-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q09T8xGxigKz8Z9rG2jeWWtWHvSskQokGL5Vv2sVxnkAp/hHTdgd15k/BW+k5KKc jzRdBg867kxDvs0mzxfK+w== 0000950123-99-010810.txt : 19991209 0000950123-99-010810.hdr.sgml : 19991209 ACCESSION NUMBER: 0000950123-99-010810 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19991208 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SHAMAN PHARMACEUTICALS INC CENTRAL INDEX KEY: 0000891933 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 943095806 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-44883 FILM NUMBER: 99770346 BUSINESS ADDRESS: STREET 1: 213 E GRAND AVE SO CITY: SAN FRANCISCO STATE: CA ZIP: 94080 BUSINESS PHONE: 6509527070 MAIL ADDRESS: STREET 1: 213 E GRAND AVE CITY: SOUTH SAN FRANCISCO STATE: CA ZIP: 94080 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MERCK KGAA /FI CENTRAL INDEX KEY: 0001004059 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 64271 DARMSTADT CITY: GERMANY HRB 6164 STATE: I8 FORMER COMPANY: FORMER CONFORMED NAME: MERCK KGAA /FI DATE OF NAME CHANGE: 19970219 SC 13D/A 1 AMENDMENT #1 TO SCHEDULE 13D 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 -------------------------- SCHEDULE 13D (RULE 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1 (a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (Amendment No. 1)1 SHAMAN PHARMACEUTICALS, INC. (Name of Issuer) COMMON STOCK $0.001 PAR VALUE (Title of Class Securities) Jean-Noel Julliard Head of Business & Economic Affairs Lipha S.A. 37 rue Saint-Romain 69379 Lyon, cedex 08, France 011-33-4-72-78-29-08 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) December 3, 1999 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because Rule 13d-1 (e), 13d-1(f) or 13d-1(g), check the following box [ ] (continued on following pages) (1) The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Exhibit Index: Page 13 Page 1 2 CUSIP NO. 819319 10 SCHEDULE 13D - -------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Merck KGaA - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION GERMANY - -------------------------------------------------------------------------------- NUMBER OF SHARES 7 SOLE VOTING POWER BENEFICIALLY OWNED BY 0 EACH REPORTING PERSON WITH - -------------------------------------------------------------------------------- 8 SHARED VOTING POWER 1,000,092,248* - -------------------------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 1,000,092,248* - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,000,092,248* - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 98.7%* - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- * Includes 1,000,005,000 shares that Lipha S.A. may acquire upon automatic conversion of 133,334 shares of Series R Convertible Preferred Stock of the Issuer (the "Series R Shares") on February 1, 2000, at the conversion price calculated as of November 30, 1999. Page 2 3 ITEM 1. SECURITY AND ISSUER This Amendment No. 1 to the statement on Schedule 13D is being filed by Merck KGaA, a Kommanditgesellschaft auf Aktien organized under the laws of Germany ("KGaA" or the "Acquiror") and relates to the acquisition by Lipha S.A., a French corporation (collectively with Lipha Lyonnaise Industrielle Pharmaceutique SA, its predecessor prior to an internal reorganization, "Lipha"), of 133,334 shares of the Series R Convertible Preferred Stock ("Series R Stock") of Shaman Pharmaceuticals, Inc., a Delaware corporation (the "Issuer" or the "Company"). Lipha is a wholly-owned subsidiary of KGaA and KGaA may be deemed to be the beneficial owner of the shares held by Lipha. KGaA is controlled by E. Merck, a German partnership, which holds approximately 74% of the shares of KGaA. The class of securities to which this statement relates is the common stock, par value $0.001 per share (the "Common Stock") of the Issuer. Specifically, this statement relates to the shares of Common Stock issuable upon the automatic conversion of the Series R Stock on February 1, 2000. The address of the principal executive offices of the Issuer is 213 East Grand Avenue, South San Francisco, California 94080. Relationship with the Company On September 23, 1996, Lipha entered into a five-year collaborative agreement (the "Research & Development Agreement") with the Company to jointly develop the Company's antihyperglycemic drugs. In connection with the Research & Development Agreement, the parties also entered into a Stock Purchase Agreement and Registration Rights Agreement (collectively with the Research & Development Agreement, the "Agreements") providing for Lipha's purchase of Common Stock, as described below, and giving Lipha certain rights to require that its shares of Common Stock be registered under the Securities Act of 1933 after September 23, 1998. Pursuant to the Agreements, in exchange for development and marketing rights in all countries except Japan, South Korea and Taiwan, Lipha agreed to provide up to $9.0 million in research payments and up to $10.5 million in periodic equity investments over four years, priced at a 20% premium to a multi-day volume weighted average price of Common Stock at the time of purchase. On signing the Agreements, Lipha paid the Company a $1.5 million up-front research payment and $3.0 million for the purchase of 388,918 shares of Common Stock. Lipha made additional scheduled purchases of Common Stock, pursuant to the terms of the Agreements, on September 23, 1997 (200,787 shares) and September 23, 1998 (813,008 shares). Pursuant to the Research & Development Agreement, the Company agreed, among other things, to allocate between twenty and thirty full-time equivalent scientists (as such term is defined in the Research & Development Agreement) to its pharmaceuticals development obligations under the Research & Development Page 3 4 Agreement. The Research & Development Agreement provided for additional preclinical and clinical milestone payments to the Company in excess of $10.0 million per compound for each antihyperglycemic drug the Company developed and commercialized. Lipha was to bear all preclinical, clinical, regulatory and other development expenses associated with the compounds selected by Lipha under the Research & Development Agreement. In addition, as products were commercialized by Lipha, the Company would receive royalties on all product sales outside the United States and up to 50% of the profits (if the Company were to exercise co-promotion rights) or royalties on all product sales in the United States. Certain of the milestone payments were to be credited against future royalty payments, if any, due to the Company from sales of products developed pursuant to the Research & Development Agreement. On December 3, 1998, the parties completed a renegotiation of the terms of the Agreements. Under the new terms, the Company forgave $6.0 million in aggregate payments due from Lipha over the remaining term of the original Agreements in exchange for a one-time up-front payment from Lipha of an aggregate of $2.0 million, consisting of a $1.0 million research payment and a $1.0 million equity investment pursuant to which, on December 3, 1998, Lipha purchased 342,231 shares of Common Stock, bringing its total ownership of Common Stock to 1,744,944. As a result of the Company's 20 for 1 reverse stock split effective June 22, 1999, Lipha's total ownership of Common Stock was reduced to 87,248. On February 1, 1999, the Company unilaterally announced that it would immediately cease operations in its pharmaceutical business and devote most of its efforts to the development and marketing of botanical dietary supplements derived from tropical plant sources. Shortly thereafter, the Company informed Lipha that it would cease to perform its obligations under the Research & Development Agreement. ITEM 2. IDENTITY AND BACKGROUND The Acquiror is a Kommanditgesellschaft auf Aktien organized under the laws of Germany with its principal offices located at Frankfurter Str. 250, D-64293 Darmstadt, Germany. The Acquiror is part of a worldwide operating group of companies in the business sectors of pharmaceuticals, laboratory supplies and services and specialty chemicals. The name, business address, present principal occupation or employment (and the name, principal business and address of any corporation or other organization in which such employment is conducted) and citizenship of each of the directors and executive officers of the Acquiror and each general partner of E. Merck is set forth in Schedule A attached hereto and incorporated herein by this reference. During the last five years, neither the Acquiror, E. Merck nor, to the best of the Acquiror's knowledge, any of the persons identified in Schedule A hereto has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or Page 4 5 mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION Lipha acquired the Series R Stock in exchange for releasing the Company from claims made by Lipha under the Research & Development Agreement. ITEM 4. PURPOSE OF TRANSACTION The Acquiror views the acquisition of shares of Common Stock and Series R Stock of the Issuer primarily as an investment incident to its product research and development activities and has no present intention to increase its proportional investment in the Issuer, dispose of its shares of Common Stock or to effect any transaction that would relate to or result in any of the events described in subparagraphs (a) through (j) of this item. Nevertheless, there is substantial uncertainty regarding Lipha's ongoing relationship with the Company and the Acquiror reserves the right to change its investment in the Issuer based upon the results of ongoing discussions between Lipha and the Issuer, the market price of the Common Stock, alternative investment possibilities available to it, its business and research and development strategy and other factors which may emerge from time to time. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER As of the date hereof, Lipha owns of record and beneficially (i) 87,248 shares of Common Stock (the "Common Shares") and (ii) 133,334 shares of Series R Stock. The Company issued Series R Stock pursuant to the terms set forth in the Company's rights offering which was completed in August 1999 (the "Rights Offering"). In the Rights Offering, the Company offered to the Common Stock shareholders of record as of July 14, 1999 (including Lipha) shares of Series R Stock at a price of $15.00 per share. Lipha acquired its shares of Series R Stock pursuant to a Settlement Letter dated August 18, 1999 between the Company and Lipha (the "Settlement Letter") attached hereto as exhibit 5. Under the terms of the Settlement Letter, the Company issued 133,334 shares of Series R Stock, having a value of $2.0 million at the Rights Offering price of $15.00 per share, to Lipha in partial settlement for claims made by Lipha under the Research & Development Agreement. As of November 30, 1999, 777,101 shares of Series R Stock, including those acquired by Lipha, were outstanding. The Series R Stock will automatically convert into Common Stock on February 1, 2000. Each share of Series R Stock will convert into a number of shares of Common Stock equal to $15.00 divided by the conversion price then in effect (the "Conversion Price"). The Conversion Price will be equal to the lesser of (i) $0.10 per share, or (ii) the price that is equal to 10% of the average closing sales price of Common Stock for the 10 trading days ending three trading days prior to February 1, 2000. The exact number of shares of Common Stock into which each share of Series R Stock will be converted will not be calculable under the terms of the Rights Offering until January Page 5 6 26, 2000. For purposes of determining the number of shares of the Common Stock beneficially owned by Lipha and Lipha's percentage ownership of Common Stock in this statement, we have used the Conversion Price calculated as of November 30, 1999. Based on the Conversion Price as of November 30, 1999, Lipha's shares of Series R Stock will convert into 1,000,005,000 shares of Common Stock (the "Underlying Shares") upon the automatic conversion of the Series R Stock on February 1, 2000. Pursuant to Rule 13d-3(d)(1) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Lipha is deemed to beneficially own the Underlying Shares. Because KGaA is controlled by E. Merck and because Lipha is a wholly-owned subsidiary of KGaA, E. Merck and KGaA may be deemed to be the beneficial owners of the shares of Common Stock and Series R Stock held by Lipha. In accordance with Rule 13d-3(d)(1)(i) of the Exchange Act, assuming conversion of only the shares of Series R Stock owned by Lipha, the sum of the Common Shares and the Underlying Shares represent 98.7% of the total shares of Common Stock. However, all shares of the Series R Stock will automatically convert to shares of Common Stock on February 1, 2000. Assuming conversion of all of the shares of Series R Stock into Common Stock on February 1, 2000, the Common Shares and Underlying Shares represent 17.1% of the total shares of Common Stock. Except as set forth herein, there have been no transactions in the Common Stock of the Issuer by the Acquiror or any of the executive officers or directors identified in Schedule A hereto during the 60 days preceding the filing of this Amendment No. 1. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDING OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Except as set forth herein, the Acquiror (and the executive officers and directors identified in Schedule A hereto) do not have any arrangements, contracts, understandings or relationships (legal or otherwise) with respect to each other or with any other person with respect to the securities of the Issuer. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS 1. Joint Research and Product Development Agreement dated as of September 23, 1996 between the Company and Lipha (incorporated by reference to exhibit 10.50 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, as amended).* 2. Stock Purchase Agreement dated as of September 23, 1996 between the Company and Lipha (incorporated by reference to exhibit 10.51 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, as amended).* 3. Registration Rights Agreement dated as of September 23, 1996 between the Company and Lipha (attached as Exhibit A to the preceding exhibit). Page 6 7 4. Letter Agreement dated December 1, 1998 (incorporated by reference to exhibit 4 of the Reporting Person's Statement on Schedule 13D filed June 4, 1999). 5. Settlement Letter dated as of August 18, 1999 between the Company and Lipha. 6. Prospectus for Rights to Purchase Series R Convertible Preferred Stock of Shaman Pharmaceuticals, Inc., dated July 16, 1999, (incorporated by reference to the Company's Registration Statement on Form S-1 filed November 22, 1999). * Confidential treatment has been granted with respect to certain portions of these agreements. Page 7 8 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: December 3, 1999 Merck KGaA By: /s/ Klaus-Peter Brandis ------------------------------------ Name: Klaus-Peter Brandis Title: Departmental Director Page 8 9 SCHEDULE A DIRECTORS AND EXECUTIVE OFFICERS OF MERCK KGAA AND E. MERCK The address of each of the directors, executive officers and general partners listed below is c/o Merck KGaA at its principal offices located at Frankfurter Str. 250, D-64293 Darmstadt, Germany. All individuals listed below are citizens of Germany.
NAME POSITION AND PRINCIPAL OCCUPATION MERCK KGaA Dr. Heinrich Hornef Chairman, Supervisory Board (Aufsichtsrat); Member of partners council of SAP, Walldorf, a computer industry/software company, of Neurottstrasse 16.69190 Germany and of Friatec AG, a machine building/engineering company, of Steinzeugstrasse 50, 68229 Mannheim, Germany Flavio Battisti Vice Chairman, Supervisory Board (Aufsichtsrat) Michael Fletterich Supervisory Board Member (Aufsichtsrat) Jon Baumhauer Supervisory Board Member (Aufsichtsrat); Chief Executive Officer, Matthias Kraus KG, a beverage manufacturer, of Mariastrasse 14, 80639 Munchen, Germany. Klaus Brauer Supervisory Board Member (Aufsichtsrat) Prof. Dr. Christoph Clemm Supervisory Board Member (Aufsichtsrat) Dr. Michael Kasper Supervisory Board Member (Aufsichtsrat) Brigitte Niems Supervisory Board Member (Aufsichtsrat)
Page 9 10 Dr. Arend Oetker Supervisory Board Member (Aufsichtsrat); Member of partners councils of Cognos AG, an education/counseling company, of Kielortallee 1, 20144 Hamburg, Germany, Jungheinrich AG, a warehousing/transport/service company of Freidrich-Ebert-Damm 129, 22047 Hamburg, Germany, VAW Aluminum AG, an aluminum manufacturer, of Georg-von-Boeselager-Strasse 25, 53117 Bonn, Germany Hans Schonhals Supervisory Board Member (Aufsichtsrat); Member of partners councils of Pirelli Deutschland AG, a tyre-industry business, of 64741 Breuberg, Germany, Rohm GmbH, a plastic-industry/chemistry company of Kirschenallee, 64293 Darmstadt, Germany Dr. Gerhard Ziener Supervisory Board Member (Aufsichtsrat); Member of advisory boards of Benckiser Holding GmbH, a machine-building company, of Ludwig-Bertram-Strasse 8, 67059 Ludwigshafen, Germany and Dohler GmbH, a good stuffs company, of Riedstrasse 9, 64295 Darmstadt, Germany Peter Zuhlsdorff Supervisory Board Member (Aufsichtsrat); Member of partners councils of Deutz AG, a vehicle engineering company, of Muhlheimer Strasse 107, 51063 Koln, Germany, GFK AG, an opinion research company, of Nordwestring 101, 90419 Nurnberg, Germany, and Deutsche Hypothekenbank AG, a banking company, of Taunusanlage 9, 60329 Frankfurt, Germany Dr. Walter Bardorff Director (Direktor) Prof. Dr. Gerd Bauer Director (Direktor) Dr. Michael Becker Director (Direktor) Dr. Klaus Bofinger Director (Direktor) Rolf Peter Deutsch Director (Direktor) Prof. Dr. Christian Flamig Director (Direktor) Walter Galinat Director (Direktor) Dr. Jurgen Gehlhaus Director (Direktor) Dr. Hartmut Hartner Director (Direktor) Dr. Ullrich Hanstein Director (Direktor) Dr. Sigmar Herberg Director (Direktor)
Page 10 11 Dr. Hans-Joachim Lohrisch Director (Direktor) Dr. Ingeborg Lues Director (Direktor) Prof. Dr. Hans-Eckart Radunz Director (Direktor) Dr. Bernd Reckmann Director (Direktor) Dr. Karl Roser Director (Direktor) Prof. Dr. Erhard Schnurr Director (Direktor) Joachim Szebel Director (Direktor) Jurgen Schupp Director (Direktor) Dr. Gregor Wehner Director (Direktor) Ernst-Jorg Zehelein Director (Direktor) Walter Zywottek Director (Direktor) York Bernau Departmental Director (Abteilungsdirektor) Rudolf Bracher Departmental Director (Abteilungsdirektor) Klaus-Peter Brandis Departmental Director (Abteilungsdirektor) Dr. Jurgen Eichler Departmental Director (Abteilungsdirektor) Dr. Rolf Fohring Departmental Director (Abteilungsdirektor) Winfried Muller Departmental Director (Abteilungsdirektor) Friedrich Schmitt Departmental Director (Abteilungsdirektor) Gerhard Weber Departmental Director (Abteilungsdirektor) E. MERCK Prof. Dr. Hans Joachim Langmann Executive Board Member (Geschaftsleitung), E. Merck; general partner, E. Merck Wolfgang Honn Executive Board Member (Geschaftsleitung), E. Merck; general partner, E. Merck; Director of VWR Scientific Products Corp. ("VWR"), an indirect subsidiary of Merck KGaA Dr. Michael Romer Executive Board Member (Geschaftsleitung), E. Merck; general partner, E. Merck Prof. Dr. Bernhard Scheuble Executive Board Member (Geschaftsleitung), E. Merck; general partner, E. Merck Prof. Dr. Thomas Schreckenbach Executive Board Member (Geschaftsleitung), E. Merck; general partner, E. Merck
Page 11 12 Dr. Harald J. Schroder Executive Board Member (Geschaftsleitung), E. Merck; general partner, E. Merck; Chairman, Board of Directors of EM Industries Incorporated, an indirect subsidiary of Merck KGaA, of 7 Skyline Drive, Hawthorne, NY 10532; Director of VWR Dr. Johannes Sombroek Executive Board Member (Geschaftsleitung), E. Merck; general partner, E. Merck Jon Baumhauer Chairman, Partners Council, E. Merck; see also, entry under Merck KGaA Dr. Heinrich Hornef Partners Council Member, E. Merck Karl-Heinrich Kraft Partners Council Member, E. Merck Albrecht Merck Partners Council Member, E. Merck Dr. Arend Oetker Partners Council Member, E. Merck Dr. Frank Stangenberg-Haverkamp Partners Council Member, E. Merck Dr. Gerhard Ziener Partners Council Member, E. Merck Peter Zuhlsdorff Partners Council Member, E. Merck Prof. Dr. Christoph Clemm Partners Council Member, E. Merck; see also, entry under Merck KGaA
Page 12 13 EXHIBIT INDEX
Exhibit Description Page - ------- ----------- ---- 1. Joint Research and Product Development Agreement dated as of September 23, 1996 between the Company and Lipha (incorporated by reference to exhibit 10.50 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, as amended).* 2. Stock Purchase Agreement dated as of September 23, 1996 between the Company and Lipha (incorporated by reference to exhibit 10.51 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, as amended).* 3. Registration Rights Agreement dated as of September 23, 1996 between the Company and Lipha (attached as Exhibit A to the preceding exhibit). 4. Letter Agreement dated December 1, 1998 (incorporated by reference to exhibit 4 of the Reporting Person's Statement on Schedule 13D filed June 4, 1999). 5. Settlement Letter dated as of August 18, 1999 between the Company and Lipha. 6. Prospectus for Rights to Purchase Series R Convertible Preferred Stock of Shaman Pharmaceuticals, Inc., dated July 16, 1999, incorporated by reference to the Company's Registration Statement on Form S-1 filed November 22, 1999.
* Confidential treatment has been granted with respect to certain portions of these agreements. Page 13 EX-99.5 2 SETTLEMENT LETTER 1 Exhibit 5 Date: August 18, 1999 Ms. Lisa A. Conte President and CEO Shaman Pharmaceuticals Inc. 213 East Grand Avenue South San Francisco, CA 94080-4812 Settlement Letter Dear Ms. Conte: This Settlement is dated as of August 18, 1999 by and between Shaman Pharmaceuticals Inc., a Delaware corporation ("Shaman"), and Lipha s.a., a French corporation ("Lipha") and sets forth a supplemental agreement of the parties with respect to the Joint Research and Product Development and Commercialization Agreement (the "Research Agreement") dated as of September 23, 1996 between Shaman and Lipha. WHEREAS, Lipha has advanced certain sums of money to Shaman in December 1998 in connection with the Research Agreement, and a dispute has arisen in connection with such advance and the parties desire to settle such dispute; NOW, THEREFORE, Shaman and Lipha agree as follows: 1. In consideration of the release and discharge granted by Lipha pursuant to Section 2 below, Shaman agrees to pay to Lipha Two Million Ten Dollars ($2,000,010.00) (the "Indebtedness) in accordance with the terms set forth in Section 3 below. 2. In consideration of receipt of payment in full from Shaman of the Indebtedness referred to in Section 1 above as provided in Section 3 below, Lipha agrees to release and discharge Shaman from all claims, suits and causes of action that Lipha may have against Shaman for refund of advances made or other monies paid by Lipha to Shaman in December 1998 , including release and discharge of Shaman's obligation to credit such advances made or other monies paid toward $6 million of amounts payable by Lipha to Shaman in the future under the Research Agreement. 3. Lipha agrees to exchange such Indebtedness of Shaman to Lipha for the issuance to Lipha of 133,334 shares of Series R Convertible Preferred Stock of Shaman ("Preferred Stock") pursuant to the terms described in the prospectus dated July 16, 1999, previously delivered to the undersigned in connection with Shaman's public offering of the Series R Preferred Stock. Upon receipt of 133,334 shares of such Preferred Stock, the Indebtedness shall be canceled and shall be deemed to be paid in full by Shaman to Lipha. If less than 133,334 shares of such Preferred Stock are received by Lipha, the Indebtedness shall be canceled and shall be deemed to be paid 2 only to the extent of the number of shares of Preferred Stock so received times $15.00 per share, and the balance of the Indebtedness shall be canceled and shall be deemed paid in full upon receipt by Lipha of payment by Shaman of such balance in cash, such payment to be effected by Shaman within 180 days after the expiration (currently August 23, 1999) of the public offering of the Series R Preferred Stock pursuant to the prospectus dated July 16, 1999 (or any extension of the expiration date pursuant to the terms of said prospectus). Enclosed herewith is Lipha's completed and signed subscription agreement for 133,334 shares of such Preferred Stock. The undersigned understands and agrees that the terms and conditions of the Series R Preferred Stock subscription documents enclosed herewith remain unchanged and in full force and effect. Yours very truly, AGREED: LIPHA S.A. By /s/ Andre Meynaud --------------------------------- Name: Andre Meynaud Title: Managing Director Lipha S.A. 37, rue Saint-Romain Lyon Cedex, F-69379 AGREED: Shaman Pharmaceuticals, Inc. hereby agrees to accept the cancellation of the above-referenced $2,000,010 indebtedness of Shaman Pharmaceuticals, Inc. to Lipha s.a. in lieu of cash, in payment of the purchase price for the shares of Series R Preferred Stock to be purchased by Lipha pursuant to the foregoing. SHAMAN PHARMACEUTICALS INC. By /s/ Lisa A. Conte ------------------------------------ Name: Lisa A. Conte Title: President and Chief Executive Officer -----END PRIVACY-ENHANCED MESSAGE-----