SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
|X| Filed by the registrant
|_| Filed by a party other than the registrant
Check the appropriate box:
|X| Preliminary Proxy Statement |_| Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Shaman Pharmaceuticals, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
Title of each class of securities to which transaction applies:
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(1) Aggregate number of securities to which transactions applies:
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(2) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(3) Proposed maximum aggregate value of transaction:
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(4) Total fee paid:
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|_| Fee paid previously with preliminary materials:
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|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(5) Amount Previously Paid:
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(6) Form, Schedule or Registration Statement No.:
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(7) Filing Party:
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(8) Date Filed:
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[LOGO] Shaman
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PHARMACEUTICALS, INC.
SHAMAN PHARMACEUTICALS, INC.
213 East Grand Avenue
South San Francisco, California 94080
February 9, 2000
Dear Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders
("Special Meeting") of Shaman Pharmaceuticals, Inc. (the "Company"), which will
be held at 9:00 A.M. Pacific Standard Time on Friday, March 10, 2000 at The
Embassy Suites, 250 Gateway Boulevard, South San Francisco, California 94080,
for the following purposes:
(i) To approve the transfer of all of the assets and liabilities of Shaman
Pharmaceuticals, Inc. to Shaman.com, Inc. ("Shaman.com") in exchange
for shares of Common Stock of Shaman.com;
(ii) To approve an amendment to the Amended and Restated Certificate to
delete the provision stating that a sale of all or substantially all
of the assets the Company will be treated as a liquidation,
dissolution or winding up of the Company, for purposes of causing a
required liquidation preference distribution to the holders of Series
C Preferred Stock; and
(iii) To transact such other business as may properly come before the
Special Meeting and any adjournment or postponement thereof.
The enclosed Proxy Statement more fully describes the details of the
business to be conducted at the Special Meeting. After reading the Proxy
Statement, please mark, date, sign and return the enclosed proxy card in the
accompanying reply envelope as soon as possible. If you attend the Special
Meeting and vote by ballot, your proxy will be automatically revoked and only
your vote at the Special Meeting will be counted. YOUR SHARES CANNOT BE VOTED
UNLESS YOU MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY OR ATTEND THE SPECIAL
MEETING AND VOTE IN PERSON.
After careful consideration, the Company's Board of Directors has
unanimously approved the proposals and recommends that you vote IN FAVOR OF each
such proposal.
Sincerely,
Lisa A. Conte
President, Chief Executive Officer,
Chief Financial Officer and director
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IMPORTANT
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE
ACCOMPANYING POSTAGE-PAID RETURN ENVELOPE SO THAT, IF YOU ARE UNABLE TO ATTEND
THE SPECIAL MEETING, YOUR SHARES MAY BE VOTED.
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SHAMAN PHARMACEUTICALS, INC.
-----------------------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 10, 2000
-----------------------------------------
TO THE STOCKHOLDERS OF SHAMAN PHARMACEUTICALS, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders ("Special
Meeting") of Shaman Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), will be held at 9:00 A.M. Pacific Standard Time on Friday, March 10,
2000 at The Embassy Suites, 250 Gateway Boulevard, South San Francisco,
California 94080, for the following purposes:
(1) To approve the transfer of all of the assets and liabilities of Shaman
Pharmaceuticals, Inc. to Shaman.com, Inc. ("Shaman.com") in exchange for
shares of Common Stock of Shaman.com;
(2) To approve an amendment to the Amended and Restated Certificate to
delete the provision stating that a sale of all or substantially all of the
assets the Company will be treated as a liquidation, dissolution or winding
up of the Company, for purposes of causing a required liquidation
preference distribution to the holders of Series C Preferred Stock; and
(3) To transact such other business as may properly come before the Special
Meeting and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The record date for determining those stockholders entitled to notice of,
and to vote at, the Special Meeting and any adjournment thereof is February 2,
2000. The stock transfer books will not be closed between the record date and
the date of the Special Meeting. A list of the stockholders entitled to vote at
the Special Meeting will be available for inspection at the Company's offices,
213 East Grand Avenue, South San Francisco, California 94080, for a period of 10
days prior to the Special Meeting.
All stockholders are cordially invited to attend the Special Meeting in
person. Whether or not you plan to attend, please carefully read the
accompanying Proxy Statement, which describes the matters to be voted upon at
the Special Meeting, and mark, date, sign and return the enclosed proxy card in
the reply envelope provided. Should you receive more than one proxy because your
shares are registered in different names and addresses, each proxy should be
returned to ensure that all your shares would be voted. You may revoke your
proxy at any time prior to the Special Meeting. If you attend the Special
Meeting and vote by ballot, your proxy vote will be revoked automatically and
only your vote at the Special Meeting will be counted. The prompt return of your
proxy card will assist us in preparing for the Special Meeting.
Sincerely,
Lisa A. Conte
President, Chief Executive Officer, Chief Financial Officer and Director
South San Francisco, California
February 9, 2000
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY. IF YOU DO NOT EXPECT TO ATTEND IN
PERSON, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE
ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE.
SHAMAN PHARMACEUTICALS, INC.
213 East Grand Avenue
South San Francisco, California 94080
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PROXY STATEMENT
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FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 10, 2000
General Information for Stockholders
The enclosed proxy ("Proxy") is solicited on behalf of the Board of
Directors (the "Board") of Shaman Pharmaceuticals, Inc., a Delaware corporation
(the "Company"), for use at the Special Meeting of Stockholders (the "Special
Meeting") to be held at 9:00 A.M. Pacific Standard Time on Friday, March 10,
2000, at The Embassy Suites, 250 Gateway Boulevard, South San Francisco,
California 94080, and at any adjournment thereof.
This Proxy Statement and the accompanying form of Proxy are to be first
mailed to the stockholders entitled to vote at the Special Meeting on or about
February 9, 2000.
Record Date and Voting
The specific proposals to be considered and acted upon at the Special
Meeting are summarized in the accompanying Notice and are described in more
detail in this Proxy Statement. All stockholders of record at the close of
business on February 2, 2000 are entitled to notice of, and to vote at, the
Special Meeting. As of the close of business on such date, there were _____
shares of the Company's Common Stock, par value $0.001 per share (the "Common
Stock"), outstanding and entitled to vote, held by ____ stockholders of record.
____ shares of Series C Preferred Stock were outstanding and entitled to vote
and held by ____ stockholders of record, and ____ shares of Series D Preferred
Stock were outstanding and held by ___ stockholders of record. Each holder of
Common Stock as of the record date is entitled to one vote for each share of
Common Stock held by such stockholder as of the record date. Each holder of
Series C Preferred Stock is entitled to one vote for each share of Common Stock
into which such share of Series C Preferred Stock is convertible as of the
record date. Each holder of Series D Preferred Stock as of the record date is
entitled to one vote for each share of Series D Preferred Stock held by such
stockholder as of the record date.
Proposal One will be decided by the affirmative vote of a majority of the
voting shares outstanding on the record date including all shares of Common
Stock, Series C Preferred Stock and Series D Preferred Stock voting together as
a single class. Proposal Two will be decided by the affirmative vote of (a) a
majority of all of the Company's outstanding voting shares, including all shares
of Common Stock, Series C Preferred Stock and Series D Preferred Stock, voting
together as a single class, and (b) a majority of the outstanding shares of the
Series C Preferred Stock voting as a separate class. All other matters submitted
for stockholder approval at this Special Meeting will be decided by the
affirmative vote of a majority of shares present in person or represented by
proxy and entitled to vote on such matters. If a choice as to the matters coming
before the Special Meeting has been specified by a stockholder on the Proxy, the
shares will be voted accordingly. If no contrary instructions are given, the
shares will be voted in favor of the approval of all proposals described in the
accompanying Notice of Special Meeting and in this Proxy Statement. All votes
will be tabulated by the inspector of election appointed for the meeting, who
will separately tabulate affirmative and negative votes, abstentions and broker
non-votes (i.e., the submission of a Proxy by a broker
1
or nominee specifically indicating the lack of discretionary authority to vote
on the matter). Abstentions and broker non-votes are counted as present for
purposes of determining the presence or absence of a quorum for the transaction
of business. Abstentions will be counted towards the tabulation of votes cast on
proposals presented to the stockholders and will have the same effect as
negative votes, whereas broker non-votes will not be counted for purposes of
determining whether a proposal has been approved. However, because Proposals One
and Two require the affirmative vote of a majority of the Company's outstanding
voting shares on the Record Date, broker non-votes with respect to both of those
particular proposals will have the same effect as votes against the approval of
those proposals.
Any stockholder or stockholder's representative who, because of a
disability, may need special assistance or accommodation to allow him or her to
participate at the Special Meeting may request reasonable assistance or
accommodation from the Company by contacting Investor Relations in writing at
213 East Grand Avenue, South San Francisco, California 94080 or by telephone at
(650) 952-7070. To provide the Company sufficient time to arrange for reasonable
assistance, please submit such requests by February 25, 2000.
Revocability of Proxies
Any stockholder giving a Proxy pursuant to this solicitation may revoke it
at any time prior to its exercise by filing with the Secretary of the Company at
its principal executive offices at 213 East Grand Avenue, South San Francisco,
California 94080, a written notice of such revocation or a duly executed Proxy
bearing a later date, or by attending the Special Meeting and voting in person.
Solicitation
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of the Notice of Special Meeting,
this Proxy Statement, the Proxy and any additional solicitation materials
furnished to stockholders. Copies of solicitation materials will be furnished to
brokerage houses, fiduciaries and custodians holding shares in their names that
are beneficially owned by others so that they may forward this solicitation
material to such beneficial owners. To assure that a quorum will be present in
person or by proxy at the Special Meeting, it may be necessary for certain
officers, directors, employees or other agents of the Company to solicit proxies
by telephone, facsimile or other means or in person. The Company will not
compensate such individuals for any such services. The Company does not
presently intend to solicit proxies other than by mail.
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IMPORTANT
Please mark, date, sign and return the enclosed Proxy in the accompanying
postage-prepaid, return envelope as soon as possible so that, if you are unable
to attend the Special Meeting, your shares may be voted.
================================================================================
2
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
PROPOSAL ONE
TRANSFER OF ALL OF THE ASSETS AND LIABILITIES
OF THE COMPANY TO SHAMAN.COM
IN EXCHANGE FOR SHARES OF
COMMON STOCK OF SHAMAN.COM
General Information About the Transaction
The Company's stockholders are being asked to act upon a proposed transfer
of all of the assets and liabilities of the Company to the Company's
wholly-owned subsidiary, Shaman.com, Inc, a Delaware corporation ("Shaman.com").
The Company will receive in exchange for its assets and liabilities shares of
common stock of Shaman.com having a value equal to the net book value of the
assets and liabilities transferred. If this Proposal One is approved, the
Company would become a holding company of Shaman.com, and Shaman.com would
conduct the Company's current operations. This corporate structure is intended
to permit greater flexibility in the management and financing of the Company's
business operations, since the Company believes that it can more easily obtain
financing of the Company's business through a privately held corporation.
Reasons for the Transfer of Assets to Shaman.com
Until December 1998, the Company was solely focused on developing
pharmaceuticals products derived from tropical plant sources. The Company's
pharmaceutical business model was dependent upon its ability to launch its first
pharmaceutical product in 1999. As a result of the U.S. Food and Drug
Administration response to the Company's proposed fast-track New Drug
Application package for its 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,
the Company restructured its business to focus on the development and marketing
of dietary supplements. In July 1999, the Company launched its first botanical
product SB-NSF and began marketing this product in September 1999. SB-NSF is a
botanical dietary supplement to normalize water flow in the bowel and promote
stool formation.
The Company has incurred significant losses in each year since its founding
in 1989. As of September 30, 1999 the Company's accumulated deficit was
approximately $168.5 million. The Company will need to obtain additional funding
through public or private equity or debt financing, collaborative agreements or
from other sources to continue its research and development activities, fund
operating expenses and commercialize its products. The Company's projections
show that cash on hand as of September 30, 1999 should be sufficient to fund
operations at the current level only through the first quarter of 2000. Unless
the Company is successful in its effort to sell or out-license its
pharmaceutical products, or to sell or establish collaborative agreements to
sell its botanical products, it will be unable to fund its current operations
beyond the first quarter of 2000. The Company believes that as a publicly traded
company, it will be unable to obtain adequate financing to continue operations
and to further its business plans, and that creating a privately held,
wholly-owned subsidiary for the Company's operations is necessary to seek
financing for the Company's business, since the simpler structure of a private
company will be more attractive to outside investors as a private investment.
However, there can be no guarantee that Shaman.com will be successful in raising
any financing to be able to continue its operations or further its business
plans. In addition, the Company's operations will better thrive in a private
company unencumbered by the expenses generated by the extensive reporting
requirements of the federal securities laws.
3
Material Differences in the Rights of the Company's Stockholders Following the
Transfer of Assets
The transfer of the Company's assets and liabilities will not change the
ownership rights of the Company's stockholders in the Company. Each of the
Company's stockholders will still own shares of the Common Stock or Preferred
Stock, as the case may be, of the Company and will continue with the same voting
and dividend rights as before. However, the transfer will effect a change in the
nature of each of the Company's stockholder's ownership of the assets of the
Company. Prior to the transfer, the Company directly owned all of its assets. By
transferring all of the assets to Shaman.com, a wholly-owned subsidiary of the
Company, the Company's stockholders will now indirectly own such assets through
the Company's ownership of Shaman.com. As a result of the proposed transaction,
the stockholders of the Company will not directly elect the Directors of
Shaman.com. Directors of Shaman.com will be elected by the Board of the Company,
which will be the sole shareholder of Shaman.com. The Board of Directors of
Shaman.com will in turn elect the officers of Shaman.com and will otherwise
control the business and affairs of Shaman.com. It is generally expected that
the officers, directors, and other senior management employees of Shaman.com
will be comprised principally of persons also serving as officers, directors,
and other senior executives of the Company. Similarly, the stockholders'
statutory right to inspect the books and records of the Company under applicable
Delaware law may not extent to the books and records of Shaman.com. However,
because the Company is a public company subject to the reporting requirements of
the Securities Exchange Act of 1934, information regarding the Company and its
subsidiary is available to stockholders without resort to the statutory right to
inspect the Company's books and records.
In the event that the Company proposes to make a further disposition of the
stock of Shaman.com or if Shaman.com disposes of its assets, in either case to
an unrelated third party or affiliate other than another subsidiary of the
Company, the Company will seek stockholder approval if the stock or assets
involved constitute substantially all of the assets of Shaman.com. For this
reason, the proposed transaction does not alter stockholders' rights to approve
such dispositions. The Company has no present intention to cause Shaman.com to
make a further transfer of assets (other than a sale or out-license of the
Company's pharmaceutical assets) to an unrelated third party. The Company does
not intend to seek stockholder approval of any subsequent dispositions of assets
by Shaman.com or of the stock of Shaman.com, unless such assets or stock to be
transferred constitute all or substantially all of the assets of the Company and
Shaman.com as a whole.
In the future, the Company's stockholders will experience dilution in their
indirect ownership of Shaman.com if Shaman.com is successful in raising equity
financing. Currently, Shaman.com is a wholly-owned subsidiary of the Company.
Therefore, the stockholders of the Company indirectly own all of the outstanding
capital stock of Shaman.com. However, Shaman.com will need to obtain additional
financing through private equity or debt financings or from other sources or may
enter into collaborative arrangements that involve either sales of its capital
stock or transactions involving an exchange of shares of its capital stock for
shares of the third party's capital stock or shares of Shaman.com's capital
stock for certain of the third party's assets. If additional funds are raised by
issuing equity securities, the Company will no longer own all of the outstanding
capital stock of Shaman.com, and the indirect ownership percentage of the
Company's stockholders will correspondingly decrease. Additionally, as employees
are hired for Shaman.com, such employees will likely receive options to acquire
shares of Shaman.com common stock. Any such issuance of options, and the
subsequent exercise thereof, would dilute the Company's stockholders' indirect
ownership interest in Shaman.com. The Company and Shaman.com may not be
successful in raising equity or debt financing.
4
Effect on Company's Financial Statements
The implementation of Proposal One will not have a material effect on the
financial statements of the Company. The Company will however report its
financial operations and condition on a consolidated basis. The net income of
Shaman.com, reflected as income on the Company's consolidated financial
statements, will be available for the payment of dividends to stockholders of
the Company to the extent that the Company has received dividends or other
distributions from Shaman.com.
Financial Accounting Implications
For financial accounting and reporting purposes, Shaman.com will be fully
consolidated with the Company, and this transaction is not expected to otherwise
have any material financial reporting implications for the Company.
Federal Tax Consequences
Following is a summary of the material federal income tax consequences of
the proposed transfer of the Company's assets to Shaman.com (the "Transaction").
The summary does not purport to discuss all potential tax issues or consequences
of the Transaction. In addition, no summary is provided as to (1) any federal
income tax consequences other than as expressly set forth herein and (2) any
state and local tax consequences.
The facts relevant to this summary are set forth in this Proxy Statement
and related documents. This summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), the income tax regulations issued by the Internal
Revenue Service (the "IRS"), including temporary and proposed Treasury
regulations ("Treas. Reg."), administrative rulings of the IRS, and judicial
decisions as of the date of this Proxy Statement - all of which are subject to
change at any time either prospectively or retroactively. In some cases, the
proper interpretation of such authorities or their application to particular
factual situations is unclear.
Capitalization of Shaman.com
The Company proposes the transfer of all of its assets to Shaman.com in
exchange for (a) all of the issued and outstanding voting stock of Shaman.com
and (b) the assumption by Shaman.com of all of the Company's liabilities.
Section 351 of the Code provides that no "gain or loss shall be recognized if
property is transferred to a corporation...solely in exchange for stock or
securities in such corporation" and immediately after the exchange the
transferor "controls" the corporation to which the property has been
transferred. The statute, in short, renders non-taxable transfers of property in
exchange for a proprietary interest in a controlled corporation. Accordingly,
except to the extent that the Company's liabilities assumed by Shaman.com exceed
the Company's adjusted basis in the assets it transfers to Shaman.com, no gain
or loss should be recognized by the Company as a result of the Transaction. Code
sections 351(a) and 357 (c)(1). Shaman.com will realize no gain or loss by
reason of the Transaction. Code sections 351(a) and 118(a). Even were the
Company to recognize gain on the transaction by reason of Shaman.com's
assumption of the Company's liabilities, the Company's net operating losses
might be sufficient to offset any such gain.
Shaman.com's Basis in its Assets
Shaman.com's basis in the assets transferred to it will be the same as the
Company's basis in those assets increased by the amount of gain (if any)
recognized by the Company. Code section 362(a).
5
Consolidated Returns
Because the Company will possess at least 80% of the total voting power of
the stock of Shaman.com, the Company and Shaman.com constitute an "affiliated
group" of corporations eligible to file consolidated federal corporate income
tax returns. Code ss. 1501 and 1504 (a)(1) and (2). The issuance of additional
Shaman.com shares to third parties could cost the Company and Shaman.com their
"affiliated group" status and with it the privilege of filing consolidated
returns.
Rights of Dissenting Stockholders
If the proposed transfer of all of the assets and liabilities of the
Company to Shaman.com is consummated, a stockholder objecting to the terms of
the proposed transaction or voting against Proposal One is not entitled to any
appraisal or similar rights under Delaware or California law.
Vote Required for Stockholder Approval
The affirmative vote of a majority of all shares the Company's outstanding
voting shares is required for approval of the transfer of all of the assets and
liabilities of the Company to Shaman.com in exchange for shares of common stock
of Shaman.com.
Recommendation of the Board of Directors
The Board recommends that the stockholders vote IN FAVOR OF the transfer of
all of the assets and liabilities of the Company to Shaman.com in exchange for
shares of common stock of Shaman.com.
The Board has carefully considered the benefits and risks of the proposed
transaction described in this Proposal One and believes that the Company and its
stockholders will benefit from the increased potential ability of Shaman.com, as
a privately held company, to raise capital to maintain operations and further
its business plan and work to increase the value of its assets.
6
PROPOSAL TWO
AMENDMENT TO THE
COMPANY'S CERTIFICATE OF INCORPORATION TO AMEND CERTAIN
LIQUIDATION PREFERENCE RIGHTS OF PREFERRED STOCK
The Board has adopted a resolution proposing and declaring the advisability
of amending Article IV, Section B.5 (e) of the Company's Amended and Restated
Certificate of Incorporation to amend the provision stating that a sale of all
or substantially all of the assets of the Company will be treated as a
liquidation, dissolution or winding up of the Company. The proposed amendment to
Section B.5 (e) provides that a sale or transfer of all or substantially all of
the assets of the Company to any entity other than a subsidiary of the Company
will be treated as a liquidation, dissolution or winding up of the Company. If
approved by the Company's stockholders as provided herein, the amendment to
Section B.5 (e) will be effected by an amendment to Section B.5 (e) of the
Company's Amended and Restated Certificate in substantially the form attached to
this Proxy Statement as Exhibit A which will become effective upon the filing of
the amendment with the Secretary of State of Delaware. The following discussion
is qualified in its entirety by the full text of the amendment, which is
incorporated by reference herein.
Currently, this section of the Amended and Restated Certificate provides as
follows:
"With respect to the Series A Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock (except as limited with respect to Series D Preferred
Stock as set forth in Section 5 (b) above), (i) any acquisition of the
Corporation by means of merger or other form of corporate reorganization in
which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring corporation
or its subsidiary (other than a mere reincorporation transaction) or (ii) a sale
of all or substantially all of the assets of the Corporation or (iii) any other
transaction or series of related transactions by the Corporation in which in
excess of 50% of the Corporation's voting power is transferred, shall be treated
as a liquidation, dissolution or winding up of the Corporation and shall entitle
the holders of the Series C Preferred to receive at the closing thereof the
amount as specified in Section 5 (a) and Section 5 (c), respectively."
Stockholders are being asked to vote on a proposal to amend subclause (ii)
of this section. The effect of this amendment would be that a sale or transfer
by the Company of all or substantially all of its assets to a subsidiary (as in
the case of Proposal One) would not be treated as a liquidation event, and that
such transaction would therefore not result in a requirement that the
liquidation preference amounts of the preferred stock be distributed to the
holders of Series C Preferred Stock. The amendment of subclause (ii) will not
affect the holders of Series D Preferred Stock since Section B.5 (b) of the
Amended and Restated Certificate provides that sales or transfers of the
Company's assets are not considered in and of themselves as a liquidation event
for holders of Series D Preferred Stock.
Reasons for the Amendment
The proposed amendment would avoid having a transfer or sale of all of the
assets of the Company to a subsidiary of the Company cause a liquidation event
under the Amended and Restated Certificate that would require the Company to
distribute to the holders of Series C Preferred Stock their liquidation
preference amounts. If the Company effects the transaction contemplated in
Proposal One, the Company could be required to pay the liquidation amounts in
cash to its Series C Preferred Stock holders. The Company does not have the
financial resources to pay the liquidation preference amounts, and any such
required payment would therefore be detrimental to the Company and its
stockholders. The possibility that the transfer of all of the assets of the
Company to its wholly-owned subsidiary could result in requiring the
7
Company to distribute the Series C preferred stockholders' liquidation
preference amounts would make it impossible to proceed with Proposal One, and
the Board believes it is necessary and in the best interests of its stockholders
to avoid this possibility. Proposal One would permit greater flexibility in the
financing of new and existing business operations and the formation of joint
ventures or other business combinations with third parties.
Vote Required for Stockholder Approval
The affirmative vote of (a) a majority of all of the Company's outstanding
voting shares, including all shares of Common Stock, Series C Preferred Stock
and Series D Preferred Stock, voting together as a single class, and (b) a
majority of the outstanding shares of Series C Preferred Stock voting as a
separate series, is required to approve the amendment of the Amended and
Restated Certificate to amend subclause (ii) of Article IV, Section B.5 (e) of
the Amended and Restated Certificate to provide that a sale or transfer of all
or substantially all of the assets to an entity other than a subsidiary of the
Company will be treated as a liquidation, dissolution or winding up of the
Company.
Recommendation of the Board of Directors
The Board of Directors recommends that the stockholders vote IN FAVOR OF
the amendment of the Company's Amended and Restated Certificate of
Incorporation. The fact that a transfer of all of the assets of the Company to
its wholly-owned subsidiary could result in requiring the Company to distribute
the Series C Preferred Stock holders' liquidation preference amount would make
it impossible to proceed with Proposal One if approved, since the Company does
not have the financial resources to pay the liquidation preference amounts.
8
ADDITIONAL INFORMATION
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to us with respect
to the beneficial ownership of the common stock and Series R Preferred Stock as
of December 15, 1999 by (1) all persons who are beneficial owners of five
percent or more of the common stock or Series R Preferred Stock, as applicable,
(2) each director and officer of Shaman and (3) all current directors and
executive officers as a group. The number of shares beneficially owned by each
director or executive officer is determined under rules of the SEC and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Shares of common stock or Series R Preferred Stock, as applicable,
subject to options or warrants currently exercisable or exercisable within 60
days of December 15, 1999 are included in the number of shares beneficially
owned by the person holding such option or warrant for computing the percentage
ownership of such person, but are not treated as outstanding for computing the
percentage of any other person. Except as otherwise indicated, we believe that
the beneficial owners of the common stock and Series R Preferred Stock, listed
below, based upon such information furnished by such owners, have sole voting
and investment power with respect to such shares, subject to community property
laws where applicable.
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Name and Address of Shares of Common Stock Series R Preferred Stock
Beneficial Owner(1) Owned Shares Owned(3)
- --------------------------------------------------------------------------------------------------------
Number Percent(2) Number Percent(2)
- -------------------------------------------------------------------------------------------------------
Vulcan Ventures, Inc. 5,459,812(4) 8.01% 118,596(5) 15.10%
110-110th Avenue NW, Suite 550
Belleview, WA 98084
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Lipha S.A. 87,247 * 133,334 17.16%
37 rue Saint-Romain
69379 Lyon cedex 08
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H. Reisman Corporation 0 * 67,862 8.73%
P.O. Box 759
377 Crane Street
Orange, NJ 07051
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Lisa A. Conte 23,110 * 36,626(6) 4.50%
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John W.S. Chow 0 * 3,167(7) *
- -------------------------------------------------------------------------------------------------------
Thomas Carlson, M.D. 0 * 7,483(8) *
- -------------------------------------------------------------------------------------------------------
Steven R. King, Ph.D. 763 * 10,917(9) 1.39%
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Gerald R. Reaven, M.D. 25 * 1,195(10) *
- -------------------------------------------------------------------------------------------------------
Tom White 25 * 2,251(11) *
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Adrian D.P. Bellamy 0 * 8,262(12) 1.05%
- -------------------------------------------------------------------------------------------------------
Jeffrey Berg 0 * 5,736(13) *
- -------------------------------------------------------------------------------------------------------
Loren D. Israelsen 45 * 24,736(14) 3.16%
- -------------------------------------------------------------------------------------------------------
Herbert McDade, Jr. 0 * 6,069(15) *
- -------------------------------------------------------------------------------------------------------
G. Kirk Raab 397,457(16) * 13,998(17) 1.77%
- -------------------------------------------------------------------------------------------------------
M. David Titus 250 * 7,269(18) *
- -------------------------------------------------------------------------------------------------------
Directors and officers as a group 421,610 * 127,709(19) 14.50%
- -------------------------------------------------------------------------------------------------------
* Less than 1.0%
9
(1) This table is based upon information supplied to us by executive officers,
directors and stockholders owning greater than five percent, as set forth in
filings required by the Securities and Exchange Commission or as otherwise
provided. The address of each officer and director identified in this table is
that of Shaman's executive offices, 213 East Grand Avenue, South San Francisco,
CA 94080.
(2) Percentage of beneficial ownership is calculated assuming 68,135,451 shares
of common stock were outstanding as of December 15, 1999, and 777,101 shares of
Series R Preferred Stock were outstanding as of December 15, 1999. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Shares of common stock or Series R Preferred Stock, as
applicable, subject to options and warrants currently exercisable or exercisable
within 60 days of December 15, 1999, are included in the number of shares
outstanding for computing the percentage of the person holding such option or
warrant but are not included in the number of shares outstanding for computing
the percentage of any other person.
(3) The Company's Series R Preferred Stock will automatically convert on
February 1, 2000 into a number of shares of Common Stock equal to $15.00 divided
by the conversion price then in effect. The conversion price shall be equal to
the lesser of $0.10 per share, or the price that is equal to 10% of the average
closing sales price of the common stock for the 10 trading days ending three
trading days prior to February 1, 2000. However, the Series R Preferred Stock
will convert on February 1, 2000 only to extent that the Company has enough
common stock shares authorized to issue all shares of common stock needed to
effect the conversion of all outstanding shares of the Series R Preferred Stock,
after taking into account the number of common stock shares necessary to effect
the conversion of any then outstanding shares of Series C Preferred Stock and
Series D Preferred Stock. Based on a conversion price of $0.002, which is equal
to 10% of the average closing price of the Company's Common Stock for the 10
trading days ending three trading days prior to December 15, 1999, the
outstanding shares of Series R Preferred Stock and outstanding warrants and
options would be convertible into 8,294,107,500 shares of Common Stock.
(4) Does not include 20,000 shares of Series C Preferred Stock which is
convertible to a certain number of shares of common stock, such number which
shall be determined in accordance with Shaman's certificate of incorporation.
The certificate of incorporation prohibits conversion of the Series C Preferred
Stock to the extend such conversion would cause the holder's beneficial
ownership of Common Stock to exceed 4.9% of the outstanding shares of Common
Stock.
(5) Includes 8,333 shares issuable upon exercise of outstanding warrants within
60 days of December 15, 1999.
(6) Includes 2,500 shares issuable upon exercise of outstanding warrants and
33,459 shares of issuable upon exercise of options within 60 days of December
15, 1999.
(7) Includes 667 shares issuable upon exercise of outstanding warrants and 2,500
shares of issuable upon exercise of options within 60 days of December 15, 1999.
(8) Includes 400 shares issuable upon exercise of outstanding warrants and 7,083
shares of issuable upon exercise of options within 60 days of December 15, 1999.
(9) Includes 500 shares issuable upon exercise of outstanding warrants and
10,417 shares of issuable upon exercise of options within 60 days of December
15, 1999.
(10) Represents shares of issuable upon exercise of options within 60 days of
December 15, 1999.
(11) Includes 2,151 shares of issuable upon exercise of options within 60 days
of December 15, 1999.
(12) Includes 833 shares issuable upon exercise of outstanding warrants and
5,736 shares of issuable upon exercise of options within 60 days of December 15,
1999.
(13) Represents shares of issuable upon exercise of options within 60 days of
December 15, 1999.
(14) Includes 19,000 shares held by LDI Group, of which Mr. Israelsen owns 80%
and 5,736 shares issuable upon exercise of options within 60 days of December
15, 1999.
(15) Includes 333 shares issuable upon exercise of outstanding warrants and
5,736 shares of issuable upon exercise of options within 60 days of December 15,
1999.
(16) Does not include 1,500 shares of Series C Preferred Stock which is
convertible to a certain number of shares of common stock, such number which
shall be determined in accordance with Shaman's certificate of incorporation.
The certificate of incorporation prohibits conversion of the Series C Preferred
Stock to the extend such conversion would cause the holder's beneficial
ownership of Common Stock to exceed 4.9% of the outstanding shares of Common
Stock.
10
(17) Includes 833 shares issuable upon exercise of outstanding warrants and
11,472 shares of issuable upon exercise of options within 60 days of December
15, 1999.
(18) Includes 833 shares issuable upon exercise of outstanding warrants and
5,736 shares of issuable upon exercise of options within 60 days of December 15,
1999.
(19) Represents total shares held by directors and officers listed above.
Includes 6,899 shares issuable upon exercise of outstanding warrants and 96,957
shares of issuable upon exercise of options within 60 days of December 15, 1999.
11
OTHER MATTERS
The Board knows of no other business which will be presented at the Special
Meeting. If any other business is properly brought before the Special Meeting,
it is intended that proxies in the enclosed form will be voted in respect
thereof in accordance with the judgment of the persons voting the proxies.
It is important that the proxies be returned promptly and that your shares
be represented. Stockholders are urged to mark, date, execute and promptly
return the accompanying proxy card in the enclosed envelope.
By Order of the Board of Directors,
Lisa A. Conte,
President and Chief Executive Officer,
Chief Financial Officer and Director
February _, 2000
South San Francisco, California
12
EXHIBIT A
AMENDMENT TO ARTICLE IV, SECTION B.5 (e)
OF THE CERTIFICATE OF INCORPORATION
TO AMEND CERTAIN LIQUIDATION PREFERENCE RIGHTS OF PREFERRED STOCK
The following are the resolutions of the Board of Directors regarding the
amendment to the Certificate of Incorporation amending certain liquidation
preference rights of preferred stock:
RESOLVED, that the subclause (ii) of Article IV, of Section B.5 (e) of the
Restated and Amended Certificate of Incorporation of Shaman Pharmaceuticals,
Inc. is hereby amended to read in its entirety as follows so as to amend certain
liquidation preference rights of preferred stock in the event of a sale of all
or substantially all of the assets of the corporation to a subsidiary of the
corporation:
"(ii) a sale of all or substantially all of the assets of the
Corporation to any entity other than a subsidiary of the Corporation or."
13
SHAMAN PHARMACEUTICALS, INC.
PROXY
Special Meeting of Stockholders, March 10, 2000
This Proxy is Solicited on Behalf of the Board of Directors of
Shaman Pharmaceuticals, Inc.
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of the Special Meeting of Stockholders to be held on March 10, 2000 and
the Proxy Statement and appoints Lisa A. Conte and G. Kirk Raab, and each of
them, the Proxy of the undersigned, with full power of substitution, to vote all
shares of Common Stock or Preferred Stock of Shaman Pharmaceuticals, Inc. (the
"Company") which the undersigned is entitled to vote, either on his or her own
behalf or on behalf of any entity or entities, at the Special Meeting of
Stockholders of the Company to be held at The Embassy Suites, 250 Gateway
Boulevard, South San Francisco, California, 94080 on Friday, March 10, 2000 at
9:00 A.M. Pacific Standard Time (the "Special Meeting"), and at any adjournment
or postponement thereof, with the same force and effect as the undersigned might
or could do if personally present thereat. The shares represented by this Proxy
shall be voted in the manner set forth on the reverse side.
1. |_| FOR |_| AGAINST |_| ABSTAIN To approve the transfer of all of the
assets and liabilities of Shaman Pharmaceuticals, Inc. to Shaman.com,
Inc. ("Shaman.com") in exchange for shares of Common Stock of
Shaman.com;
2. |_| FOR |_| AGAINST |_| ABSTAIN To approve an amendment to the Amended
and Restated Certificate to delete the provision stating that a sale
of all or substantially all of the assets the Company will be treated
as a liquidation, dissolution or winding up of the Company, for
purposes of causing a required liquidation preference distribution to
the holders of Series C Preferred Stock; and
3. To transact such other business as may properly come before the
Special Meeting and any adjournment or postponement thereof.
The Board of Directors recommends a vote IN FAVOR OF each of the proposals
listed above. This Proxy, when properly executed, will be voted as specified
above. If no specification is made, this Proxy will be voted IN FAVOR OF each of
the proposals listed above.
Please print the name(s) appearing on each share certificate(s) over which
you have voting authority: _______________________________________________
(Print name(s) on certificate)
Please sign your name: _____________________________________ Date: ___________
(Authorized Signature(s))