================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K/A
AMENDMENT NO. 1
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------------------ ------------------
COMMISSION FILE NO. 0-21022
SHAMAN PHARMACEUTICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-3095806
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
213 East Grand Avenue, South San Francisco, California 94080
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: 650-952-7070
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
COMMON STOCK $.001 PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant based upon the closing sales price of the Common Stock on the Nasdaq
OTC Bulletin Board on March 17, 2000 was $23,676,687.*
The number of shares of the Registrant's Common Stock outstanding was
36,960,174 as of March 17, 2000.
DOCUMENTS INCORPORATED BY REFERENCE: NONE.
- ----------
* Excludes 174,581 shares of the Registrant's Common Stock held by executive
officers, directors and affiliated parties at February 26, 1999. Exclusion of
such shares should not be construed to indicate that any such person
possesses the power, direct or indirect, to direct or cause the direction of
the management or policies of the Registrant or that such person is
controlled by or under common control with the Registrant.
================================================================================
<PAGE>
EXPLANATORY NOTE
This Form 10-K/A constitutes Amendment No. 1 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1999 and is being filed
solely for the purpose of filing the information required by Part III (Items 10,
11, 12 and 13) to the Form 10-K.
2
<PAGE>
SHAMAN PHARMACEUTICALS, INC.
FORM 10-K/A
AMENDMENT NO. 1 TO 1999 ANNUAL REPORT
TABLE OF CONTENTS
PART III
Page
----
Item 10. Directors and Executive Officers of the Registrant 4
Item 11. Executive Compensation 6
Item 12. Security Ownership of Certain Beneficial Owners and Management 10
Item 13. Certain Relationships and Related Transactions 13
SIGNATURES 15
3
<PAGE>
PART III
All information contained in this Report on Form 10-K/A reflects a
1-for-20 reverse stock split of the Common Stock effected on June 22, 1999 and a
1-for-50 reverse stock split of the Common Stock effected on January 31, 2000.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is information regarding the Company's executive officers and
directors as of December 31, 1999.
NAME AGE POSITION
- ------------------------------ --- -------------------------------------------
Lisa A. Conte 40 Director, President, Chief Executive
Officer, and Chief Financial Officer
Steven R. King, Ph.D. 42 Senior Vice President, Ethnobotany and
Conservation
Gerald M. Reaven 71 Senior Vice President, Clinical Research
Thomas Carlson 43 Vice President, Medical Ethnobotany
John Chow 48 Vice President, Technical Operations
Tom White 41 Senior Vice President, Commercial Strategy
and Chief Sales and Marketing Officer
G. Kirk Raab (1) 64 Chairman of the Board
Loren D. Israelsen 43 Director
Adrian D.P. Bellamy (2) 57 Director
Jeffrey Berg 52 Director
Herbert H. McDade, Jr.(2) 72 Director
M. David Titus (1) 42 Director
- ------------------------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee. Mr. Herbert H. McDade, Jr. was
also a member of the Compensation Committee for 1999. Mr. McDade resigned
as a director effective April 2000.
Lisa A. Conte founded Shaman in May 1989 and currently serves as Shaman's
President, Chief Executive Officer, Chief Financial Officer, and Director. From
1987 to 1989, Ms. Conte was Vice President at Technology Funding, Inc., a
venture capital firm, where she was responsible for the analysis and management
of healthcare industry investments. From 1985 to 1987, she conducted risk and
strategy audits for venture capital portfolio companies at Strategic Decisions
Group, a management consulting firm. Ms. Conte received an A.B. in Biochemistry
from Dartmouth College, an M.S. in Physiology/Pharmacology from the University
of California, San Diego and an M.B.A. from The Amos Tuck School, Dartmouth
College.
Steven R. King, Ph.D. joined Shaman in March 1990. He currently serves as
Senior Vice President, Ethnobotany and Conservation and is responsible for
coordinating our Scientific Strategy Team. From 1989 to 1990, Dr. King was the
chief botanist for Latin America at Arlington, Virginia's Nature Conservancy. He
worked in 1988 as Research Associate for the Committee on Managing Global
Genetic Resources at the National Academy of Sciencesand was a Doctoral Fellow
from 1983 to 1988 at The New York Botanical Garden's Institute of Economic
Botany. Dr. King received a B.A. in Human Ecology from the College of the
Atlantic and M.S. and Ph.D. degrees in Biology from City University of New York.
Gerald M. Reaven, M.D. joined Shaman as a consultant in February 1995 and
became an employee in July 1995. He currently serves as Senior Vice President,
Clinical Research. Dr. Reaven came to Shaman from the Stanford University School
of Medicine where he served as a faculty member since 1960 and a Professor of
Medicine since 1970. Over the last 20 years, Dr. Reaven served as head of the
Division of Endocrinology and Metabolic Diseases, Division of Gerontology and
director of the General Clinical Research Center. Dr. Reaven also served as head
of the Division of Endocrinology, Gerontology and Metabolism at Stanford
University School of Medicine, and Director of the Geriatric Research, Education
and Clinical Center, at the Palo Alto Veterans Affairs Medical Center. Dr.
Reaven received his A.B., B.S. and M.D. from the University of Chicago.
Thomas Carlson, M.D. joined Shaman in October 1992. He currently serves as
Vice President, Medical Ethnobotany and is responsible for developing
ethnobotanical field research and coordinating clinical studies. Dr. Carlson has
conducted research with traditional healers in over 40 different indigenous
groups in 15 different tropical countries. Prior to joining Shaman, from 1990 to
1992, Dr. Carson practiced General Pediatrics at Kaiser Permanente in Santa
Clara, California and worked at the Aravind Childrens and Eye Hospitals in
Madurai, India on child malnutrition and blindness. From 1987 to 1990, Dr.
Carlson completed his Internship and Residence in Pediatrics at Stanford
4
<PAGE>
University Medical Center. Dr. Carlson received his M.D. from Michigan State
University and a B.S. and M.S. in Botany from the University of Michigan.
John Chow joined Shaman in April 1998 as Vice President of Technical
Operations. Prior to joining Shaman, from December 1997 to April 1998, Dr. Chow
served as Director, Product and Technology Evaluation at Bristol-Myers Squibb
Company, where he performed technical due diligence toward the acquisition and
licensing of various dosage forms and technologies and reviewed and approved new
product specifications. Prior to holding this position, from July 1980 to
December 1997, Dr. Chow held other positions, also with Bristol-Myers Squibb
Company, where he was responsible for developing strategies for manufacturing
consolidation, facilitating technology transfers of new and existing products,
and directing technical operations of an international plant. Dr. Chow received
a B.S. in Pharmacy from Washington State University, a Ph.D. in Pharmaceutical
Chemistry from Ohio State University and an M.B.A. in Pharmaceutical/Chemical
Studies from Fairleigh Dickinson University.
Tom White joined Shaman in May 1999 as Senior Vice President, Commercial
Strategy and Chief Sales and Marketing Officer. Prior to joining Shaman, from
April 1998 to May 1999, Mr. White served as Executive Vice President, General
Manager Functional Food & Beverages at Weider Nutrition International. Prior to
that, from June 1995 to March 1998, he was a Principal in the firm of White,
Smith-White & Partners, a consumer products consulting firm and from August 1993
to May 1995, he served as Director of Marketing for Pete's Brewing Company. Mr.
White received his B.A. in Journalism from the University of Missouri and his
M.S. in Advertising from Northwestern University.
G. Kirk Raab became a director in January 1992 and Chairman of the Board in
September 1995. Mr. Raab was President, Chief Executive Officer and director of
Genentech, Inc. from February 1990 to July 1995 and President, Chief Operating
Officer and director from February 1985 to January 1990. Before joining
Genentech, Mr. Raab was associated with Abbott Laboratories, serving as
President, Chief Operating Officer and director. Mr. Raab is also Chairman of
the Board of Connectics, Inc., Oxford GlycoSciences (UK) Ltd. and LXR
Biotechnology, Inc. and is a director of Bridge Medical, Inc., Accumetrics, Inc.
and Applied Imaging Corporation. Mr. Raab holds a B.A. in Political Science from
Colgate University.
Loren D. Israelsen became a director in April 1999. Mr. Israelsen has been
President of LDI Group, a consulting firm specializing in dietary supplement and
phytomedicine issues, since 1997. From 1990 to 1997, Mr. Israelsen practiced law
at a private firm. From 1981 to 1990, Mr. Israelsen served in various positions
at Murdock International Corporation, including President from 1989 to 1990,
Vice President of Strategic Development from 1986 to 1989 and General Counsel
from 1981 to 1986. While acting as Vice President of Strategic Development, he
identified and negotiated several license agreements to bring the world's
leading phytomedicines, including ginkgo biloba extract, milk thistle extract,
echinacea, evening primrose oil, and saw palmetto extract, to the United States.
Mr. Israelsen has served as General Counsel/Vice President to the American
Herbal Products Association, Co-counsel to the European American Phytomedicine
Coalition, industry liaison to FDA's expert advisory committee on Ephedra and
advisor to the Natural Products Quality Assurance Alliance, the Office of
Technology Assessment and the Office of Dietary Supplements. Since 1992, he has
served as Executive Director of the Utah Natural Products Alliance, which was
instrumental in developing and passing the Dietary Supplement Health and
Education Act of 1994.
Adrian D.P. Bellamy became a director in October 1997. Since April 1995,
Mr. Bellamy has served as Chairman and a director of each of Airport Group
International Holdings, L.L.C. and Gucci Group N.V. From September 1983 to April
1995, Mr. Bellamy served as Chairman of the Board of Directors and Chief
Executive Officer of DFS Group Limited, a specialty retailer. He received a B.A.
in Communications and an M.B.A. from the University of South Africa. Mr. Bellamy
is a director of The Body Shop, Inc., The Body Shop International PLC, The Gap,
Inc., Paragon Trade Brands, Inc. and Williams-Sonoma, Inc.
Jeffrey Berg became a director in June 1998. Mr. Berg has been the Chairman
and Chief Executive Officer of International Creative Management, Inc. since
1985. Mr. Berg, one of the leading agents in the entertainment industry, has
been in the entertainment industry for over 25 years. Mr. Berg received a B.A.
from the University of California at Berkeley and a Master of Liberal Arts from
the University of Southern California. He served as Co-Chair of the California
Information Technology Council and is a director of each of Oracle Corporation
and Excite, Inc.
Herbert H. McDade, Jr. became a director in October 1991. He has served as
Chairman of the Board and Chief Executive Officer of Chemex Pharmaceuticals,
Inc. since February 1989 and as Chief Executive Officer from February 1989
through January 1996, when Chemex Pharmaceuticals merged with Access
Pharmaceutical Corporation and the combined entity changed its name to Access
Pharmaceutical Corporation Inc. From October 1986 to January 1988, Mr. McDade
was Chairman, President and Chief Executive Officer of Armour Pharmaceuticals,
Inc., after previously serving as President, International Health Care Division
of the Revlon Health Care Group. Mr. McDade holds a B.S. in Biology from the
University of Notre Dame and a B.Ph.. in Theology and Philosophy from Laval
University. He is Chairman of the Board of Access Pharmaceutical Corporation and
a director of Cytrx, Inc., Discovery Ltd. and several privately held companies.
Mr. McDade resigned as a director effective April 2000.
5
<PAGE>
M. David Titus became a director in April 1990. Mr. Titus is currently a
General Partner of Windward Ventures Management, L.P., a venture capital firm,
which he founded in November 1997. Prior to founding Windward Ventures
Management, L.P., Mr. Titus was Managing Director of Windward Ventures, a
venture capital consulting and investment firm, which he founded in 1993. From
May 1986 to December 1992, he served in various capacities at Technology
Funding, Inc., a venture capital firm, including Group Vice President,
Technology Funding, Inc. and General Partner of Technology Funding Limited.
Prior to joining Technology Funding, Inc. in May 1986, Mr. Titus was a founder
and Senior Vice President of the Technology Division of Silicon Valley Bank. Mr.
Titus earned a B.A. in Economics from the University of California, Santa
Barbara. He is a director of several privately held companies.
SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and persons who are the beneficial owners of
more than 10% of the Common Stock to file initial reports of ownership and
reports of changes in ownership of the Common Stock with the United States
Securities and Exchange Commission ("SEC"). Officers, directors and greater than
10% stockholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on its review of the copies of
such forms furnished to the Company and the written representations that no
other reports were required, during the period from January 1, 1999 to December
31, 1999, all officers, directors and beneficial owners of more than 10% of the
Common Stock complied with all Section 16(a) requirements, except as noted
below. Each of Mr. Israelsen and Mr. White inadvertently failed to timely file
their respective Form 3. Each of Mr. Berg, Mr. Bellamy, Mr. Israelsen, Mr.
McDade, Mr. Raab, Mr. Titus, Ms. Conte, Dr. Reaven, Dr. King, Dr. Carlson, Dr.
Chow and Mr. White inadvertently failed to timely file their respective Form 5.
Each of Mr. Berg, Mr. Bellamy, Mr. McDade, Mr. Raab, Mr. Titus, Ms. Conte, Dr.
Reaven, Dr. King, Dr. Carlson, Dr. Chow and Mr. White inadvertently missed a
filing deadline for Form 4 for an event occuring on February 1, 2000; the
required Form 4 will be filed shortly. Mr. Israelsen inadvertently missed a
filing deadline for one transaction effected on January 28, 2000; the required
Form 4 will be filed shortly.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each non-employee Board member receives an annual retainer fee of $10,000,
provided the non-employee Board member attends at least 75% of the Board
meetings. In addition, non-employee Board members are reimbursed for reasonable
expenses incurred in connection with their attendance at such meetings. None of
the Board members received such annual retainer fee in 1999. Directors who are
employees of the Company do not receive any compensation for their service as
directors.
Under the revised Automatic Option Grant Program in effect under the 1992
Plan, a special one-time option grant was made on February 1, 2000 to each
individual serving as a non-employee Board member at that time. The option
allows each such non-employee Board member to purchase that number of shares of
Common Stock equal to one half of one percent (0.5%) of the number of voting
shares of the Company's capital stock outstanding at that time. Each individual
who first joins the Board as a non-employee Board member will, upon his or her
initial appointment or election to the Board, receive a special one-time option
grant for that number of shares of Common Stock equal to one half of one percent
(0.5%) of the number of voting shares of the Company's capital stock outstanding
on February 1, 2000, provided such individual has not previously been the
Company's employ. Such grant is in lieu of the 20-share option grant currently
provided under the program for newly-appointed or elected non-employee Board
members and the number of shares subject to such grant will be adjusted for any
subsequent changes in the Company's capital structure resulting from stock
dividends, stock splits, or other similar transactions. Each automatic option
grant has a maximum term of 10 years. Each automatic grant becomes exercisable
for the option shares in a series of 48 successive equal monthly installments
over the optionee's period of continued Board service, measured from the grant
date. The option would, however, become immediately exercisable for all the
option shares upon certain changes in control or ownership of the Company.
The Company did not issue such grant under the revised Automatic Option
Grant Program to the non-employee Board members on February 1, 2000 as the
Company already issued a similar grant under the Series R Preferred Stock Option
Plan.
Messrs. Bellamy, Berg, Israelsen, McDade and Titus each received, on
December 14, 1999, an option grant for 5,736 shares of Series R Preferred Stock
under the Series R Preferred Stock Option Plan adopted in September 1999 (the
"Series R Plan") with an exercise price per share of $10.25, the fair market
6
<PAGE>
value per share of Series R Preferred Stock on that date. Mr. Raab received on
December 14, 1999, an option grant for 11,472 shares of Series R Preferred Stock
under the Series R Plan with an exercise price per share of $10.25, the fair
market value per share of Series R Preferred Stock on that date. Each share of
Series R Preferred Stock was automatically converted on February 1, 2000 into 31
shares of Common Stock, such that these options are currently exercisable in
shares of Common Stock commencing on February 1, 2000.
In January 1999, the Company entered into a consulting agreement with Mr.
Loren D. Israelsen, a director of the Company, pursuant to which he is to serve
as an interim Chief Executive Officer of Shaman's Botanicals division. Under
this agreement, Mr. Israelsen was paid a total of $30,000 for his service in
January and February 1999. In addition, upon further funding of the Company, Mr.
Israelsen is to be paid $10,000 in deferred consulting expenses and a project
retainer to help close a corporate deal for Shaman's Botanicals division. Such
retainer will be paid in three installments. Mr. Israelsen will also receive a
success payment for each corporate partnership venture, which is a percentage of
the up front fee received from a partner, which fee shall vary from three to
five percent depending upon the timing of closing such partnership. In August
1999, the Company issued Mr. Israelsen 19,000 shares of Series R Preferred Stock
at $15.00 per share in exchange for consulting services provided in 1999.
No other compensation was paid or accrued for directors of the Company with
respect to their 1999 services as directors of or consultants to the Company.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation earned, for services
rendered in all capacities to the Company, for each of the last three fiscal
years by (i) the Company's Chief Executive Officer and (ii) the four other
highest paid executive officers serving as such at the end of the 1999 fiscal
year whose salary and bonus for that fiscal year was in excess of $100,000. The
individuals named in the table will be hereinafter referred to as the "Named
Officers." No other executive officer who would otherwise have been included in
such table on the basis of fiscal year 1999 salary and bonus resigned or
terminated employment during the year.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long-Term Compensation
---------------------------------------------- ------------------------------------
Awards
----------------------------------------------------------------------------------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary($)(1) Bonus ($) Compensation($) Options/ SARS(#) Compensation($)
- ------------------------------ ---- ------------ --------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Lisa A. Conte 1999 287,700(2) -- -- 2,489,331(4) --
President, Chief Executive 1998 311,537(4) 3,000(5) -- 2,045(6) --
Officer and Chief Financial 1997 312,901(7) 91,689(8) -- 295(6) --
Officer
Steven R. King, Ph.D. 1999 173,872 -- -- 775,000(3) --
Senior Vice President, 1998 179,329 3,000(5) -- 149(6) --
Ethnobotany and Conservation 1997 176,202 40,000(9) -- -- --
Thomas F. White 1999 134,650 -- -- 533,417(3) --
Senior Vice President, 1998 -- -- -- -- --
Commercial Strategy and 1997 -- -- -- -- --
Chief Sales and Marketing
Officer
John W.S. Chow, Ph.D. 1999 166,447 -- -- 372,000(3) 77,712(10)
Vice President, Technical 1998 113,807 10,000(11) -- 65(6) 56,281(12)
Operations 1997 -- -- -- -- --
Thomas Carlson, M.D. 1999 157,467 -- -- 527,000(3) --
Vice President, Medical 1998 157,800 3,000(5) -- 3(6) --
Ethnobotany 1997 150,651 -- -- -- --
</TABLE>
- ------------------------------
(1) Includes amounts deferred under the Company's Internal Revenue Code
Section 401(k) Plan and the Company's Section 125 Plan.
(2) Includes $58,489 and $2,366 attributable to childcare costs and family
travel, respectively.
7
<PAGE>
(3) Represents shares of Common Stock granted under the Series R Plan. Each
share of the Series R Preferred Stock was automatically converted on
February 1, 2000 into 31 shares of Common Stock, such that these options
are currently exercisable in shares of Common Stock at an exercise price
of $0.3396 per share commencing on February 1, 2000.
(4) Includes $59,573 and $13,431 attributable to childcare costs and family
travel, respectively.
(5) Represents all employees bonus paid in 1998 for achievement of the
Company's milestones in 1997.
(6) All previously granted Common Stock options were surrendered for
cancellation upon issuance of shares under the 1999 Series R Plan.
(7) Includes $61,214 and $27,287 attributable to childcare costs and family
travel, respectively.
(8) Includes $75,000 paid in 1998 for achievement of milestones in 1997.
(9) Represents bonus paid in 1998 for achievement of milestones in 1997.
(10) Represents indebtedness for which repayment was forgiven in 1999.
(11) Represents sign-on bonus.
(12) Includes $53,000 as a housing subsidy and $3,281 for travel expenses in
1998.
The following table contains information concerning the grant of stock
options under the 1999 Stock Option Plan to the Named Officers during the 1999
fiscal year. Except for the limited stock appreciation right described in
footnote (2) below which formed part of the option grant made to each Named
Officer, no stock appreciation rights were granted to such Named Officers during
the 1999 fiscal year.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term (1)
------------------------------------------------------------------------------- ----------------------
Number of Securities % of Total Options
Underlying Options/ Granted to Employees Exercise Expiration 5% 10%
Name SARS Granted(#)(2) in Fiscal Year ($/Share)(3) Date 12/31/99 12/31/99
- ---------------------- --------------------- -------------------- ------------ ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Lisa A. Conte 2,489,331(4) 31.39% $0.3396 12/14/09 531,653 1,347,313
Steven R. King, Ph.D. 775,000(4) 9.77% $0.3396 12/14/09 165,519 419,457
Thomas F. White 533,417(5) 6.73% $0.3396 12/14/09 113,923 288,704
Thomas Carlson, M.D. 527,000(4) 6.65% $0.3396 12/14/09 122,553 285,231
John W.S. Chow, Ph.D. 372,000(5) 4.69% $0.3396 12/14/09 79,449 201,339
</TABLE>
- --------------------
(1) Potential realizable value is based on assumption that the market price of
the Common Stock appreciates at the annual rate shown (compounded
annually) from the date of grant until the end of the 10-year option term.
There can be no assurance that the actual stock price appreciation over
the 10-year option term will be at the assumed 5% and 10% levels or at any
other defined level. As of April 24, 2000, the exercise price of all
options was higher than the trading price of the stock on that date.
(2) Represents shares of Common Stock granted under the Sereis R Plan. Each
share of Series R Preferred Stock was automatically converted on
February 1, 2000 into 31 shares of Common Stock, such that these options
are currently exercisable in shares of Common Stock at an exercise price
of $0.3396 per share commencing on February 1, 2000. Each option has a
maximum term of 10 years, subject to earlier termination in the event of
the optionee's cessation of service with the Company. However, each of the
options granted to the named executive officers will become immediately
exercisable in full upon an acquisition of the Company by merger or asset
sale, unless the option is assumed by the successor entity. Each option
includes a limited stock appreciation right which will result in the
cancellation of that option, to the extent exercisable for vested shares,
upon the successful completion of a hostile tender for securities
possessing more than 50% of the combined voting power of the Company's
outstanding voting securities. In return for the cancelled option, the
optionee will receive a cash distribution per cancelled option share equal
to the excess of (i) the highest price paid per share of the Company's
Common Stock in such hostile tender offer over (ii) the exercise price
payable per share under the cancelled option.
(3) The exercise price may be paid in cash or in shares of Common Stock
(valued at fair market value on the exercise date) or through a cashless
exercise procedure involving a same-day sale of the purchased shares. The
Company may also finance the option exercise by loaning the optionee
sufficient funds to pay the exercise price for the purchased shares and
the federal and state income tax liability incurred by the optionee in
connection with such exercise. The optionee may be permitted, subject to
the approval of the Plan Administrator, to apply a portion of the shares
purchased under the option (or to deliver existing shares of Common Stock)
in satisfaction of such tax liability.
(4) The option is immediately exercisable on December 14, 1999 for 41.66% of
the optioned shares; 8.34% of the optioned shares vest in equal monthly
installments upon the completion of each additional month of employment
from December 10, 1999 through February 1, 2000; 25% of the optioned
shares vest in equal monthly installments upon the completion of each
additional month of employment service in year two, commencing February 1,
8
<PAGE>
2000; and 25% vest in equal monthly installments upon the completion of
each additional month of employment service in year three, commencing
February 1, 2001.
(5) The option is immediately exercisable on December 14, 1999 for 20.83% of
the optioned shares; 4.17% of the optioned shares vest in equal monthly
installments upon the completion of each additional month of employment
from December 10, 1999 through February 1, 2000; 37.5% of the optioned
shares vest in equal monthly installments upon the completion of each
additional month of employment service in year two, commencing February 1,
2000; and 37.5% vest in equal monthly installments upon the completion of
each additional month of employment service in year three, commencing
February 1, 2001.
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the Named
Officers concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year (as of December 31,
1999). No stock appreciation rights were exercised during such fiscal year and
except for the limited stock appreciation right described in Footnote (2) to the
Stock Option/SAR Grants Table which forms part of each outstanding stock option,
no stock appreciation rights were outstanding at the end of that fiscal year.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<CAPTION>
Value of Unexercised
In-the- Money Options at FY-End
Number of Securities (Market price of shares at
Value Realized Underlying Unexercised FY-End less exercise price)
(Market price at Options at FY-End (#)(1) ($)(2)
Shares Acquired exercise date less ---------------------------------------------------------------
Name on Exercise(#) exercise price)($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------- ---------------- ------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lisa A. Conte -- -- 1,037,198 1,452,133 $218,226 $305,529
Steven R. King, Ph.D. -- -- 322,927 452,073 $ 67,944 $ 95,116
Thomas F. White -- -- 97,780 435,637 $ 20,573 $ 91,658
Thomas Carlson, M.D. -- -- 219,573 307,427 $ 46,198 $ 64,683
John W.S. Chow, Ph.D. -- -- 77,500 294,500 $ 16,306 $ 61,963
</TABLE>
- ----------------------
(1) Represents shares of Common Stock granted under the Series R Plan. Each
share of Series R Preferred Stock was automatically converted on February
1, 2000 into 31 shares of Common Stock, such that these options are
currently exercisable in shares of Common Stock at an exercise price of
$0.3396 per share commencing on February 1, 2000.
(2) Based on the fair market value of the Company's Common Stock on December
31, 1999 of $0.55 per share, the last sale price for the Common Stock as
quoted on the OTC Bulletin Board. As of April 24, 2000, these options had
no value since the exercise price of all options was higher than trading
price of the stock on that date.
EMPLOYMENT CONTRACTS, TERMINATION AGREEMENTS AND CHANGE OF CONTROL AGREEMENTS
On March 15, 1999, the Board of Directors approved a Change in Control
provision concerning severance benefits for key executives. Pursuant to the
provision, should their employment with the Company terminate within 12 months
after a Change in Control, for any reason other than for cause, they will be
entitled to receive in one lump sum payment the cash equivalent of 12 months of
base salary plus any benefits to which they would otherwise be entitled. In
connection with these severance benefits, the Company has agreed to pay the
premiums for any COBRA coverage to which these individuals or their spouse or
dependents are entitled under a Company sponsored medical plan after a Change in
Control. In addition, in the event of a Change in Control, all of the options
held by such key executives will automatically become fully vested and
exercisable. Such executives' exercisable shares will be fixed at the
termination of their employment and they will have a period of 90 days from
their termination date to purchase such exercisable shares, as set forth in the
stock option agreements applicable to their options.
9
<PAGE>
On March 30, 1998, the Company entered into a letter agreement with John
W.S. Chow, Ph.D. pursuant to which he is to serve as Vice President, Technical
Operations, commencing in May 1998. Pursuant to the letter agreement, Dr. Chow
is to be paid an annual salary of $165,000 in addition to the sign-on bonus paid
to him in the amount of $10,000 and he is to be reimbursed, in an amount not to
exceed $25,000, for closing costs incurred in the sale of his former residence
in New Jersey and the purchase of his new residence in the Bay Area. Dr. Chow
will, however, be obligated to repay a prorated portion of both the sign-on
bonus and the reimbursed closing costs should he resign from the Company within
two years after his hire date. Dr. Chow was also granted an option for 50 shares
of Common Stock on May 15, 1998 with an exercise price per share of $4,937.50,
the fair market value per share of Common Stock on that date. The option will
become exercisable in a series of monthly installments over the four year period
measured from the grant date as follows: 10% of the option shares will become
exercisable upon his completion of six months of employment measured from such
grant date, an additional 30% of the option shares will become exercisable in a
series of 18 successive equal monthly installments upon his completion of each
additional month of employment over the next 18 months thereafter and the
remaining 60% of the option shares will become exercisable in a series of 24
successive equal monthly installments upon his completion of each additional
month of employment during the 3rd and 4th years of employment measured from the
grant date. Dr. Chow was also granted an additional 15 shares of Common Stock on
May 15, 1998 with an exercise price of $4,937.50, the fair market value per
share of Common Stock on that date. The 15-share grant will become exercisable
as follows: 8 shares upon Dr. Chow's completion of three years of employment
measured from the grant date and the remaining 7 shares upon his completion of
four years of employment measured from the grant date. Dr. Chow surrendered
these options upon granting the Series R Preferred Stock option on December 14,
1999. The Company further agreed to pay Dr. Chow's reasonable moving expenses in
an amount not to exceed $20,000 and to provide him with an apartment for up to
four months at a rental not to exceed $2,500 per month. Should the Company
terminate Dr. Chow's employment for any reason other than for cause prior to May
1, 2001, the Company will continue to pay Dr. Chow's base salary plus benefits
on a monthly basis for up to six months or until Dr. Chow obtains near full-time
employment or consulting of at least 80% of his time, whichever occurs sooner.
The Company also extended a $300,000 loan to Dr. Chow in connection with his
purchase of a new residence in the Bay Area. See "Certain Relationships and
Related Transactions."
None of the Company's other executive officers have employment agreements
with the Company and their employment may be terminated at any time at the
discretion of the Board of Directors. As administrator of the Plan, the
Compensation Committee has the authority to provide for accelerated vesting of
the shares of Common Stock subject to any outstanding options held by the Chief
Executive Officer and the Company's other executive officers or any unvested
shares actually held by those individuals under the Plan upon a change in
control of the Company effected through a successful tender offer for more than
50% of the Company's outstanding voting securities or through a change in the
majority of the Board as a result of one or more contested elections for Board
membership.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the 1999 fiscal year, Herbert H. McDade and Adrian D.P. Bellamy
served as members of the Compensation Committee of the Board of Directors. No
member of the Compensation Committee was, at any time during the 1999 fiscal
year or at any earlier time, an officer or employee of the Company.
No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Common Stock as of April 24,
2000 by (i) all persons who are beneficial owners of five percent or more of the
Common Stock, (ii) each director, (iii) the Named Officers in the Summary
Compensation Table above and (iv) 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 subject to options, warrants or convertible promissory notes
currently exercisable or convertible, or exercisable or convertible within 60
days of April 24, 2000 are deemed to be beneficially owned by the person holding
such option, warrant or convertible promissory notes 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, the
Company believes that the beneficial owners of the Common Stock listed below,
based upon such information furnished by such owners, have sole investment power
with respect to such shares, subject to community property laws where
applicable.
10
<PAGE>
<TABLE>
<CAPTION>
Shares of Common Stock Owned
-------------------------------------------
Name and Address of Beneficial Owner(1) Number Percent(2)
- ----------------------------------------------- --------------- ----------------------
<S> <C> <C>
Vulcan Ventures, Inc.......................... 8,676,476(3) 18.77%
110-110th Avenue NW, Suite 550
Bellevue, WA 98084
Madalyn T. Ciocca............................. 8,662,650(4) 18.75%
157 West 78th Street, #6
New York, NY 10024
Alcamin Anstalt............................... 7,087,077(5) 15.88%
666 Fifth Avenue
Suite 158
New York, NY 10103-0001
ArtXChange................................... 5,256,667(6) 12.28%
866 East Gwinn Place
Seattle, WA 98102
John Lyddon................................... 4,823,151(7) 11.39%
1750 Star Hill Road
Woodside, CA 94062
Lipha S.A..................................... 4,135,099 11.02%
37 rue Saint-Romain
69379 Lyon cedex 08
France
Tradewinds Offshore Fund, Ltd.(8)(12)......... 5,009,151(9) 11.77%
c/o Tradewinds Financial Corporation
591 Redwood Hwy, Ste 2355
Mill Valley, CA 94941
Tradewinds Debt Strategies Fund, L.P.(8)(12).. 4,664,521(10) 11.05%
c/o Tradewinds Financial Corporation
591 Redwood Hwy, Ste 2355
Mill Valley, CA 94941
Scott P. Peters(8)............................ 4,630,647(11) 11.33%
c/o Tradewinds Financial Corporation
591 Redwood Hwy, Ste 2355
Mill Valley, CA 94941
Feehan Partners, LP(12)....................... 2,464,007(13) 6.16%
c/o Tradewinds Financial Corporation
591 Redwood Hwy, Ste 2355
Mill Valley, CA 94941
Robert W. Scannell Roth IRA(12)............... 2,198,992(14) 5.53%
c/o Tradewinds Financial Corporation
591 Redwood Hwy, Ste 2355
Mill Valley, CA 94941
Tom Huzella................................... 2,100,000(15) 5.44%
1201 N. Swinton Ave.
Delray Beach, FL 33444
Lisa A. Conte................................. 1,543,011(16) 4.10%
John W.S. Chow................................ 160,177(17) *
Thomas Carlson, M.D........................... 319,816(18) *
Steven R. King, Ph.D.......................... 467,583(19) 1.25%
Gerald R. Reaven, M.D......................... 33,341(20) *
Tom White..................................... 203,113(21) *
Adrian D.P. Bellamy........................... 256,122(22) *
Jeffrey Berg.................................. 177,816(23) *
Loren D. Israelsen............................ 177,817(24) *
G. Kirk Raab.................................. 441,887(25) 1.18%
11
<PAGE>
Shares of Common Stock Owned
-------------------------------------------
Name and Address of Beneficial Owner(1)-Con't Number Percent(2)
- ----------------------------------------------- --------------- ----------------------
M. David Titus................................ 222,991(26) *
Directors and officers as a group............. 4,191,812(27) 11.11%
</TABLE>
- ----------------------------------------
* Less than 1.0%
(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 37,537,058
shares of Common Stock were outstanding as of April 24, 2000. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to securities. Shares of Common Stock subject to options, warrants
or convertible promissory notes currently exercisable or convertible or
exercisable or convertible within 60 days April 24, 2000, are included in
the number of shares outstanding for computing the percentage of the
person holding such option, warrant or convertible promissory note but are
not included in the number of shares outstanding for computing the
percentage of any other person.
(3) Includes 5,258,323 shares issuable upon exercise of outstanding warrants
within 60 days of April 24, 2000. Does not include 20,000 shares of Series
C Preferred Stock which is convertible to a certain number of shares of
Common Stock, such number which shall be determined in accordance with
Shaman's certificate of incorporation. The certificate of incorporation
prohibits conversion of the Series C Preferred Stock to the extent such
conversion would cause the holder's beneficial ownership of Common Stock
to exceed 4.9% of the outstanding shares of Common Stock.
(4) Includes 8,518,650 shares issuable upon conversion and exercisable of
outstanding convertible promissory notes and warrants within 60 days of
April 24, 2000.
(5) Includes 6,787,075 shares issuable upon conversion and exercisable of
outstanding convertible promissory notes and warrants within 60 days of
April 24, 2000.
(6) Represents shares issuable upon conversion and exercisable of outstanding
convertible promissory notes and warrants within 60 days of April 24,
2000.
(7) Represents shares issuable upon conversion and exercisable of outstanding
convertible promissory notes and warrants within 60 days of April 24,
2000.
(8) Mr. Scott Peters is an affiliate of Tradewinds Offshore, Ltd. and
Tradewinds Debt Strategies Fund, L.P. with voting and dispositive power
over the shares of such entities. Therefore, Mr. Peters may be deemed the
beneficial owner of such shares.
(9) Includes 4,823,151 shares issuable upon conversion and exercisable of
outstanding convertible promissory notes and warrants within 60 days of
April 24, 2000.
(10) Includes 3,858,521 shares issuable upon conversion and exercisable of
outstanding convertible promissory notes and warrants within 60 days of
April 24, 2000.
(11) Includes 3,408,360 shares issuable upon conversion and exercisable of
outstanding convertible promissory notes and warrants within 60 days of
April 24, 2000 and 643,087 shares held by Atlas Defined Contribution Plan
which shares are issuable upon conversion and exercisable of outstanding
convertible promissory notes and warrants within 60 days of April 24,
2000. Mr. Peters is an affiliate of Atlas Defined Contribution Plan with
voting and dispositive power over the shares of such entities. Therefore,
Mr. Peters may be deemed the beneficial owner of such shares.
(12) Mr. Robert Scannell is an affiliate of Tradewinds Offshore, Ltd.,
Tradewinds Debt Strategies Fund, L.P. and Feehan Partners, LP with voting
and dispositive power over the shares of such entities. Therefore, Mr.
Scannell may be deemed the beneficial owner of such shares.
(13) Includes 2,443,730 shares issuable upon conversion and exercisable of
outstanding convertible promissory notes and warrants within 60 days of
April 24, 2000.
(14) Includes 1,929,260 shares issuable upon conversion and exercisable of
outstanding convertible promissory notes and warrants within 60 days of
April 24, 2000.
(15) Includes 950,000 shares issuable upon conversion and exercisable of
outstanding convertible promissory notes and warrants within 60 days of
April 24, 2000 and 950,000 shares held by Practice Soluctions, Inc. which
shares are issuable upon conversion and exercisable of outstanding
convertible promissory notes and warrants within 60 days of April 24,
12
<PAGE>
2000. Mr. Huzella is an affiliate of Practic Solutions, Inc. with voting
and dispositive power over the shares of such entity. Therefore, Mr.
Huzella may be deemed the beneficial owner of such shares.
(16) Includes 77,500 shares issuable upon exercise of outstanding warrants and
1,452,122 shares issuable upon exercise of options within 60 days of April
24, 2000.
(17) Includes 20,677 shares issuable upon exercise of outstanding warrants and
139,500 shares issuable upon exercise of options within 60 days of April
24, 2000.
(18) Includes 12,400 shares issuable upon exercise of outstanding warrants and
307,416 shares issuable upon exercise of options within 60 days of April
24, 2000.
(19) Includes 15,500 shares issuable upon exercise of outstanding warrants and
452,083 shares issuable upon exercise of options within 60 days of April
24, 2000.
(20) Includes 33,340 shares issuable upon exercise of options within 60 days of
April 24, 2000.
(21) Includes 200,012 shares issuable upon exercise of options within 60 days
of April 24, 2000.
(22) Includes 25,823 shares issuable upon exercise of outstanding warrants and
177,816 shares issuable upon exercise of options within 60 days of April
24, 2000.
(23) Represents shares issuable upon exercise of options within 60 days of
April 24, 2000.
(24) Includes 177,816 shares issuable upon exercise of options within 60 days
of April 24, 2000.
(25) Includes 25,823 shares issuable upon exercise of outstanding warrants and
355,632 shares issuable upon exercise of options within 60 days of April
24, 2000. 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 extent such conversion would cause the
holder's beneficial ownership of Common Stock to exceed 4.9% of the
outstanding shares of Common Stock.
(26) Includes 177,816 shares issuable upon exercise of options within 60 days
of April 24, 2000.
(27) Represents total shares held by directors and officers listed above.
Includes 188,046 shares issuable upon exercise of outstanding warrants and
3,829,185 shares issuable upon exercise of options within 60 days of April
24, 2000.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 17, 1998, the Company loaned $300,000 to John W.S. Chow, Ph.D.,
the Vice President, Technical Operations, to reimburse him for a reasonable
difference between the purchase price of his residence in the Bay Area and the
cost of comparable housing in New Jersey, his former state of residence. The
loan is evidenced by his promissory note of the same date which will become due
and payable in a series of five successive equal annual installments, with the
first such installment due on June 25, 1999. The note will bear interest at a
variable per annum rate equal to the short-term applicable federal rate in
effect under the federal tax laws for January of each calendar year the loan
remains outstanding. Accordingly, the interest rate in effect for the period Dr.
Chow's note was outstanding during the 1998 calendar year was 5.52%. Accrued and
unpaid interest will become due and payable each year on the same date the
principal installment for that year becomes payable. Each installment of
principal and accrued interest will automatically be forgiven as that
installment becomes due, provided Dr. Chow continues in the Company's employ.
However, the entire unpaid balance of the note, together with all accrued and
unpaid interest, will become immediately due and payable upon Dr. Chow's
termination of employment with the Company prior to June 25, 2003, unless Dr.
Chow's employment is involuntarily terminated by the Company other than for
cause. In the event (i) the Company terminates Dr. Chow's employment for any
reason other than for cause or (ii) Dr. Chow's employment terminates by reason
of his death or disability, then the entire principal balance of the note plus
accrued interest will be forgiven. The amount outstanding on Dr. Chow's note
(including accrued interest) was approximately $260,006 as of December 31, 1999
and the highest amount outstanding on that note during the 1998 fiscal year was
$308,729.
INDEMNIFICATION AGREEMENTS
Shaman's Certificate of Incorporation limits, to the maximum extent
permitted by Delaware Law, the personal liability of directors for monetary
damages for breach of their fiduciary duties as a director. Our Bylaws provide
that we will indemnify our officers, directors, employees and agents to the full
13
<PAGE>
extent permitted by the general corporation law of Delaware. We have entered
into indemnification agreements with our officers and directors containing
provisions which are in some respects broader than the specific indemnification
provisions contained in Delaware Law. The indemnification agreements may require
us, among other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as directors or
officers (other than liabilities arising from willful misconduct of a culpable
nature), to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified and to obtain directors' and
officers' insurance, if available on reasonable terms. We currently maintain
directors' and officers' insurance.
Section 145 of the Delaware Law provides that a corporation may indemnify
a director, officer, employee or agent made or threatened to be made a party to
an action by reason of the fact that he was a director, officer, employee or
agent of the corporation or was serving at the request of the corporation
against expenses actually and reasonably incurred in connection with such action
if he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Delaware Law does not permit a corporation to eliminate a
director's duty of care and the provisions of our Certificate of Incorporation
have no effect on the availability of equitable remedies, such as injunction or
rescission, for a director's breach of the duty of care.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Exhibit No. Description of Exhibit
------------ ------------------------------
23.1 Consent of Ernest & Young LLP.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: May 1, 2000 SHAMAN PHARMACEUTICALS, INC.
By: /s/ Lisa A. Conte
_______________________________
Lisa A. Conte
President, Chief Executive Officer
and Chief Financial Officer
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
--------- ----- ----
/s/ Lisa A. Conte President, Chief Executive Officer, May 1, 2000
_________________________ Chief Financial Officer and Director
Lisa A. Conte (principal executive and financial officer)
/s/ Adrian D.P. Bellamy* Director May 1, 2000
__________________________
Adrian D.P. Bellamy
/s/ Jeffrey Berg* Director May 1, 2000
__________________________
Jeffrey Berg
/s/ Loren D. Israelsen* Director May 1, 2000
__________________________
Loren D. Israelsen
/s/ G. Kirk Raab* Chairman of the Board May 1, 2000
_________________________
G. Kirk Raab
/s/ M. David Titus* Director May 1, 2000
__________________________
M. David Titus
*By: /s/ Lisa A. Conte May 1, 2000
__________________________
Lisa A. Conte, Attorney-in-fact
15
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUN LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-66450, No. 33-93938, No. 333-30365, No. 333-09169 and No.
333-96323) pertaining to the Company's 1992 Stock Option Plan, the 1999 Series R
Preferred Stock Option Plan, and in the Registration Statements (Form S-1 No.
333-78115, No. 333-86463) pertaining to the Company's Series R Convertible
Preferred Stock, of our report dated February 11, 1999, with respect to the
financial statements of Shaman Pharmaceuticals, Inc. included in the Annual
Report (Form 10-K) for the year ended December 31, 1999.
/s/ Ernst & Young, LLP
Palo Alto, California
March 30, 2000
16
<PAGE>
