SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
[ X ] Filed by the registrant
[ ] Filed by a party other than the registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Shaman Pharmaceuticals, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
Title of each class of securities to which transaction applies:
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(1) Aggregate number of securities to which transactions applies:
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(2) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(3) Proposed maximum aggregate value of transaction:
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(4) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[SHAMAN LOGO]
SHAMAN PHARMACEUTICALS, INC.
213 EAST GRAND AVENUE
SOUTH SAN FRANCISCO, CALIFORNIA 94080
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
("Annual Meeting") of Shaman Pharmaceuticals, Inc. (the "Company"), which will
be held at 9:00 A.M. Pacific Time on Friday, July 14, 2000 at The Embassy
Suites, 250 Gateway Boulevard, South San Francisco, California 94080.
At the Annual Meeting, you will be asked to consider and vote upon the
following proposals:
(i) To elect two Class I directors to serve on the Board of Directors for
two years or until their successors are duly elected and qualified
pursuant to the classified board provisions of the Company's Amended and
Restated Certificate of Incorporation. In addition, in accordance with
Section 2115 of the California General Corporation Law, the Company is
permitting the stockholders of the Company to vote to elect all five
directors of the Company to serve until the next annual meeting or until
their respective successors are elected and qualified. Accordingly, there
will be two separate votes regarding the election of directors;
(ii) To ratify the appointment of BDO Seidman LLP as the Company's independent
auditors for the year ending December 31, 2000; and
(iii) To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
The enclosed Proxy Statement more fully describes the details of the
business to be conducted at the Annual Meeting. After reading the Proxy
Statement, please mark, date, sign and return the enclosed proxy card in the
accompanying reply envelope as soon as possible. If you attend the Annual
Meeting and vote by ballot, your proxy will be automatically revoked and only
your vote at the Annual Meeting will be counted. Please note that if your shares
are held of record by a broker, bank or other nominee, and you wish to vote at
the meeting, you must obtain from the recordholder a proxy issued in your name.
YOUR SHARES CANNOT BE VOTED UNLESS YOU MARK, DATE, SIGN AND RETURN THE ENCLOSED
PROXY OR ATTEND THE ANNUAL MEETING AND VOTE IN PERSON.
After careful consideration, the Company's Board of Directors has
unanimously approved the proposals and recommends that you vote in favor of each
such proposal.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Lisa A. Conte
Lisa A. Conte
President, Chief Executive Officer,
Chief Financial Officer and Director
South San Francisco, California
June 6, 2000
<PAGE>
SHAMAN PHARMACEUTICALS, INC.
-----------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 14, 2000
-----------------------------------------------------
TO THE STOCKHOLDERS OF SHAMAN PHARMACEUTICALS, INC.:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders
("Annual Meeting") of Shaman Pharmaceuticals, Inc., a Delaware corporation (the
"Company"), will be held at 9:00 A.M. Pacific Time on Friday, July 14, 2000 at
The Embassy Suites, 250 Gateway Boulevard, South San Francisco, California
94080, for the following purposes:
(1) To elect two Class I directors to serve on the Board of Directors for
two years or until their successors are duly elected and qualified
pursuant to the classified board provisions of the Company's Amended and
Restated Certificate of Incorporation. In addition, in accordance with
Section 2115 of the California General Corporation Law, the Company is
permitting the stockholders of the Company to vote to elect all five
directors of the Company to serve until the next annual meeting or until
their respective successors are elected and qualified. Accordingly, there
will be two separate votes regarding the election of directors;
(2) To ratify the appointment of BDO Seidman LLP as the Company's independent
auditors for the year ending December 31, 2000; and
(3) To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The record date for determining those stockholders entitled to notice of,
and to vote at, the Annual Meeting and any adjournment thereof is May 16, 2000.
The stock transfer books will not be closed between the record date and the date
of the Annual Meeting. A list of the stockholders entitled to vote at the Annual
Meeting will be available for inspection at the Company's offices, 213 East
Grand Avenue, South San Francisco, California 94080, for a period of 10 days
prior to the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. Whether or not you plan to attend, please carefully read the
accompanying Proxy Statement, which describes the matters to be voted upon at
the Annual Meeting, and mark, date, sign and return the enclosed proxy card in
the reply envelope provided. Should you receive more than one proxy because your
shares are registered in different names and addresses, each proxy should be
returned to ensure that all your shares will be voted. You may revoke your proxy
at any time prior to the Annual Meeting. If you attend the Annual Meeting and
vote by ballot, your proxy vote will be revoked automatically and only your vote
at the Annual Meeting will be counted. The prompt return of your proxy card will
assist us in preparing for the Annual Meeting.
Sincerely,
/s/ Lisa A. Conte
Lisa A. Conte
President, Chief Executive Officer,
Chief Financial Officer and Director
South San Francisco, California
June 6, 2000
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YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ THE ATTACHED PROXY STATEMENT CAREFULLY. IF YOU DO NOT EXPECT TO ATTEND IN
PERSON, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE
ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE.
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<PAGE>
SHAMAN PHARMACEUTICALS, INC.
213 East Grand Avenue
South San Francisco, California 94080
--------------------------------------------
PROXY STATEMENT
--------------------------------------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 14, 2000
GENERAL INFORMATION FOR STOCKHOLDERS
THE ENCLOSED PROXY ("PROXY") IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS (THE "BOARD") OF SHAMAN PHARMACEUTICALS, INC., A DELAWARE CORPORATION
(THE "COMPANY"), FOR USE AT THE 2000 ANNUAL MEETING OF STOCKHOLDERS (THE "ANNUAL
MEETING") TO BE HELD AT 9:00 A.M. PACIFIC TIME ON FRIDAY, JULY 14, 2000, AT THE
EMBASSY SUITES, 250 GATEWAY BOULEVARD, SOUTH SAN FRANCISCO, CALIFORNIA 94080,
AND AT ANY ADJOURNMENT THEREOF.
This Proxy Statement and the accompanying form of Proxy are to be first
mailed to the stockholders entitled to vote at the Annual Meeting on or about
June 6, 2000.
RECORD DATE AND VOTING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice and are described in more
detail in this Proxy Statement. All stockholders of record at the close of
business on May 16, 2000 (the "Record Date") are entitled to notice of, and to
vote at, the Annual Meeting. As of the close of business on such date, there
were 75,981,759 shares of the Company's Common Stock, par value $0.001 per share
(the "Common Stock"), outstanding and entitled to vote, held by approximately
1,100 stockholders of record. In addition, there were 29,495 shares of the
Company's Series C Preferred Stock outstanding and entitled to vote and held by
11 stockholders. Each holder of Common Stock as of the Record Date is entitled
to one vote for each share of Common Stock then held by such stockholder. Each
holder of Series C Preferred Stock as of the Record Date is entitled to the
number of votes equal to the number of whole shares of Common Stock into which
the shares of Series C Preferred Stock held by such holder are then convertible.
As discussed below, in connection with the election of directors of the
Company pursuant to Proposal I, Stockholders will be permitted to exercise
cumulative voting. All other matters submitted for stockholder approval at this
Annual Meeting will be decided by the affirmative vote of a majority of shares
present in person or represented by proxy and entitled to vote on such matters.
If a choice as to the matters coming before the Annual Meeting has been
specified by a stockholder on the Proxy, the shares will be voted accordingly.
If no contrary instructions are given, the shares will be voted equally for the
election of all directors (unless the authority to vote on the election of any
such director is withheld) and in favor of the approval of all proposals
described in the accompanying Notice of Annual Meeting and in this Proxy
Statement. All votes will be tabulated by the inspector of election appointed
for the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes (i.e., the submission of a Proxy by a broker or
nominee specifically indicating the lack of discretionary authority to vote on
the matter). Abstentions and broker non-votes are counted as present for
purposes of determining the presence or absence of a quorum for the transaction
of business. Abstentions will be counted towards the tabulation of votes cast on
proposals presented to the stockholders and will have the same effect as
negative votes, whereas broker non-votes will not be counted for purposes of
determining whether a proposal has been approved.
Any stockholder or stockholder's representative who, because of a
disability, may need special assistance or accommodation to allow him or her to
participate at the Annual Meeting may request reasonable assistance or
accommodation from the Company by contacting Investor Relations in writing at
213 East Grand Avenue, South San Francisco, California 94080 or by telephone at
<PAGE>
(650) 952-7070. To provide the Company sufficient time to arrange for reasonable
assistance, please submit such requests by June 29, 2000.
REVOCABILITY OF PROXIES
Any stockholder giving a Proxy pursuant to this solicitation may revoke it
at any time prior to its exercise by filing with the Secretary of the Company at
its principal executive offices at 213 East Grand Avenue, South San Francisco,
California 94080, a written notice of such revocation or a duly executed Proxy
bearing a later date, or by attending the Annual Meeting and voting in person.
SOLICITATION
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of the Notice of Annual Meeting,
this Proxy Statement, the Proxy and any additional solicitation materials
furnished to stockholders. Copies of solicitation materials will be furnished to
brokerage houses, fiduciaries and custodians holding shares in their names that
are beneficially owned by others so that they may forward this solicitation
material to such beneficial owners. To assure that a quorum will be present in
person or by proxy at the Special Meeting, it may be necessary for certain
officers, directors, employees or other agents of the Company to solicit proxies
by telephone, facsimile or other means or in person. The Company will not
compensate such individuals for any such services. The Company does not
presently intend to solicit proxies other than by mail.
IMPORTANT
PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
POSTAGE-PREPAID, RETURN ENVELOPE AS SOON AS POSSIBLE SO THAT, IF YOU ARE UNABLE
TO ATTEND THE ANNUAL MEETING, YOUR SHARES MAY BE VOTED.
2
<PAGE>
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL ONE
ELECTION OF DIRECTORS
The number of Directors on the Board is fixed at five (5). With respect to
the election of directors, the Board has divided the nominees into two slates,
one for election in accordance with the Delaware General Corporation Law
("Delaware Law") and the Company's Amended and Restated Certificate of
Incorporation and the other for election in accordance with the California
General Corporation Law ("California Law"). All holders of record of Common
Stock and Series C Preferred Stock at the close of business on the Record Date
will be entitled to vote on each slate with the number of votes per share held
as described below.
In connection with the vote on the first slate (the "First Slate"),
stockholders of record as of the Record Date will be entitled to vote, under
Delaware Law, for two directors who will hold office until the 2002 annual
meeting of stockholders. Further, in connection with the First Slate, each
holder of Common Stock is entitled to one vote for each share Common Stock held
and each holder of Series C Preferred Stock will be entitled to one vote for
each whole share of Common Stock issuable upon conversion of each share of
Series C Preferred Stock held.
In connection with the vote on the second slate (the "Second Slate"),
stockholders of record as of the Record Date will be entitled to vote, under
California Law, for all five nominees who will hold office until the 2001 annual
meeting of stockholders. Further, in connection with the Second Slate,
cumulative voting may be used for the election of each director under California
Law. Under cumulative voting, each stockholder may cast for a single candidate,
or distribute among the candidates as such stockholder chooses, a number of
votes equal to the number of candidates (five (5) at this meeting) multiplied by
the number of shares held by such stockholder. Cumulative voting will apply only
to those candidates whose names have been placed in nomination prior to voting.
No stockholder shall be entitled to cumulate votes unless the stockholder has
given notice at the Annual Meeting, prior to the voting, of the stockholder's
intention to cumulate the stockholder's vote. If any one stockholder gives such
notice, all stockholders may cumulate their votes for candidates in nomination,
except to the extent that a stockholder withholds votes from the nominees, the
proxy holders named in the accompanying form of Proxy, in their sole discretion,
will vote such Proxy for, and, if necessary, exercise cumulative voting rights
to secure, the election of the nominees listed below, under the Second Slate, as
directors of the Company.
The Slates are as follows:
FIRST SLATE: NOMINEES FOR A TWO-YEAR TERM EXPIRING AT THE 2002 ANNUAL MEETING.
<TABLE>
<CAPTION>
Name of Nominees Position(s) with the Company Age Director Since
---------------- ---------------------------- --- --------------
<S> <C> <C> <C>
Lisa A. Conte Director, President, Chief 41 1989
Executive Officer and
Chief Financial Officer
Nezam Tooloee Nominee 41 n.a.
</TABLE>
SECOND SLATE: NOMINEES FOR A ONE-YEAR TERM EXPIRING AT THE 2001 ANNUAL MEETING.
<TABLE>
<CAPTION>
Name of Nominees Position(s) with the Company Age Director Since
---------------- ---------------------------- --- --------------
<S> <C> <C> <C>
Lisa A. Conte Director, President, Chief 41 1989
Executive Officer and
Chief Financial Officer
Nezam Tooloee Nominee 41 n.a.
G. Kirk Raab Chairman of the Board 64 1992
M. David Titus Director 42 1990
Loren D. Israelsen Director 45 1999
</TABLE>
3
<PAGE>
Should the elections yield different results, the Company plans to seek
guidance from a court of law regarding which state's law the Company must apply
in its corporation governance matters. To the extent both the First Slate and
Second Slate are elected, the Company's Board of Directors shall consist of
those members set forth in the Second Slate.
INFORMATION WITH RESPECT TO NOMINEES
LISA A. CONTE founded the Company in May 1989 and currently serves as
the Company's President, Chief Executive Officer, Chief Financial Officer and
a 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.
NEZAM TOOLOEE is an entrepreneur with extensive experience in both
strategy development and start-ups. Until 1989, Mr. Tooloee was a partner with
Strategic Decisions Group, specializing in strategic management of
technology-intensive businesses and advising entrepreneurial executives in a
wide range of industries. Subsequently, Mr. Tooloee helped found two start-up
companies, International Wireless Communications in 1990 and U.S. AirWaves in
1994, where he was the chief business development officer until 1996. From 1996
to 1998 he served as an advisor to MCI for its wireless strategies prior to
joining ClearComm as the CEO of its U.S. business and a member of its board.
Since 1998, he has worked with selected start-ups as a senior advisor. Mr.
Tooloee also has ongoing relationships with SigmaOne Communications, eCommerce
Networks, and Magic Bubble, among others. Mr. Tooloee holds degrees in
mechanical engineering and management science from Stanford University.
G. KIRK RAAB became a director of the Company in January 1992 and
Chairman of the Board in September 1995. Mr. Raab was President, Chief
Executive Officer and director of Genentech, Inc. ("Genentech") 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 holds a B.A. in Political Science from
Colgate University, where he currently serves as a trustee. Mr. Raab is also
Chairman of the Board of Connectics, Inc. and Oxford GlycoSciences (UK) Ltd.
and a director of Accumetrics, Inc, Applied Imaging Corp., Bridge Medical,
Inc. and LXR Biotechnology, Inc.
M. DAVID TITUS became a director of the Company in April 1990. Mr.
Titus is currently a General Partner of Windward Ventures Management, L.P.
("Windward"), a venture capital firm, which he founded in November 1997.
Prior to founding Windward, 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.
LOREN D. ISRAELSEN became a director of the Company 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 Corp., including President
from 1989 to 1990, Vice President of Strategic Development from 1986 to 1989 and
General Counsel from 1981 to 1986. 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.
4
<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS
FIRST SLATE: ELECTION OF DIRECTORS PURSUANT TO DELAWARE LAW AND COMPANY'S
CHARTER DOCUMENTS
The Company's Amended and Restated Certificate of Incorporation and Bylaws
in accordance with Delaware law, provide that the Board shall be divided into
two classes, designated as Class I and Class II, each serving a term of two
years, with such terms staggered so that only one class of directors is elected
at each annual meeting of stockholders. Directors are elected to serve for two
years or until their successors shall have been duly elected and qualified or
until their death, resignation or removal. Vacancies on the Board may be filled
only by persons elected by a majority of the remaining directors. A director
elected by the Board to fill a vacancy (including a vacancy created by an
increase in the size of the Board) shall serve for the remainder of the full
term of the class of directors in which the vacancy occurred and until such
director's successor is elected and qualified.
Two current members of the Board, Mr. Adrian D.P. Bellamy and Mr. Jeffrey
Berg, will not stand for re-election at the Annual Meeting. Effective April
2000, Mr. Herbert McDade submitted his resignation as a director of the Company.
As a result, under the Company's Certificate (and without giving effect to
Section 2115 of California Law) the Board of Directors is presently composed of
five members, two of whom are Class I directors (with a term expiring at this
year's 2000 Annual Meeting and who must be re-elected or replaced for a term
which will expire in two years time) and three of whom are Class II directors
(with a term expiring at next year's 2001 annual meeting). The Board has
selected Mr. Tooloee and Ms. Conte as nominees for the Class I director
positions. Ms. Conte is currently a director of the Company.
Shares represented by executed proxies will be voted, if authority to do
so is not withheld, for the election of these Class I nominees. In the event
that any nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as management may propose. The persons nominated for election have
agreed to serve if elected, and management has no reason to believe that such
nominees will be unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE CLASS I NOMINEES
SECOND SLATE: ELECTION OF DIRECTORS PURSUANT TO CALIFORNIA LAW
Under Section 2115 of the California Law ("Section 2115"), certain
corporations not organized under California law which have significant contacts
with California and which are not otherwise exempt from Section 2115 are subject
to a number of key provisions of the California Law. Because the Company had
significant contacts with California during the period specified in Section
2115, the Company believes that it is currently subject to Section 2115.
Accordingly, the Company is complying with certain provisions of the California
Law, including Section 301, regarding the election of directors. Section 301
does not permit the Company to have a classified Board. In connection with the
"Second Slate," each stockholder will be voting to elect all three current Class
II directors and the nominees for Class I directors to hold office until the
next annual meeting of stockholders. Each director to be elected will hold
office until the next annual meeting of stockholders and until his successor is
elected and has qualified, or until such director's earlier death, resignation
or removal. Four nominees, Ms. Conte and Messrs. Raab, Titus and Israelsen, are
currently directors of the Company. The Board has selected Mr. Tooloee as a new
nominee for the Board.
Under Section 2115, stockholders are permitted to exercise cumulative
voting rights. Each stockholder may give one candidate, who has been nominated
prior to voting, all the votes such stockholder is entitled to cast or may
distribute such votes among as many such candidates as such stockholder chooses.
(However, no stockholder will be entitled to cumulate votes unless the
candidate's name has been place in nomination prior to the voting in accordance
with applicable law and the Company's Bylaws and Amended and Restated
Certificate of Incorporation and at least one stockholder has given notice at
5
<PAGE>
the meeting, prior to the voting, of his or her intention to cumulate votes).
Unless the proxyholders are otherwise instructed, stockholders, by means of the
accompany Proxy, will grant the proxyholders discretionary authority to cumulate
votes.
Pursuant to the Second Slate, the five candidates receiving the highest
number of affirmative votes cast at the meeting will be elected directors of the
Company.
Shares represented by executed Proxies will be voted, if authority to do
so is not withheld, for the elction of the five nominees enumerated above. In
the event that any nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as management may propose. Each person nominated for election
has agreed to serve if elected and management has no reason to believe that any
nominee will be unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NOMINEE NAMED ABOVE.
6
<PAGE>
PROPOSAL TWO
RATIFICATION OF INDEPENDENT AUDITORS
The Board has appointed the firm of BDO Seidman LLP, independent auditors,
to audit the financial statements of the Company for the year ending December
31, 2000, and is asking the stockholders to ratify this appointment.
In the event the stockholders fail to ratify the appointment, the Board
will reconsider its selection. Even if the selection is ratified, the Board in
its discretion may direct the appointment of a different independent auditing
firm at any time during the year if the Board feels that such a change would be
in the best interests of the Company and its stockholders. The affirmative vote
of the holders of a majority of the Company's outstanding voting shares, present
or represented by proxy at the Annual Meeting and entitled to vote is required
to ratify the selection of BDO Seidman LLP.
BDO Seidman LLP was elected as the Company's new independent accountants
as of February 15, 2000 and audited the Company's financial statements for the
year ended December 31, 1999. A representative of BDO Seidman LLP is expected to
be present at the Annual Meeting to respond to appropriate questions, and will
be given the opportunity to make a statement if he or she so desires.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE
RATIFICATION OF THE SELECTION OF BDO SEIDMAN LLP TO SERVE AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31, 2000.
7
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Certain information about the Company's executive officers, as of May 16,
2000, is set forth below. Information concerning the Company's directors,
including Lisa A. Conte, the Company's President, Chief Executive Officer and
Chief Financial Officer is contained in "Proposal One - Election of Directors."
<TABLE>
<CAPTION>
NAME AGE POSITION
-------------------------- --- ----------------------------------
<S> <C> <C>
Steven R. King, Ph.D ..... 42 Senior Vice President, Ethnobotany
and Conservation
Gerald M. Reaven, M.D .... 71 Senior Vice President, Research
Thomas F. White .......... 41 Senior Vice President, Commercial
Strategy and Chief Sales and
Marketing Officer
Thomas Carlson, M.D ...... 43 Vice President, Medical Ethnobotany
John W.S. Chow, Ph.D ..... 48 Vice President, Technical Operations
</TABLE>
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 the Company's 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 Sciences, and
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, Medical and Clinical Advisor. 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 F. 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.
THOMAS CARLSON, M.D. joined Shaman in October 1992. He currently
serves Vice President, Medical Ethnobotany and is responsible for developing
ethnobotancial field research and coordinating clinical studies. Dr. Carlson
has conducted research with traditional healers in over 40 different
ethnolinguistic groups in 15 different tropical countries. Prior to joining
Shaman, from 1990 to 1992, Dr. Carlson 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 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 W.S. CHOW, PH.D. joined Shaman in April 1998 as Vice President of
Technical Operations. Prior to joining the Company, 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
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<PAGE>
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.
NUMBER OF DIRECTORS; RELATIONSHIPS
The Company's Bylaws authorize the Board to fix the number of directors
serving on the Board, provided that such number shall not be less than five nor
more than nine. The number of directors is currently fixed at five.
There are no family relationships among executive officers or directors of
the Company.
BOARD MEETINGS AND COMMITTEES
The Board held twelve meetings during the 1999 fiscal year and acted by
written consent on one occasion. The Board has an Audit Committee and a
Compensation Committee. All directors, except Messrs. Berg and Isrealsen who
served on the Board of Directors throughout the 1999 fiscal year participated in
or attended at least 75% of the aggregate of (i) the total number of meetings of
the Board of Directors held during the period in which they served and (ii) the
total number of meetings held by all committees of the Board on which he or she
served during the past fiscal year. Mr. Berg, whose term as a director expires
at the Annual Meeting, did not stand for re-election in 2000.
The Audit Committee is primarily responsible for annually recommending
independent auditors for appointment by the Board, for reviewing the services
performed by the Company's independent auditors and reviewing reports submitted
by the independent auditors. The Audit Committee includes two directors, Messrs.
Titus and Raab. The Audit Committee held no meetings during the 1999 fiscal
year, however, the Audit Committee did review reports submitted by Company's
independent auditors.
The Compensation Committee, which is comprised of Messrs. McDade and
Bellamy, reviews and approves the Company's general compensation policies and
practices, sets compensation levels for the Company's executive officers and
administers the Company's 1992 Stock Option Plan (the "1992 Plan") and the 1999
Series R Preferred Plan (the "1999 Plan"), and other employee benefits programs.
During the 1999 fiscal year, the Compensation Committee held one meeting. Mr.
McDade resigned as a director effective April 2000 and Mr. Bellamy, whose term
as a director expires at the Annual Meeting, did not stand for re-election in
2000.
DIRECTOR COMPENSATION
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. No 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 in the
Company's employ. 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
9
<PAGE>
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 grant such options to
the directors, as the Company had previously granted similar options to them
under the 1999 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 1999 Plan adopted in September 1999 with an exercise price per share
of $10.25, the fair market 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 1999 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.
Messrs. Titus and Isrealsen each received, on April 18, 2000, an option
grant for 100,000 shares of Common Stock under the 1999 Plan with an exercise
price per share of $0.25, the fair market value per share of Common Stock on
that date. The option becomes exercisable in a series of six successive equal
monthly installments commencing April 18, 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.
In August 1999, the Company entered into a consulting agreement with Mr.
Nezam Tooloee. Pursuant to this agreement, Mr. Tooloee was engaged to provide
consulting services for the Company with respect to the conduct of its business
affairs as needed through August 30, 2000. Under this agreement, the Company
shall pay to Mr. Tooloee a total consulting fee of $52,750 upon submission of
invoice(s) by Mr. Tooloee, but not later than August 30, 2000.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
As members of the Compensation Committee of the Board, it is our duty to
exercise the power and authority of the Board of Directors with respect to the
compensation levels to be in effect for the Company's executive officers. As
such, it is our responsibility to set the base salary of certain executive
officers and to administer the 1992 Plan and the 1999 Plan under which grants
may be made to such officers and other key employees.
For 1999, we established the compensation payable to Lisa A. Conte,
President, Chief Executive Officer and Chief Financial Officer, the Company's
highest-paid executive officer, and the Company's four other most highly-paid
executive officers. Ms. Conte reported to us the performance evaluations of each
executive officer, including herself, and the factors to be considered in
setting their compensation. We endorse those factors and include them as part of
our report.
GENERAL COMPENSATION POLICY. Under our supervision, the Company has
developed a compensation policy that is designed to attract and retain qualified
key executives critical to the Company's success and to provide such executives
with performance-based incentives tied to corporate milestones. It is our
objective to have a substantial portion of each officer's compensation
contingent upon the Company's performance as well as upon the individual's
contribution to the success of the Company as measured by personal performance.
Accordingly, each executive officer's compensation package is normally comprised
of three elements: (i) base salary, which reflects individual performance and is
commensurate with salaries for comparable positions in the peer group companies
given the level of seniority and skills possessed by such officer, (ii)
long-term, stock-based incentive awards, which strengthen the mutuality of
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<PAGE>
interests between the executive officers and the Company's stockholders and
which may be tied to the Company's achievement of certain pre-established goals,
and (iii) bonus incentive plan, which tie to individual and Company performance.
GUIDELINES. Because the Company is in the pre-product commercialization
stage for the first half of 1999, the use of traditional performance standards
(such as profitability and return on equity) is not appropriate in evaluating
the performance of its executive officers. In particular, the unique nature of
our industry, the relatively short period of time during which the Company's
stock has been publicly traded, the performance of the stock during this period,
and the absence of product revenues have made it impossible to tie performance
objectives to standard financial considerations. The primary guidelines which we
used in establishing the components of each executive officer's compensation
package are summarized below. However, we may in our discretion apply entirely
different guidelines, particularly different measures of performance, in setting
executive compensation for future fiscal years. The executive officers have not
received a salary increase since February 1998.
BASE SALARY. Base compensation is initially established through
negotiation between the Company and the executive at the time the executive is
hired, and it is subject to periodic review or reconsideration, usually on an
annual basis. When establishing or reviewing the level of base compensation for
each executive officer, we consider numerous factors, including the
qualifications of the executive and his or her level of relevant experience,
strategic goals for which the executive has responsibility, specific
accomplishments of the executive during the last fiscal year and the
compensation levels in effect at companies in the Company's industry which
compete with the Company for business and executive talent.
INCENTIVE COMPENSATION. The Committee did not award any special cash
bonuses to the executive officers for the 1999 fiscal year.
STOCK-BASED INCENTIVE COMPENSATION. In addition to establishing and
reviewing the base salary levels in effect for the executive officers, we also
have discretionary authority to award equity incentives in the form of stock
option grants to the executive officers as a way to more closely align the
interests of management with those of the Company's stockholders and to reward
officers for achieving certain defined personal and corporate performance
targets. Factors which we consider in determining whether to grant options and
the number of shares underlying each such grant include the executive's position
in the Company, his or her performance and responsibilities, the extent to which
he or she already holds an equity interest in the Company. We have also
established general guidelines for maintaining the unvested option holdings of
each executive officer at a targeted level based upon his or her position with
the Company, and option grants are periodically made to maintain the targeted
levels. These factors, however, are used only as guidelines, and the relative
weight given to each factor varies from individual to individual, as we deem
appropriate under the circumstances.
For 1999, we approved total stock option grants under the 1999 Plan for
255,813 shares of Series R Preferred Stock. Upon granting shares under the 1999
Plan in December 1999, all employees surrendered their existing option grants
under the 1992 Plan, including all executive officers. All executive officers of
the Company received option grants in fiscal 1999. Each grant allows the
executive officer to acquire shares of the Company's Series R Preferred Stock at
$10.25 price per share (the market price on the grant date) over a specified
period of time (up to 10 years). The options vest in monthly installments over
three year periods, contingent upon the executive officer's continued employment
with the Company. In all cases, the options will provide a return to the
executive officer only if he or she remains with the Company and then only if
the market price of the underlying shares appreciates over the option term. 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.
CEO COMPENSATION. The annual base salary of Lisa A. Conte, the Company's
President, Chief Executive Officer and Chief Financial Officer, was set at
$287,700 for the 1999 fiscal year, as compared to $311,537 for the 1998 fiscal
year. This amount includes $58,489 and $2,366 attributable to childcare costs
and family travel, respectively.
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<PAGE>
DEDUCTION LIMIT FOR EXECUTIVE COMPENSATION. As a result of Section 162(m)
of the Internal Revenue Code, which was enacted into law in 1993, the Company
will not be allowed a federal income tax deduction for compensation paid to
certain executive officers, to the extent that compensation exceeds $1 million
per officer in any one year. This limitation will be in effect for each fiscal
year of the Company beginning after December 31, 1993 and will apply to all
compensation paid to the covered executive officers which is not considered to
be performance based. Compensation which qualifies as performance-based
compensation will not have to be taken into account for purposes of this
limitation. The 1992 Plan and the 1999 Plan have been structured so that any
compensation deemed paid in connection with the exercise of stock options
granted under these Plans with an exercise price equal to the fair market value
of the option shares on the grant date will qualify as performance-based
compensation.
We do not expect that the compensation to be paid to the Company's
executive officers for the 2000 fiscal year will exceed the $1 million limit per
officer. Accordingly, we have decided at this time not to take any other action
to limit or restructure the elements of cash compensation payable to the
Company's executive officers. We will reconsider this decision should the
individual compensation of any executive officer ever approach the $1 million
level.
Compensation Committee
Herbert H. McDade, Jr.
Adrian D.P. Bellamy
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<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the 1999 fiscal year, Messrs. McDade and 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.
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 $100,000. The
individuals named in the table will be hereinafter referred to as the "Named
Officers." No other executive officer who would otherwise have been included in
such table on the basis of fiscal year 1999 salary and bonus resigned or
terminated employment during the year.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
====================================================================================================================================
Long-Term
Annual Compensation Compensation
---------------------------------------------- -------------------------------------
Awards
-------------------------------------
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary($)(1) Bonus($) Compensation($) Options/SARS (#) Compensation($)
------------------------------ ---- ------------- --------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Lisa A. Conte 1999 287,700(2) -- -- 2,489,331(3)
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, 1998 113,807 10,000(11) -- 65(6) 56,281(12)
Technical Operations 1997 -- -- -- -- --
Thomas Carlson, M.D. 1999 157,467 -- -- 527,000(3) --
Vice President, 1998 157,800 3,000(5) -- 3(6) --
Medical 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.
(3) Represents shares of Common Stock granted under the 1999 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.
(4) Includes $59,573 and $13,431 attributable to childcare costs and family
travel, respectively.
(5) Represents bonus paid to all employees 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 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.
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<PAGE>
(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 $3,281 for travel expenses in
1998.
The following table contains information concerning the grant of stock
options under the 1999 Plan to the Named Officers during the 1999 fiscal year.
Except for the limited stock appreciation right described in footnote (2) below
which formed part of the option grant made to each Named Officer, no stock
appreciation rights were granted to such Named Officers during the 1999 fiscal
year.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
====================================================================================================================================
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants For Option Term (1)
------------------------------------------------------------------------------------------------------------------------------------
Number of Securities % of Total
Underlying Options Granted Exercise
Options/SAR to employees Price Expiration 5% 10%
Name Granted(#)(2) in Fiscal Year ($/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 May 16, 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 1999 Plan. Each share
of Series R Preferred Stock was 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. 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 14, 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,
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.
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<PAGE>
(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 14, 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>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
====================================================================================================================================
Value of Unexercised In-the-
No. of Securities Money Options at FY-End
Value Realized Underlying Unexercised (Marke price of shares at FY-
(Market price at Options at FY-End(#)(1) end less exercise price)($)(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 1999 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.
(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 May 16, 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.
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
15
<PAGE>
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.
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.
16
<PAGE>
See "Employment Contracts, Termination Agreements and Change of Control
Agreements" and "Director Compensation" with respect to further transactions
between the Company and its officers and directors.
The Company's Restated Certificate of Incorporation and Bylaws provide for
indemnification of directors, officers and other agents of the Company. Each of
the current directors and certain officers and agents of the Company have
entered into separate indemnification agreements with the Company.
17
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information known to the Company
with respect to the beneficial ownership of the Common Stock as of May 16, 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 May 16, 2000 are deemed to be beneficially owned by the person holding
such option, warrant or convertible promissory note 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.
<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) 10.68%
110-110th Avenue NW, Suite 550
Bellevue, WA 98084
Madalyn T. Ciocca ...................... 8,743,484(4) 10.92%
157 West 78th Street, #6
New York, NY 10024
Alcamin Anstalt ........................ 7,087,077(5) 8.93%
666 Fifth Avenue
Suite 158
New York, NY 10103-0001
ArtXChange ............................. 5,256,667(6) 6.70%
866 East Gwinn Place
Seattle, WA 98102
Tradewinds Offshore Fund, Ltd.(7)(12)... 5,009,151(8) 6.40%
c/o Tradewinds Financial Corporation
591 Redwood Hwy, Ste 2355
Mill Valley, CA 94941
Scott P. Peters(7) ..................... 4,887,881(9) 6.27%
c/o Tradewinds Financial Corporation
591 Redwood Hwy, Ste 2355
Mill Valley, CA 94941
John Lyddon ............................ 4,823,151(10) 6.17%
1750 Star Hill Road
Woodside, CA 94062
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS (Con't)
Shares of Common Stock Owned
----------------------------------------
Name and Address of Beneficial Owner(1) Number Percent(2)
------------------------------------------------ --------------- --------------------
<S> <C> <C>
Tradewinds Debt Strategies Fund, L.P.(7)(12).... 4,664,521(11) 6.00%
c/o Tradewinds Financial Corporation
591 Redwood Hwy, Ste 2355
Mill Valley, CA 94941
Robert W. Scannell(12) ......................... 4,662,999(13) 5.98%
c/o Tradewinds Financial Corporation
591 Redwood Hwy, Ste 2355
Mill Valley, CA 94941
Lipha S.A ...................................... 4,135,099 5.44%
37 rue Saint-Romain
69379 Lyon cedex 08
France
Lisa A. Conte .................................. 1,594,872(14) 2.10%
John W.S. Chow ................................. 171,802(15) *
Thomas Carlson, M.D ............................ 330,795(16) *
Steven R. King, Ph.D ........................... 483,729(17) *
Gerald R. Reaven, M.D .......................... 36,119(18) *
Tom White ...................................... 219,783(19) *
Adrian D.P. Bellamy ............................ 256,122(20) *
Jeffrey Berg ................................... 177,816(21) *
Loren D. Israelsen ............................. 277,817(22) *
G. Kirk Raab ................................... 441,887(23) *
M. David Titus ................................. 322,991(24) *
Nezam Tooloee .................................. 103,324 *
Directors and officers as a group............... 4,417,057(25) 5.80%
</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 75,981,759
shares of Common Stock were outstanding as of May 16, 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 May 16, 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 May 16, 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 4,110,150 shares issuable upon exercise of outstanding warrants
within 60 days of May 16, 2000.
5) Includes 3,356,207 shares issuable upon exercise of outstanding warrants
within 60 days of May 16, 2000.
6) Includes 2,490,000 shares issuable upon exercise of outstanding warrants
within 60 days of May 16, 2000.
19
<PAGE>
7) 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.
8) Includes 2,250,000 shares issuable upon exercise of outstanding warrants
within 60 days of May 16, 2000.
9) Includes 1,590,000 shares issuable upon exercise of outstanding warrants
within 60 days of May 16, 2000 and 900,321 shares held by Atlas Defined
Contribution Plan, of which 420,000 shares are issuable upon exercise of
outstanding warrants within 60 days of May 16, 2000. Mr. Peters is an
affiliate of Atlas Defined Contribution Plan with voting and dispositive
power over the shares of such entity. Therefore, Mr. Peters may be deemed
the beneficial owner of such shares.
10) Includes 2,250,000 shares issuable upon exercise of outstanding warrants
within 60 days of May 16, 2000.
11) Includes 1,800,000 shares issuable upon exercise of outstanding warrants
within 60 days of May 16, 2000.
12) Mr. Robert Scannell is an affiliate of Tradewinds Offshore, Ltd. and
Tradewinds Debt Strategies 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 900,000 shares issuable upon exercise of outstanding warrants
within 60 days of May 16, 2000 and 2,464,007 shares held by Feehan
Partners, LP, of which 1,140,000 shares are issuable upon exercise of
outstanding warrants within 60 days of May 16, 2000. Mr. Scannell is an
affiliate of Feehan Partners, LP with voting and dispositive power over
the shares of such entity. Therefore, Mr. Scannell may be deemed the
beneficial owner of such shares.
14) Includes 77,500 shares issuable upon exercise of outstanding warrants and
1,503,983 shares issuable upon exercise of options within 60 days of May
16, 2000.
15) Includes 20,677 shares issuable upon exercise of outstanding warrants and
151,125 shares issuable upon exercise of options within 60 days of May 16,
2000.
16) Includes 12,400 shares issuable upon exercise of outstanding warrants and
318,395 shares issuable upon exercise of options within 60 days of May 16,
2000.
17) Includes 15,500 shares issuable upon exercise of outstanding warrants and
468,229 shares issuable upon exercise of options within 60 days of May 16,
2000.
18) Includes 36,118 shares issuable upon exercise of options within 60 days
of May 16, 2000.
19) Includes 216,682 shares issuable upon exercise of options within 60 days
of May 16, 2000.
20) Includes 25,823 shares issuable upon exercise of outstanding warrants and
177,816 shares issuable upon exercise of options within 60 days of May 16,
2000.
21) Represents shares issuable upon exercise of options within 60 days of
May 16, 2000.
22) Includes 277,816 shares issuable upon exercise of options within 60 days
of May 16, 2000.
23) Includes 25,823 shares issuable upon exercise of outstanding warrants and
355,632 shares issuable upon exercise of options within 60 days of May 16,
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.
24) Includes 277,816 shares issuable upon exercise of options within 60 days
of May 16, 2000.
25) Represents total shares held by directors and officers listed above.
Includes 177,723 shares issuable upon exercise of outstanding warrants and
3,961,428 shares issuable upon exercise of options within 60 days of May
16, 2000.
20
<PAGE>
STOCK PERFORMANCE GRAPH
The graph below depicts the Company's stock price as an index assuming $100
invested on December 31, 1994, along with the composite prices of companies
listed in the Chase H&Q Biotechnology Index, Nasdaq Total U.S. Stock Market
Index, Russell 2000 and an unpublished data comprised of Botanical and Dietary
Supplements Sector of the Natural Business Composite Index (the "Peer Group
Index"). This information has been provided to the Company by Research Data
Group, Inc. Since the Company discontinued its pharmaceutical business and
shifted its focus to the botanical dietary supplements starting February 1999,
the Company added the Russell 2000 and a new Peer Group Index. The Company
intends to replace the Chase H&Q Biotechnology Index and Nasdaq Total U.S. Stock
Market Index with the Peer Group Index and Russell 2000 in future filings. The
comparisons in the graph are required by regulations of the Securities and
Exchange Commission and are not intended to forecast or to be indicative of the
possible future performance of the Common Stock.
<TABLE>
<CAPTION>
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Shaman Pharmaceuticals, Inc.,
The Chase H&Q Biotechnology Index,
The Nasdaq Stock Market - U.S. Index,
Russell 2000 and Peer Group Index
[Performance Graph Omitted]
Cumulative Total Return
-------------------------------------------------------------------
12/94 12/95 12/96 12/97 12/98 12/99
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Shaman Pharmaceuticals, Inc. 100.00 165.63 146.88 123.44 47.66 0.01
Chase H&Q Biotechnology 100.00 170.11 156.95 158.87 241.93 517.14
Nasdaq Stock Market (U.S.) 100.00 141.34 173.90 213.07 300.44 556.91
Russell 2000 100.00 127.49 154.73 203.91 190.76 187.92
Peer Group 100.00 122.39 153.12 180.85 124.68 88.35
</TABLE>
--------------------------
* $100 invested on December 31, 1994 in stock or index, including investment
of dividends.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, which might incorporate future filings made by
the Company under those statutes, the preceding Compensation Committee Report on
Executive Compensation and the Company Stock Performance Graph will not be
incorporated by reference into any of those prior filings, nor will such report
or graph be incorporated by reference into any future filings made by the
Company under those Acts.
21
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
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 occurring 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.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 2001 Annual Meeting must be received by
the Company no later than February 7, 2001 in order that they may be included in
the proxy statement and form of proxy relating to that meeting.
In addition, the proxy solicited for the 2000 Annual Meeting will confer
discretionary authority to vote on any stockholder proposals presented at that
meeting, unless the Company is provided with notice of such proposal no later
than April 23, 2001.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1999 has been mailed concurrently with this Proxy Statement to all
stockholders entitled to notice of and to vote at the Annual Meeting. The Annual
Report is not incorporated into this Proxy Statement and is not considered proxy
soliciting material.
CHANGES IN THE COMPANY'S INDEPENDENT AUDITORS
On February 15, 2000, Ernst & Young LLP was dismissed as the Company's
independent auditors. The reports of Ernst & Young on the financial statements
for December 31, 1998 and 1997 (the two most recent audited fiscal years)
contained no adverse opinion or disclaimer of opinion. The report of Ernst &
Young for the year ended December 31, 1998 contains an explanatory paragraph
with respect to the Company's ability to continue as a going concern as
mentioned in Note 1 of the notes to the financial statements. The Company's
Board of Directors participated in and approved the decision to hire new
independent accountants. In connection with its audits for December 31, 1998 and
1997 (the two most recent audited fiscal years) and subsequent interim periods
through February 15, 2000, there have been no disagreements with Ernst & Young
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements if not resolved
to the satisfaction of Ernst & Young would have caused them to make reference
thereto in their report on the financial statements for such years. During
December 31, 1998 and 1997 (the two most recent audited fiscal years) and
subsequent interim periods through February 15, 2000, there have been no
reportable events (as defined in Regulation S-K Item 304 (a) (l) (iv). The
Company has furnished Ernst & Young with a copy of the disclosure made in the
Form 8-K filed with the Securities and Exchange Commission (the "Commission") in
22
<PAGE>
connection with the change in its certified public accountants. Ernst & Young
furnished the Company with a letter addressed to the Commission stating whether
or not it agrees with the statements made in the Form 8-K. A copy of such
letter, dated February 18, 2000, is filed as Exhibit 16 to the Form 8-K.
The Company has elected BDO Seidman, LLP as its new independent
accountants as of February 15, 2000. During the two most recent fiscal years and
through February 15, 2000, the Company has not consulted with BDO Seidman, LLP
regarding either (i) the application of accounting principles to a specified
transaction, either completed or proposed; or the type of audit opinion that
might be rendered on the Company's financial statements, and neither a written
report was provided to the Company nor an oral advice was provided that BDO
Seidman, LLP concluded was an important factor considered by the Company in
reaching a decision as to the accounting, auditing or financial reporting
issued; or (ii) any matter that was either the subject of a disagreement, as
that term is defined in Item 304 (a) (I) (iv) of Regulation S-K and the related
instructions to Item 304 of Regulation S-K, or a reportable event, as that term
is defined in Item 304 (a) (l) (iv) of Regulation S-K.
OTHER MATTERS
The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board may recommend.
Discretionary authority with respect to such other matters is granted by the
execution of the enclosed Proxy.
THE BOARD OF DIRECTORS
Dated: June 6, 2000
23
<PAGE>
SHAMAN PHARMACEUTICALS, INC.
213 EAST GRAND AVENUE
SOUTH SAN FRANCISCO, CALIFORNIA 94080
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 14, 2000
The undersigned stockholder of Shaman Pharmaceuticals, Inc., a Delaware
Corporation (the "Company") acknowledges receipt of the Notice of Annual Meeting
of Stockholders and Proxy Statement, each dated June 6, 2000, and hereby
appoints Lisa A. Conte and G. Kirk Raab, and each of them, as the proxies and
attorneys-in-fact, with full power to each of substitution on behalf and in the
name of the undersigned, to vote all shares of the capital stock the Company,
and otherwise represent all of the shares registered in the name of the
undersigned at the 2000 Annual Meeting of Stockholders of the Company to be held
at The Embassy Suites, 250 Gateway Boulevard, South San Francisco, California,
94080 on Friday, July 14, 2000 at 9:00 A.M. Pacific Time, and at any and all
postponements, continuations or adjournments thereof, with the same force and
effect as the undersigned might or could do if personally present thereat, as
set forth below and in their discretion upon any other business that may
properly come before the meeting.
Attendance of those signing on the reverse side at the Annual Meeting or
at any adjourned session thereof will not be deemed to revoke this proxy unless
those signing on the reverse side shall affirmatively indicate thereat the
intention of those signing on the reverse side to vote said shares in person. If
those signing on the reverse side hold(s) any of the shares of capital stock of
the Company in a fiduciary, custodial or joint capacity or capacities, this
proxy is signed by those signing on the reverse side in every such capacity as
well as individually.
IN THEIR DISCRETION, THE NAMED PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING, OR ANY ADJOURNMENT
THEREOF.
PROPOSAL 1:To elect two Class I directors of the Company pursuant to Delaware
law and the classified Board provisions of the Company's Amended and Restated
Certificate of Incorporation to serve until the 2002 Annual Meeting of
Stockholders and until their successors are elected; and to elect five
directors of the Company pursuant to California Law, whether by cumulative
voting or otherwise, to serve until the next Annual Meeting of Stockholders and
until their successors are elected.
SLATE 1 SLATE 2
NOMINEES FOR A TWO-YEAR TERM EXPIRING NOMINEES FOR A ONE-YEAR TERM
AT THE 2002 ANNUAL MEETING EXPIRING AT THE 2001 ANNUAL MEETING
--------------------------------------- -------------------------------------
Lisa A. Conte Lisa A. Conte
Nezam Tooloee Nezam Tooloee
G. Kirk Raab
M. David Titus
Loren D. Israelsen
|_| WITH AUTHORITY to vote for the SLATE 1 nominees
|_| WITHHOLD AUTHORITY as to the SLATE 1 nominees
|_| WITH AUTHORITY to vote for the SLATE 2 nominees listed above (except as
marked below)
|_| WITHHOLD AUTHORITY as to the following SLATE 2 nominees:
To withhold authority to vote for any Slate 2 Nominee(s) write such nominee(s)
name(s) below:
--------------------------------------------------------------------------------
24
<PAGE>
PROPOSAL 2: To ratify the appointment of BDO Seidman LLP as independent auditors
for the Company for the fiscal year ending December 31, 2000 (check one box).
|_| For |_| Against |_| Abstain
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH SPECIFICATIONS MADE HEREIN. IF NO
SPECIFICATION IS MADE AS TO ANY INDIVIDUAL ITEM HEREIN, IT IS INTENDED THAT
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NAMED
NOMINEES AND FOR THE OTHER PROPOSALS SPECIFIED HEREIN.
BOTH OF SAID ATTORNEYS AND PROXIES OR THEIR SUBSTITUTES AS SHALL BE
PRESENT AND ACT AT THE MEETING, OR IF ONLY ONE BE PRESENT AND ACT THEN THAT ONE,
SHALL HAVE AND MAY EXERCISE ALL OF THE POWERS OF BOTH OF SAID ATTORNEYS AND
PROXIES HEREUNDER.
The undersigned hereby acknowledges receipt of (a) the Notice of Annual
Meeting of Stockholders to be held on July 14, 2000 and (b) the accompanying
Proxy Statement.
WITNESS the signature of the undersigned this __________ day of
__________, 2000.
____________________________________________
____________________________________________
SIGNATURE(S)
Please sign this proxy exactly as your name
appears hereon: joint owners should each
sign personally. Trustees and other
fiduciaries should indicate the capacity in
which they sign. If a corporation or
partnership, this signature should be that
of an authorized officer who should state
his or her title.
Please vote, date and promptly return this proxy in the enclosed return
envelope which is postage prepaid if mailed in the United States.
25
<PAGE>
