certain compounds, extracts, and related intellectual
property rights for use in connection with diabetes. Metabolex desires to
obtain, and Shaman desires to grant, licenses under such intellectual property,
and, in connection with such license, to purchase certain related materials for
the purpose of developing and commercializing products incorporating such
compounds and/or extracts and derivatives thereof.
In consideration of the foregoing premises and the mutual covenants set
forth below, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Metabolex and Shaman hereby agree
as follows:
AGREEMENT
1. DEFINITIONS. As used herein, the following terms shall have the
meanings as defined below. The definition of a term in singular form shall
include that term in the plural form, and vice versa:
1.1 "COMPOUNDS" means the molecular compounds listed on Exhibit A.
1.2 "CONFIDENTIAL INFORMATION" shall have the meaning given in Section
10.2.
1.3 "DERIVATIVE" means a compound that is derived directly from one or
more Compounds.
1.4 "DIABETES PROGRAM" means Shaman's program for the development of
compounds and extracts isolated or prepared from plant materials as
pharmaceuticals or nutritionals for prevention, treatment of, or use in
connection with human diseases in the Metabolic Disease Field.
1.5 "DIETARY SUPPLEMENTS" shall have the meaning given at 21 U.S.C.
Sec. 321(ff).
1.6 "EXTRACTS" means all preparations from plant materials by or on
behalf of Shaman in connection with the Diabetes Program, including without
limitation those listed on Exhibit B.
1.7 "INTELLECTUAL PROPERTY RIGHTS" means Patents, trade secrets, and
know-how.
1
<PAGE>
1.8 "LICENSED PRODUCT" means a commercial product incorporating a
Compound, an Extract, a Metabolex Extract, a Metabolex Compound or a Metabolex
Derivative.
1.9 "LIPHA COMPOUNDS" means all Compounds listed as such on Exhibit A,
and includes Natural LIPHA Compounds and Synthetic LIPHA Compounds.
1.10 "LIPHA EXTRACTS" means all Extracts listed as such on Exhibit B.
1.11 "LIPHA PLANTS" means all plants listed in Exhibit B.
1.12 "METABOLEX COMPOUND" means a compound that is isolated from extracts
from LIPHA Plants or from Metabolex Extracts by Metabolex, any of its
Affiliates, or any sublicensee of the foregoing, that is not a Compound.
1.13 "METABOLEX DERIVATIVE" means a compound that is derived by
Metabolex, any of its Affiliates, or any sublicensee of the foregoing, directly
from a Compound or Metabolex Compound.
1.14 "METABOLIC DISEASE FIELD" means ********, ******* **********, and
******** * (including ***** lowering as related to ******** *). [* indicates
that we intend to seek confidential treatment with the Commission for the
selected portion of this exhibit. The omitted portion will be separately filed
with the Commission pursuant to Rule 24b-2.]
1.15 "METABOLEX EXTRACT" means an extract that Metabolex, any of its
Affiliates, or any sublicensee of the foregoing, prepares from a LIPHA Extract
or LIPHA Plant.
1.16 "NET SALES" means all gross revenues from the sale of Licensed
Products received by Metabolex, its Affiliates or sublicensees on all sales
to third parties (including all amounts invoiced to cover the deductions listed
in paragraphs (a) through (c) below) recognized in accordance with generally
accepted accounting principles from the sale of Licensed Products, less the
following deductions with respect to such sales:
(a) transportation charges, commissions, discounts, credits allowed
for defective or returned goods and other allowances actually paid or allowed,
including but not limited to, prompt payment and volume discounts, charge backs
from wholesalers and other allowances granted to the end commercial customer of
the Licensed Product, whether in cash or trade, provided that all discounts
shall be deductible only to the extent of the normal and customary trade
discounts offered by Metabolex generally for its products;
(b) shipping insurance; and
(c) sales and other taxes based on sales prices and customs and other
duties and charges, in each case when included in gross sales, but not including
taxes assessed on income derived from such sales.
Net Sales of a product which is a combination of a Licensed Product
and one or more products that are not Licensed Products shall be calculated
by multiplying actual Net Sales by the fraction A/(A+B), where A is equal to the
invoice price of the Licensed Product, if sold separately, and B is the total
invoice price of such other product or products if each is sold separately, or,
if not, of the combination of such other product(s), if such combination is sold
separately. If on a country-by-country basis, any of the Licensed Product or
such other products is not sold separately in said country, the value of the
relevant terms "A" and "B" in the above fractions shall be determined by
Metabolex in good faith and reasonably acceptable to Shaman on the basis of the
fair market value of such Licensed Product or other product if it were to be
sold separately in such country.
1.17 "NON-LIPHA COMPOUND" means all Compounds listed as such on Exhibit
A. Each Non-LIPHA Compound is further designated on Exhibit A as either a
Natural Non-LIPHA Compound or a Synthetic Non-LIPHA Compound.
2
<PAGE>
1.18 "NON-LIPHA PLANTS" means plants that are in Shaman's plant inventory
on the Effective Date except for (1) the LIPHA Plants, (2) ***** ********,
(3) ***** ****** ****, and (4) the plant or plants from which exclusive* has
been derived by or on behalf of Shaman as of the Effective Date. [* indicates
that we intend to seek confidential treatment with the Commission for the
selected portion of this exhibit. The omitted portion will be separately filed
with the Commission pursuant to Rule 24b-2.]
1.19 "NUTRITIONAL AREA" means Dietary Supplements, medical foods, foods
for a special dietary use, food additives which when taken into the body
serve to nourish or build up tissues or supply energy and/or maintain, restore,
or support adequate nutritional status or metabolic function. Nutritional Area
shall not include any portion of the Pharmaceutical Area.
1.20 "ONO COMPOUNDS" means Compounds listed as such on Exhibit A.
1.21 "PATENTS" means all foreign and domestic patent applications
(including, without limitation, all provisional, divisional, substitution,
continuation and continuation-in-part applications, and all foreign counterparts
thereof) and all domestic and foreign patents (including, without limitation,
extensions, reissues, reexaminations, renewals, inventors certificates and
foreign counterparts thereof).
1.22 "PHARMACEUTICAL AREA" means use in the diagnosis, cure, mitigation,
treatment or prevention of disease in humans, that requires for marketing in the
relevant country or countries, (i) as to the United States, the filing of a New
Drug Application, PLA, Abbreviated New Drug Application, or reasonable
equivalent for regulatory approval by the U.S. Food and Drug Administration,
(ii) as to countries within the European Union, the filing of a Marketing
Approval Application for regulatory approval by the European Medical Evaluation
Agency, or the filing of an equivalent marketing application for regulatory
approval by the equivalent individual country regulatory authority, (iii) as to
Japan, the filing of a marketing approval application equivalent to a New Drug
Application or a Marketing Approval Application for regulatory approval by the
Japanese Ministry of Health, or (iv) as to any other country, the filing of a
marketing approval application equivalent to a New Drug Application or a
Marketing Approval Application for regulatory approval by the appropriate
regulatory authority for such country.
1.23 "PURCHASED MATERIALS" means the Compounds, Extracts and LIPHA
Plants, in each case in the quantities set forth in Exhibit D.
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1.24 "SP-*********TECHNOLOGY" means all of Shaman's Intellectual Property
Rights in or relating to the compound from Shaman's diabetes program designated
SP-*********and derived from *** ****** ****. [* indicates that we intend to
seek confidential treatment with the Commission for the selected portion of this
exhibit. The omitted portion will be separately filed with the Commission
pursuant to Rule 24b-2.]
1.25 "TECHNOLOGY" means all of Shaman's Intellectual Property Rights in
or relating to the Metabolic Disease Field on the Effective Date, consisting of
the Intellectual Property Rights relating to the Compounds, Extracts
prepared from LIPHA Plants (and, beginning with the exercise of the option
described in Section 11.2, Extracts prepared from Non-LIPHA Plants), the LIPHA
Plants, the Patents listed in Exhibit C, Patents that are divisionals,
continuations, continuations-in-part, renewals, reexaminations, reissuances or
extensions of the Patents listed in Exhibit C, Patents which are prosecuted
pursuant to Section 8 during the term of this Agreement, and no other
Intellectual Property Rights. With respect to Technology that Shaman jointly
owns with a third party and as to which Shaman is contractually obligated to
maintain confidentiality, Shaman shall only be obligated to provide in Exhibit C
the applicable patent application numbers or, for issued patents, patent
numbers. The grant by Shaman of a non-exclusive license to use the Technology
outside the Metabolic Disease Field for certain purposes, as described in
Section 2, shall not be construed as an implied expansion of the foregoing
definition but shall only give Metabolex the right to use its Metabolic Disease
Field rights for the non-Metabolic Disease Field applications, as specified in
Section 2. "Technology" does not include Intellectual Property Rights, in the
Metabolic Disease Field or otherwise, (1) that relate to compounds, extracts, or
plant materials first developed or collected after the Effective Date by Shaman,
or by a third party under contract or license with Shaman, and that are
different from those Intellectual Property Rights, in the Metabolic Disease
Field, in existence on the Effective Date, as described in the first sentence of
this Section 1.25; and (2) that relate to ***** ********. [* indicates
that we intend to seek confidential treatment with the Commission for the
selected portion of this exhibit. The omitted portion will be separately filed
with the Commission pursuant to Rule 24b-2.]
1.26 "VALID CLAIM" means (i) a claim of a Patent that is an application,
that is pending and that has been pending for not longer than three (3) years
(in the case of a filing in the United States) or five (5) years (in the
case of a filing outside the United States) from the earlier of the filing of
such Patent, the filing of its parent application, or the filing of the Patent
Cooperation Treaty application corresponding to such Patent, or (ii) a claim of
an issued Patent, which claim has not lapsed, been canceled or disclaimed, or
become abandoned and which claim has not been declared invalid or unenforceable
by a court of competent jurisdiction in a decision from which no appeal has or
can be taken.
2. LICENSE GRANTS.
2.1 PHARMACEUTICAL AREA LICENSE GRANTS. Shaman hereby grants to
Metabolex and its sublicensees each of the following licenses within the
Pharmaceutical Area:
(a) within the Metabolic Disease Field, an exclusive (even as to
Shaman), perpetual royalty-bearing license under the Technology, and
non-exclusive within all other fields within the Pharmaceutical Area, with right
of sublicense, to make, have made, use, import, offer for sale and sell and
otherwise commercialize LIPHA Compounds and products containing any formulation
of a LIPHA Compound within the countries of *****, ***** and ***** *****;
[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be
separately filed with the Commission pursuant to Rule 24b-2.]
(b) within the Metabolic Disease Field, a worldwide, perpetual
royalty-bearing, exclusive (even as to Shaman), perpetual license under the
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Technology, and non-exclusive within all other fields within the Pharmaceutical
Area, with right of sublicense, to make, have made, use, import, offer for sale
and sell and otherwise commercialize Non-LIPHA Compounds and Licensed Products
incorporating Non-LIPHA Compounds;
(c) an exclusive (even as to Shaman), perpetual license under the
Technology, and non-exclusive within all other fields within the Pharmaceutical
Area, with right of sublicense, to make, have made, use, import, offer for
sale and sell and otherwise commercialize the Ono Compounds and Licensed
Products incorporating the Ono Compounds within the countries of *****, *****
and ***** *****, provided that no such license shall become effective prior to
the date listed next to the Compound on Exhibit A; and [* indicates that we
intend to seek confidential treatment with the Commission for the selected
portion of this exhibit. The omitted portion will be separately filed with the
Commission pursuant to Rule 24b-2.]
(d) a worldwide, royalty-bearing, perpetual license, with right of
sublicense, which license is exclusive (even as to Shaman) within the Metabolic
Disease Field and non-exclusive within all other fields within the
Pharmaceutical Area, under the Technology for all uses and including, without
limitation, to discover, develop, make, have made, use, import, offer for sale,
sell and otherwise commercialize Metabolex Extracts and Licensed Products
containing Metabolex Extracts.
2.2 PHARMACEUTICAL AND NUTRITIONAL AREA LICENSE GRANTS. Shaman hereby
grants to Metabolex and its sublicensees each of the following licenses within
the Pharmaceutical and Nutritional Areas:
(a) a worldwide, perpetual, royalty free license, with the right to
sublicense, which license is exclusive (even as to Shaman) within the Metabolic
Disease Field and non-exclusive within all other fields within the
Pharmaceutical and Nutritional Areas, under the Technology for internal research
purposes only, to use Extracts from LIPHA Plants, Metabolex Extracts, and LIPHA
Plants for all uses, including, without limitation the preparation of additional
extracts and the isolation of compounds;
(b) a worldwide, perpetual, royalty-free license, with right of
sublicense, which license is exclusive (even as to Shaman) within the Metabolic
Disease Field and non-exclusive within all other fields within the
Pharmaceutical and Nutritional Areas, under the Technology for internal research
purposes only, to use Compounds to develop Derivatives; and
(c) an exclusive (even as to Shaman), worldwide, perpetual,
royalty-bearing license under the Technology, with right of sublicense, to
discover, develop, make, have made, use, import, offer for sale, sell and
otherwise commercialize Metabolex Compounds and Metabolex Derivatives, and
Licensed Products incorporating Metabolex Compounds and Metabolex Derivatives
for all uses.
2.3 NUTRITIONAL AREA LICENSE GRANTS. Shaman hereby grants to Metabolex
each of the following licenses within the Nutritional Area:
(a) within the Metabolic Disease Field, a worldwide, perpetual
royalty-bearing, exclusive (even as to Shaman), perpetual license under the
Technology, and non-exclusive within all other fields within the Nutritional
Areas, with right of sublicense, to make, have made, use, import, offer for sale
and sell and otherwise commercialize the Synthetic LIPHA Compounds and the
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Synthetic Non-LIPHA Compounds, and Licensed Products incorporating the Synthetic
LIPHA Compounds and Synthetic Non-LIPHA Compounds;
(b) Subject to Section 2.3(c), a worldwide, co-exclusive (with
Shaman), perpetual license under the Technology to make, have made, use,
import, offer for sale and sell and otherwise commercialize the Natural LIPHA
Compounds and Extracts from LIPHA Plants, and products incorporating any Natural
LIPHA Compounds and Extracts from LIPHA Plants for use in the Metabolic Disease
Field, but shall not include a commercialization right for Dietary Supplements.
This license shall not be assignable by Metabolex as whole, but Metabolex may
grant sublicenses under this license on a product by product basis to develop
and commercialize such products. Furthermore, Shaman may not assign or grant a
license under the whole of its corresponding co-exclusive or exclusive rights,
but it may grant a license under such rights on a product by product basis to
develop and commercialize such products.
(c) Notwithstanding the provisions of Section 2.3(b), a Party may
obtain exclusive rights within the Metabolic Disease Field in the
Nutritional Area as to a Natural Compound or LIPHA Extract during a "Pick
Period" (as defined below) and the other Party's co-exclusive rights will be
suspended during the Pick Period. The process for Picks is as follows:
(i) Beginning with the Effective Date, Shaman may select up to
*** (*) Compounds or LIPHA Extracts, including a combination thereof but
excluding any Synthetic LIPHA Compound or Synthetic Non-LIPHA Compound for which
Metabolex has exclusive rights pursuant to Section 2.3(a) (which, together with
the other picks of Shaman described in the following sentence and the picks of
Metabolex described the following paragraph are referred to herein as a "Pick"
of a Party). Shaman's initial *** (*) picks are set forth on Exhibit F.
Beginning on the first anniversary of the Effective Date and continuing annually
thereafter, Shaman may also select up to **** (*) additional Picks. [* indicates
that we intend to seek confidential treatment with the Commission for the
selected portion of this exhibit. The omitted portion will be separately filed
with the Commission pursuant to Rule 24b-2.]
(ii) Beginning with the date *** (*) months after the Effective
Date and during each one (1) year period commencing with the anniversary of such
date, by giving written notice, Metabolex may select up to *** (*) Picks. With
any such written notice, Metabolex shall provide to Shaman a commercially
reasonable plan for the development and commercialization of any Pick by
Metabolex. [* indicates that we intend to seek confidential treatment with the
Commission for the selected portion of this exhibit. The omitted portion will
be separately filed with the Commission pursuant to Rule 24b-2.]
(iii) A Pick of a LIPHA Extract shall include all Extracts
prepared as of the Effective Date that are derived from the LIPHA Plant
that corresponds to such LIPHA Extract, as shown in Exhibit B. A Pick of a
Compound shall include all Compounds that are derived from the same LIPHA Plant
and in the same class as such Compound, as shown in Exhibit A, and all Extracts
prepared as of the Effective Date that are derived from the LIPHA Plant that
corresponds to such Compound, as shown in Exhibit B. Subject to Section 2.3(d),
the Party that makes the first Pick, whether a Compound or a LIPHA Extract, that
corresponds to a particular LIPHA Plant, as shown in Exhibit B, shall have, for
so long as such Party maintains exclusive rights to such Pick under this
Agreement, exclusive rights to use the common or scientific names of such LIPHA
Plant in marketing products based on any Compound or LIPHA Extract, and the
other Party agrees that it shall not use any such name in marketing such
products for such period, except that the Parties agree that Shaman may use such
names of a plant in marketing (in accordance with this Agreement) Dietary
Supplements derived from such plant.
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(iv) As to each of its Picks, a Party must have a good faith
intention and ability to undertake commercially reasonable development,
manufacture and commercialization of products incorporating such Pick. Each
Party shall have exclusive rights under the Technology within the Nutritional
Area as to each of its Picks for a period that will expire, in the case of a
Pick by Metabolex, ******** (**) months from the date of notice as to such Pick,
and, in the case of a Pick by Shaman, ******-**** (**) months from the date of
such notice as to such Pick (the "Pick Period"), unless a Party extends the Pick
Period as to one of its Picks (1) for a period of *** (*) months by making a
payment of ****** ******** Dollars ($*****) to the other Party before the end of
the original Pick Period if it is not "Actively Selling" (as defined below)
products incorporating the Pick as of that date, or through Actively Selling
products containing the Pick. A Party may also shorten the Pick Period by
voluntarily terminating the Pick Period as to one of its Picks by giving written
notice of such termination to the other Party. If a Party voluntarily terminates
a Pick, it may not select a replacement Pick until the conclusion of the Pick
Period for the terminated Pick. [* indicates that we intend to seek
confidential treatment with the Commission for the selected portion of this
exhibit. The omitted portion will be separately filed with the Commission
pursuant to Rule 24b-2.]
(v) If a Party is not "Actively Selling" (defined as commercial
introduction of a product incorporating the Pick and recognition of any revenue
from sales of that product prior to the expiration or termination of the
Pick Period, annual product sales in the first year after commercial
introduction of any product incorporating the Pick in excess of $******** and
annual sales of $********* thereafter) products incorporating a Pick prior to
the expiration or termination of the corresponding Pick Period, such Pick shall
revert to a co-exclusive status for which either Party may thereafter conduct
development and commercialization efforts, provided that the other Party may at
any time select such Compound or LIPHA Extract as one of its Picks and the first
Party may after one (1) year select such Compound or LIPHA Extract as one of its
Picks, subject in each case to the limits of Subsection 2.2(a). If the Party is
Actively Selling products incorporating a Pick, the Pick Period for that
Compound or LIPHA Extract will continue until the Party discontinues Actively
Selling such products. [* indicates that we intend to seek confidential
treatment with the Commission for the selected portion of this exhibit. The
omitted portion will be separately filed with the Commission pursuant to
Rule 24b-2.]
(vi) If a Pick is not claimed by a Valid Claim of a Patent of the
Party which makes the Pick, but such Party owns or has a license to a trade
secret relating to such Pick, and that trade secret enters the public domain
through no fault of the Party that did not make the Pick, then the Party that
did not make the Pick may then declare the Pick invalid by sending notice to the
other Party, along with evidence that reasonably shows that such trade secret is
in the public domain. The Party that did not make the Pick may then make, use,
sell and otherwise develop and commercialize a product incorporating that Pick.
(d) EXCLUSIVITY OF PICK FOR THE ENTIRE NUTRITIONAL AREA. Metabolex may
obtain the exclusive rights to commercialize a Pick for the entire
Nutritional Area through its exercise of the option set forth in Section 11.3.
2.4 SUBLICENSEES. None of Metabolex or its Affiliates shall grant to any
sublicensee any license rights under the Technology that are greater than the
rights granted to Metabolex under this Agreement. Metabolex shall indemnify
Shaman for certain activities of any such sublicensee as set forth in Section
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9.3.
3. PURCHASE OF MATERIALS.
3.1 PURCHASE. In connection with the license rights granted hereunder,
Shaman hereby sells, assigns, transfers and conveys, and shall deliver as
set forth in Section 3.2, unto Metabolex, its successors and assigns, and
Metabolex hereby purchases, all of Shaman's right, title and interest in and to
the Purchased Materials.
3.2 DELIVERY. As set forth below in this Section 3.2, Shaman shall
deliver or shall make the Purchased Materials available at times and places
to be mutually arranged:
(a) COMPOUNDS AND LIPHA EXTRACTS. Shaman shall deliver to Metabolex's
offices at 3876 Bay Center Place, Hayward, CA 94545 the Compounds and LIPHA
Extracts in the amounts listed on Exhibit D no later than five (5) business days
after the Effective Date. Metabolex shall bear all shipping and insurance costs
that Shaman incurs in connection with such deliveries.
(b) LIPHA EXTRACTS AND LIPHA PLANTS. Shaman shall store the LIPHA
Extracts and LIPHA Plants at its premises until Metabolex requests in
writing that Shaman deliver additional quantities (up to the total amount
specified in Exhibit D), whereupon Shaman shall make such additional quantities
available to Metabolex for collection at Shaman's principal office no later than
five (5) business days after the receipt of Metabolex's written request. During
the time that Shaman maintains possession of such LIPHA Extracts and LIPHA
Plants, it shall keep such materials segregated from Shaman's general inventory
and designated as property of Metabolex (provided that Shaman shall not be
required to segregate frozen plant materials but shall designate the relative
amounts of ownership for such materials) and shall maintain such materials in
the same manner as it maintains its own inventory of plant materials which shall
in no event be less than the current efforts of Shaman to avoid loss of its
inventory of plant materials. Provided that Shaman maintains the LIPHA Extracts
and LIPHA Plants in this manner, risk of loss will lie with Metabolex
notwithstanding the maintenance of such materials at Shaman's facilities. To the
extent that Shaman incurs reasonable identifiable additional expenses in
maintaining and storing the LIPHA Extracts and LIPHA Plants, Metabolex shall
reimburse Shaman for such expenses within thirty (30) days after receipt of an
invoice from Shaman describing such expenses in reasonable detail.
(c) DELIVERY OF ADDITIONAL MATERIALS TO METABOLEX FACILITY. Metabolex
may request that Shaman deliver the LIPHA Extracts or LIPHA Plants to it at its
principal office or at a different location. Metabolex may provide instructions
regarding shipment and insurance or, in the absence of specific instructions
Shaman will select the method of shipment, the carrier, and the insurance in a
commercially reasonable manner. Risk of loss for any LIPHA Extracts or LIPHA
Plants delivered to Metabolex pursuant to this Section 3.2(c) will pass to
Metabolex upon delivery of such LIPHA Extracts or LIPHA Plants by Shaman to
Metabolex's facility. Metabolex shall bear all shipping and insurance costs that
Shaman incurs in connection with such deliveries.
3.3 INTELLECTUAL PROPERTY RIGHTS. Shaman retains all of its Intellectual
Property Rights in the Purchased Materials subject only to the license grants in
Section 2 and to Section 8.1 hereof.
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3.4 TAXES. Metabolex shall be responsible for sales and use taxes
arising out of the transfer of the Purchased Materials.
3.5 NO WARRANTY. ALL MATERIALS, TECHNICAL INFORMATION AND TECHNOLOGY
THAT SHAMAN IS PROVIDING HEREUNDER ARE PROVIDED "AS IS, WHERE IS" EXCEPT AS
EXPRESSLY PROVIDED IN SECTION 9 WITH RESPECT TO THE TECHNOLOGY. SHAMAN DISCLAIMS
ALL OTHER WARRANTIES RELATING TO SUCH MATERIALS, WHETHER EXPRESS, IMPLIED, OR
STATUTORY, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
3.6 PURCHASE OF ADDITIONAL MATERIALS; RETURN OF MATERIALS.
(a) PURCHASE OF ADDITIONAL MATERIALS; LIMITATIONS.
(i) MATERIALS IN INVENTORY HELD FOR METABOLEX. If Metabolex
designates an item as one for which it wishes to receive additional
quantities, such quantities shall be taken first from any available inventory
that Shaman is holding pursuant to Section 3.2(b) at no additional cost to
Metabolex (other than the expenses described in Section 3.2(c)).
(ii) MATERIALS NOT IN INVENTORY HELD FOR METABOLEX. Metabolex
may request that Shaman supply the additional materials as Extracts, Compounds
(in pure form) or plant material in addition to those specified in Section
3.6(a)(i). If Shaman has the requested materials available in its inventory,
Shaman will provide the materials to Metabolex at the price and under the other
terms specified in Section 3.6(b). For requested materials which are not in
Shaman's inventory, Shaman will use reasonable commercial efforts, each as
determined by Shaman in its good-faith judgment, to provide the requested
Extracts and/or Compounds to the extent that it has the technical and other
resources and capabilities to produce such Extracts or Compounds in an
economical manner through the exercise of reasonable commercial efforts.
Metabolex may request that Shaman deliver plant materials in place of Extracts
and/or Compounds. Shaman shall use reasonable commercial efforts to obtain and
provide the plant materials requested by Metabolex to the extent that Shaman may
obtain and provide them, reasonably taking into account (i) Shaman's
then-current technical and other resources and capabilities, and (ii) all
conditions in the country of origin of such plants that are relevant in Shaman's
good-faith judgment.
(iii) LIMITATIONS. Notwithstanding anything to the contrary
herein, Shaman shall have no obligation to provide, and shall have no
liability for its failure to provide, any quantities of the Compounds or
Extracts, based upon its inability to produce such materials due to (i) lack of
technical or other resources or capabilities or (ii) an inability to obtain such
materials under commercially reasonable terms through the exercise of reasonable
commercial efforts. Metabolex understands and acknowledges that sufficient
additional Compounds, Extracts, and plant materials may not be available to meet
its current or projected needs.
(b) PAYMENT AND OTHER TERMS RELATING TO THE ADDITIONAL PURCHASED
MATERIALS. Upon receipt of a request by Metabolex for Extracts, Compounds
or plant materials not retained in inventory for Metabolex under Section 3.2(b)
Shaman shall prepare an estimated invoice for Metabolex for the requested
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materials, which shall consist of Shaman's estimated actual direct and indirect
cost of such materials plus ******* percent (**%), and Metabolex shall pay such
invoice within thirty (30) days of receipt of thereof. Within thirty (30) days
after delivery of the requested materials, or such portion thereof as the
parties may mutually agree, Shaman will invoice Metabolex for any deficit in its
actual direct and indirect cost of such materials plus ****** percent (**%), or
shall refund to Metabolex any excess payments. Delivery shall be made at a
mutually agreed time. Shipping and other terms relating to the additional
Purchased Materials shall be as set forth in Section 3.2(c) except that title,
as well as risk of loss, shall pass to Metabolex upon the delivery by Shaman of
the materials to Metabolex. [* indicates that we intend to seek confidential
treatment with the Commission for the selected portion of this exhibit. The
omitted portion will be separately filed with the Commission pursuant to
Rule 24b-2.]
(c) RETURN OF MATERIALS. Metabolex shall make reasonable inquiry with
respect to LIPHA Extracts and LIPHA Plants that Shaman is holding pursuant to
Section 3.2(b) as to whether or not Metabolex has or will have a future need
with respect to such materials. Beginning with the second year after the
Effective Date and continuing for a period of five (5) years, Metabolex will use
commercially reasonable efforts to designate, prior to end of that year, which
of such LIPHA Extracts and LIPHA Plants it shall no longer require and which it
wishes to return to Shaman pursuant to the terms of this Section. During each of
the first three (3) years of such period, Metabolex shall designate for return
at least thirty-five (35) of such LIPHA Extracts and LIPHA Plants. By the end of
such five (5) year period, Metabolex shall have made such inquiry as to, and
shall have informed Shaman as to whether it shall designate for return, all of
such LIPHA Extracts and LIPHA Plants. This process shall continue during each
year of the Agreement until the end of such five (5) year period until all LIPHA
Extracts and LIPHA Plants have been returned pursuant to this Section 3.6(c),
Shaman holds no more quantities of such materials, or the Agreement terminates.
Title to such returned materials shall revert to Shaman, and Shaman may
thereafter use such materials or destroy them, in its sole discretion, subject
only to the license rights of Metabolex under this Agreement. The return of such
materials shall have no effect on Metabolex's license rights under this
Agreement.
3.7 AUDITS. The following provisions shall apply:
(a) Upon the written request of Metabolex and not more than once in
each calendar year, within three (3) years after the date of the first invoice
in question, Shaman shall permit an independent certified public accounting firm
selected by Metabolex and reasonably acceptable to Shaman, to have access during
normal business hours to such of the records of Shaman as may be reasonably
necessary to verify the accuracy of the invoices for costs or expenses incurred
by Shaman pursuant to this Section 3. The accounting firm shall disclose to
Metabolex only whether the invoices are correct or incorrect and the specific
details concerning any discrepancies, and such firm shall not otherwise disclose
Shaman's Confidential Information to Metabolex. No other information shall be
provided to Metabolex.
(b) Metabolex shall bear the full cost of such audit, unless such
audit reveals an overcharge by Shaman of more than seven and one-half
percent (7.5%) of costs or expenses actually payable by Metabolex for any
quarterly period. In such case, Shaman shall bear the full cost of such audit
and shall pay to Metabolex within thirty (30) days of the date on which
Metabolex delivers to Shaman the accounting firm's written report any
overcharges refundable to Metabolex plus interest at the lesser of three percent
(3%) over the prime rate posted by Citibank NA, New York, or the maximum
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interest rate allowed under applicable law, from the date originally due until
paid.
4. ADDITIONAL AGREEMENTS.
4.1 PLANT DATABASE. Shaman will provide Metabolex with reasonable access
to Shaman's database relating to the plants from which Extracts and/or Compounds
are derived for the purpose of allowing Metabolex to pursue the research and the
development of products in connection with its exercise of its license rights,
as set forth in Section 2 hereof.
4.2 TECHNICAL INFORMATION ASSETS. Beginning with the Effective Date,
Shaman will make available for Metabolex's review the technical information
assets listed on Exhibit E (the "Technical Information") at Shaman's principal
offices at mutually agreed times during Shaman's normal business hours. Shaman
will photocopy and deliver to Metabolex, at Metabolex's expense, any Technical
Information which Metabolex designates for duplication within fifteen (15)
business days after receiving Metabolex's written request for the copies.
Metabolex shall have the right to use such materials, subject to its obligations
under Section 10, solely for the purpose of exercising its license rights under
Section 2 and to disclose such materials to its permitted sublicensees under
licenses granted under Section 2 hereof solely for the purpose of such
sublicensees' exercise of such sublicense rights. Shaman will reasonably assist
Metabolex at Metabolex's expense (calculated as Shaman's cost plus ******
percent (**%) pursuant to Section 3.6(b)) if reasonably necessary or useful to
ascertain the extraction protocols used by Shaman or its supplier for extracting
the individual Extracts from LIPHA Plants or Natural Compounds, as the case may
be, from LIPHA Plants, and all chemical synthesis approaches used in
synthesizing any Compounds. [* indicates that we intend to seek confidential
treatment with the Commission for the selected portion of this exhibit. The
omitted portion will be separately filed with the Commission pursuant to
Rule 24b-2.]
4.3 SHAMAN COVENANT. Shaman covenants that it has not granted, will not
grant, and will not purport to grant any liens, security interest, charges
or other encumbrances of any kind on any Compounds or Extracts sold pursuant to
Section 3 or on Patents included in the Technology, other than the lien under
the Loan and Security Agreement by and between Shaman and MMC/GATX Partnership
No. I dated June 30, 1997, as amended through the Effective Date.
5. PAYMENT AND ROYALTIES.
5.1 PAYMENT. Subject to the terms of this Agreement, Metabolex shall pay
to Shaman a one time, nonrefundable payment of ************* ***************
($*******) dollars at the time of delivery of the Compounds and LIPHA Extracts
at Metabolex's offices as specified in Section 3.2(a). [* indicates that we
intend to seek confidential treatment with the Commission for the selected
portion of this exhibit. The omitted portion will be separately filed with the
Commission pursuant to Rule 24b-2.]
5.2 ROYALTIES. If Net Sales are received based on sales within the
Pharmaceutical Area or the Nutritional Area of Licensed Products incorporating
Compounds, Extracts from LIPHA Plants, Metabolex Compounds, Metabolex
Derivatives or Metabolex Extracts, Metabolex shall pay royalties to Shaman as
follows:
(a) as to each Licensed Product incorporating one or more Compounds,
(i) if one or more of such Compounds is claimed at such time by a Valid
Claim of a Patent within the Technology, amounts equal to the lesser of ***
percent (*%) of Net Sales of such Licensed Products or ****** percent (**%) of
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royalties received by Metabolex from its sublicensee for sales of such Licensed
Products, or (ii) if none of such Compounds is claimed at such time by a Valid
Claim of a Patent within the Technology, the lesser of *** percent (*%) of Net
Sales of such Licensed Products or *** (**%) of royalties received by Metabolex
from its sublicensee for sales of such Licensed Products. [* indicates that we
intend to seek confidential treatment with the Commission for the selected
portion of this exhibit. The omitted portion will be separately filed with the
Commission pursuant to Rule 24b-2.]
(b) as to Licensed Products incorporating one or more Metabolex
Compounds, Metabolex Derivatives, or Metabolex Extracts, amounts equal to
the lesser of *** percent (*%) of Net Sales thereof or *** percent (**%) of
royalties received by Metabolex from its sublicensee for sales thereof.
[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be separately
filed with the Commission pursuant to Rule 24b-2.]
(c) as to Licensed Products that are marketed exclusively for use
within the Metabolic Disease Field and incorporate one or more Extracts
from LIPHA Plants, (i) if one or more of such Extracts from LIPHA Plants is
claimed at such time by a Valid Claim of a Patent within the Technology, amounts
equal to the lesser of *** percent (*%) of Net Sales of such Licensed Products
or ****** percent (**%) of royalties received by Metabolex from its sublicensee
for sales of such Licensed Products, or (ii) if none of such Extracts from LIPHA
Plants is claimed at such time by a Valid Claim of a Patent within the
Technology, amounts equal to the lesser of *** percent (*%) of Net Sales of such
Licensed Products or *** (**%) of royalties received by Metabolex from its
sublicensee for sales of such Licensed Products incorporating LIPHA Extracts.
[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be
separately filed with the Commission pursuant to Rule 24b-2.]
(d) as to Licensed Products that are not marketed exclusively for use
within the Metabolic Disease Field and that incorporate one or more Extracts
from LIPHA Plants, amounts equal to the lesser of *** percent (*%) of Net Sales
thereof or *** (**%) of royalties received by Metabolex from its sublicensee for
sales thereof. [* indicates that we intend to seek confidential treatment with
the Commission for the selected portion of this exhibit. The omitted portion
will be separately filed with the Commission pursuant to Rule 24b-2.]
5.3 ROYALTY DURATION. Metabolex shall pay royalties at the rates set
forth in Section 5.2 for a period ending, upon a country-by-country basis
and a product-by-product basis, upon the later of (i) the expiration in such
country of the last-to-expire Patent within the Technology having a Valid Claim
claiming the relevant Compound, LIPHA Extract, Metabolex Compound, Metabolex
Derivative or Metabolex Extract in such Licensed Product, or, (ii) for Licensed
Products which are not claimed at such time by a Valid Claim of a Patent within
the Technology, the earlier of (10) years after the Effective Date or the point
in time at which Metabolex or its sublicensee no longer has market exclusivity
within such country for such Licensed Product.
5.4 LIMITATION ON ROYALTIES. Metabolex will not pay any royalty to
Shaman based on either Net Sales of Licensed Products or royalties received from
sublicensees for sales of Licensed Products, in any territory in which a
Metabolex sublicensee is already paying a royalty to Shaman for sales of such
Licensed Product.
5.5 SINGLE ROYALTY. If Net Sales are received based on sales of Licensed
Products incorporating more than one Compound, LIPHA Extract, Metabolex
Compound, Metabolex Derivative or Metabolex Extract, Metabolex shall pay
royalties to Shaman under Section 5.2 as to such Licensed Products only under
the Subsection of 5.2 that results in the greatest royalty amount, and Metabolex
shall not be obligated to pay Shaman any royalties under Section 5.2 as to such
Licensed Products other than pursuant to such Subsection.
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5.6 REDUCTION IN ROYALTY FOR IN-LICENSE. If Metabolex reasonably
believes that a Licensed Product on which Metabolex owes royalties under
this Agreement is claimed by a Valid Claim of Patent of a Third Party, any
royalty payable under this Agreement with respect to sales of such product shall
be reduced by one-half of any royalty actually paid under a license under such
Patent, provided that that any such royalty payable under this Agreement shall
not be reduced by more than ***** percent (**%) in the aggregate. [* indicates
that we intend to seek confidential treatment with the Commission for the
selected portion of this exhibit. The omitted portion will be separately filed
with the Commission pursuant to Rule 24b-2.]
5.7 REPORTS; PAYMENT OF ROYALTY. Following each calendar quarter
beginning with the first calendar quarter in which Net Sales are received,
Metabolex shall furnish to Shaman a quarterly written report showing the sales
of all Licensed Products subject to royalty payments sold by Metabolex, its
Affiliates and its sublicensees during such calendar quarter and the royalties
payable under this Agreement, and the method of royalty calculation in relation
to Licensed Products reported. Reports shall be due on the forty-fifth (45th)
day following the close of each calendar quarter. Royalties shown to have
accrued by each royalty report shall be due and payable on the date such royalty
report is due. Metabolex shall keep complete and accurate records in sufficient
detail to enable the royalties payable hereunder to be determined for a period
of at least three (3) years after the calendar quarter in which the report is
delivered.
5.8 AUDITS OF METABOLEX. The following provisions shall apply:
(a) Upon the written request of Shaman and not more than once in each
calendar year, within three (3) years after the royalty period in question,
Metabolex shall permit an independent certified public accounting firm selected
by Shaman and reasonably acceptable to Metabolex, to have access during normal
business hours to such of the records of Metabolex as may be reasonably
necessary to verify the accuracy of the royalty reports provided pursuant to
Section 5.7 above. The accounting firm shall disclose to Shaman only whether the
royalty reports are correct or incorrect and the specific details concerning any
discrepancies, and such firm shall not otherwise disclose Metabolex's
Confidential Information to Shaman. No other information shall be provided to
Shaman.
(b) Shaman shall bear the full cost of such audit, unless such audit
reveals an underpayment by Metabolex of more than seven and one half percent
(7.5%) of royalties actually due to Shaman for any quarterly period. In such
case, Metabolex shall bear the full cost of such audit and shall pay to Shaman
within thirty (30) days of the date on which Shaman delivers to Metabolex
the accounting firm's written report any additional royalties due plus interest
at the lesser of three percent (3%) over the prime rate posted by Citibank NA,
New York, or the maximum interest rate allowed under applicable law, from the
date originally due until paid.
5.9 PAYMENT EXCHANGE RATE. All payments to Shaman under this Agreement
shall be made in United States Dollars by bank wire transfer in immediately
available funds to such bank account in the United States designated in writing
by Shaman from time to time or by check, as agreed to by the Parties. In the
case of sales outside the United States, the rate of exchange to be used in
computing the amount of currency equivalent in United States Dollars due Shaman
in a particular calendar quarter shall be made at a rate of exchange equal to
the average of the rates of exchange for each of the last twenty (20) business
days of the calendar quarter to which such payments relate, as reported in the
Wall Street Journal.
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5.10 TAXES; INCOME TAX WITHHOLDING. Except as provided in the following
sentence, any sales or personal property taxes or value added taxes, use taxes,
excise taxes or duties or similar taxes or charges arising out of Metabolex's
activities under this Agreement and the licenses granted hereunder, and any
interest and penalties thereon, shall be the obligation of Metabolex. Shaman
shall be responsible for any taxes or assessments based on Shaman's income
arising out of this Agreement. Notwithstanding the foregoing, if any laws, rules
or regulations require withholding of income taxes or other taxes imposed upon
payments to Shaman pursuant to this Section 5 or Section 12, Metabolex shall
make such withholding payments as required and subtract such withholding
payments from such payments to Shaman. Metabolex shall submit appropriate proof
of payment of the withholding rates to Shaman within a reasonable period of
time. Metabolex shall use efforts consistent with its usual business practices
to minimize the extent of any withholding taxes imposed under the provisions of
the current or any future double taxation treaties or agreements between foreign
countries, and the Parties shall cooperate with each other with respect thereto,
with the appropriate Party under the circumstances providing the documentation
required under such treaty or agreement to claim benefits thereunder.
6. TERM AND TERMINATION.
6.1 TERM. The term of this Agreement shall commence as of the Effective
Date and, unless earlier terminated pursuant to Section 6.2, shall continue
for a period of not less than ten (10) years after the Effective Date, and
thereafter until Metabolex terminates the Agreement on not less than sixty (60)
days written notice.
6.2 TERMINATION. Either Party may terminate this Agreement upon a
material breach hereof by the other Party, effective thirty (30) days after
giving notice of such breach, provided that the other Party has failed to cure
such breach within such thirty (30) days.
6.3 SURVIVAL. The provisions of Sections 5, 6.3, 7, 9.2(g)-(h), 9.3, 10,
12, and 13, and, for a period of four years after the Effective Date,
Sections 9.1 and 9.2(a)-(f), shall survive the termination of this Agreement, as
well as any provisions which would be necessary or useful in connection with the
enforcement by a party of its rights hereunder.
7. LIMITATIONS.
Nothing in this Agreement shall be construed to give Metabolex any right,
title or interest in or to ********** or SP-******** or any license or other
right under any foreign or domestic Patent claiming **********, to make, have
made, use, offer for sale or sell ********** or SP-********, except for the
option set forth in Section 11.1. [* indicates that we intend to seek
confidential treatment with the Commission for the selected portion of this
exhibit. The omitted portion will be separately filed with the Commission
pursuant to Rule 24b-2.]
8. INTELLECTUAL PROPERTY.
8.1 PATENT PROSECUTION. At its own expense, Shaman will file and
prosecute patent applications relating to Compounds or to Extracts from
LIPHA Plants and will maintain Patents relating to the Compounds or to Extracts
from LIPHA Plants. Shaman will consult Metabolex regarding the filing and
prosecution and maintenance of Patents claiming Compounds or claiming Extracts
from LIPHA Plants, provided that the final decision whether Shaman will take any
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action regarding patent protection for Compounds and LIPHA extracts shall be
Shaman's alone. If Shaman decides not to file or to discontinue prosecution of a
patent application, or if it decides not to maintain a patent registration
relating to the Compounds or to Extracts from LIPHA Plants, Shaman shall provide
Metabolex with notice of such decision reasonably in advance of any deadline
with respect to such patent application or patent registration, and Metabolex
may undertake the filing, prosecution and maintenance of such patent application
or patent at its own discretion and at its own expense. If Metabolex gives
notice to Shaman that it desires to undertake the filing, prosecution and
maintenance of such patent application or patent, Shaman shall promptly provide
Metabolex with pertinent information and documentation in its possession
relating to the filing, prosecution and maintenance of such patent application
or patent registration, or shall authorize its patent counsel to transfer such
information and documentation to Metabolex as Metabolex may reasonably request.
Shaman shall reasonably cooperate with Metabolex in its efforts to prosecute and
maintain such patent applications and patents, including without limitation
providing an irrevocable power of attorney for the prosecution and/or
maintenance of each Patent within the Technology as Shaman elects not to
prosecute or maintain, provided that Metabolex reimburses Shaman for the
expenses that Shaman incurs in connection with rendering such assistance.
Metabolex shall thereafter have control over the prosecution and maintenance of
such Patents, subject to the following obligations: (1) it shall reasonably
cooperate with Shaman and any Shaman licensee under the Patents within the
Technology outside of Metabolex's licensed areas under this Agreement to permit
such parties to exercise their rights under such Patents; (2) in the event that
Metabolex declines to obtain the prosecution and maintenance rights for a Patent
within the Technology and such rights are assumed or obtained by a Shaman
licensee under such Patent which is not a party to this Agreement, Metabolex's
continued right to a license under such Patent under the terms of this Agreement
shall be subject to the sharing of the prosecution and maintenance costs for
such Patent after the date the third-party licensee assumes or obtains such
rights by Metabolex on a pro rata basis with such licensee and all other
licensees under such Patent; and (3) in the event that Metabolex elects to
discontinue the prosecution or maintenance of any Patent within the Technology
for which it has obtained such prosecution and maintenance rights, it will
provide notice of such election to any third-party licensee under the Patents
within the Technology as reasonably requested by Shaman. Shaman shall include in
all subsequent license agreements in which it grants a license to any of the
Patents within the Technology a provision which will obligate such licensee, as
a condition to a continued license under any Patent within the Technology for
which Shaman ceases, and Metabolex assumes, prosecution and maintenance
obligations, to share on a pro rata basis with Metabolex and with any other
licensee of the Patent in the prosecution and maintenance costs for such Patent.
Any resulting or continuing Patent under this Section 8.1 shall be owned by
Shaman.
8.2 ENFORCEMENT OF PATENTS. If a Party learns of any possible
infringement of Patents within the Technology by a third party, it shall
promptly give notice of such infringement to the other Party, including facts
supporting the possibility of infringement. Shaman shall have the first right,
but not the obligation, to protect Patents within the Technology from
infringement in the Pharmaceutical Area and the Nutritional Area and shall
prosecute infringers in the Pharmaceutical Area and/or the Nutritional Area at
Shaman's sole cost and expense (subject to allocation of any awards or sums
recovered as described in this Section 8.2, when, in its sole judgment, such
action may be reasonably necessary, proper and justified. If Shaman elects not
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to prosecute such infringers, it will promptly notify Metabolex of its decision.
If Shaman so notifies Metabolex or if Shaman does not either (i) cause the
infringement to terminate or (ii) initiate a legal action against the infringer
, within three (3) months of providing or receiving the notice described above,
Metabolex shall have the right, but not the obligation to, and may, at its
election and at its sole cost and expense, prosecute the infringement action. In
connection with such action, Metabolex may grant a sublicense to any alleged
infringer in the Pharmaceutical Area and/or the Nutritional Area within the
scope of the licenses granted to Metabolex under this Agreement (subject to
Shaman's consent in the event of a settlement, as provided below). Metabolex
shall have sole control of the action it initiates, and Shaman shall have sole
control of the action it initiates, except that Metabolex shall not settle or
compromise any action that either brings to enforce the Compound Patents or
Extract Patents without Shaman's written consent, and Shaman shall consult with
Metabolex prior to entering into a settlement or compromise which would
materially adversely affect the rights granted to Metabolex under this
Agreement. Any awards recovered in connection with such actions shall be
allocated first to reimburse the Party bringing the action for expenses incurred
in connection with such action, then the expenses incurred by the other party in
connection with such action. Any remaining sums shall be retained by the party
bringing the action if only one party participates in the litigation of the
action. If both parties participate in the litigation of the action, the
remaining proceeds, after satisfaction of each party's expenses, shall be
divided between Shaman and Metabolex on the basis of the fields in which the
alleged third party infringer made or would have made infringing sales, so that
as to remaining proceeds from recoveries that are based on sales within fields
in which (x) Metabolex has an exclusive license shall be deemed to be Net Sales
by Metabolex of Licensed Products, (y) Metabolex has a non-exclusive license
shall be allocated sixty percent (60%) to Shaman and forty percent (40%) to
Metabolex, and (z) Metabolex has no license shall be allocated one-hundred
percent (100%) to Shaman. Any dispute between the Parties as to such allocation
shall be resolved pursuant to Section 12. If the Party initiating an enforcement
action elects to abandon such enforcement action other than pursuant to a
settlement with the alleged infringer as described above, the Party controlling
the action shall give timely notice to the other Party who, if it so desires,
may continue the action; provided, however, that the sharing of expenses and any
recovery in such suit shall be as set forth above.
8.3 DEFENSE OF THIRD PARTY INFRINGEMENT CLAIMS. In the event that a
Licensed Product is the subject of a third party claim for patent or other
proprietary right infringement or misappropriation anywhere in the world by
virtue of the incorporation of an invention claimed in the Technology in such
Licensed Product, the Party first having notice of such claim shall promptly
give notice to the other Party. Metabolex shall have the right, but not the
obligation to defend such actions and have sole control of such defense, at its
sole expense and shall indemnify pursuant to Section 9.3(d).
8.4 DEFENSE OF PATENTS. If a declaratory judgment action alleging
invalidity, unenforceability or noninfringement of any of the Compound
Patents or Extract Patents is brought against Shaman and/or Metabolex, Shaman
shall have the first right, but not the obligation, to defend such action and
have sole control of such defense. If Shaman does not defend such action within
twenty (20) days, Metabolex may undertake the defense. If Metabolex undertakes
such defense, it shall bear all the costs of the action.
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8.5 COOPERATION OF PARTIES. In the event one Party shall institute or
carry on a legal action pursuant to Sections 8.2, 8.3 or 8.4, the other
Party shall fully cooperate with and supply all assistance reasonably requested
by the Party instituting or carrying on such action, including by using
commercially reasonable efforts to have its employees testify when requested and
to make available relevant records, papers, information, samples, specimens, and
the like. A Party controlling an action pursuant to Sections 8.2, 8.3 or 8.4
shall bear the reasonable expenses incurred by the other Party in providing such
assistance and cooperation as is requested pursuant to this Section 8.5. A Party
instituting or carrying on such an action shall keep the other Party informed of
the progress of such action, and each said other Party shall be entitled to be
represented by counsel in connection with such action at its own expense.
9. REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; LIABILITIES.
9.1 REPRESENTATIONS AND WARRANTIES. Each Party represents and warrants
that, as of the Effective Date:
(a) it is duly organized and validly existing under the laws of the
jurisdiction in which it is incorporated;
(b) it has full corporate power and authority to enter into this
Agreement and carry out the provisions herein;
(c) this Agreement is a legal and binding obligation upon it,
enforceable in accordance with its terms; and
(d) the person executing this Agreement on its behalf is duly
authorized to do so by all requisite corporate action.
9.2 SHAMAN REPRESENTATIONS AND WARRANTIES. Shaman represents and
warrants that, as of the Effective Date:
(a) it has sufficient rights in the Technology to grant the licenses
granted hereunder;
(b) it has good and marketable title to Purchased Materials, and that
such personal property is free and clear of any lien, security interest, charge
or other encumbrance of any kind;
(c) there are no threatened or pending actions, suits,
investigations, claims, or proceedings in any way relating to the Patents
listed on Exhibit C;
(d) it has not, and will not grant any right to any third party that
is or would be inconsistent with the rights granted to Metabolex under this
Agreement;
(e) the Technology can be practiced to the full extent and scope of
their claims without giving rise to any claim by a third party of patent
infringement or misappropriation of trade secrets;
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(f) it has no knowledge of any infringement by a third party of the
Patents listed on Exhibit C;
(g) the Compounds include all molecular compounds prepared or isolated
by or on behalf of Shaman in connection with the Diabetes Program, except
for SP-*********and **********, the Extracts listed in Exhibit B include all E4
and E4a2 Extracts, and the LIPHA Plants include all plants from which LIPHA
Extracts have been prepared by or on behalf of Shaman or from which any Extract
has been prepared by or on behalf of Shaman and presented to LIPHA, and
[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be
separately filed with the Commission pursuant to Rule 24b-2.]
(h) the Patents listed on Exhibit C include all Patents relating to
Compounds, Extracts and LIPHA Plants.
EXCEPT AS SET FORTH ABOVE, SHAMAN DISCLAIMS ALL WARRANTIES, WHETHER EXPRESS OR
IMPLIED, RELATING TO THE TECHNOLOGY.
9.3 INDEMNIFICATION BY METABOLEX. Metabolex agrees to defend, indemnify,
and hold harmless Shaman and Shaman's officers, agents, and employees from
any third party claims, demands, losses, costs, or damages ("THIRD PARTY
CLAIMS") which may result from (a) personal injury, death, or property damage
related to the manufacture, use, or sale of Licensed Products by Metabolex, its
licensees or distributors, (b) a breach of any representation, warranty or
covenant in this Agreement by Metabolex (to the extent that such representations
or warranties are in effect by the terms of this Agreement), (c) infringement by
Metabolex of any third-party intellectual property or other proprietary rights
in connection with its exercise of its license rights hereunder (other than
those Third-Party Claims for which Shaman has an indemnification obligation as a
result of a breach of its warranty in Section 9.2 or that result from the
infringement of third party Patents as a direct result of the practice of a
Valid Claim of a Patent within the Technology), (d) Metabolex's continued
marketing of Licensed Products after receiving notice of a third party
infringement claim with respect to such Licensed Products pursuant to Section
8.3 (unless such Third Party Claim relates to Shaman's breach of a
representation or warranty under this Agreement or to marketing by Shaman, its
licensees (except for Metabolex or its sublicensees) or distributors of products
incorporating Technology, Compounds or Extracts) or (e) the negligence or
willful misconduct of Metabolex or its officers, agents, or employees, in each
case provided that (i) Shaman promptly notifies Metabolex of any Third Party
Claims, (ii) Metabolex has the sole right to control and defend or settle any
Third Party Claims or litigation within the scope of this indemnity, and (iii)
all indemnified parties cooperate to the extent necessary in the defense of any
Third Party Claims.
9.4 INDEMNIFICATION BY SHAMAN. Shaman agrees to defend, indemnify, and
hold harmless Metabolex and Metabolex's officers, agents, and employees
from any Third Party Claims which may result from (a) personal injury, death, or
property damage related to the manufacture, use or sale by Shaman, its licensees
or distributors of products incorporating the Technology, a Compound or an
Extract, (b) a breach of any representation, warranty or covenant in this
Agreement by Shaman (to the extent that such representations or warranties are
in effect by the terms of this Agreement), (c) the negligence or willful
misconduct of Shaman or its officers, agents, or employees, provided in each
case provided that (i) Metabolex promptly notifies Shaman of any Third Party
Claims, (ii) Shaman has the sole right to control and defend or settle any Third
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Party Claims or litigation within the scope of this indemnity, and (iii) all
indemnified parties cooperate to the extent necessary in the defense of any
Third Party Claims.
9.5 LIMITATION ON LIABILITIES. Without limiting the obligations of a
Party under Sections 9.3 or 9.4, IN NO EVENT SHALL EITHER PARTY BE LIABLE
TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL, PUNITIVE, INCIDENTAL, OR INDIRECT
DAMAGES ARISING OUT OF THIS AGREEMENT, HOWEVER CAUSED, UNDER ANY THEORY OF
LIABILITY.
9.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Sections 9.1 and 9.2(a)-(f) hereof shall survive for a
period of four (4) years after the Effective Date, at which time they shall
terminate, provided that the termination of Shaman's representation and warranty
in Section 9.2(e) shall in no way diminish its indemnification obligation with
respect to such matters under Section 9.4.
10. CONFIDENTIALITY.
10.1 CONFIDENTIALITY OBLIGATION. During the term of this Agreement, and
for five (5) years thereafter, each Party shall maintain in confidence any
and all Confidential Information, as defined in Section 10.2 below. Each Party
further agrees that it shall not use for any purpose other than the purposes
expressly contemplated under this Agreement and shall not disclose to any third
party the Confidential Information of the other Party, except that a Party may
disclose Confidential Information under an obligation of confidentiality and
non-use at least as restrictive as the one set forth in this Section 10.1, on a
need-to-know basis solely for purposes permitted under this Agreement to its
sublicensees, directors, officers, employees, consultants, financial advisors or
agents.
10.2 CONFIDENTIAL INFORMATION DEFINED. Confidential Information means
information of a Party that is not generally known and that such Party provides
in writing to the other Party under this Agreement, including, without
limitation, scientific, manufacturing, marketing, financial, personnel and other
business information and plans, whether in oral, written, graphic or electronic
form. Confidential information does not include information which:
(a) was already known to the Receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the Party
disclosing the information (the "Disclosing Party");
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the Receiving Party;
(c) became generally available to the public or otherwise publicly
known after its disclosure to the Receiving Party through no fault
attributable to the Receiving Party;
(d) was disclosed to the Receiving Party, other than under an
obligation of confidentiality to a third party, by a third party who had no
obligation to the Disclosing Party not to disclose such information to others;
or
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(e) was independently discovered or developed by the Receiving Party
without the use of the Confidential Information belonging to the Disclosing
Party.
10.3 AUTHORIZED DISCLOSURE. Each Party may disclose Confidential
Information of the other Party to the extent such disclosure is reasonably
necessary in filing or prosecuting patent applications, prosecuting or defending
litigation, complying with applicable laws, including securities laws,
governmental regulations or court orders, obtaining regulatory or other
government approvals, or negotiating a merger, acquisition, strategic alliance,
or securities offering, provided that a Party making any such disclosure uses
its reasonable efforts to secure confidential treatment of such Confidential
Information required to be disclosed and to minimize the extent of such
disclosure, except to the extent inappropriate in the case of patent
applications.
11. METABOLEX OPTIONS.
11.1 SP-*********.
(a) EVALUATION LICENSE GRANT. Shaman hereby grants to Metabolex a
personal, non-transferable, royalty-free license, with no right of
sublicense, under the Technology solely for the purpose of evaluating
SP-*********internally to determine whether to exercise the option grant
described in this Section 2.4(a). Such license shall continue for a period of
thirty (30) days after Shaman delivers to Metabolex a quantity of approximately
seven (7) grams of SP-*********pursuant to Section 11.1(b). [* indicates
that we intend to seek confidential treatment with the Commission for the
selected portion of this exhibit. The omitted portion will be separately filed
with the Commission pursuant to Rule 24b-2.]
(b) OPTION. Shaman hereby grants to Metabolex the option to evaluate
and exploit Shaman's proprietary compound designated SP-*********as provided in
this Section 11.1. Upon delivery to Metabolex of approximately seven (7) grams
of the compound SP-*********, Metabolex shall have up to thirty (30) days
(extendible to a total of sixty (60) days at Metabolex's sole discretion,
in which case the length of such extension shall be deducted from the length of
the option granted under Section 11.2(a)) from the date of such delivery to
evaluate the compound. [* indicates that we intend to seek confidential
treatment with the Commission for the selected portion of this exhibit. The
omitted portion will be separately filed with the Commission pursuant to
Rule 24b-2.]
(c) EXERCISE OF OPTION AND LICENSE GRANT. If Metabolex makes a
non-refundable, onetime payment of *********** ************** Dollars ($*******)
prior to the expiration of the thirty (30) day option period described in
Section 11.1(b), then, effective upon such payment, [* indicates that we intend
to seek confidential treatment with the Commission for the selected portion of
this exhibit. The omitted portion will be separately filed with the Commission
pursuant to Rule 24b-2.]
(i) Shaman is deemed automatically to have granted to Metabolex a
worldwide royalty-bearing, exclusive (even as to Shaman), perpetual license,
with right of sublicense, under the SP-*********Technology within the
Pharmaceutical Area and the Nutritional Area (except for Dietary Supplements as
provided below) to make, have made, use, import, offer for sale and sell and
otherwise commercialize the SP-*********and commercial products incorporating
SP-*********, and [* indicates that we intend to seek confidential treatment
with the Commission for the selected portion of this exhibit. The omitted
portion will be separately filed with the Commission pursuant to Rule 24b-2.]
(ii) Shaman will make available for Metabolex's review all
information in the laboratory notebooks and data relating to SP-*********at
Shaman's principal offices at mutually agreed times during Shaman's normal
business hours. Shaman will photocopy and deliver to Metabolex, at Metabolex's
expense, any such information which Metabolex designates for duplication within
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fifteen (15) business days after receiving Metabolex's written request for the
copies. Metabolex shall have the right to use such materials and information,
subject to its obligations under Section 10, solely for the purpose of
exercising its license rights under the license granted in this Section 11.1 and
to disclose such materials to its permitted sublicensees under such license
solely for the purpose of such sublicensees' exercise of such sublicense rights.
Shaman will reasonably assist Metabolex at Metabolex's expense (calculated as
Shaman's cost plus ******* percent (**%) pursuant to Section 3.6(b)) if
reasonably necessary or useful to ascertain the extraction and synthesis
protocols used by Shaman or its supplier relating to SP-*********. [* indicates
that we intend to seek confidential treatment with the Commission for the
selected portion of this exhibit. The omitted portion will be separately filed
with the Commission pursuant to Rule 24b-2.]
The license granted in this Section 11.1(c) shall be worldwide except that it
will exclude license rights relating to Dietary Supplements in the ******
******, ******, ******* *******, ****** *******, and ******. [* indicates
that we intend to seek confidential treatment with the Commission for the
selected portion of this exhibit. The omitted portion will be separately filed
with the Commission pursuant to Rule 24b-2.]
(d) ROYALTY OBLIGATIONS. If Shaman grants Metabolex a license pursuant
to Section 11.1(c), then Metabolex shall have royalty obligations as to
commercial sales of SP-*********or commercial products incorporating
SP-*********as though such were commercial sales of Licensed Products
incorporating one or more Compounds, including without limitation as provided in
Subsection 5.2(a). [* indicates that we intend to seek confidential treatment
with the Commission for the selected portion of this exhibit. The omitted
portion will be separately filed with the Commission pursuant to Rule 24b-2.]
11.2 PURCHASE OF NON-LIPHA EXTRACTS.
(a) Shaman hereby grants to Metabolex, beginning with the Effective
Date and continuing for a period of three (3) months (which time may be
reduced pursuant to Section 11.1(b)) thereafter, a non-exclusive option to
purchase ********** (**) grams each of the remaining quantities of all Shaman
Extracts that are not Extracts from LIPHA Plants, as listed on Exhibit B
("Non-LIPHA Extracts"). During the option period, Shaman shall promptly deliver
to Metabolex up to *** (**) grams each of *********** (**) samples of Non-LIPHA
Extracts designated by Metabolex. Shaman hereby grants Metabolex, for the
duration of the option period, a worldwide, royalty free license, which license
is exclusive (even as to Shaman) within the Metabolic Disease Field and
non-exclusive within all other fields within the Pharmaceutical Area, under the
Technology for internal research purposes only, to use Extracts prepared from
Non-LIPHA Plants (with the exception in each case of compounds derived from
Extracts prepared from Non-LIPHA Plants for which Shaman has obtained issued
Patents prior to the exercise of the option) for all uses, including, without
limitation, the preparation of additional extracts and the isolation of
compounds. If Metabolex exercises the option during the option term through a
one-time payment of *********** ************** Dollars ($*******) to Shaman,
then: [* indicates that we intend to seek confidential treatment with the
Commission for the selected portion of this exhibit. The omitted portion will
be separately filed with the Commission pursuant to Rule 24b-2.]
(i) Shaman is deemed automatically to have granted to Metabolex a
worldwide, royalty bearing, freely sublicensable, exclusive (even as to
Shaman), perpetual license in the Metabolic Disease Field in the Pharmaceutical
Area under the Technology to make, have made, use, import, sell, offer for sale,
and otherwise develop and commercialize Extracts prepared from Non-LIPHA Plants
(with the exception in each case of compounds derived from Extracts prepared
from Non-LIPHA Plants for which Shaman has obtained issued Patents prior to the
exercise of the option) and products incorporating such Extracts prepared from
Non-LIPHA Plants; and
21
<PAGE>
(ii) Metabolex will receive access to and use rights in the
laboratory notebooks and data relating to such Extracts prepared from
Non-LIPHA Plants as specified for Technical Information in Section 4.2.
(b) After the exercise of such option and upon the request of
Metabolex, Shaman shall, subject to the limitations set forth in Section
3.6(b)(iii), using reasonable commercial efforts, provide to Metabolex
additional quantities of plant material necessary for the preparation of
Non-LIPHA Extracts for Metabolex, and shall invoice Metabolex for the cost of
such plant material plus ******* percent (**%). [* indicates that we intend to
seek confidential treatment with the Commission for the selected portion of this
exhibit. The omitted portion will be separately filed with the Commission
pursuant to Rule 24b-2.]
(c) Metabolex shall have royalty obligations as to sales of Extracts
prepared from Non-LIPHA Plants as to which Metabolex receives license
rights under Subsection 11.2(a) and commercial products incorporating such
Extracts prepared from Non-LIPHA Plants as though such were commercial sales of
Licensed Products incorporating one or more LIPHA Product, including without
limitation as indicated in Subsections 5.2(c) and (d).
11.3 EXCLUSIVE RIGHTS FOR METABOLEX IN NUTRITIONAL AREA. For any Pick by
Metabolex of Natural LIPHA Compound or LIPHA Extract, Metabolex shall have the
option to obtain exclusive rights for the entire Nutritional Area (including
areas outside the Metabolic Disease Field) with respect to such Pick, provided
that Shaman is not Actively Selling products incorporating such Pick, as the
case may be, at the time Metabolex exercises such option by giving written
notice to Shaman. Shaman shall inform Metabolex in writing within ten (10) days
of receiving such notice whether Shaman is Actively Selling such Pick as a
commercial nutritional ingredient, and if it is not, Shaman hereby grants to
Metabolex a worldwide, royalty-bearing, freely sublicensable, exclusive license
under the Technology within the Nutritional Area to make, have made, use,
import, offer for sale and sell and otherwise commercialize products
incorporating such Pick. Within ten (10) days of the notification by Shaman,
Metabolex shall pay to Shaman a one-time, nonrefundable payment of ***********
******** Dollars ($*******). If a Pick for which Metabolex obtains exclusivity
is not claimed by a Valid Claim of a Patent of Metabolex, but Metabolex owns or
has a license to a trade secret relating to such Pick, and that trade secret
enters the public domain through no fault of Shaman, then Shaman may then
declare the Pick invalid by sending notice to the other Party, along with
evidence that reasonably shows that such trade secret is in the public domain
and Shaman may thereafter make, use, sell and otherwise develop and
commercialize a product incorporating that Pick. [* indicates that we intend to
seek confidential treatment with the Commission for the selected portion of this
exhibit. The omitted portion will be separately filed with the Commission
pursuant to Rule 24b-2.]
12. DISPUTE RESOLUTION.
12.1 ARBITRATION. Except as provided in paragraph (c) and Section 12.5
below, any dispute, controversy or claim arising out of or relating to the
validity, construction, enforceability or performance of this Agreement,
including disputes relating to alleged breach or to termination of this
Agreement, other than disputes which are expressly prohibited herein from being
resolved by this mechanism, shall be settled by binding arbitration in the
manner described below:
(a) A Party that intends to begin arbitration shall provide written
notice to counsel for the other Party informing such other Party of such
intention and the issues to be resolved.
22
<PAGE>
(b) Within ten (10) business days after the receipt of such notice,
the other Party may, by written notice to the counsel for the Party
initiating arbitration, add additional issues to be resolved.
(c) Any dispute regarding the validity or enforceability of an issued
Patent in Australia, Canada, France, Germany, Italy, Japan, Spain, the
United Kingdom or the United States applicable to a Licensed Product shall be
submitted to a court of competent jurisdiction in the country in which such
patent right exists, and any dispute regarding the validity or enforceability of
an issued Patent in any other country shall resolved through arbitration unless
the arbitrator makes a preliminary finding that he/she cannot competently
resolve the issues under the applicable law in the country in which such patent
right exists, after which it shall be promptly submitted to a court of competent
jurisdiction in the country in which such patent right exists.
12.2 PROCEDURE. The arbitration shall be conducted pursuant to the
Streamlined Rules for Commercial, Real Estate and Construction of
JAMS/Endispute, or, at the option of either Party, pursuant to the Comprehensive
Rules for Commercial, Real Estate and Construction Cases of JAMS/Endispute.
Notwithstanding the applicable rules, the following provisions shall apply to
the arbitration hereunder:
(a) ARBITRATOR; PROCEEDINGS; AWARD. The arbitration shall be conducted
by a single arbitrator, or, at the option of either Party, three
arbitrators ("the Arbitrator"). No Party shall engage in ex parte contact with
the Arbitrator. The parties shall use their best efforts to complete the
arbitration proceeding within 18 months after the initial arbitration demand.
The Parties intend that each Party will have the opportunity to conduct complete
discovery with respect to all material issues involved in a dispute within the
framework provided above. The Arbitrator shall render an opinion setting forth
findings of fact and conclusions of law with the reason therefor stated. A
transcript of the evidence adduced at the hearing shall be made and, upon
request, shall be made available to each Party. The Arbitrator shall, in
rendering its decision, apply the substantive law of the State of California,
without regard to its conflict of laws provisions, except that the
interpretation of and enforcement of this Section 13 shall be governed by the
United States Arbitration Act, 9 U.S.C. ** 1-14, 201-208. The Arbitrator shall
apply the Federal Rules of Evidence to the hearing. The proceeding shall take
place in San Francisco, California. Each Party shall bear its own legal fees,
except that the fees of the Arbitrator and JAMS/Endispute shall be paid by the
losing Party, which shall be designated by the Arbitrator, or split equally
among the Parties if the Arbitrator is unable to designate a losing Party. The
Arbitrator is empowered to award any remedy allowed by law, including money
damages, prejudgment interest and attorneys' fees, and to grant final, complete,
interim, or interlocutory relief. Notwithstanding the foregoing, however, the
Arbitrator may not award any special, consequential, punitive, incidental or
indirect damages arising out of this Agreement, however caused, under any theory
of liability.
12.3 CONFIDENTIALITY. The arbitration proceeding, its existence, the
dispute submitted to arbitration, and the Arbitrator's decision shall be
confidential and deemed Confidential Information of each Party, except as
required in connection with the enforcement of such award or as otherwise
required by applicable law, and the Arbitrator shall issue appropriate
protective orders to safeguard such Confidential Information.
23
<PAGE>
12.4 AUTHORITY OF U.S. DISTRICT COURT. The United States District Court
for the Northern District of California may enter judgment upon any award.
The Parties consent to the exclusive jurisdiction of the above-specified Court
for the enforcement of these provisions. In the event such Court lacks
jurisdiction, then any court having jurisdiction of this matter may enter
judgment upon any award and provide the same relief, and undertake the same
review, as specified herein.
12.5 PROVISIONAL REMEDIES. Each Party has the right before or during the
arbitration to seek and obtain from the appropriate court provisional remedies
such as attachment, preliminary injunction, replevin, etc. to avoid irreparable
harm, maintain the status quo, or preserve the subject matter of the
arbitration.
13. MISCELLANEOUS.
13.1 ASSIGNMENT. Except for assignments to an Affiliate of a Party or
assignments in connection with a merger or sale of substantially all the assets
to which this Agreement relates, neither Party may assign its rights or delegate
its duties under this Agreement without the prior written consent of the other,
such consent not to be unreasonably withheld. The parties agree that assignment
of rights or obligations to a direct competitor of the non-assigning party will
constitute a reasonable basis for withholding consent to assignment. Any
attempted assignment or delegation in contravention of the foregoing shall be
void and of no effect. This Agreement or the relevant provisions shall be
binding upon, and inure to the benefit of, the successors, executors, heirs,
representatives, administrators and permitted assigns of the Parties hereto.
13.2 ENTIRE AGREEMENT. This Agreement, together with any nondisclosure
agreement between the Parties relating to the subject matter of this
Agreement, and the Side Agreement between the Parties dated as of even date
herewith, and the Foreclosure and Non-Disturbance Agreement by and among the
Parties and MMC/GATX Partnership No.I dated as of even date herewith, embodies
the final, complete and exclusive understanding between the Parties, and
replaces and supersedes all previous agreements, understandings or arrangements
between the Parties with respect to its subject matter. No modification,
amendment or waiver of any of the provisions of this Agreement shall be
effective unless made in writing specifically referring to this Agreement and
duly signed and delivered by the Parties hereto. Whenever in this Agreement a
Party's approval or signature is required, such approval or signature may not be
unreasonably withheld.
13.3 WAIVER. No modification or waiver of any terms or conditions hereof,
nor any representations or warranties shall be of any force or effect unless
such modification or waiver is in writing and signed by an authorized officer of
each Party hereto. Any waiver (express or implied) by either Party of any
default or breach of this Agreement shall not constitute a waiver of any other
or subsequent default or breach
13.4 NOTICE. Notices, demands or other communications required or
permitted to be given or made hereunder shall be in writing and delivered
personally or sent by private overnight mail delivery, with recorded delivery or
by legible telefax addressed to the intended recipient at its address set forth
below in this Section or to such other address or telefax number as any Party
may from time to time duly notify to the other. Any such notice, demand or
24
<PAGE>
communication shall, unless the contrary is proved, be deemed to have been duly
served (if given or made by telefax) on the next following business day at the
place of receipt or (if given or made by overnight private mail) forty-eight
(48) hours after posting and in proving the same, it shall be sufficient to
show, in the case of a letter, that the envelope contained the same as duly
addressed, correctly stamped and posted and in the case of a telefax, that such
telefax was duly dispatched to a current telefax number of the addressee.
Correspondence to Shaman shall be addressed to:
President and Chief Executive Officer
Shaman Pharmaceuticals, Inc.
213 East Grand Avenue
South San Francisco, California 94080 U.S.A.
Fax: (415) 873-8367
with a copy to:
Bay Venture Counsel, LLP
1999 Harrison Street, Suite 1300
Oakland, CA 94612
Attention: Bruce D. Holloway
Fax: (510) 834-7440
Correspondence to Metabolex shall be addressed to:
President
Metabolex, Inc.
3876 Bay Center Place
Hayward, CA 94545
Fax: (510)293-8800
13.5 SEVERABILITY. If any provision of this Agreement is found by a court
of competent jurisdiction to be unenforceable, that provision shall be severed
and the remainder of this Agreement shall continue in full force and effect.
13.6 GOVERNING LAW. This Agreement shall be governed by California law,
excluding its choice of law rules and except pursuant to Subsection 12.2(a)
as to any arbitration.
13.7 FORCE MAJEURE. Neither Party shall be held liable or responsible to
the other Party nor be deemed to have defaulted under or breached this
Agreement for failure or delay in fulfilling or performing any terms of this
Agreement when such failure or delay is caused by or results from fires, floods,
embargoes, war, acts of war (whether war be declared or not), insurrections,
riots, civil commotions, strikes, lockouts, acts of God, or any other cause
beyond their respective reasonable control, but they shall make every reasonable
effort to remove any such cause of their failure or delay as soon as possible.
13.8 BANKRUPTCY RIGHTS. In the event that this Agreement is terminated or
rejected by a Party or its receiver or trustee under applicable bankruptcy laws
due to such Party's bankruptcy, then all rights and licenses granted under or
pursuant to this Agreement by such Party to the other Party are, and shall
25
<PAGE>
otherwise be deemed to be, for purposes of Section 365(n) of the Bankruptcy Code
and any similar law or regulation in any other country, licenses of rights to
"intellectual property" as defined under Section 101(52) of the Bankruptcy Code.
The Parties agree that all intellectual property rights licensed hereunder,
including without limitation any patents or patent applications in any country
of a Party covered by the license grants under this Agreement, are part of the
"intellectual property" as defined under Section 101(52) of the Bankruptcy Code
subject to the protections afforded the non-terminating Party under Section
365(n) of the Bankruptcy Code, and any similar law or regulation in any other
country.
13.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
26
<PAGE>
IN WITNESS WHEREOF, the Parties have by duly authorized persons, executed
this Agreement, as of the date first above written.
METABOLEX, INC. SHAMAN PHARMACEUTICALS, INC.
By:/s/ Thomas A. Glaze By:/a/ Lisa Conte
______________________ ____________________________
Name: Thomas A. Glaze Name: Lisa Conte
Title: CEO Title: President
27
<PAGE>
EXHIBIT A
COMPOUNDS
1. LIPHA COMPOUNDS.
(a) NATURAL LIPHA COMPUNDS
* SHAMAN TO PROVIDE THE LIST OF * WITHIN * OF THE EFFECTIVE DATE [* indicates
that we intend to seek confidential treatment with the Commission for the
selected portion of this exhibit. The omitted portion will be separately filed
with the Commission pursuant to Rule 24b-2.]
- - --------------------------------------------------------------------------
*SP NO. * * CLASS
- - ------------------ --------------------- --------------------
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
1
<PAGE>
- - --------------------------------------------------------------------------
*SP NO. * * CLASS
- - ------------------ --------------------- --------------------
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
- - --------------------------------------------------------------------------
* *
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* *
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* *
- - --------------------------------------------------------------------------
* *
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* *
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* *
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* *
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* *
- - --------------------------------------------------------------------------
* *
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* *
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* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
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* *
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* *
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* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
2
<PAGE>
- - --------------------------------------------------------------------------
*SP NO. * * CLASS
- - ------------------ --------------------- --------------------
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
* *
- - --------------------------------------------------------------------------
[* indicates that we intend to seek confidential treatment with the
Commission for the selected portion of this exhibit. The omitted portion will be
separately filed with the Commission pursuant to Rule 24b-2.]
(b) SYNTHETIC LIPHA COMPOUNDS [* indicates that we intend to seek
confidential treatment with the Commission for the selected portion of this
exhibit. The omitted portion will be separately filed with the Commission
pursuant to Rule 24b-2.]
- - -------------------------------------------
* Compound SP No. Compound Class
- - ------------------ -------------------
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
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* *
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* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
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* *
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* *
- - -------------------------------------------
* *
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* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
3
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- - -------------------------------------------
* Compound SP No. Compound Class
- - ------------------ -------------------
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
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* *
- - -------------------------------------------
* *
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* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
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* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
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* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
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* *
- - -------------------------------------------
* *
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* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
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* *
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* *
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* *
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* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
4
<PAGE>
- - -------------------------------------------
* Compound SP No. Compound Class
- - ------------------ -------------------
- - -------------------------------------------
* *
- - -------------------------------------------
* *
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* *
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* *
- - -------------------------------------------
* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
- - -------------------------------------------
* *
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* *
- - -------------------------------------------
* *
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* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
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* *
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* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
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* *
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* *
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* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
5
<PAGE>
- - -------------------------------------------
* Compound SP No. Compound Class
- - ------------------ -------------------
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
- - -------------------------------------------
* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
6
<PAGE>
- - -------------------------------------------
* Compound SP No. Compound Class
- - ------------------ -------------------
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
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* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
7
<PAGE>
- - -------------------------------------------
* Compound SP No. Compound Class
- - ------------------ -------------------
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
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* *
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* *
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* *
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* *
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* *
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* *
- - -------------------------------------------
8
<PAGE>
- - -------------------------------------------
* Compound SP No. Compound Class
- - ------------------ -------------------
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
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* *
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* *
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* *
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* *
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* *
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* *
- - -------------------------------------------
9
<PAGE>
- - -------------------------------------------
* Compound SP No. Compound Class
- - ------------------ -------------------
- - -------------------------------------------
* *
- - -------------------------------------------
* *
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* *
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* *
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* *
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- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
10
<PAGE>
- - -------------------------------------------
* Compound SP No. Compound Class
- - ------------------ -------------------
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
11
<PAGE>
- - -------------------------------------------
* Compound SP No. Compound Class
- - ------------------ -------------------
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
12
<PAGE>
- - -------------------------------------------
* Compound SP No. Compound Class
- - ------------------ -------------------
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
[* indicates that we saught confidential treatment with the Commission for the
selected portion of this exhibit. The omitted portion will be separately filed
with the Commission pursuant to Rule 24b-2.]
13
<PAGE>
2. NON LIPHA COMPOUNDS.
(a) NATURAL NON LIPHA COMPOUNDS[* indicates that we intend to seek
confidential treatment with the Commission for the selected portion of this
exhibit. The omitted portion will be separately filed with the Commission
pursuant to Rule 24b-2.]
Natural Non-Lipha
Compound SP No. Jar Code Amount of Compound Purchased (mg)
- - ----------------- -------- --------------------------------
* *
* *
* * *
* *
* *
* *
* *
[* indicates that we intend to seek confidential treatment with the
Commission for the selected portion of this exhibit. The omitted portion will be
separately filed with the Commission pursuant to Rule 24b-2.]
(b) SYNTHETIC NON-LIPHA COMPOUNDS[* indicates that we intend to seek
confidential treatment with the Commission for the selected portion of
this exhibit. The omitted portion will be separately filed with the
Commission pursuant to Rule 24b-2.]
- - -------------------------------------------
Synthetic Non-Lipha
Compound SP No. Compound Class
- - ------------------ -------------------
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
14
<PAGE>
- - -------------------------------------------
Synthetic Non-Lipha
Compound SP No. Compound Class
- - ------------------ -------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
15
<PAGE>
- - -------------------------------------------
Synthetic Non-Lipha
Compound SP No. Compound Class
- - ------------------ -------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
16
<PAGE>
- - -------------------------------------------
Synthetic Non-Lipha
Compound SP No. Compound Class
- - ------------------ -------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
* *
- - -------------------------------------------
[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be separately
filed with the Commission pursuant to Rule 24b-2.]
17
<PAGE>
3. ONO COMPOUNDS
- - --------------------------------------------------------------------------------
SP NUMBER LIPHA PLANT EXPIRATION DATE OF *
MONTH EVALUATION PERIOD
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* * *
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* * *
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* * *
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* * *
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* * *
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* * *
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* * *
- - --------------------------------------------------------------------------------
[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be separately
filed with the Commission pursuant to Rule 24b-2.]
18
<PAGE>
EXHIBIT B
EXTRACTS
(a) LIPHA EXTRACTS AND LIPHA PLANTS
LIPHA EXTRACTS [* indicates that we intend to seek confidential treatment
with the Commission for the selected portion of this exhibit. The omitted
portion will be separately filed with the Commission pursuant to Rule 24b-2.]
- - -----------------------------------------------------------------------------
LIPHA
EXTRACT CORRESPONDING LIPHA PLANT EXTRACT
SP NUMBER NUMBER
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
FAMILY GENUS SPECIES
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
19
<PAGE>
- - -----------------------------------------------------------------------------
LIPHA
EXTRACT CORRESPONDING LIPHA PLANT EXTRACT
SP NUMBER NUMBER
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
20
<PAGE>
- - -----------------------------------------------------------------------------
LIPHA
EXTRACT CORRESPONDING LIPHA PLANT EXTRACT
SP NUMBER NUMBER
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
21
<PAGE>
- - -----------------------------------------------------------------------------
LIPHA
EXTRACT CORRESPONDING LIPHA PLANT EXTRACT
SP NUMBER NUMBER
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
22
<PAGE>
- - -----------------------------------------------------------------------------
LIPHA
EXTRACT CORRESPONDING LIPHA PLANT EXTRACT
SP NUMBER NUMBER
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
23
<PAGE>
- - -----------------------------------------------------------------------------
LIPHA
EXTRACT CORRESPONDING LIPHA PLANT EXTRACT
SP NUMBER NUMBER
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
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* * * * *
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* * * * *
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* * * * *
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* * * * *
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* * * * *
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* * * * *
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- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
24
<PAGE>
- - -----------------------------------------------------------------------------
LIPHA
EXTRACT CORRESPONDING LIPHA PLANT EXTRACT
SP NUMBER NUMBER
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
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* * * * *
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* * * * *
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* * * * *
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
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* * * * *
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* * * * *
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- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
25
<PAGE>
- - -----------------------------------------------------------------------------
LIPHA
EXTRACT CORRESPONDING LIPHA PLANT EXTRACT
SP NUMBER NUMBER
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
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- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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- - -----------------------------------------------------------------------------
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- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
26
<PAGE>
- - -----------------------------------------------------------------------------
LIPHA
EXTRACT CORRESPONDING LIPHA PLANT EXTRACT
SP NUMBER NUMBER
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
* * * * *
- - -----------------------------------------------------------------------------
- - -----------------------------------------------------------------------------
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- - -----------------------------------------------------------------------------
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- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
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* * * * *
- - -----------------------------------------------------------------------------
27
<PAGE>
[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be separately
filed with the Commission pursuant to Rule 24b-2.]
(b) NON-LIPHA EXTRACTS
NON-LIPHA EXTRACT
[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be separately
filed with the Commission pursuant to Rule 24b-2.]
- - --------------------------
NON-LIPHA
EXTRACT SP EXTRACT
NUMBER NUMBER
- - --------------------------
- - --------------------------
* *
- - --------------------------
- - --------------------------
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28
<PAGE>
- - --------------------------
NON-LIPHA
EXTRACT SP EXTRACT
NUMBER NUMBER
- - --------------------------
- - --------------------------
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29
<PAGE>
- - --------------------------
NON-LIPHA
EXTRACT SP EXTRACT
NUMBER NUMBER
- - --------------------------
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30
<PAGE>
- - --------------------------
NON-LIPHA
EXTRACT SP EXTRACT
NUMBER NUMBER
- - --------------------------
- - --------------------------
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- - --------------------------
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31
<PAGE>
- - --------------------------
NON-LIPHA
EXTRACT SP EXTRACT
NUMBER NUMBER
- - --------------------------
- - --------------------------
* *
- - --------------------------
- - --------------------------
* *
- - --------------------------
- - --------------------------
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- - --------------------------
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32
<PAGE>
- - --------------------------
NON-LIPHA
EXTRACT SP EXTRACT
NUMBER NUMBER
- - --------------------------
- - --------------------------
* *
- - --------------------------
- - --------------------------
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- - --------------------------
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33
<PAGE>
- - --------------------------
NON-LIPHA
EXTRACT SP EXTRACT
NUMBER NUMBER
- - --------------------------
- - --------------------------
* *
- - --------------------------
- - --------------------------
* *
- - --------------------------
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34
<PAGE>
- - --------------------------
NON-LIPHA
EXTRACT SP EXTRACT
NUMBER NUMBER
- - --------------------------
- - --------------------------
* *
- - --------------------------
- - --------------------------
* *
- - --------------------------
- - --------------------------
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[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be separately
filed with the Commission pursuant to Rule 24b-2.]
35
<PAGE>
EXHIBIT C
PATENTS
- - --------------------------------------------------------------------------------
U.S. PATENT DATE DATE STATUS OF FOREIGN
NO./SER. NO. FILED ISSUED EQUIVALENTS
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* * * *
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* * * *
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* * * *
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* * * *
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
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- - --------------------------------------------------------------------------------
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* * * *
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* * * *
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* * * *
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* * * *
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* * * *
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* * * *
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* * * *
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
* * * *
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be separately
filed with the Commission pursuant to Rule 24b-2.]
36
<PAGE>
EXHIBIT D
PURCHASED MATERIALS
1. PURCHASED COMPOUNDS. The Compounds listed below in the amounts set
forth below:
NATURAL NON-LIPHA COMPOUNDS [* indicates that we intend to seek
confidential treatment with the Commission for the selected portion of this
exhibit. The omitted portion will be separately filed with the Commission
pursuant to Rule 24b-2.]
NATURAL NON-LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
----------------- ---------- ---------------------------------
* *
* *
* * *
* *
* *
* * *
* * *
* * *
* * *
* *
* * *
* *
* *
* *
* *
* *
* * *
37
<PAGE>
NATURAL NON-LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
----------------- ---------- ---------------------------------
* *
* *
* *
* * *
* * *
* * *
* * *
* * *
* * *
* *
* *
* *
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* *
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* *
* *
38
<PAGE>
NATURAL NON-LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
----------------- ---------- ---------------------------------
* *
* *
* *
* *
* *
* *
* *
* *
* *
* * *
* *
* *
* *
* *
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* *
* *
* *
* *
* * *
39
<PAGE>
NATURAL NON-LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
----------------- ---------- ---------------------------------
* *
* *
* *
* *
* *
* *
* *
* *
* *
[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be separately
filed with the Commission pursuant to Rule 24b-2.]
SYNTHETIC LIPHA COMPOUNDS
[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be separately
filed with the Commission pursuant to Rule 24b-2.]
SYNTHETIC LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
- - ----------------- ---------- ---------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
40
<PAGE>
SYNTHETIC LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
- - ----------------- ---------- ---------------------------------
- - ---------------------------------------------------------------------
* * *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* * *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
41
<PAGE>
SYNTHETIC LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
- - ----------------- ---------- ---------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
42
<PAGE>
SYNTHETIC LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
- - ----------------- ---------- ---------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
43
<PAGE>
SYNTHETIC LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
- - ----------------- ---------- ---------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* * *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* * *
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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* * *
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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* *
- - ---------------------------------------------------------------------
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* *
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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* *
- - ---------------------------------------------------------------------
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* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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* *
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* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
44
<PAGE>
SYNTHETIC LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
- - ----------------- ---------- ---------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* * *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
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* *
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* *
- - ---------------------------------------------------------------------
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* *
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* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
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* *
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
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* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
45
<PAGE>
SYNTHETIC LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
- - ----------------- ---------- ---------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* * *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* * *
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* * *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
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* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
46
<PAGE>
SYNTHETIC LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
- - ----------------- ---------- ---------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
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* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
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* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
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* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
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* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
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* *
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
47
<PAGE>
SYNTHETIC LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
- - ----------------- ---------- ---------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
48
<PAGE>
SYNTHETIC LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
- - ----------------- ---------- ---------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
49
<PAGE>
SYNTHETIC LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
- - ----------------- ---------- ---------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
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- - ---------------------------------------------------------------------
50
<PAGE>
SYNTHETIC LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
* *
- - ---------------------------------------------------------------------
- - ---------------------------------------------------------------------
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* *
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*
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*
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[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be separately
filed with the Commission pursuant to Rule 24b-2.]
51
<PAGE>
NATURAL NON-LIPHACOMPOUNDS
[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be separately
filed with the Commission pursuant to Rule 24b-2.]
NATURAL NON-LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
- - ----------------- ---------- ---------------------------------
* *
* *
* * *
* *
* *
* *
* *
[* indicates that we intend to seek confidential treatment with the
Commission for the selected portion of this exhibit. The omitted portion will be
separately filed with the Commission pursuant to Rule 24b-2.]
SYNTHETIC NON-LIPHACOMPOUNDS
[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be separately
filed with the Commission pursuant to Rule 24b-2.]
- - -------------------------------------------------------------------
SYNTHETIC
NON-LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
- - ----------------- ---------- ---------------------------------
- - -------------------------------------------------------------------
* *
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* *
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* *
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* *
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* *
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52
<PAGE>
- - -------------------------------------------------------------------
SYNTHETIC
NON-LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
- - ----------------- ---------- ---------------------------------
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* *
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53
<PAGE>
- - -------------------------------------------------------------------
SYNTHETIC
NON-LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
- - ----------------- ---------- ---------------------------------
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* *
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* * *
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54
<PAGE>
- - -------------------------------------------------------------------
SYNTHETIC
NON-LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
- - ----------------- ---------- ---------------------------------
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* *
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55
<PAGE>
- - -------------------------------------------------------------------
SYNTHETIC
NON-LIPHA
COMPOUND SP NO. JAR ID NO. AMOUNT OF COMPOUND PURCHASED (MG)
- - ----------------- ---------- ---------------------------------
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* * *
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* *
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* *
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* *
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* *
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[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be separately
filed with the Commission pursuant to Rule 24b-2.]
56
<PAGE>
2. PURCHASED EXTRACTS. The Extracts listed below in the amounts set forth
below:
LIPHA EXTRACTS
* If Shaman determines in good faith within ten (10) days of the Effective Date
that it does not have in inventory at least * of a particular plant material,
the parties agree that they shall reduce the amount of plant material to be
stored to the amount that Shaman has at the time of such determination, but in
no case less than the greatest amount Shaman has in inventory from the Effective
Date to the end of such ten (10) day period.
- - --------------------------------------------------------------------------------
LIPHA JAR EXTRACT AMOUNT OF AMOUNT OF AMOUNT OF
EXTRACT CODE NUMBER EXTRACT EXTRACT CORRESPONDING PLANT
SP TO BE TO BE MATERIAL TO BE
NUMBER DELIVERED STORED BY STORED BY SHAMAN
PURSUANT TO SHAMAN PURSUANT TO
SECTION PURSUANT TO SECTION 3.2(b)
3.2(a) SECTION (GRAMS)*
(GRAMS) 3.2(b)
(GRAMS)
- - --------------------------------------------------------------------------------
* * * * * *
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57
<PAGE>
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LIPHA JAR EXTRACT AMOUNT OF AMOUNT OF AMOUNT OF
EXTRACT CODE NUMBER EXTRACT EXTRACT CORRESPONDING PLANT
SP TO BE TO BE MATERIAL TO BE
NUMBER DELIVERED STORED BY STORED BY SHAMAN
PURSUANT TO SHAMAN PURSUANT TO
SECTION PURSUANT TO SECTION 3.2(b)
3.2(a) SECTION (GRAMS)*
(GRAMS) 3.2(b)
(GRAMS)
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[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be separately
filed with the Commission pursuant to Rule 24b-2.]
58
<PAGE>
EXHIBIT E
TECHNICAL INFORMATION
(a) Diabetes Program laboratory notebooks, consisting of the following,
together with the Intellectual Property Rights relating to the Licensed
Technology contained therein or expressed thereby:
* SHAMAN TO PROVIDE WITHIN FIFTEEN (15) BUSINESS DAYS OF THE EFFECTIVE
DATE
(b) Diabetes Program data, consisting of the following, together with the
Intellectual Property Rights relating to the Licensed Technology contained
therein or expressed thereby:
* SHAMAN TO PROVIDE WITHIN FIFTEEN (15) BUSINESS DAYS OF THE EFFECTIVE
DATE
59
<PAGE>
EXHIBIT F
INITIAL SHAMAN PICKS
LIPHA Extract SP *****88200 (from ********* *********)
Compound ***** from ************ *******
No other Compounds in same class from same plant LIPHA Extract SP *****
Compound ***** from ******* *****
Compounds in same class: *****, *****, *****, *****, *****
Compound *****from *********** *************
No other Compounds in same class from same plant
LIPHA Extract SP ***** (from ***** ************)
LIPHA Extract SP ***** (from ******* ********)
[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be separately
filed with the Commission pursuant to Rule 24b-2.]
60
<PAGE>
EXHIBIT G
LETTER AGREEMENT
61
<PAGE>
EXHIBIT 10.49
SETTLEMENT AGREEMENT
This Settlement Agreement effective as of December 30, 1999 (the
"Effective Date") is by and between Shaman Pharmaceuticals, Inc., a corporation
organized and existing pursuant to the laws of the State of Delaware with its
principal office at 213 East Grand Avenue, South San Francisco, California,
U.S.A. ("Shaman") and Lipha, S.A., a corporation organized and existing pursuant
to the laws of France with its principal office at 37, rue Saint-Romain, F-69379
Lyon, cedex-08, France ("LIPHA").
RECITALS
WHEREAS, Shaman and LIPHA entered into a "Joint Research And Product
Development And Commercialization Agreement" (the "Joint Development Agreement")
effective as of September 23, 1996; and
WHEREAS, Shaman has informed LIPHA that it will not perform its
obligations under the Joint Development Agreement and has ceased to perform
under the Joint Development Agreement; and
WHEREAS, Shaman has acknowledged that it is in breach of its obligations
under the Joint Development Agreement and LIPHA has made a claim against Shaman
for damages; and
WHEREAS, Shaman and LIPHA wish to settle LIPHA's claim and to terminate
the Joint Development Agreement;
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS. As used in this Settlement Agreement, the following terms
shall have the meanings set forth below:
1.1. "Affiliates" means, with respect to any specified Person, a Person that is
controlled by, controlling or under common control with, the Person specified;
provided, that in the case of each Party, "Affiliate" shall not include the
other Party. For the purposes of this definition, control of a corporation or
other business entity means (i) direct or indirect beneficial ownership of
greater than fifty percent (50%) of the voting stock or a greater than fifty
percent (50%) interest in the income of such corporation or other business
entity or (ii) the power to direct or cause the direction of the management of
policies of such corporation or other business entity.
1.2. "Settlement Agreement" means this Settlement Agreement and all
amendments and modifications hereto.
1
<PAGE>
1.3. "Compound" means a molecule that (i) was presented to LIPHA by Shaman
pursuant to the Joint Development Agreement, except for SP****** (NDGA) which is
***********, as set forth on the list of compounds attached as Exhibit A hereto,
or (ii) was synthesized or derived (analog) in the past from a compound in the
anthranillic acid class or aspartic acid class jointly by the Parties under the
Joint Development Agreement. [* indicates
that we intend to seek confidential treatment with the Commission for the
selected portion of this exhibit. The omitted portion will be separately filed
with the Commission pursuant to Rule 24b-2.]
1.4. "Dollars" means United States dollars.
1.5. "Exclusive Territory" means all of the nations of the world, other than
Japan, South Korea and Taiwan.
1.6. "Field" means the diagnosis and treatment of diabetes mellitus and its
complications and other pathologies related to the Insulin Resistance Metabolic
Syndrome where such diagnosis and treatment requires, as a prerequisite to
marketing in the relevant country or countries, the filing of a market approval
application equivalent to a New Drug Application in the United States for
regulatory approval by the appropriate regulatory authority for such country.
1.7. "Joint Inventions" has the meaning set forth in Section 6.1.1.
1.8. "Joint Patent" means (i) all issued patents, including any extension,
registration, confirmation, reissue, re-examination or renewal thereof and (ii)
all pending patent applications, including any continuation, division or
continuation-in-part, which patent(s) contain claims covering any Joint
Invention.
1.9. "Net Sales" means with respect to any Product, the aggregate amount
invoiced by LIPHA (including by its Affiliates, licensees and sublicensees) for
or on account of any sale to a non-affiliated purchaser of such Product, less
(i) normal and customary trade discounts (i.e. consistent with customary
practice for a situation in which the Product is the only product being
transferred between seller and purchaser) allowed and taken (ii) rebates to
wholesalers, (iii) returns, (iv) amounts for transportation and shipping charges
to purchasers if invoiced separately, and (v) taxes (not including any taxes on
income) and duties levied on such sale. Any commercial use or sale of a Product
at a reduced or promotional price by LIPHA (including its Affiliates, licensees
and sublicensees) shall be consistent with customary trade practices.
1.10. "Ex-Ono Territory" shall mean the nations of Japan, South Korea and
Taiwan.
1.11. "Party" shall mean either Shaman or LIPHA and "Parties" means both
Shaman and LIPHA.
1.12. "Patents" means (i) issued patents, including any extension, registration,
confirmation, reissue, re-examination or renewal thereof, and (ii) pending
patent applications, including any continuation, division or
continuation-in-part applications, whether or not such patent applications have
2
<PAGE>
yet been filed.
1.13. "Person" means an individual, a partnership, a joint venture, a
corporation, a trust, an estate, an unincorporated organization, or any other
entity.
1.14. "Plants" means the plants collected by Shaman prior to February 1, 1999
pursuant to the Joint Development Agreement, and specifically includes the *****
******* and ********* (***) plants listed on the attached Exhibit C.
[* indicates that we intend to seek confidential treatment with the
Commission for the selected portion of this exhibit. The omitted portion will be
separately filed with the Commission pursuant to Rule 24b-2.]
1.15. "Plant Extracts" means any chemicals or mixtures of chemicals extracted
from Plants.
1.16. "Product" means any finished human therapeutic composition (whether in
bulk or final product form), intended for use in the Field, that contains a
Compound (as defined in Section 1.3) as an active ingredient.
1.17. "Shaman Patents" means Patents which cover a method, material,
manufacture, use, treatment, process, compound, composition or
product-by-process which is useful in the manufacture, use or sale of a Compound
or a Product, which Patent is owned or controlled by Shaman, including Shaman's
interest in any Joint Patents.
1.18. "Shaman Technical Information" means all proprietary Shaman information
about the Products, the Plants, the Plant Extracts, the Compounds, uses of
Compounds, methods of manufacturing, formulating or extracting the Compounds,
modifications of Compounds, improvements to the Compounds, the compounds listed
on attached Exhibit B and any invention disclosures, discoveries, know-how,
trade secrets, improvements, information, experience, technical data, formulas,
procedures or results (including, without limitation, physical, chemical,
biological, botanical, geographical, ethnomedical, toxicological,
pharmacological, pre-clinical and clinical data, product forms and formulations,
and know-how relating to methods, processes or techniques for the manufacture,
handling or use of the Products, the Compounds, the Plants, and the Plant
Extracts, including, without limitation, preparation, recovery, packaging, and
sterilization processes and techniques, dosage regimens, control assays and
specifications), that are rightfully held by Shaman or its Affiliates or which
Shaman has a right to license or sublicense as of the Effective Date.
2. ISSUANCE OF SHAMAN STOCK TO LIPHA. In consideration of the discharge of its
obligation to LIPHA with respect to the funds advanced to it by LIPHA in
December 1998 under the Joint Development Agreement, Shaman shall issue to LIPHA
One Hundred Thirty-three Thousand, Three Hundred Thirty-Four (133,334) shares of
Series R Convertible Preferred Stock pursuant to the terms set forth in the
offering of Shaman's shares described in the prospectus dated July 16, 1999, and
the subscription agreement for such offering. If for any reason Shaman does not
issue to LIPHA stock certificates representing the stock, or any portion of the
stock, required by this Section within 21 days after the expiration (currently
August 23, 1999) of the public offering of the Series R Convertible Preferred
3
<PAGE>
Stock as provided in the prospectus dated July 16, 1999 (or any extension of the
expiration date pursuant to the terms of said prospectus) (the "Deadline"), it
shall make a cash payment to LIPHA in an amount equal to Fifteen Dollars ($15)
times the number of shares it is unable to provide within 180 days after the
Deadline.
3. RELEASE AND TERMINATION OF JOINT DEVELOPMENT AGREEMENT. This Settlement
Agreement supercedes and replaces the Joint Development Agreement, which is
hereby fully terminated and extinguished. Except as expressly reincorporated
into this Settlement Agreement, none of the provisions of the Joint Development
Agreement survive this termination. The Parties hereby mutually and fully
release and forever discharge each other from their respective obligations under
the Joint Development Agreement and any and all claims and causes of action,
whether known, unknown or contingent arising thereunder or relating thereto.
Neither Party shall have an action against the other Party, or its Affiliates,
for any past breach of the Joint Development Agreement irrespective of whether
the circumstances of such breach are known to the non-breaching Party as of the
Effective Date of this Settlement Agreement. In granting the foregoing release
and discharge, each party acknowledges the existence of California Civil Code
Section 1542, which provides that a general release does not extend to claims
which the creditor does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially affected his
settlement with the debtor. Each party intends to waive the applicability of
California Civil Code Section 1542 to any and all claims which the Parties may
have against each other under the Joint Development Agreement both now and in
the future and acknowledges that the release in this paragraph and such waiver
will bar each party from asserting claims under the Joint Development Agreement
in the future for any reason. Nothing herein shall affect the Stock Purchase
Agreement between LIPHA and Shaman dated September 23, 1996 and the Registration
Rights Agreement dated as of September 23, 1996 between Shaman and LIPHA which
shall remain in full force and effect.
4. RIGHTS IN TECHNOLOGY.
4.1. Licensing of Shaman Patents and Technology.
4.1.1. License and Transfer of Technology. Shaman hereby grants to LIPHA
and its Affiliates, an irrevocable exclusive license in the Field in the
Exclusive Territory under the Shaman Patents and the Shaman Technical
Information to make, have made, use, sell and offer for sale, Products and
Compounds. Shaman does not grant to LIPHA rights to exploit those compounds
listed on Exhibits A and B hereto in the Ex-Ono Territory. After the Effective
Date, on a date or dates which are mutually agreed upon by the parties but which
is any event within twenty (20) days after notice to Shaman from LIPHA, Shaman
shall provide LIPHA with access to all Shaman Technical Information which has
not previously been transferred to LIPHA, including, without limitation,
Shaman's pertinent laboratory notebooks and experimental results at Shaman's
facilities.
4.1.2. Right to Sublicense. The licenses granted to LIPHA hereunder
including the rights granted under Section 4.2 includes the right to
sublicense, subject to the acceptance by the sublicensee of the terms of this
Settlement Agreement, and specifically includes the right in LIPHA to work with
other Persons in the development, evaluation and marketing of Products and
Compounds.
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4.2. Exploitation of Plants and Plant Extracts.
4.2.1. Access to the Plants, Plant Extracts and Compounds. After the
Effective Date, on a date which is mutually agreed upon by the parties, but
which is in any event within twenty (20) days after notice to Shaman from LIPHA,
Shaman shall transfer to LIPHA at least (i) ***** ******* (**%) of the Plant
Extracts and compounds which were part of the Joint Development Agreement as
such amounts are listed on attached Exhibit B, and (ii) the lesser of *** (*)
kilogram or ***** ******* (**%) of the Plants that were collected as part of the
Joint Development Agreement. Shaman represents and warrants to LIPHA that if
there are Compounds listed on attached Exhibit A which are not on the list of
compounds to be transferred to LIPHA on attached Exhibit B, then all or
substantially all of such Compounds were used up in the research under the Joint
Development Agreement and therefore does not appear on Exhibit B. The parties
shall mutually agree as to the manner of handling and shipment so as to protect
the Plants, Plant Extracts and Compounds from degradation. Shaman shall use
commercially reasonable methods to protect the Plants, Plant Extracts and
Compounds from degradation prior to the transfer to LIPHA. At LIPHA's request,
after providing LIPHA with a cost estimate acceptable to LIPHA, Shaman shall
make commercially reasonable efforts to supply additional Plants to LIPHA, at
Shaman's documented cost plus ******* ******* (**%), payable upon receipt of the
requested plants. [* indicates that we intend to seek confidential treatment
with the Commission for the selected portion of this exhibit. The omitted
portion will be separately filed with the Commission pursuant to Rule 24b-2.]
4.3. Shaman's Rights in the Technology and Restrictions On Shaman's Rights.
4.3.1. Subject to the rights granted to LIPHA in this Settlement Agreement
and the restrictions set forth in Section 4.3.2 below, Shaman shall have
all rights to license or otherwise transfer rights to exploit the Shaman
Patents, the Shaman Technical Information, the Compounds, the compounds listed
on Exhibit B, the Plants and the Plant Extracts for all uses outside the Field
worldwide and for all uses without limitation as to field within the Ex-Ono
Territory.
4.3.2. Shaman agrees that Shaman will not license or otherwise grant
rights to exploit the Plants, the Plant Extracts or the compounds listed on
Exhibit B or any substances derived, isolated or synthesized from such compounds
or the Compounds, including rights to access or screen the Plants and Plant
Extracts, for use in the Field in the Exclusive Territory to more than one
Person, aside from the Parties. Any license or rights granted by Shaman to
another company under the Shaman Patents and the Shaman Technical Information or
with respect to the Plants, the Plant Extracts, the compounds listed on Exhibit
B or any substances derived, isolated or synthesized from such compounds or the
Compounds to any Person shall affirmatively preclude the licensee from (i)
selling Products in the Field in the Exclusive Territory, (ii) from exploiting,
screening or otherwise using any of the Plants, the Plant Extracts, the
compounds listed on Exhibit B or any substances derived, isolated or synthesized
from such compounds or the Compounds in the Exclusive Territory in connection
with the sale, use, or manufacture of any product, of any kind, in the Field,
except to the extent permitted in the preceding sentence for a single licensee,
5
<PAGE>
it being specifically understood that the Plants, the Plant Extracts, the
compounds listed on Exhibit B or any substances derived, isolated or synthesized
from such compounds or the Compounds may be used for selling, screening or
otherwise exploiting such materials in the Ex-Ono Territory, and (iii)
disseminating the Shaman Technical Information or other information, whether
obtained from Shaman or independently developed by the licensee, about the
Plants, the Plant Extracts or the Compounds to the public to the extent such
dissemination would adversely affect LIPHA's exclusive rights hereunder.
4.3.3. Shaman shall not disseminate the Shaman Technical Information, or
other information, whether developed by Shaman or obtained from others,
about the Plants, the Plant Extracts or the Compounds, to the public to the
extent such dissemination would adversely affect LIPHA's exclusive rights
hereunder. The foregoing shall not be construed as prohibiting disclosure of
such information to the single licensee permitted under Section 4.3.2 or to
third party contractors performing services for Shaman or disclosure of such
information in connection with business negotiations or in the performance of
existing contractual obligations, provided that the recipient is in each
instance under a written obligation not to publicly disclose such information.
4.4 Covenant Not to Sue. Shaman agrees not to make any claims or institute
any lawsuits or legal proceedings against LIPHA, its affiliates, and its
licensees and sublicensees arising out of the transfer to LIPHA or the
development or use by LIPHA (or its Affiliates, licensees or sublicensees) of
the Compounds, the compounds listed on attached Exhibit B, Plant Extracts,
Plants, the Shaman Patents or the Shaman Technical Information, including
without limitation any claims or lawsuits or legal proceedings alleging
infringement or other improper use of the Shaman Patents or the Shaman Technical
Information, provided that this covenant shall not prevent Shaman from enforcing
its rights under Sections 3, 5, 6, 7, 8, 9, and 10 of this Agreement.
4.5 Royalties. For Products sold in the Exclusive Territory that are covered by
a Shaman Patent or a Joint Patent issued in the country where the Product is
sold (hereinafter referred to as "Royalty Bearing Products"), LIPHA shall pay
royalties to Shaman in accordance with Section 5.1. LIPHA is also not required
to make any other payments to Shaman in consideration of the rights granted by
Shaman in this Settlement Agreement.
5. ROYALTY PAYMENTS AND REPORTS TO SHAMAN.
5.1. Running Royalties. In consideration of the license grant of Section 4.1,
LIPHA shall pay to Shaman royalties at the rate of *** and ******** percent
(**%) of the Net Sales of Royalty Bearing Products sold within the Exclusive
Territory, subject to the remaining provisions of this Article 5. Such royalties
are to be calculated and paid on aggregate sales but accounted for on a
county-by-country basis. LIPHA shall be responsible for all royalties payable by
its Affiliates, licensees or sublicensees. All payments made by LIPHA shall be
in Dollars. [* indicates that we intend to seek confidential treatment with the
Commission for the selected portion of this exhibit. The omitted portion
will be separately filed with the Commission pursuant to Rule 24b-2.]
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5.2. Limitations on Royalties. LIPHA's obligation to pay royalties to Shaman
shall cease ten (10) years after the Effective Date, or upon the payment of
royalties to Shaman in the amount of *** ******* Dollars ($**********)
cumulative as to the sale of all Products by Lipha, its Affiliates, licensees or
sublicensees, whichever comes first. Thereafter, the licenses granted to LIPHA
under Section 4.1 shall become royalty free. [* indicates that we intend to
seek confidential treatment with the Commission for the selected portion of this
exhibit. The omitted portion will be separately filed with the Commission
pursuant to Rule 24b-2.]
5.3. Royalty Reports. LIPHA shall provide a royalty report and, if applicable, a
royalty payment to Shaman every three (3) months. The report and payment
relating to Net Sales shall be provided within forty-five (45) days after the
end of each calendar quarter, and shall include all sales of Royalty Bearing
Products by LIPHA and its Affiliates, licensees and sublicensees. To the extent
that the applicable currency control laws and regulations in any country in the
Exclusive Territory prohibit or limit LIPHA's ability to export funds from such
country to discharge its royalty obligation hereunder, LIPHA shall pay to Shaman
to an account designated by Shaman prior to the time payment is due, all
royalties that would otherwise have been due with respect to Net Sales in such
country. LIPHA shall keep, and require any Affiliate, licensee and sublicensee
to keep, for a period of not less than three (3) years, complete and accurate
records of all Net Sales of each Royalty Bearing Product. Shaman shall have the
right, at Shaman's sole expense, through a certified public accountant
reasonably acceptable to LIPHA, and following reasonable notice, to examine such
records during regular business hours during the life of the LIPHA's obligation
to pay royalties, provided however, that such examination shall not take place
more often than once a year, and shall not cover any records which date prior to
the date of the last examination, and provided further that, such accountants
shall report to Shaman only as to the accuracy of the royalty statements and
payments. Copies of such reports shall be supplied to LIPHA.
5.4. Tax Payments. Any tax paid or required to be withheld by LIPHA for the
benefit of Shaman on account of royalties payable to Shaman under this
Settlement Agreement shall be deductible and deducted from the amount of
royalties otherwise due. LIPHA shall secure and send to Shaman proof of any such
taxes withheld and paid by LIPHA for the benefit of Shaman and shall, at
Shaman's request, provide reasonable assistance to Shaman in recovering or
obtaining credit for said taxes, if possible.
6. PATENT MATTERS.
6.1. Inventions: Joint Inventions and Patents.
6.1.1. All inventions made jointly by employees or other agents of Shaman
(collectively "Shaman personnel") and employees or other agents of Lipha
(collectively "Lipha personnel") during the term of the Joint Development
Agreement shall be vested jointly in Shaman and Lipha ("Joint Inventions"),
provided that, it is legally proper to list as named inventors on a patent
application both Shaman personnel and Lipha personnel. In the event that the
parties disagree as to who may properly be listed as named inventors on a
Patent, they shall hire an independent patent counsel acceptable to both Parties
to investigate the issue of inventorship. The Parties shall jointly own any
Patents resulting from Joint Inventions.
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6.1.2. In the event that Shaman becomes aware of an invention that it
believes should be treated as a Joint Invention pursuant to Section 6.1.1
within five years of the Effective Date of this Settlement Agreement and is not
being treated as such by LIPHA, Shaman shall have the opportunity to receive a
reasonably detailed scientific presentation by LIPHA on such invention, and the
Parties shall cooperate in good faith to determine whether such invention should
be treated as a Joint Invention.
6.2. General Provisions Relating to Prosecution and Maintenance. Shaman shall
have the lead responsibility to draft, file, prosecute and maintain the Joint
Patents. Lipha shall cooperate with Shaman, and shall secure the cooperation of
its inventors, as reasonably required, in connection with the drafting, filing
and prosecution of the Joint Patents. Each Party shall be responsible for one
half (1/2) of the costs associated with the drafting, filing and prosecution of
the Joint Patents. In the event that either Party decides that it is no longer
interested in supporting the cost of drafting, filing and prosecuting or
maintaining any of the Joint Patents it shall give the other Party reasonable
notice, and upon receipt of such notice the other Party shall acquire the rights
of the notifying Party in the Joint Patent(s) identified in the notice.
Notwithstanding any such notice, the notifying Party shall continue to
cooperate, and shall secure the cooperation of its inventors, as reasonably
necessary, to secure, perfect and maintain the other Party's rights in the Joint
Patent(s).
6.3. Maintenance of the Shaman Patents. Shaman shall, at its expense, prepare,
file and maintain patent applications and patents relating to Shaman Technical
Information with respect to any of the Compounds and the Products in such
countries in the Exclusive Territory as LIPHA shall request in writing; provided
that Shaman shall be relieved of such obligation to prepare and file patent
applications in a specific country if (a) Shaman gives LIPHA reasonable advance
notice that it does not intend to file a patent application in such country and
provides the names and addresses of any and all other persons, companies or
other organizations to which Shaman has granted licenses or other rights or
which have an interest in such patent application and cooperates with LIPHA, as
reasonably necessary, to enable LIPHA to prepare, file and maintain such patent
applications and patents, and (b) Shaman confirms to LIPHA in such advance
notice that if LIPHA elects to prepare, file or maintain such patent
applications and patents, then after such election, Shaman will not use or
assign such applications or resulting patents or grant any further license or
other rights under such applications or resulting patents, without the prior
written consent of LIPHA; and provided further that Shaman shall be relieved of
such obligation to maintain Patents in a specific country if (a) Shaman gives
LIPHA reasonable notice that it intends to abandon the Patent and provides the
names and addresses of any and all other persons, companies or other
organizations to which Shaman has granted a license or other rights under the
Patent or which have an interest in the Patent, prior to allowing the Patent to
lapse or become abandoned, other than a decision to abandon a patent application
in favor of a continuation patent application which claims priority to the
abandoned application, and cooperates with LIPHA, as reasonably necessary, with
the maintenance of the Patent by LIPHA, and (b) Shaman confirms to LIPHA in such
advance notice that if LIPHA elects to maintain the Patent, that after such
election, Shaman will not use, assign or grant any further license or other
rights under the Patent without the prior written consent of LIPHA. If Shaman
gives advance notice to LIPHA that it does not intend to file a patent
application or it intends to abandon the Patent as provided above and if LIPHA
8
<PAGE>
and other licensees desire to prepare, file or maintain such patent application
or Patent, then the costs of filing or maintaining such patent application or
Patent will be shared by LIPHA and such other licensees as agreed among them In
no event shall LIPHA be required to file any patent application or maintain or
prosecute any Patent which Shaman elects not to pursue under this Section 6.3.
6.4. Infringement by a Third Party. If at any time either Party hereto shall
become aware of any infringement or threatened infringement by a third party of
any of the Shaman Patents, the Party having the knowledge of such infringement
shall promptly give notice thereof to the other Party. Upon any such notice of
infringement, the Parties shall promptly consult with one another with a view
toward reaching agreement on a course of action to be pursued.
7. REPRESENTATIONS AND WARRANTIES. Shaman and LIPHA each represent and
warrant to the other as set forth below:
7.1. Representations and Warranties of Shaman. Shaman represents and
warrants that:
7.1.1. The execution, delivery and performance of this Settlement
Agreement by Shaman will not, with or without notice, the passage of time
or both, result in any violation of, be in conflict with, or constitute a
default under any material contract, obligation or commitment to which Shaman is
a party or by which it is bound, or to Shaman's knowledge, any statute, rule or
governmental regulation applicable to Shaman.
7.1.2. Shaman has all requisite legal and corporate power and authority to
enter into this Settlement Agreement, to grant the licenses to be granted
by Shaman hereunder, to transfer the materials under Section 4.2 and to carry
out and perform its obligations under the terms of this Settlement Agreement.
All corporate action on the part of Shaman, its officers and directors necessary
for the grants of licenses pursuant hereto, the transfer of the materials under
Section 4.2, the execution and delivery of this Settlement Agreement and the
performance of Shaman's obligations hereunder has been taken. This Settlement
Agreement constitutes a valid and binding obligation of Shaman, enforceable in
accordance with its terms, except (i) the enforceability hereof may be limited
by bankruptcy, insolvency, moratorium or other similar law as affecting the
enforcement of creditors' rights generally, (ii) the availability of equitable
remedies (e.g., specific performance, injunctive relief, and other equitable
remedies) may be limited by equitable principles or general applicability; and
(iii) that no representation is made regarding the effect of laws relating to
competition, antitrust or patent misuse or the effect of LIPHA's or third
parties' intellectual property rights.
7.2. Representations and Warranties of LIPHA. LIPHA represents and warrants
that:
7.2.1. The execution, delivery and performance of this Settlement
Agreement by LIPHA will not, with or without notice, the passage of time or
both, result in any violation of, be in conflict with, or constitute a default
under any material contract, obligation or commitment to which LIPHA is a party
or by which it is bound, or to LIPHA's knowledge, any statute, rule or
governmental regulation applicable to LIPHA.
9
<PAGE>
7.2.2. LIPHA has all requisite legal and corporate power and authority to
enter into this Settlement Agreement and to carry out and perform its
obligations under the terms of this Settlement Agreement. All corporate action
on the part of LIPHA and its officers and directors necessary for the execution
and delivery of this Settlement Agreement and the performance of LIPHA's
obligations hereunder has been taken. This Settlement Agreement constitutes a
valid and binding obligation of LIPHA, enforceable in accordance with its terms,
except as (i) the enforceability hereof may be limited by bankruptcy,
insolvency, moratorium or other similar law as affecting the enforcement of
creditors' rights generally, (ii) the availability of equitable remedies (e.g.,
specific performance, injunctive relief, and other equitable remedies) may be
limited by equitable principles or general applicability, and (iii) and that no
representation is made regarding the effect of laws relating to competition,
antitrust or patent misuse or the effect of Shaman's or third parties'
intellectual property rights.
7.2.3. For a period of one year from the Effective Date, LIPHA will not
solicit the votes or agreements of other stockholders of Shaman to vote
against proposals made by the board of directors of Shaman to its stockholders.
7.2.4. For a period of one year from the Effective Date, LIPHA will vote
its shares in favor of proposals made by the board of directors of Shaman
to its stockholders, unless LIPHA, in its sole discretion, determines that such
proposal or vote is illegal or adverse to the interests of LIPHA.
7.3. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS SETTLEMENT AGREEMENT,
SHAMAN AND LIPHA MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND,
EITHER EXPRESS OR IMPLIED. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
8. DISPUTE RESOLUTION AND ARBITRATION.
8.1. Arbitration. The Parties agree that any dispute, controversy or claim
arising out of or relating to this Settlement Agreement, or the breach,
termination or invalidity thereof, shall be resolved through negotiation and/or
binding arbitration. If a dispute arises between the Parties, the Parties agree
to resolve by binding arbitration in accordance with the rules of the
International Chamber of Commerce ("I.C.C."), except as modified herein. Shaman
and LIPHA shall each select one arbitrator and the two arbitrators so selected
shall choose a third arbitrator to resolve the dispute. The arbitration shall be
held in San Francisco, California, and the decision shall be rendered within
three (3) months of conclusion of arbitration and shall be binding and not be
appealable to any court in any jurisdiction. The arbitration shall determine the
share of the cost of the arbitration filing and hearing fees and the cost of the
arbitrators. Each party must bear its own attorney's fees and associated costs
and expenses.
8.2. Jurisdiction. For the purposes of this Section 8.2, the Parties agree to
accept the jurisdiction of the federal courts located in the Northern District
of California for the purposes of entering the decision rendered by any
arbitration panel and enforcing awards entered pursuant to, and for enforcing
the agreements reflected in, this Article.
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9. NO PUBLIC ANNOUNCEMENT OF AGREEMENT. Except as required to comply with
U.S. and other foreign securities or other laws, or any order or regulation
of a court or government agency of any country, neither Party shall release
information concerning this Settlement Agreement or the subject matter hereof to
the news media, or other media, without the prior written consent of the other
Party, and shall not disclose the content of this Settlement Agreement to any
third party, unless such disclosing Party has received the prior written consent
of the other Party or unless such information was at the time of disclosure in
the public domain other than as a result of a breach by such disclosing Party of
its confidentiality obligations herein or was received by such disclosing Party
on an unrestricted basis from a source unrelated to the other Party or unless
disclosure is required for such disclosing Party to protect, assert, use or
exercise the rights, privileges or entitlements that it has under this
Settlement Agreement.
10. ASSIGNMENT. This Settlement Agreement shall be binding on the Parties
hereto and their respective successors and assigns. Neither of the Parties
hereto shall be entitled to assign this Settlement Agreement or any of its
rights or obligations hereunder without the consent of the other.
Notwithstanding the foregoing, each Party shall be entitled to assign this
Settlement Agreement to an Affiliate of such Party unless the other Party
reasonably objects to such assignment for valid business purposes. If either
Party is acquired or merged with another entity, that entity shall succeed to
all of the rights and obligations of the disappearing Party; provided in the
event either Party is acquired or merged with another entity, such acquiring or
successor entity shall expressly assume in writing the due and punctual
performance and observance of all obligations under this Settlement Agreement of
the Party it has acquired or with which it has merged, with the same effect as
if such entity had originally been such Party hereunder.
11. FURTHER ASSURANCES. Shaman and LIPHA shall cooperate with each other and
execute and deliver to each other such other instruments and documents and take
such other actions as may be reasonably requested from time to time in order to
carry out, evidence and confirm the rights and intended purposes of this
Settlement Agreement.
12. GOVERNING LAW. Disputes arising out of or based upon this Settlement
Agreement shall be governed by and construed in accordance with the laws of the
State of California, United States of America, as applied to agreements among
California residents entered into and to be performed entirely within
California. LIPHA hereby submits to the non-exclusive personal jurisdiction and
to service and venue in any U.S. state or federal court located in the State of
California in connection with any claim arising hereunder or in connection
herewith. Shaman, in turn hereby submits to the non-exclusive personal
jurisdiction and to service and venue in any French court in connection with any
claim arising hereunder or in connection herewith.
13. NOTICES. Notices, demands or other communications required or permitted to
be given or made hereunder shall be in writing and delivered personally or sent
by private overnight mail delivery, with recorded delivery or by legible telefax
addressed to the intended recipient at its address set forth below in this
Section or to such other address or telefax number as any Party may from time to
time duly notify to the other. Any such notice, demand or communication shall,
11
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unless the contrary is proved, be deemed to have been duly served (if given or
made by telefax) on the next following business day at the place of receipt or
(if given or made by overnight private mail) forty-eight (48) hours after
posting and in proving the same, it shall be sufficient to show, in the case of
a letter, that the envelope contained the same as duly addressed, correctly
stamped and posted and in the case of a telefax, that such telefax was duly
dispatched to a current telefax number of the addressee. Correspondence to
Shaman shall be addressed to:
President and Chief Executive Officer
Shaman Pharmaceuticals, Inc.
213 East Grand Avenue
South San Francisco, California 94080 U.S.A
Telefax number: (650) 873-1463
Correspondence to LIPHA shall be addressed to:
Chairman and Chief Executive Officer
LIPHA, S.A.
37 rue Saint-Romain
F-69379 Lyon, cedex 08
France
Telefax number: 33/04 78 75 39 05
14. ENTIRE AGREEMENT. This Settlement Agreement, together with the exhibits
attached hereto, constitutes the entire agreement between the Parties with
respect to the subject matter hereof and save as otherwise expressly provided no
modification, amendment or waiver of any of the provisions of this Settlement
Agreement shall be effective unless made in writing specifically referring to
this Settlement Agreement and duly signed and delivered by the Parties hereto.
Whenever in this Settlement Agreement a Party's approval or signature is
required, such approval or signature may not be unreasonably withheld. The
headings herein are for the convenience of the parties and shall have no legal
effect.
15. NONWAIVER OF RIGHTS. No failure or delay on the part of Shaman or LIPHA in
exercising any right under this Settlement Agreement, irrespective of the length
of time for which such failure or delay shall continue, will operate as a waiver
of, or impair, any such right. No single or partial exercise of any such right
will preclude any other or further exercise thereof or the exercise of any other
right. No waiver of any such right will be effective unless given in a signed
writing. No waiver of any such right will be deemed a waiver of any other right
hereunder or thereunder.
16. SEVERABILITY. In case any provision of this Settlement Agreement shall be
invalid, illegal, or unenforceable, it shall to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as nearly
as practicable the intent of the Parties, and the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
17. FORCE MAJEURE. Neither Party shall be held liable or responsible to the
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other Party nor be deemed to have defaulted under or breached this Settlement
Agreement for failure or delay in fulfilling or performing any terms of this
Settlement Agreement when such failure or delay is caused by or results from
fires, floods, embargoes, government regulations or administrative guidance,
prohibitions or interventions, war, acts of war (whether war be declared or
not), insurrections, riots, civil commotions, strikes, lockouts, acts of God, or
any other cause beyond their respective reasonable control, but they shall make
every reasonable effort to remove any such cause of their failure or delay as
soon as possible.
18. COUNTERPARTS. This Settlement Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Settlement Agreement
shall be deemed for all purposes to be executed and effective upon receipt of an
executed signature page, either an original or telefax copy thereof, from the
duly authorized officer of each of LIPHA and Shaman.
IN WITNESS WHEREOF, the Parties have executed this Settlement Agreement as
of the Effective Date written above.
SHAMAN PHARMACEUTICALS, INC.
By: /s/Lisa A. Conte
---------------------------------
Name: Lisa A. Conte
Title:
LIPHA s.a.
By: /s/ Jean-Noel Julliard
---------------------------------
Name: Jean-Noel Julliard
Title: Director, Business and
Economic Affairs
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Exhibit A
1.3 Compounds
** Compounds ([**] Chemical Classes)
- SP ***** (************)
- SP ****** (**********)
- SP ****** (*********** ****)
- SP ********** (**********)
- SP **************
- SP *****
- SP ********
- SP *****
* Compounds (* Chemical Classes)
- SP ***** (*********)
- SP ******** (********)
- SP ********* (****** ***********)
- SP ********* (***********)
* Compounds (* Chemical Classes)
- SP ***** (**********)
- SP *********
* Compounds (* Chemical Classes)
- SP **************
- SP ******
- SP ******
* Compounds (* Chemical Classes)
- SP ******
- SP ******
** Compounds (* Chemical Classes)
- SP **************
- SP *********
- SP ******
- SP *********
- SP ********
* Compounds (* Chemical Classes)
- SP ******
- SP ********
- SP ********* (**********)
[* indicates that we intend to seek confidential treatment with the Commission
for the selected portion of this exhibit. The omitted portion will be
separately filed with the Commission pursuant to Rule 24b-2.]
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Exhibit B
Section 4.2.1 The compounds to be delivered to Lipha
15
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Exhibit C
Plants
16
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LIPHA PURE COMPOUNDS AND SYNTHETICS
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* * * *
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* * * *
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* * * *
- - ---------------------------------------------------------------------------
Exhibit B (Page 1)
<PAGE>
LIPHA PURE COMPOUNDS AND SYNTHETICS
- - ---------------------------------------------------------------------------
SP no. Date Jar ID No. Bar Code Amount in mg
- - ---------------------------------------------------------------------------
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* * * *
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* * * * *
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* * * *
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* * * * *
- - ---------------------------------------------------------------------------
Exhibit B (Page 2)
<PAGE>
LIPHA PURE COMPOUNDS AND SYNTHETICS
- - ---------------------------------------------------------------------------
SP no. Date Jar ID No. Bar Code Amount in mg
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * *
- - ---------------------------------------------------------------------------
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* * * *
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* * * * *
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* * * *
- - ---------------------------------------------------------------------------
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* * * *
- - ---------------------------------------------------------------------------
Exhibit B (Page 3)
<PAGE>
LIPHA PURE COMPOUNDS AND SYNTHETICS
- - ---------------------------------------------------------------------------
SP no. Date Jar ID No. Bar Code Amount in mg
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * *
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * *
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* * * *
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* * * * *
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* * * *
- - ---------------------------------------------------------------------------
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* * * *
- - ---------------------------------------------------------------------------
Exhibit B (Page 4)
<PAGE>
LIPHA PURE COMPOUNDS AND SYNTHETICS
- - ---------------------------------------------------------------------------
SP no. Date Jar ID No. Bar Code Amount in mg
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * *
- - ---------------------------------------------------------------------------
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* * * *
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* * * *
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* * * *
- - ---------------------------------------------------------------------------
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* * * *
- - ---------------------------------------------------------------------------
Exhibit B (Page 5)
<PAGE>
LIPHA PURE COMPOUNDS AND SYNTHETICS
- - ---------------------------------------------------------------------------
SP no. Date Jar ID No. Bar Code Amount in mg
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * *
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * *
- - ---------------------------------------------------------------------------
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* * * *
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* * * *
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* * * *
- - ---------------------------------------------------------------------------
Exhibit B (Page 6)
<PAGE>
LIPHA PURE COMPOUNDS AND SYNTHETICS
- - ---------------------------------------------------------------------------
SP no. Date Jar ID No. Bar Code Amount in mg
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * *
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * *
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* * * *
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* * * *
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* * * *
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* * * *
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* * * *
- - ---------------------------------------------------------------------------
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* * * *
- - ---------------------------------------------------------------------------
Exhibit B (Page 7)
<PAGE>
LIPHA PURE COMPOUNDS AND SYNTHETICS
- - ---------------------------------------------------------------------------
SP no. Date Jar ID No. Bar Code Amount in mg
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * *
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * *
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* * * *
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Exhibit B (Page 8)
<PAGE>
LIPHA PURE COMPOUNDS AND SYNTHETICS
- - ---------------------------------------------------------------------------
SP no. Date Jar ID No. Bar Code Amount in mg
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * * *
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * *
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* * * *
- - ---------------------------------------------------------------------------
Exhibit B (Page 9)
<PAGE>
LIPHA PURE COMPOUNDS AND SYNTHETICS
- - ---------------------------------------------------------------------------
SP no. Date Jar ID No. Bar Code Amount in mg
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * *
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * *
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* * * *
- - ---------------------------------------------------------------------------
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* * * * *
- - ---------------------------------------------------------------------------
Exhibit B (Page 10)
<PAGE>
LIPHA PURE COMPOUNDS AND SYNTHETICS
- - ---------------------------------------------------------------------------
SP no. Date Jar ID No. Bar Code Amount in mg
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * * *
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * *
- - ---------------------------------------------------------------------------
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* * * *
- - ---------------------------------------------------------------------------
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* * * *
- - ---------------------------------------------------------------------------
Exhibit B (Page 11)
<PAGE>
LIPHA PURE COMPOUNDS AND SYNTHETICS
- - ---------------------------------------------------------------------------
SP no. Date Jar ID No. Bar Code Amount in mg
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * *
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * * *
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* * * *
- - ---------------------------------------------------------------------------
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* * * *
- - ---------------------------------------------------------------------------
Exhibit B (Page 12)
<PAGE>
LIPHA PURE COMPOUNDS AND SYNTHETICS
- - ---------------------------------------------------------------------------
SP no. Date Jar ID No. Bar Code Amount in mg
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * *
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
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* * * *
- - ---------------------------------------------------------------------------
Exhibit B (Page 13)
<PAGE>
LIPHA PURE COMPOUNDS AND SYNTHETICS
- - ---------------------------------------------------------------------------
SP no. Date Jar ID No. Bar Code Amount in mg
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
* * * *
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Exhibit B (Page 14)
<PAGE>
EXTRACTS TO LIPHA
- - -------------------------
SP Number Amt to LIPHA
- - -------------------------
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Exhibit B (Page 15)
<PAGE>
EXTRACTS TO LIPHA
- - -------------------------
SP Number Amt to LIPHA
- - -------------------------
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Exhibit B (Page 16)
EXTRACTS TO LIPHA
- - -------------------------
SP Number Amt to LIPHA
- - -------------------------
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Exhibit B (Page 17)
EXTRACTS TO LIPHA
- - -------------------------
SP Number Amt to LIPHA
- - -------------------------
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* *
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- - -------------------------
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- - -------------------------
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Exhibit B (Page 18)
EXTRACTS TO LIPHA
- - -------------------------
SP Number Amt to LIPHA
- - -------------------------
- - -------------------------
* *
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* *
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- - -------------------------
* *
- - -------------------------
- - -------------------------
* *
- - -------------------------
Exhibit B (Page 19)
EXTRACTS TO LIPHA
- - -------------------------
SP Number Amt to LIPHA
- - -------------------------
- - -------------------------
* *
- - -------------------------
- - -------------------------
* *
- - -------------------------
- - -------------------------
* *
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- - -------------------------
- - -------------------------
* *
- - -------------------------
- - -------------------------
* *
- - -------------------------
- - -------------------------
* *
- - -------------------------
- - -------------------------
* *
- - -------------------------
Exhibit B (Page 20)
EXTRACTS TO LIPHA
- - -------------------------
SP Number Amt to LIPHA
- - -------------------------
- - -------------------------
* *
- - -------------------------
- - -------------------------
* *
- - -------------------------
- - -------------------------
* *
- - -------------------------
- - -------------------------
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* *
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* *
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* *
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- - -------------------------
- - -------------------------
* *
- - -------------------------
- - -------------------------
* *
- - -------------------------
- - -------------------------
* *
- - -------------------------
- - -------------------------
* *
- - -------------------------
Exhibit B (Page 21)
EXTRACTS TO LIPHA
- - -------------------------
SP Number Amt to LIPHA
- - -------------------------
- - -------------------------
* *
- - -------------------------
- - -------------------------
* *
- - -------------------------
- - -------------------------
* *
- - -------------------------
- - -------------------------
* *
- - -------------------------
Exhibit B (Page 22)
<PAGE>
EXHIBIT C -PLANTS
LIPHA PLANT LIST
- - ---------------------------------------
Genus Species Family
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
Exhibit C (Page 1)
LIPHA PLANT LIST
- - ---------------------------------------
Genus Species Family
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
Exhibit C (Page 2)
LIPHA PLANT LIST
- - ---------------------------------------
Genus Species Family
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
Exhibit C (Page 3)
LIPHA PLANT LIST
- - ---------------------------------------
Genus Species Family
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
Exhibit C (Page 4)
LIPHA PLANT LIST
- - ---------------------------------------
Genus Species Family
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
Exhibit C (Page 5)
LIPHA PLANT LIST
- - ---------------------------------------
Genus Species Family
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
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* * *
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* * *
- - ---------------------------------------
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* * *
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
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* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
Exhibit C (Page 6)
LIPHA PLANT LIST
- - ---------------------------------------
Genus Species Family
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
- - ---------------------------------------
* * *
- - ---------------------------------------
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* * *
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Exhibit C (Page 7)
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Shaman Pharmaceuticals, Inc.
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-66450, No. 33-93938, No. 333-09169 and No. 333-30365)
pertaining to Shaman Pharmaceutical Inc.'s 1992 Stock Option Plan, in the
Registration Statements (Form S-8 No. 333-96323) pertaining to the Shaman
Pharmaceutical Inc.'s 1999 Series R Preferred Stock Option Plan, and in the
Registration Statements (Form S-1 No. 333-78115, No. 333-86463) pertaining to
the Shaman Pharmaceutical Inc.'s Series R Convertible Preferred Stock, of our
report dated March 21, 2000, with respect to the financial statements of Shaman
Pharmaceuticals, Inc. included in the Annual Report (Form 10-K) for the year
ended December 31, 1999.
BDO Seidman, LLP
San Francisco, California
March 30, 2000
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Shaman Pharmaceuticals, Inc.
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-66450, No. 33-93938, No. 333-09169 and No. 333-30365)
pertaining to Shaman Pharmaceutical Inc.'s 1992 Stock Option Plan, in the
Registration Statements (Form S-8 No. 333-96323) pertaining to the Shaman
Pharmaceutical Inc.'s 1999 Series R Preferred Stock Option Plan, and in the
Registration Statements (Form S-1 No. 333-78115, No. 333-86463) pertaining to
the Shaman Pharmaceutical Inc.'s Series R Convertible Preferred Stock, of our
report dated March 21, 2000, with respect to the financial statements of Shaman
Pharmaceuticals, Inc. included in the Annual Report (Form 10-K) for the year
ended December 31, 1999.
Ernst & Young, LLP
San Francisco, California
March 30, 2000
<PAGE>
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