1
EXHIBIT 1.1
150,000 Shares*
SHAMAN PHARMACEUTICALS, INC.
Series C Convertible Preferred Stock
($.001 Par Value)
PLACEMENT AGENT AGREEMENT
July __, 1998
▇▇▇▇▇ SECURITIES CORPORATION
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
Shaman Pharmaceuticals, Inc., a Delaware corporation (the "Company"),
pursuant to the terms and conditions set forth below, hereby engages ▇▇▇▇▇
Securities Corporation (the "Placement Agent") to undertake to use its "best
efforts" to offer and sell (the "Offering") shares of the Company's Series C
Convertible Preferred Stock, par value $0.001 per share (the "Shares"), at a
purchase price of $100.00 per Share. The minimum number of Shares to be sold
hereunder shall be 150,000 Shares (the "Minimum Number of Shares"), and the
maximum number of Shares to be sold hereunder shall be 200,000 Shares (the
"Maximum Number of Shares").
1. Representations and Warranties of the Company. The Company hereby
represents and warrants as follows:
(a) A registration statement on Form S-2 (File No. 333-59053) with
respect to the Shares has been carefully prepared and filed by the Company
in conformity with the requirements of the Act of 1933, as amended, (the
"Act") and the Rules and Regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder. Copies of
such registration statement, including any amendments thereto, the
preliminary prospectuses (meeting the Requirements of Rule 430A of the
Rules and Regulations) contained therein and the exhibits, financial
statements and schedules, as finally amended and revised, have heretofore
been delivered by the Company to you. Such registration statement, herein
referred to as the
--------
* The Company may offer to sell up to 200,000 shares of its Series C
Convertible Preferred Stock ($0.001 Par Value).
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"Registration Statement," which shall be deemed to include all information
omitted therefrom in reliance upon Rule 430A and contained in the
Prospectus referred to below, has been declared effective by the Commission
under the Act and no post-effective amendment to the Registration Statement
has been filed as of the date of this Agreement. The form of prospectus
first filed by the Company with the Commission pursuant to its Rule 424(b)
and Rule 430A is herein referred to as the "Prospectus." Each preliminary
prospectus included in the Registration Statement prior to the time it
becomes effective is herein referred to as a "Preliminary Prospectus." Any
reference herein to any Preliminary Prospectus or the Prospectus shall be
deemed to refer to and include any supplements or amendments thereto filed
with the Commission after the date of filing of the Prospectus under Rules
424(b) and 430A, and prior to the termination of the offering of the Shares
by the Placement Agent.
(b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own its properties and conduct its
business as described in the Registration Statement except, where such
failure would not have a material adverse effect on the business,
operations or financial condition of the Company; the Company is duly
qualified to transact business in all jurisdictions in which the conduct of
its business requires such qualification except where the failure to be so
qualified would not have a material adverse effect on the business,
operations or financial condition of the Company; and, except as described
in the Registration Statement or the Prospectus, no options, warrants or
other rights to purchase, agreements or other obligations to issue or other
rights to convert any obligations into shares of capital stock or ownership
interests in the Subsidiaries are outstanding.
(c) The Shares and the shares of the Company's Common Stock issuable
upon conversion of the Shares have been duly and validly authorized and,
when issued and delivered upon conversion thereof, will be validly issued,
fully paid and nonassessable. A sufficient number of shares of the
Company's Common Stock has been reserved for issuance upon conversion of
the Shares. No preemptive rights or other rights to subscribe for or
purchase exist with respect to the issuance and sale of the Shares, or the
underlying shares of the Company's Common Stock issuable upon conversion of
the Shares.
(d) The Shares conform with the statements concerning them in the
Registration Statement.
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(e) The Commission has not issued an order preventing or suspending
the use of any Preliminary Prospectus relating to the proposed offering of
the Shares nor instituted proceedings for that purpose. The Registration
Statement contains and the Prospectus and any amendments or supplements
thereto will contain all statements which are required to be stated therein
by, and in all respects conform or will conform, as the case may be, to the
requirements of, the Act and the Rules and Regulations. Neither the
Registration Statement nor any amendment thereto, and neither the
Prospectus nor any supplement thereto, contains or will contain, as the
case may be, any untrue statement of a material fact or omits or will omit
to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that the Company makes
no representations or warranties as to information contained in or omitted
from the Registration Statement or the Prospectus, or any such amendment or
supplement, in reliance upon, and in conformity with written information
furnished to the Company by or on behalf of the Placement Agent or any
Selected Dealer, specifically for use in the preparation thereof.
(f) Since the respective dates as of which information is given in the
Registration Statement, there has not been any material adverse change in
the business, properties, financial condition or results of operations of
the Company, whether or not arising from transactions in the ordinary
course of business, other than as set forth in the Registration Statement,
and since such dates, the Company has not entered into any material
transaction not referred to in the Registration Statement.
(g) The authorized, issued and outstanding capitalization of the
Company as of March 31, 1998 is as set forth in the section entitled
"Capitalization" in the Registration Statement, and the Company is not a
party to or bound by any instrument, agreement or other arrangement
providing for the Company to issue any capital stock, rights, warrants,
options or other securities, except for this Agreement and as described in
the Registration Statement. Except as described in the Registration
Statement or the Prospectus, since March 31, 1998, the Company has not
issued any shares of capital stock or rights, warrants or options to
acquire shares of its capital stock, other than options granted to or
shares issued pursuant to the exercise of outstanding options held by
employees, consultants or directors of, or service providers to,
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the Company. The outstanding shares of the Company's Common Stock (the
"Outstanding Shares") have been duly authorized and are validly issued,
fully paid and nonassessable. The Outstanding Shares have been issued in
compliance with all applicable securities laws.
(h) This Agreement has been duly authorized, executed and delivered by
the Company and, assuming the due authorization, execution and delivery by
the Placement Agent, constitutes a valid and legally binding agreement of
the Company enforceable against the Company in accordance with its terms,
except as enforceability may be limited by general equitable principles, or
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors rights generally, and except as rights to indemnity or
contribution for liabilities arising under the Act may be limited by
applicable law.
(i) The Company is not, and with the giving of notice or lapse of time
will not be, in violation of or in default under, nor will the execution or
delivery of this Agreement, or the issuance and sale of the Shares or the
consummation of the transactions contemplated hereby, result in a violation
of or constitute a default under, the certificate of incorporation, bylaws
or other governing documents of the Company or any agreement to which the
Company is a party or by which it is bound, or to which any of its
properties is subject, except where such violation or default has been
waived or would not have a material adverse effect on the business
condition of the Company. The performance by the Company of its obligations
hereunder will not violate any law, rule, administrative regulation or
decree of any court, or any governmental agency or body having jurisdiction
over the Company, or any of its properties, or result in the creation or
imposition of any lien, charge, claim or encumbrance upon any property or
asset of the Company, except where such violation or lien, charge, claim or
encumbrance would not have a material adverse effect on the business
condition of the Company. No consent, approval, authorization or order of
any court, governmental agency or body, or other third party, is required
in connection with the issuance of the Shares or the shares of Common Stock
issuable upon the conversion of the Shares and the consummation of the
transactions contemplated by this Agreement, except as has been obtained or
as such as may be required under applicable state or foreign securities
laws and the rules and regulations of the National Association of
Securities Dealers, Inc.
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(j) The Company owns, or has valid rights to use, all items of real
and personal property which are material to the business of the Company,
free and clear of all liens, encumbrances and claims which materially
interfere with the business, properties, financial condition or results of
operations of the Company.
(k) Except as described in the Registration Statement or the
Prospectus, the Company has no knowledge of any material infringement by it
of any trademark, trade name, service ▇▇▇▇, service name, copyright,
license, patent, trade secret or other similar right of others
(collectively, the "Intellectual Property Rights"), and, except as
described in the Registration Statement, the Company has not received any
notice of any claim made relating to such Intellectual Property Rights
against the Company which is reasonably likely to have a material adverse
effect on the condition, business, or results of operations of the Company.
(l) Except as described in the Registration Statement or the
Prospectus, there is no litigation or governmental proceeding to which the
Company is a party or which any property of the Company is subject or which
is pending, or to the knowledge of the Company, contemplated against the
Company which is reasonably likely to result in any material adverse change
in the business, properties, financial condition, or results of operations
of the Company.
(m) The Company has not been advised, nor has it reason to believe it
is in violation of any applicable law, statute, ordinance, rule,
regulation, order or decree of any court, governmental body or regulatory
authority or administrative agency having jurisdiction over the Company or
any of the property or assets of the Company (including, without
limitation, any such law, statute, ordinance, rule, regulation, order or
decree with respect to environmental protection or the release, handling,
treatment, storage or disposal of hazardous substances or toxic wastes)
which violation, individually or in the aggregate, would have a material
adverse effect on the general affairs, business, financial condition,
stockholders equity, or results of operations of the Company. Neither the
Company nor any of its officers or directors have taken any action relating
directly to the Offering which would constitute a material violation of
federal, foreign or, to its knowledge, state securities laws or
regulations.
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(n) Neither the execution of this Agreement nor the consummation of
the transactions contemplated hereby will result in the Company owing a fee
or a commission to anyone other than the Placement Agent.
(o) The Company has filed all material federal, state and foreign
income and franchise tax returns or extensions for filing thereof required
to be filed as of the date hereof, and has paid or accrued all taxes shown
as due thereon; and the Company has no knowledge of any tax deficiency
which has been or might be asserted or threatened against the Company which
would materially and adversely affect the business, operations or
properties of the Company.
(p) All material transactions between the Company and the officers,
directors and beneficial holders of five percent or more of the Outstanding
Shares of the Company have been accurately disclosed in the Registration
Statement and the terms of each such transaction are fair to the Company
and no less favorable to the Company than the terms that could have been
obtained from unrelated parties, except as disclosed in the Registration
Statement.
(q) The Company maintains insurance of the type and in the amount
which it deems adequate for its business, including, but not limited to,
general liability insurance and insurance covering all material interests
in real and personal property owned or leased by the Company against theft,
damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect.
(r) The Company has not distributed and during the Offering Period (as
such term is defined below) will not distribute any offering material in
connection with the offer and sale of the Shares other than the
Registration Statement and any other materials permitted by state Blue Sky
laws and delivered to the Placement Agent in advance.
2. Appointment of Placement Agent; Offer and Sale of the Shares.
(a) The Company hereby appoints you as the exclusive Placement Agent
to offer and sell the Shares on the terms and conditions set forth herein.
Your
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appointment as Placement Agent hereunder shall terminate upon the
completion or termination of the Offering, as more fully described below.
As Placement Agent, you shall offer and sell the Shares for the
Company upon the terms and conditions set forth in the Registration
Statement (as such term is defined below).
For purposes of this Agreement, the Offering will be deemed to have
commenced upon delivery to you of copies of the Registration Statement and
will terminate upon the first to occur (the "Termination Date") of: (i) the
failure of the Company to meet the conditions of the Initial Closing (as
such term is defined below); (ii) the sale of the Maximum Number of Shares;
or (iii) August __, 1998; provided, however, that the Company and the
Placement Agent may mutually agree to extend the Offering up to an
additional 30 days. The period beginning the date on which the Offering was
deemed to have commenced and ending on the Termination Date shall be
referred to herein as the Offering Period.
Subject to the performance by the Company of all of its material
obligations to be performed hereunder and to the completeness and accuracy
of all representations and warranties of the Company contained herein, you
hereby accept such agency and agree on the terms and conditions herein set
forth: (i) in your sole discretion to form and manage a group of securities
broker-dealers (the "Selected Dealers") selected by you, each of which
shall be a member of the National Association of Securities Dealers, Inc.,
and to cause each Selected Dealer to enter into a Selected Dealer Agreement
in a customary form; and (ii) in conjunction with such Selected Dealers, if
any, to use your best efforts during the Offering Period to find
subscribers for the Shares. In carrying out the transactions contemplated
by this Agreement, you have observed and will observe and comply with: (A)
all applicable securities laws, regulations, rules and ordinances in any
jurisdiction in which the Shares may be offered, sold or delivered; and (B)
all applicable regulations and rules of the National Association of
Securities Dealers, Inc.; provided, however, that except as specifically
provided in this Agreement and except for information as may be provided by
you without prior review and approval by the Company, you assume no
responsibility for the accuracy or completeness of the information
contained in the Registration Statement or provided to subscribers in
connection with their investment decisions.
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Subject to earlier termination as provided herein, your agency
hereunder shall continue until the termination of the Offering Period. In
the event that the Offering is commenced and subscriptions for at least the
Minimum Number of Shares are not received and accepted by the Company on or
before August __, 1998, which date may be extended by the Company and the
Placement Agent up to an additional 30 days, all funds received from
subscribers shall be returned in full, with interest actually earned
thereon, and your agency and this Agreement shall terminate without
obligations on your part or on the part of the Company, except as provided
in Section 9 of this Agreement.
(b) Each subscriber for Shares will be required to complete and
execute a Purchase Agreement in the form attached hereto as Exhibit B (the
"Purchase Agreement"). Each Purchase Agreement must be accompanied by
payment in full for the Shares subscribed for. All payments for Shares in
the form of a check, draft or money order must be made payable to U.S. Bank
Trust N.A./Account No. 180121167365, and all payments for Shares in the
form of a wire transfer must be made in accordance with the wire transfer
instructions attached to the Escrow Agreement (as such term is defined
below), until otherwise directed by the Placement Agent.
(c) Except as otherwise agreed in writing by you and the Company, all
funds for subscriptions for Shares received by the Placement Agent or any
Selected Dealer shall be deposited in an escrow account maintained with
U.S. Bank Trust N.A. (the "Escrow Agent") and held by the Escrow Agent upon
the terms and conditions of the Escrow Agreement dated July __, 1998, among
the Company, the Escrow Agent and the Placement Agent (the "Escrow
Agreement"). Except as otherwise agreed in writing by you and the Company,
you will transmit to the Escrow Agent for deposit in the escrow account all
subscribers' payments for Shares payable as provided in Section 2(b) above
by noon P.D.T. on the next business day after your receipt thereof. You
agree that any subscriber's payment received by you which is payable other
than as provided in Section 2(b) above will be returned by you directly to
the subscriber not later than the end of the next business day following
your receipt thereof with instructions as to the proper party to whom said
payment should be made.
(d) All sales of Shares are conditioned upon the receipt and
acceptance by the Company of subscriptions for the Minimum Number of Shares
on or before August __, 1998, which date may be extended by mutual
agreement of the Company and the Placement Agent up to an additional 30
days. Subject to the
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satisfaction of the foregoing, and the other terms and conditions of this
Agreement, as soon as practicable after notice from the Escrow Agent to the
Company and you that it has funds deposited in the escrow account which
have cleared the collection process representing the proceeds from the sale
of at least the Minimum Number of Shares, unless delayed by agreement of
the Company and you, delivery of the Shares (as described in Section 2(f)
hereof) against payment thereof or (Initial Closing) shall take place at
the offices of Sheppard, Mullin, ▇▇▇▇▇▇▇ & Hampton LLP, Four Embarcadero
Center, San Francisco, California (or such other place as may be designated
by agreement between the Company and you) at 10:00 a.m., local time (the
"Initial Closing Date"). On the Initial Closing Date, the Shares will be
issued and delivered (as described in Section 2(f) hereof) by the Company
for distribution to the purchasers thereof against payment of the purchase
price by the Escrow Agent by wire transfer in same day funds, payable to
the order of the Company. Interest earned on subscription funds while in
the escrow account shall also be remitted to the Company by the Escrow
Agent on the Initial Closing Date.
(e) Subject to the terms and conditions of this Agreement, following
the Initial Closing Date (if less than the Maximum Number of Shares were
issued on such date), periodically at such dates and times as agreed to by
the Company and you, additional closings (Additional Closing Dates) shall
be held at the offices of Sheppard, Mullin, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, Four
Embarcadero Center, San Francisco, California, at which delivery of the
Shares (as described in Section 2(f) hereof) will be issued against payment
therefor, all as provided in Section 2(d) above. (The Initial Closing Date
and the Additional Closing Dates may be referred to individually as a
"Closing Date" or collectively as the "Closing Dates".)
(f) All actions to be taken on a Closing Date shall be deemed to take
place simultaneously and no actions shall be deemed complete, no payment
deemed made and no document or certificate deemed delivered until all
actions are complete, all payments made and all documents and certificates
have been delivered, including all actions, payments and deliveries
required by any other section of this Agreement to be made on a Closing
Date. For purposes of this Agreement, certificates for Shares shall be
deemed delivered upon confirmation by the Company's transfer agent that
such certificates shall be mailed via courier to the purchasers of Shares
in accordance with the Purchase Agreement.
(g) The Company acknowledges that it has retained the Placement Agent
in connection with the Offering and that, in such capacity, only personnel
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employed by the Placement Agent and such other personnel as are assigned
for the specific purposes of services contemplated by this Agreement to be
performed by the Placement Agent will be involved in providing the services
described herein.
3. Information Furnished by the Placement Agent. The information set forth
in the Registration Statement under the caption "Plan of Distribution" (insofar
as such information relates to the Placement Agent) constitutes the only
information furnished by you to the Company for inclusion in the Registration
Statement, and you warrant to the Company that the statements made therein do
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
4. Further Agreements of the Company. The Company covenants and agrees as
follows:
(a) The Company will (i) prepare and timely file with the Commission
under Rule 424(b) of the Rules and Regulations a Prospectus containing
information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Rules and
Regulations; and (ii) not file any amendment to the Registration Statement
or supplement to the Prospectus of which the Placement Agent shall not
previously have been advised and furnished with a copy or to which the
Placement Agent shall have reasonably and in good faith objected in writing
or which is not in compliance with the Rules and Regulations.
(b) The Company will advise the Placement Agent promptly of any
request of the Commission for amendment of the Registration Statement or
for supplement to the Prospectus or for any additional information, or of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or the use of the Prospectus or
of the institution of any proceedings for that purpose, and the Company
will use its best efforts to prevent the issuance of any such stop order
preventing or suspending the use of the Prospectus and to obtain as soon as
possible the lifting thereof, if issued.
(c) The Company will deliver to, or upon the order of, the Placement
Agent, from time to time, as many copies of any Preliminary Prospectus as
the Placement Agent may reasonably request. The Company will
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deliver to, or upon the order of, the Placement Agent during the period
when delivery of a Prospectus is required under the Act, as many any copies
of the Prospectus in final form, or as thereafter amended or supplemented,
as the Placement Agent may reasonably request. The Company will deliver to
the Placement Agent at or before the Closing Date, four signed copies of
the Registration Statement and all amendments thereto including all
exhibits filed therewith, and will deliver to the Placement Agent or
Selected Dealers such number of copies of the Registration Statement, but
without exhibits, and of all amendments thereto, as the Placement Agent may
reasonably request.
(d) If during the period in which a prospectus is required by law to
be delivered by the Placement Agent or Selected Dealer any event shall
occur as a result of which, in the judgment of the Company or in the
opinion of counsel for the Placement Agent, it becomes necessary to amend
or supplement the Prospectus in order to make the statements therein, in
light of the circumstances existing at the time the Prospectus is delivered
to a purchaser, not misleading, or, if, to the Company's knowledge, it is
or becomes necessary at any time to amend or supplement the Prospectus to
comply with any law, the Company promptly will prepare and file with the
Commission an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with law.
(e) The Company will, for a period of four years from the Closing
Date, deliver to the Placement Agent copies of annual reports and copies of
all other documents, reports and information furnished by the Company to
its stockholders or filed with any securities exchange pursuant to the
requirements of such exchange or with the Commission pursuant to the Act or
the Securities Exchange Act of 1934, as amended. The Company will deliver
to the Placement Agent similar reports with respect to significant
subsidiaries, as that term is defined in the Rules and Regulations, which
are not consolidated in the Company's financial statements.
(f) The Company will pay its expenses in connection with this Offering
and the transactions contemplated herein, including, but not limited to:
the costs of preparing and printing the Registration Statement, Preliminary
Prospectus, Prospectus and the stock certificates; all expenses incident to
the
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issuance and delivery of the Shares; fees and expenses of legal counsel and
independent accountants for the Company; the cost and expenses in
connection with Blue Sky or other securities filings, including filings
with the Commission and the National Association of Securities Dealers,
Inc.; and the Placement Agent's legal fees up to a maximum of $50,000.
(g) The Placement Agent will pay all costs and expenses incurred by it
in connection with the Offering; provided, however, that the Company will
on each Closing Date, reimburse the Placement Agent for its unreimbursed
actual itemized out-of-pocket expenses incurred in connection with the
Offering through such Closing Date.
(h) In consideration for the services rendered to the Company in
connection with the Offering, the Company will pay to you, on the Initial
Closing Date, and each Additional Closing Date, a commission in an amount
equal to six percent (6%) of the aggregate sales proceeds of all Shares
sold at such Closing Date; provided, however, that the Company will only be
obligated to pay a commission in an amount equal to three percent (3%) of
the aggregate sales proceeds received from investors introduced to the
Placement Agent by the Company. The $30,000 retainer that has previously
been paid by the Company to you shall be subtracted from the amount due to
you at the Initial Closing.
(i) In the event the Offering terminates or is terminated prior to the
Initial Closing Date, the Placement Agent shall be entitled to receive
reimbursement only for its actual itemized out-of-pocket expenses incurred
in connection with the Offering. After deducting any such expenses, the
Placement Agent shall return to the Company any remaining funds from the
$30,000 retainer.
(j) The Company will apply the net proceeds from the sale of the
Shares in a manner consistent with the Registration Statement.
(k) During the Offering Period, the Company will maintain appropriate
arrangements with the Escrow Agent for depositing funds received from
subscribers for the Shares, as more fully described in Section 2 hereof.
The Company will use its best efforts to cause the Escrow Agent to make
appropriate refunds of such funds in the event that such refunds are
required to
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be made in accordance with the Offering as described in the Registration
Statement.
(l) The Company will comply with all registration, filing and
reporting requirements which may from time to time be applicable to the
Company under the Act, any applicable Blue Sky laws, the rules and
regulations of the National Association of Securities Dealers, Inc., and
any other applicable securities laws.
(m) The Company will use commercially reasonable efforts to perform
all things required or necessary to be done and performed under this
Agreement by the Company prior to the Closing Date and to satisfy all
conditions precedent to delivery of the Shares.
5. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless the Placement Agent
and each Selected Dealer and their respective employees, officers and
directors and each person (including each partner or officer thereof) who
controls the Placement Agent or a Selected Dealer within the meaning of
Section 15 of the Act from and against any and all losses, claims, damages
or liabilities, joint or several, to which such indemnified parties or any
of them may become subject under the Act, the Exchange Act, any applicable
Blue Sky laws or the common law or otherwise, and shall reimburse the
Placement Agent and each Selected Dealer and their respective employees and
controlling persons for any legal or other expenses (including, except as
otherwise hereinafter provided, reasonable fees and disbursements of
counsel) incurred by the respective indemnified parties in connection with
defending against any such losses, claims, damages or liabilities or in
connection with any investigation or inquiry of, or other proceeding which
may be brought against, the respective indemnified parties, in each case
arising out of or based upon: (i) any breach by the Company of any of the
representations, warranties or agreements of the Company contained in this
Agreement; (ii) acts or omissions of the Company or its agents or employees
in connection with the transactions contemplated hereunder (except to the
extent that such losses, claims, damages, liabilities or expenses are found
in a final judgment by a court of competent jurisdiction to have resulted
from the willful misconduct or negligence of the Placement Agent or any
other party entitled to indemnification under this Section 5(a)); or (iii)
any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or the omission or alleged omission
to
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state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that the indemnity agreements of the Company
contained in this paragraph (a) shall not apply to any such losses, claims,
damages, liabilities or expenses if such statement or omission was made in
reliance upon and in conformity with information furnished to the Company
by or on behalf of the Placement Agent and any Selected Dealer for use in
the Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or Supplement thereto. The indemnity agreements of the
Company contained in this paragraph (a) and the representations and
warranties of the Company contained in Section 1 hereof shall remain
operative and in full force and effect regardless of any investigation made
by or on behalf of any indemnified party and shall survive the delivery of
and payment for the Shares.
(b) The Placement Agent shall indemnify and hold harmless the Company,
each of its directors and officers, and each person (including each partner
or officer thereof) who controls the Company within the meaning of Section
15 of the Act, from and against any and all losses, claims, damages or
liabilities, joint or several, to which such indemnified parties or any of
them may become subject under the Act, the Exchange Act, any applicable
Blue Sky laws or the common law or otherwise, and shall reimburse each of
them for any legal or other expenses (including, except as otherwise
hereinafter provided, reasonable fees and disbursements of counsel)
incurred by the respective indemnified parties in connection with defending
against any such losses, claims, damages or liabilities or in connection
with any investigation or inquiry of, or other proceeding which may be
brought against, the respective indemnified parties, in each case arising
out of or based upon: (i) the Placement Agent's use of the Registration
Statement other than for purposes of consummating the transactions
contemplated by this Agreement; (ii) the Placement Agent's release of the
Registration Statement without the prior approval of the Company; (iii) the
willful misconduct or gross negligence of the Placement Agent; and (iv) any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or the omission or alleged omission to state
therein a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, in each case to the extent, but only to the extent, that such
statement or omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Placement Agent
specifically for use in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or Supplement thereto. The
indemnity agreement of the Placement Agent contained in this paragraph (b)
shall remain operative and in full force and effect regardless of any
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investigation made by or on behalf of any indemnified party and shall
survive the delivery of and payment for the Shares.
(c) Each party indemnified under the provision of paragraphs (a) and
(b) of this Section 5 shall, upon the service of a summons or other initial
legal process upon it in any action or suit instituted against it or upon
its receipt of written notification of the commencement of any
investigation or inquiry of, or proceeding against, it in respect of which
indemnity may be sought on account of any indemnity agreement contained in
such paragraphs, promptly give written notice (the "Notice") of such
service or notification to the party or parties from whom indemnification
may be sought hereunder. No indemnification provided for in such paragraphs
shall be available to any party who shall fail so to give the Notice if the
party to whom such Notice was not given was unaware of the action, suit,
investigation, inquiry or proceeding to which the Notice would have related
and was prejudiced by the failure to give the Notice, but the omission so
to notify such indemnifying party or parties of any such service or
notification shall not relieve such indemnifying party or parties from any
liability which it or they may have to the indemnified party for
contribution or otherwise than on account of such indemnity agreement. Any
indemnifying party shall be entitled at its own expense to participate in
the defense of any action, suit or proceeding against, or investigation or
inquiry of, an indemnified party. Any indemnifying party shall be entitled,
if it so elects within a reasonable time after receipt of the Notice by
giving written notice (the "Notice of Defense") to the indemnified party,
to assume (alone or in conjunction with any other indemnifying party or
parties) the entire defense of such action, suit, investigation, inquiry or
proceeding, in which event such defense shall be conducted, at the expense
of the indemnifying party or parties, by counsel chosen by such
indemnifying party or parties and reasonably satisfactory to the
indemnified party or parties; provided, however, that: (i) if the
indemnified party or parties reasonably determine that there is reasonably
likely to be a conflict between the positions of the indemnifying party or
parties and of the indemnified party or parties in conducting the defense
of such action, suit, investigation, inquiry or proceeding or that there
may be legal defenses available to such indemnified party or parties
different from or in addition to those available to the indemnifying party
or parties that could not reasonably be pursued by the use of the same
counsel, then counsel for the indemnified party or parties shall be
entitled to conduct the defense to the extent reasonably determined by such
counsel to be necessary to protect the interests of the indemnified party
or parties; and (ii) in any event, the indemnified party or parties shall
be entitled to have counsel chosen by such indemnified party or parties
participate in, but not conduct, the defense. If, within a
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reasonable time after receipt of the Notice, an indemnifying party gives a
Notice of Defense and the counsel chosen by the indemnifying party or
parties is reasonably satisfactory to the indemnified party or parties, the
indemnifying party or parties will not be liable under paragraphs (a)
through (c) of this Section 5 for any legal or other expenses subsequently
incurred by the indemnified party or parties in connection with the defense
of the action, suit, investigation, inquiry or proceeding, except that: (A)
the indemnifying party or parties shall bear the legal and other expenses
incurred in connection with the conduct of the defense as referred to in
clause (i) of the proviso to the preceding sentence; and (B) the
indemnifying party or parties shall bear such other expense as it or they
have authorized to be incurred by the indemnified party or parties. If,
within a reasonable time after receipt of the Notice, no Notice of Defense
has been given, the indemnifying party or parties shall be responsible for
any legal or other expenses incurred by the indemnified party or parties in
connection with the defense of the action, suit, investigation, inquiry or
proceeding.
(d) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an indemnified party under
paragraph (a) or (b) of this Section 5, then each indemnifying party shall,
in lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in paragraph (a) or (b) of this
Section 5 in such proportion as is appropriate to reflect not only the
relative benefits received by each indemnifying party from the Offering,
but also the relative fault of each indemnifying party in connection with
such losses, claims, damages or liabilities, or actions in respect thereof,
as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Placement Agent shall be deemed to
be in the same respective proportion as the total net proceeds from the
Offering received by the Company and the total commission received by the
Placement Agent bear to the aggregate offering price of the Shares.
Relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by each indemnifying party and the parties relative
intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if
contributions pursuant to this paragraph (d) were to be determined by pro
rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to in the first sentence
of this paragraph (d). The amount paid
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by an indemnified party as a result of the losses, claims, damages or
liabilities, or actions in respect thereof, referred to in the first
sentence of this paragraph (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection
with investigation, preparing to defend or defending against any action or
claim which is the subject of this paragraph (d). No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation.
Each party entitled to contribution shall upon the service of a
summons or other initial legal process upon it in any action instituted
against it in respect of which contribution may be sought, promptly give
written notice of such service to the party or parties from whom
contribution may be sought, but the omission so to notify such party or
parties of any such service shall not relieve the party from whom
contribution may be sought from any obligation it may have hereunder or
otherwise (except as specifically provided in paragraph (c) of this Section
5).
(e) An indemnifying party shall not be liable for any settlement of
any action, suit, proceeding or claim effected without its written consent,
which consent shall not be unreasonably withheld. Neither the Company nor
the Placement Agent will, without the prior written consent of the other,
which consent will not be unreasonably withheld, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification has been
sought hereunder unless such settlement, compromise or consent includes an
unconditional release of the other party and any person who controls such
party within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act from all liability arising out of such claim, action, suit or
proceeding.
6. Termination. This Agreement and your appointment as Placement Agent in
connection with the Offering may be terminated by you at any time upon notice to
the Company or by the Company at any time upon notice to you. Such appointment
shall terminate automatically when the Offering Period has ended.
Notwithstanding the foregoing, if either you or the Company terminates this
Agreement, Sections 4(e), 4(f), 4(g), 4(h), 4(i), 5, 9, 10, 11, 12 and 13 hereof
shall remain in full force and effect; provided, however, that if this Agreement
is terminated prior to the Initial Closing, Section 4(i) shall be of no further
force or effect.
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7. Conditions of Closing and Placement Agents Obligations. The release of
funds by the Escrow Agent and your obligation to act as Placement Agent in
connection with the Offering shall be subject to the accuracy as of each Closing
Date of the representations and warranties of the Company in this Agreement, to
the performance by the Company of its obligations in this Agreement and to the
following conditions:
(a) (i) The Shares shall have been qualified for sale in applicable
states of the United States, or an exemption from qualification shall have
been perfected or available; (ii) no stop order suspending such
qualification or prohibiting the use of the Registration Statement or
purporting to prevent the offer and sale of the Shares shall have been
issued, and no proceedings thereof or shall be pending or to the best
knowledge of the Company, threatened, by any governmental body or
authority; and (iii) the National Association of Securities Dealers, Inc.
shall have approved the terms and conditions of the Offering.
(b) On the Initial Closing Date, the Minimum Number of Shares shall
have been subscribed for and accepted by the Company in accordance with the
Registration Statement. On the Initial Closing Date, the Company and the
Placement Agent shall have delivered joint instructions to the Escrow Agent
which direct the Escrow Agent to release such funds to the Company.
(c) At each Closing Date, you shall have received such certificates,
in form and substance satisfactory to you and your counsel, as you may have
requested, from such officers of the Company as you may reasonably request,
as to: (i) the absence of any material misstatement or omission in the
statements in the Registration Statement; (ii) the absence of any material
adverse change in the business, management, financial position,
stockholders equity, or results of operations of the Company and its
subsidiaries (considered as a whole) since the date of the Registration
Statement; (iii) the accuracy as of such Closing Date of the
representations and warranties of the Company contained in Section 1 of
this Agreement; (iv) the performance by the Company of its obligations
required in this Agreement to be performed at or prior to such Closing
Date; (v) the fulfillment by the Company of the conditions to your
obligations contained in this Agreement; and (vi) such other matters as you
may reasonably request.
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(d) At each Closing Date, there shall be addressed and delivered to
you, dated as of such Closing Date, opinions of ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇
LLP (with respect to matters involving the laws of the United States) and
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP (with respect to matters involving the laws of
Intellectual Property Rights), counsel for the Company, substantially in
the forms attached hereto as Exhibits D-1 and D-2, respectively.
(e) You shall have received such opinion or opinions of Sheppard,
Mullin, ▇▇▇▇▇▇▇ & Hampton LLP, counsel for you, with respect to such
matters as you may reasonably request; and the Company shall have furnished
to such counsel such documents as they may reasonably request for the
purpose of enabling them to pass upon such matters.
(f) (i) Since the date of the latest audited financial statements
included in the Registration Statement, neither the Company nor any of its
subsidiaries shall have sustained any loss or interference with its
business from fire, explosion, flood, earthquake or other calamity, whether
or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Registration Statement, and which interferes materially
with the conduct of the Company's business and operations; (ii) since the
respective date as of which information is given in the Registration
Statement, there shall not have been any material adverse change in the
general affairs, business, management, financial position, stockholders
equity, or results of operations of the Company and its subsidiaries,
otherwise than as set forth or contemplated in the Registration Statement;
and (iii) there must not have occurred any event that makes untrue or
incorrect in any material respect any statement or information contained in
the Registration Statement or that is not reflected in the Registration
Statement but should be reflected in it in order to make the statements or
information in it not misleading in any material respect.
(g) Subsequent to the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or The Nasdaq National
Market, or the fixing of maximum ranges for prices of securities on the New
York Stock Exchange or by order of the Commission or any other governmental
authority having jurisdiction; or (ii) the engagement by the United States
in hostilities which have resulted in the declaration, on or after the date
hereof, of
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a national emergency or war, if the effect of any such event specified in
this clause (ii) in your commercially reasonable judgment is so material
and adverse as to make it impracticable or inadvisable to proceed with the
Offering or the delivery of the Shares on the terms and in the manner
contemplated in this Agreement and in the Registration Statement.
8. Effective Date of Agreement. This Agreement shall become effective
at the time this Agreement is fully executed by both parties.
9. Reimbursement of Certain Expenses. In addition to the Company's
obligations under Section 4(f) of this Agreement, the Company and the Placement
Agent agree to reimburse each other on a quarterly basis for all reasonable
legal and other expenses incurred in connection with investigating or defending
any claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission,
described in paragraph (a) or (b) of Section 5 of this Agreement,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the obligations under this Section 9 and the possibility that
such payments might later be held to be improper; provided, however, that: (i)
to the extent any such payment is ultimately held to be improper, the persons
receiving such payments shall promptly refund them; and (ii) such persons shall
provide to the Company or the Placement Agent, as the case may be, upon request,
reasonable assurances of their ability to effect any refund, when and if due.
10. Persons Entitled to Benefit of Agreement. This Agreement shall inure to
the benefit of the Company, the Placement Agent and the Selected Dealers, if
any, and their respective employees, controlling persons, directors, officers,
personal representatives, successors and assigns. Nothing in this Agreement is
intended or shall be construed to give to any other person, firm or corporation
(including, without limitation, any subscriber or potential subscriber) any
legal or equitable remedy or claim under or in respect of this Agreement or any
provision herein contained.
11. Notices. All communications hereunder will be in writing and, except as
otherwise expressly provided herein, if sent to the Placement Agent, will be
mailed, delivered or telecopied and confirmed to you at ▇▇▇▇▇ Securities
Corporation, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇.
▇▇▇▇▇, Fax: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Sheppard, Mullin, ▇▇▇▇▇▇▇ & Hampton
LLP, Four ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention: A. ▇▇▇▇
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▇▇▇▇▇▇, ▇▇., Esq., Fax: (▇▇▇) ▇▇▇-▇▇▇▇, or if to the Company, at Shaman
Pharmaceuticals, Inc. ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Fax: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy
to ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP , Two Embarcadero Place, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq., Fax: (650) 496-
2736.
12. Confidential Information. The Placement Agent will treat all
information which it receives from the Company in a confidential manner (other
than information that is or becomes publicly available other than as a result of
the wrongful or unlawful disclosure by the Placement Agent or its agents) and
will use the same degree of care to prevent inappropriate dissemination of such
information as it would employ in the protection and preservation of
confidential information about its own business. The Placement Agent will not:
(i) use any such confidential information other than in connection with the
Offering; and (ii) except as required by applicable law, regulation or legal
process, disclose to any third party any information received from the Company
which is confidential and is not publicly available. The Placement Agent further
agrees that monetary damages would not be an adequate remedy for breach of the
covenants contained in this paragraph and that the Company will be entitled to
injunctive relief for any such breach. If this Agreement is terminated, the
Placement Agent, upon written request of the Company, will return to the Company
all confidential information concerning the Company received by the Placement
Agent.
13. Miscellaneous. The representations and warranties contained in this
Agreement shall remain in full force and effect regardless of: (a) any
investigation made by or on behalf of the Placement Agent or controlling person
thereof, or by or on behalf of the Company or their respective directors or
officers; and (b) delivery and payment for the Shares.
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.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California, without regard to conflict of law principles.
In the event any of the parties to this Agreement resorts to legal action
against the other in connection with this Agreement, such action shall only be
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instituted and maintained in the courts of the City and County of San Francisco,
California; provided, however, that the Company may enforce its rights under
Section 12 hereof with respect to persons other than employees, officers and
directors of the Placement Agent in any court of competent jurisdiction. The
prevailing party shall be entitled to receive reimbursement from the
nonprevailing party for all reasonable attorneys fees and other costs incurred
in connection with such action.
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Please sign and return to the Company the enclosed duplicates of this
letter, whereupon this letter will become a binding agreement between the
Company and the Placement Agent in accordance with its terms.
Very truly yours,
SHAMAN PHARMACEUTICALS, INC.
By:
--------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Executive Officer
The foregoing Agreement is accepted
as of the date first above written.
▇▇▇▇▇ SECURITIES CORPORATION
By:
--------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman