EXHIBIT 2
OFFER TO PURCHASE FOR CASH
UP TO 3,000 UNITS OF LIMITED PARTNERSHIP INTEREST
OF
PAINEWEBBER R&D PARTNERS II, L.P.
AT
$6,000 NET PER UNIT
BY
PHARMAINVEST, L.L.C.
PharmaInvest, L.L.C., a Delaware limited liability company (the
"Purchaser"), on behalf of Pharmaceutical Royalties, L.L.C, a Delaware limited
liability company, and Pharmaceutical Royalty Investments Ltd., a Bermuda
company (collectively the "Funds"), hereby offer to purchase up to 3,000
outstanding units of limited partnership interest (the "Units") in PaineWebber
R&D Partners II, L.P., a Delaware limited partnership (the "Partnership"),
representing 36.3% of the Partnership, for cash consideration per Unit of $6,000
(the "Purchase Price") upon the terms and subject to the conditions set forth in
this Offer to Purchase and the related Letter of Transmittal (which, together
with any amendments or supplements hereto or thereto, collectively constitute
the "Offer"). The Purchase Price will be automatically reduced by the aggregate
amount of the value of any cash or asset distributions made or declared by the
Partnership on or after March 3, 1999 and prior to either the date on which the
Purchaser pays the Purchase Price for the tendered Units in the case of a
distribution of cash or, in the case of a distribution of assets, the date
assets are to be assigned to the Purchaser. This Offer is made to all limited
partners of record of the Partnership (each a "Holder").
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THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME ON MARCH 31, 1999, UNLESS
THE OFFER IS EXTENDED.
---------------
AS OF THE DATE OF THIS OFFER, THE GENERAL PARTNER OF THE PARTNERSHIP,
PAINEWEBBER TECHNOLOGIES II, L.P., HAS NOT MADE ANY RECOMMENDATION TO ANY HOLDER
AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING HIS OR HER UNITS. NO LATER
THAN 10 BUSINESS DAYS FROM THE DATE OF THIS OFFER, THE GENERAL PARTNER IS
REQUIRED BY LAW TO ISSUE A STATEMENT THAT (I) THE PARTNERSHIP ACCEPTS OR REJECTS
THE OFFER, (II) THE PARTNERSHIP EXPRESSES NO OPINION AND IS REMAINING NEUTRAL
TOWARD THE OFFER OR (III) THE PARTNERSHIP IS UNABLE TO TAKE A POSITION WITH
RESPECT TO THE OFFER.
---------------
THE OFFER IS NOT CONDITIONED UPON ANY NUMBER OF UNITS BEING TENDERED. THE
OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, PURCHASER BEING SATISFIED,
PRIOR TO THE EXPIRATION DATE, IN ITS REASONABLE DISCRETION THAT, UPON
PURCHASE OF THE UNITS PURSUANT TO THE OFFER, IT OR ITS NOMINEE WILL HAVE FULL
RIGHTS TO OWNERSHIP AS TO ALL SUCH UNITS AND THAT THE GENERAL PARTNER WILL
CONSENT TO THE TRANSFERS, THE FUNDS AND/OR THEIR NOMINEE BECOMING ASSIGNEES
OF THE PURCHASED UNITS AND A SUBSTITUTE LIMITED PARTNER. THE OFFER IS ALSO
SUBJECT TO CERTAIN OTHER CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE
SECTIONS 1, 2 AND 14 OF THIS OFFER TO PURCHASE.
EACH HOLDER IS URGED TO READ CAREFULLY THE ENTIRE OFFER TO PURCHASE, THE LETTER
OF TRANSMITTAL AND RELATED DOCUMENTS.
---------------
IMPORTANT
Any Holder wishing to tender all or a portion of his or her Units
should either (1) complete and sign the Letter of Transmittal (or a manually
signed facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, mail or deliver it and any other required documents to the
Depositary at its address set forth on the back cover of this Offer to Purchase
and tender those Units pursuant to the procedures for transfer set forth in
Section 3 hereof, or (2) request his or her broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for the Holder. Any
Holder whose Units are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee must contact that broker, dealer,
commercial bank, trust company or other nominee if the Holder wishes to tender
such Units.
There is no established trading market for the Units. The Purchase
Price has been established by the Purchaser, in its reasonable discretion. No
independent opinion, report or appraisal related to the valuation of the Units
has been obtained by the Purchaser.
Questions and requests for assistance may be directed to the
Information Agent or the Purchaser at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Requests for
additional copies of this Offer to Purchase, the Letter of Transmittal and other
related materials may be directed to the Information Agent or the Purchaser.
---------------
2
TABLE OF CONTENTS
PAGE
INTRODUCTION..................................................................4
1. TERMS OF THE OFFER........................................................9
2. PRORATION; ACCEPTANCE FOR PAYMENT AND PAYMENT.............................9
3. PROCEDURE FOR TENDERING UNITS............................................10
4. WITHDRAWAL RIGHTS........................................................12
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER.....................12
6. PRICE RANGE OF THE UNITS.................................................14
7. EFFECT OF THE OFFER ON EXCHANGE ACT REGISTRATION.........................15
8. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP...........................15
9. CERTAIN INFORMATION CONCERNING PURCHASER.................................20
10. SOURCE AND AMOUNT OF FUNDS..............................................22
11. BACKGROUND OF THE OFFER.................................................22
12. PURPOSE OF THE OFFER; PLANS FOR THE PARTNERSHIP.........................23
13. DISTRIBUTIONS TO LIMITED PARTNERS.......................................24
14. CERTAIN CONDITIONS OF THE OFFER.........................................24
15. CERTAIN LEGAL MATTERS...................................................26
16. FEES AND EXPENSES.......................................................26
17. MISCELLANEOUS...........................................................27
SCHEDULE I....................................................................1
3
To Holders of Units of Limited Partnership Interest in PaineWebber R&D Partners
II, L.P.:
INTRODUCTION
PharmaInvest, L.L.C., a Delaware limited liability company (the
"Purchaser"), on behalf of Pharmaceutical Royalties, L.L.C, a Delaware limited
liability company, and Pharmaceutical Royalty Investments Ltd., a Bermuda
company (collectively the "Funds"), hereby offer to purchase up to 3,000
outstanding units of limited partnership interest (the "Units") in PaineWebber
R&D Partners II, L.P., a Delaware limited partnership (the "Partnership"), for
cash consideration per Unit of $6,000, upon the terms and subject to the
conditions set forth in this Offer to Purchase and the related Letter of
Transmittal (which, together with any amendments or supplements hereto or
thereto, collectively constitute the "Offer"). The Purchase Price will be
automatically reduced by the aggregate amount of any cash or asset distributions
made or declared by the Partnership on or after March 3, 1999 and prior to
either the date on which the Purchaser pays the Purchase Price for the tendered
Units in the case of a distribution of cash or, in the case of a distribution of
assets, the date assets are to be assigned to the Purchaser. This Offer is made
to all limited partners of record of the Partnership (each a "Holder").
The Purchaser is making this Offer because it believes that the Units
represent an attractive investment at the price offered. There can be no
assurance, however, that the Purchaser's judgment is correct and, as a result,
ownership of Units (either by the Purchaser or Holders who retain their Units)
remains a speculative investment. The Purchaser is acquiring the Units for
investment purposes and does not currently intend to make any effort to change
the management or operations of the Partnership and has no current plans for any
extraordinary transaction regarding the Partnership.
The Purchaser is not affiliated with the General Partner of the
Partnership.
As of the date of this Offer, the General Partner of PaineWebber R&D
Partners II, L.P., PaineWebber Technologies II, L.P., has not made any
recommendation to any Holders as to whether to tender or refrain from tendering
Units. Each Holder must make his or her own decision whether to tender or
refrain from tendering his or her Units. No later than 10 business days from the
date of this Offer, the General Partner is required by law to issue a statement
that (i) the Partnership accepts or rejects the Offer, (ii) the Partnership
expresses no opinion and is remaining neutral toward the Offer or (iii) the
Partnership is unable to take a position with respect to the Offer.
The Offer is conditioned upon, among other things, Purchaser being
satisfied, prior to the Expiration Date, in its reasonable discretion, that,
upon purchase of the Units pursuant to the Offer, it, the Funds and/or their
nominee will have full rights to ownership as to all such Units and that the
General Partner will consent to the transfers, the Funds or their nominee
becoming assignees of the purchased Units and a substitute limited partner with
respect to all such Units. The Offer is also subject to certain other conditions
contained in the Offer to Purchase. See Sections 1, 2 and 14.
According to a Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998 filed by the Partnership (the "Partnership 10-Q"), 8,257
Units were issued and outstanding.
Tendering Holders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 4 to the Letter of
Transmittal, transfer taxes on the purchase of Units pursuant to the Offer.
Purchaser will pay all charges and expenses of MacKenzie Partners, Inc.
("MacKenzie"), as the depositary (the "Depositary") and information agent (the
"Information Agent") and IBJ Whitehall Bank & Trust Company ("IBJ") as the
paying agent ("Paying Agent") incurred in connection with the Offer. See Section
16.
4
According to the July 1987 Prospectus, the Partnership's principal
objective was to achieve substantial returns to investors over a 6-8 year period
by investing in the development and commercialization of new products being
developed by leading technology companies. In pursuing this strategy, the
Partnership funded ten projects, of which three -- those with Centocor, Inc.,
Genzyme Corporation and Synergen (now Amgen Boulder), Inc. -- are ongoing. The
remaining seven projects have either terminated or are near termination. From
inception through December 31, 1998, each Holder has received cumulative
distributions of $10,538 per $10,000 Unit, consisting of cash distributions of
$3,332 and in kind distributions (stock and warrants) valued at $7,206 at the
time of distribution. See Section 13.
On August 15, 1997, PPLLC and its affiliates commenced an offer to
purchase up to 4,000 of the Units for $3,650 per Unit. As a result of this
offer, which expired on October 7, 1997, PPLLC, on behalf of the Purchaser and
the Funds purchased 849 Units from approximately 750 Holders, representing
approximately 10% of the Partnership and approximately 12% of the Holders. As a
result of this offer, 849 Units were purchased from approximately 750 Holders,
representing approximately 10% of the Partnership and approximately 12% of the
Holders.
Since the expiration of this offer, funds managed by the Purchaser have
purchased an additional 659.5 Units from 26 Holders in 34 privately negotiated
transactions (see Certain Information Concerning Purchaser, SECTION 9).
Effective January 1, 1999, the Funds and their affiliates owned 1,517 Units, or
approximately 18% of the Partnership. In addition, the Funds and their
affiliates have entered into agreements to acquire an additional 6 Units which
are in the process of being transferred.
During December 1998, Pharmaceutical Partners, L.L.C. ("PPLLC"), an
affiliate of the Purchaser, had several conversations with PWDC regarding its
possible intention to make an offer for Units. On February 11, 1999, PPLLC
requested the list of Holders from PaineWebber Technologies II, L.P. and
received the list on February 24, 1999.
A Holder may wish to tender Units for a number of reasons:
o CURRENT REALIZATION OF VALUE OF UNITS. PHARMAINVEST'S PURCHASE PRICE OF
$6,000 PER UNIT REPRESENTS APPROXIMATELY 10X AGGREGATE PRE-TAX DISTRIBUTIONS
OF $606 PER UNIT MADE IN 1998 BY THE PARTNERSHIP, excluding a one-time
payment of $150 per Unit made in March 1998 related to the settlement of
litigation with Synergen Clinical Partners, L.P. Following the resolution of
the Synergen litigation, substantially all of the value of the Partnership
consists of REOPRO contingent payment rights which entitle the Partnership
to receive royalty income based on the sales of REOPRO. REOPRO royalty
payments will continue for 9 more years and will cease after the payment
related to REOPRO sales in the fourth quarter of 2007.
o WITHIN RANGE OF GENERAL PARTNER'S AUGUST 1997 VALUATION. In a response to a
tender offer made in August 1997 by an affiliate of PharmaInvest,
PaineWebber Technologies II, L.P. (the "General Partner" of the Partnership)
stated that it estimated the fair value of a Unit to be between $5,555 and
$6,955. Since this valuation, $816 per Unit has been distributed.
PharmaInvest is not aware of a more recent valuation made by the General
Partner.
o COMPARABLE TO PRICE PAID TO LARGE INSTITUTIONAL HOLDER. In January of 1999,
entities affiliated with PharmaInvest acquired 559 Units (approximately 6.8%
of the Partnership) from a corporate pension fund for $3.4 million
(approximately $6,080 per Unit).
o OPPORTUNITY TO LIQUIDATE AN OTHERWISE ILLIQUID ASSET. The Offer provides you
the opportunity to liquidate your investment in the Units without transfer
fees and transaction costs generally incurred in secondary market sales.
Although there may be limited resale mechanisms through partnership
5
matching services, the Purchaser is not aware of a formal trading market for
the Units. In addition, the Offer may be attractive to certain Holders who
wish to avoid the expenses, delays and complications of filing complex
income tax returns resulting from Form K-1s necessitated by ownership of
Units.
o REALIZATION OF LITIGATION PROCEEDS PRIOR TO SETTLEMENT OF LITIGATION. The
litigation described in Section 8 of the OFFER TO PURCHASE was initiated in
July 1995 and resulted in an agreement to settle being reached with Centocor
in June 1997. AS OF THE DATE OF THIS OFFER, THE SETTLEMENT AGREEMENT HAS NOT
BEEN APPROVED BY THE COURT. THE APPROVAL OF THE SETTLEMENT RELATED TO THE
PARTNERSHIP'S LITIGATION WITH CENTOCOR WOULD RESULT IN AGGREGATE PAYMENTS OF
APPROXIMATELY $880 PER UNIT. IN DETERMINING THE PURCHASE PRICE, PHARMAINVEST
HAS ASSUMED ITS RECEIPT OF THESE PAYMENTS IN ITS PURCHASE PRICE AND WILL
THEREFORE ASSUME THE RISK OF THE LITIGATION SETTLEMENT BEING APPROVED. Under
the proposed settlement, if and when approved, the Holders of Units would
receive: i) a one-time settlement payment of $9.3 million (net of attorney's
fees of $1.5 million), of which approximately $4.0 million corresponds to
the Partnership ($480 per Unit), ii) a one-time sales milestone payment
(when ReoPro sales exceed $600 million on a cumulative basis) of $5 million,
of which approximately $2.3 million corresponds to the Partnership ($270 per
Unit), and iii) an estimated make-up payment to the Partnership of $1.1
million ($130 per Unit), that represents the difference between the payments
based on the revised royalty rates under the settlement and the actual
payments made by Centocor (over the last eight quarters). The settlement
also provides for contingent milestone payments of $0.8 million to the
Partnership ($95 per Unit) related to the approval and launch of ReoPro in
Japan (possibly around the year 2001). Tendering Holders will not receive
any of these proceeds, if paid.
o SIGNIFICANT PASSIVE LOSS CARRYFORWARD. Based on information provided by the
General Partner, a limited partner who had held Units since inception of the
Partnership (an "Original Holder") had incurred CUMULATIVE NET PASSIVE
ACTIVITY LOSSES OF APPROXIMATELY $5,882 PER UNIT, as of year-end 1996. If
you are an original Holder and have not already used these losses in prior
years to offset passive activity income from other investments, the sale of
your Unit(s), to the extent such sale is a "complete disposition" of your
Unit(s), may enable you to use the losses this year. Although this passive
loss carryforward will have been reduced somewhat from year-end 1996, should
a Holder decide to tender his or her Units, a significant portion of the
gain from the sale ($6,000 per Unit, in the case of an Original Holder or
Holder with zero basis in the Units) should be offset and therefore
minimally taxed. The Purchaser is not aware of a more recent calculation by
the General Partner of passive losses. PHARMAINVEST IS NOT EXPRESSING AN
OPINION AS TO THE TAX CONSEQUENCES OF TENDERING UNITS. ACTUAL TAX
CONSEQUENCES WILL DEPEND ON EACH HOLDER'S PARTICULAR TAX SITUATION,
INCLUDING, BUT NOT LIMITED TO, THE LENGTH OF TIME THE HOLDER HAS HELD THE
UNITS AND THE HOLDER'S STATUS AS A U.S. TAX RESIDENT. HOLDERS ARE STRONGLY
ADVISED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES
OF ACCEPTING THE OFFER.
o VALUE DEPENDENT ON ONE PRODUCT. Largely all of the value of the Partnership
is based on the right to receive royalties on the future sales of REOPRO.
While the sales of REOPRO have grown over the last several years, there can
be no assurance that they will continue to do so. Two other competing
products were launched in 1998: Merck's AGGRASTAT and Cor
Therapeutics/Schering Plough's INTEGRILIN. Several other potentially
competitive products are in clinical development. Accordingly, there can be
no assurance that these products will not adversely affect the sales of
REOPRO.
RISK FACTORS
o Although the Purchaser cannot predict the future value of the Partnership's
assets or future trading prices of the Units, the Purchase Price could
differ significantly from the proceeds that would be realized by holding the
Units for the entire life of the expected payment stream of the
Partnership's main asset.
6
o The Purchaser is making the Offer with a view to making a profit.
Accordingly, there may be a conflict between the desire of the Purchaser to
acquire the Units at the Purchase Price and the value of the payment
stream. There can be no assurance that the Purchase Price will be more or
less than such value.
o No independent person has been retained by the Purchaser or any of its
affiliates to value or make any appraisal of the Units or to render any
opinion with respect to the fairness of the Purchase Price and no
representation is made with respect to the fairness of the Purchase Price.
o Although there are limited resale mechanisms available to Holders through
partnership matching services, there is no formal trading market for the
Units. According to the General Partner, in response to the August 1997
tender offer, "[t]he Units are illiquid, so there is no efficient trading
market for the Units [and] the prices that may be realized by a seller in
such market . . . have historically been and may be lower than the price
[the Purchaser] is offering." The Offer provides each Holder the
opportunity to liquidate his or her investment in the Partnership without
transfer fees and transaction costs generally incurred in secondary market
sales (which can range from 5% to 8.75% of the sale price).
o At year-end 1996, a limited partner who had held Units since inception of
the Partnership (an "Original Holder") had incurred cumulative net passive
activity losses of approximately $5,882 per Unit. If you are an original
Holder and have not already used these losses in prior years to offset
passive activity income from other investments, the sale of your Unit(s), to
the extent such sale is a "complete disposition" of your Unit(s), may enable
you to use the losses this year. Although this passive loss carryforward
will have been reduced somewhat from year-end 1996, should a Holder decide
to tender his or her Units, the gain from the sale ($6,000 per Unit, in the
case of an Original Holder or Holder with zero basis in the Units) should be
considerably offset and therefore minimally taxed. PHARMAINVEST IS NOT
EXPRESSING AN OPINION AS TO THE TAX CONSEQUENCES OF TENDERING UNITS. ACTUAL
TAX CONSEQUENCES WILL DEPEND ON EACH HOLDER'S PARTICULAR TAX SITUATION,
INCLUDING, BUT NOT LIMITED TO, THE LENGTH OF TIME THE HOLDER HAS HELD THE
UNITS AND THE HOLDER'S STATUS AS A U.S. TAX RESIDENT. HOLDERS ARE STRONGLY
ADVISED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES
OF ACCEPTING THE OFFER.
VALUATION
Purchaser determined the Purchase Price by dividing the sum of (i)
Purchaser's own estimate of the present value of future cash flows that may be
derived from the Partnership's holdings and (ii) Purchaser's own estimate of the
current market value of the Partnership's marketable securities, by the number
of Units outstanding. In addition, the Purchaser compared the Purchase Price to
the recent trading prices for the small number of Units that have been sold
through partnership matching services. All of the information considered by the
Purchaser in determining the Purchase Price is publicly available.
The principal assets of the Partnership are rights to receive
contingent payments based on sales of a pharmaceutical product, ReoPro, in which
the Partnership has a direct interest and sales of a medical device, Seprafilm,
in which the Partnership has an indirect interest through investments in the
limited partnerships that have such payment rights. As a result of a litigation
settlement, the Partnership is entitled to milestone payments, upon the approval
and certain sales generated by a product in Phase II development. The
Partnership also has cash and cash equivalents, which the Purchaser values at
face, and a small amount of marketable equity securities, which the Purchaser
values approximately at market value.
CENTOCOR PARTNERS III, L.P. - REOPRO CPRS
The Purchaser believes the most valuable asset of the Partnership is
its right to receive payments through 2007 based on sales of ReoPro, a product
developed by Centocor Inc. and marketed by Xxx Xxxxx
7
& Co. In addition to the expected future payments derived from the sale of
ReoPro, the Purchaser estimated the amount of payments that may be paid to the
Partnership pursuant to a proposed settlement of litigation between the
Partnership and Centocor regarding the basis of calculating payments owed to the
Partnership. Purchaser also considered the risks inherent in these future cash
flows, including (i) the dependence on the sales of a single product and (ii)
the absence of any market for the asset or for the Partnership units. Based on
this analysis, the Purchaser estimated the value of the Partnership's interest
in ReoPro to be approximately $45.6 million.
GENZYME DEVELOPMENT PARTNERS, L.P.
One of the Partnership's indirect investments is its limited
partnership interest in Genzyme Development Partners, L.P. ("GDP"), which
entitles it to receive profits from a joint venture that manufactures and
markets Seprafilm, a medical device. Since Xxxxxxxxx's introduction in August
1996, no sales have been reported in Genzyme's publicly available financial
statements. To date, no distributions have been made to limited partners of GDP.
Genzyme has an option to purchase the limited partnership interest for a lump
sum payment and payments based on the future sale of Seprafilm. Purchaser
believes that there is a significant risk that Genzyme will not exercise this
purchase option. As a result, the Purchaser placed a nominal value of $1.0
million on the Partnership's limited partnership interest in GDP.
SYNERGEN CLINICAL PARTNERS - SETTLEMENT OF LITIGATION, DISSOLUTION OF
PARTNERSHIP
The Partnership's other indirect investment was its limited partnership
interest in Synergen Clinical Partners, L.P. ("SCP") which funded the research
and development for IL-1ra, a drug in Phase II clinical testing for rheumatoid
arthritis. Upon settlement of litigation, this Partnership was dissolved for
cash and certain milestone payments (see Certain Information Concerning the
Partnership, SECTION 8) to limited partners of Synergen Clinical Partners, L.P.
("SCP"). The Purchaser believes that these milestones are highly unlikely to be
achieved and has not placed any value on the Partnership's interest in SCP.
Proceeds from this settlement have already been distributed to Holders of Units.
The Purchaser's $49.5 million valuation of the Partnership's assets at
September 30, 1998 can be summarized as follows:
Purchaser's Estimate of Value
Asset (In Millions)
-------------
Cash and Equivalents $ 1.5
Equity Securities1 1.4
ReoPro Contingent Payment Rights 45.6
Genzyme Clinical Partners, L.P. interest 1.0
------
Total $ 49.5
------
------
Per Unit $6,000
1 240,000 shares of Cygnus, Inc. at $5 3/4 (closing price on 2/26/99)
The value of $49.5 million represents approximately $6,000 per Unit
based on the 8,257 Units reported outstanding. The November/December, 1998 issue
of the Partnership Spectrum, an independent third-party industry publication
that tracks recent trades in certain limited partnership interests, indicates
that 2.0 Units traded in the period October 1, 1998 through November 30, 1998 at
prices between $2,603 and $3,002 per Unit, with a weighted average of $2,867 per
Unit.
No third party was retained by the Purchaser to value the Units or to
render any fairness opinion with respect to the Purchase Price. No
representation is made as to the fairness of the Purchase Price. No other
valuation analysis was performed or used, including any liquidation value or net
asset value analysis.
8
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including,
if the Offer is extended or amended, the terms and conditions of any such
extension or amendment), Purchaser will accept for payment (and thereby
purchase) any and all Units that are validly tendered and not withdrawn in
accordance with Section 4 prior to the Expiration Date. As used in the Offer,
the term "Expiration Date" means 12:00 midnight, New York City time, on March
31, 1999, unless and until Purchaser, in accordance with the terms of the Offer,
shall have extended the period of time during which the Offer is open, in which
event the term "Expiration Date" means the latest time and date at which the
Offer, as so extended, expires. As used in this Offer to Purchase, "business
day" has the meaning set forth in Rule 14d-1(e)(6) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act").
The Offer is not conditioned upon any minimum number of Units being
tendered. The Offer is subject to certain other conditions set forth in Sections
2 and 14. Purchaser expressly reserves the right (but will not be obligated) to
waive any or all of the conditions of the Offer. If, by the Expiration Date, any
or all of the conditions of the Offer are not satisfied or waived, Purchaser
reserves the right (but shall not be obligated) to (i) extend the period during
which the Offer is open and, subject to the rights of tendering Holders to
withdraw their Units, retain all tendered Units until the Expiration Date, (ii)
waive any or all of the conditions of the Offer and, subject to compliance with
applicable rules and regulations of the Securities and Exchange Commission (the
"Commission"), accept for payment or purchase all validly tendered Units and not
extend the Offer, or (iii) terminate the Offer and not accept for payment any
Units and return promptly all tendered Units to tendering Holders. Any
extension, delay in payment, termination or amendment may be made by giving oral
or written notice to the Depositary and will be followed as promptly as
practicable by public announcement, the announcement in the case of an extension
to be issued no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date.
In the event that the Offer is not consummated, Purchaser may seek to
acquire Units through open-market purchases, privately negotiated transactions
or otherwise, upon such terms and conditions and at such prices as it shall
determine, which may be more or less than the Offer Price and could be for cash
or other consideration.
The Commission has announced that, under its interpretation of Rules
14d-4(c) and 14d-6(d) under the Exchange Act, material changes in the terms of a
tender offer or information concerning a tender offer may require that the
tender offer be extended so that it remains open a sufficient period of time to
allow Holders to consider such material changes or information in deciding
whether or not to tender or withdraw their securities. The minimum period during
which an offer must remain open following material changes in the terms of the
Offer or information concerning the Offer, other than a change in price or a
change in percentage of securities sought, will depend upon the facts and
circumstances, including the relative materiality of the terms or information.
If Purchaser decides to increase or decrease the consideration in the Offer or
to make a change in the percentage of Units sought and if, at the time that
notice of any such change is first published, sent or given to Holders, the
Offer is scheduled to expire at any time earlier than the tenth business day
after (and including) the date of that notice, the Offer will be extended at
least until the expiration of that period of ten business days.
2. PRORATION; ACCEPTANCE FOR PAYMENT AND PAYMENT
If more than 3,000 Units are validly tendered on or prior to the
Expiration Date and not properly withdrawn on or prior to the Expiration Date,
the Purchaser will only accept for payment, upon the terms and subject to the
conditions of the Offer, and pay for an aggregate of 3,000 Units so tendered,
pro rata according to the number of Units validly tendered and not properly
withdrawn on or prior to the Expiration Date, with appropriate adjustments to
avoid purchases in fractions of other than half Units. If
9
the number of Units validly tendered and not properly withdrawn on or prior to
the Expiration Date is less than or equal to 3,000 Units, the Purchaser will
purchase all Units so tendered and not properly withdrawn, upon the terms and
subject to the conditions of the Offer.
In the event that proration is required, the Purchaser will promptly
announce the final results of such proration after the Expiration Date.
Upon the terms and subject to the conditions of the Offer (including,
if the Offer is extended or amended, the terms and conditions of any such
extension or amendment), Purchaser will accept for payment (and thereby
purchase) and pay for all Units which are validly tendered (and not properly
withdrawn) prior to the Expiration Date, promptly following the Expiration Date.
Subject to the applicable rules of the Commission, including Rule 14e-1(c),
Purchaser expressly reserves the right to delay acceptance for payment of or
payment for Units pending receipt of any regulatory approval specified in
Section 15 or in order to comply, in whole or in part, with any other applicable
law or government regulation. See Sections 14 and 15.
In all cases, payment for Units purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed with
all required signature guarantees and (ii) confirmation to Purchaser of such
Holder's ownership by MMS Escrow and Transfer Agency, Inc., the registrar and
transfer agent of the Units.
For purposes of the Offer, Purchaser will be deemed to have accepted
for payment and thereby purchased Units validly tendered and not properly
withdrawn if and when Purchaser gives oral or written notice to the Depositary
of Purchaser's acceptance of such Units for payment. Payment for Units accepted
pursuant to the Offer will be made by deposit of the Purchase Price with the
Paying Agent, which will act as agent for tendering Holders for the purpose of
receiving payment from Purchaser and transmitting payment to tendering Holders.
Upon the deposit of funds with the Paying Agent for the purpose of making
payments to tendering Holders, Purchaser's obligation to make such payment shall
be satisfied and tendering Holders must thereafter look solely to the Paying
Agent for payment of amounts owed to them by reason of the acceptance for
payment of Units pursuant to the Offer. Purchaser will pay any transfer taxes
incident to the transfer to it of validly tendered Units, except as otherwise
provided in the Letter of Transmittal, as well as any charges and expenses of
the Depositary, the Information Agent, and the Paying Agent. Under no
circumstances will interest accrue on the consideration to be paid for the Units
by Purchaser, regardless of any delay in making such payment.
If, prior to the Expiration Date, Purchaser increases the consideration
to be paid per Unit pursuant to the Offer, Purchaser will pay the increased
consideration for all the Units purchased pursuant to the Offer, whether or not
the Units were tendered prior to the increase in consideration. Purchaser does
not currently expect to increase the consideration to be paid per Unit pursuant
to the Offer.
Purchaser reserves the right to transfer or assign, in whole at any
time, or in part from time to time, to one or more of its affiliates, the right
to purchase all or any portion of the Units tendered pursuant to the Offer,
provided that any such transfer or assignment will not relieve Purchaser of its
obligations under the Offer and will in no way prejudice the rights of tendering
Holders to receive payment for Units validly tendered and accepted for payment
pursuant to the Offer.
3. PROCEDURE FOR TENDERING UNITS
VALID TENDERS. For Units to be validly tendered pursuant to the Offer,
a Letter of Transmittal (or a manually signed facsimile), properly completed and
duly executed, with any required signature guarantees and any other documents
required by the Letter of Transmittal, must be received by the Depositary at its
address set forth on the back cover of this Offer to Purchase prior to the
Expiration Date.
10
MMS Escrow and Transfer Agency, Inc., the registrar and transfer agent of the
Units, will provide confirmation to Purchaser of such Holder's ownership.
SIGNATURE GUARANTEES. In all cases, signatures on the Letter of
Transmittal must be guaranteed by a participant in the Security Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program (an "Eligible Institution"). SEE
INSTRUCTION 1 OF THE LETTER OF TRANSMITTAL. If the Units are registered in the
name of a person other than the signer of the Letter of Transmittal, or if
payment is to be made to a person other than the registered Holder of the Units
surrendered, then the Letter of Transmittal for the tendered Units must be
endorsed or accompanied by appropriate stock powers, in each case signed exactly
as the name or names of the registered Holder appears in the records of MMS
Escrow and Transfer Agency, Inc. SEE INSTRUCTIONS 1 AND 5 OF THE LETTER OF
TRANSMITTAL.
IN ALL CASES, UNITS SHALL NOT BE DEEMED VALIDLY TENDERED UNLESS A
PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED
FACSIMILE) IS RECEIVED BY THE DEPOSITARY.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER. IF
DELIVERY IS MADE BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Notwithstanding any other provision of this Offer to Purchase, payment
for Units accepted for payment pursuant to the Offer in all cases will be made
only after timely receipt by the Depositary of confirmation of such Holder's
ownership by MMS Escrow and Transfer Agency, Inc., the registrar and transfer
agent of the Units with respect to the Units, and a Letter of Transmittal (or a
manually signed facsimile), properly completed and duly executed, with any
required signature guarantees, and all other documents required by the Letter of
Transmittal.
DETERMINATION OF VALIDITY. All questions as to the form of documents
and the validity, eligibility (including time of receipt) and acceptance for
payment of any tender of Units pursuant to any of the procedures described above
will be determined by Purchaser in its reasonable discretion, which
determination shall be final and binding on all parties. Purchaser reserves the
absolute right to reject any or all tenders of Units determined not to be in
proper form or the acceptance of or payment for which may, in the opinion of
counsel, be unlawful and reserves the absolute right to waive any defect or
irregularity in any tender of Units. Purchaser also reserves the absolute right
to waive or amend any or all of the conditions of the Offer prior to the
Expiration Date. Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and its instructions) will be final
and binding on all parties. No tender of Units will be deemed to have been
validly made, until all defects and irregularities have been cured or waived.
None of Purchaser, the Depositary, the Information Agent or any other person
will be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.
APPOINTMENT as PROXY. By executing and delivering the Letter of
Transmittal, a tendering Holder irrevocably appoints designees of Purchaser as
his or her attorneys-in-fact and proxies, with full power of substitution, in
the manner set forth in the Letter of Transmittal, to the full extent of the
Holder's rights with respect to the Units (and with respect to any and all other
securities issued or issuable in respect of such Units on or after the date
hereof) tendered by the Holder. All such powers of attorney and proxies will be
considered coupled with an interest in the tendered Units and all prior powers
of attorney and proxies given by the Holder with respect to the Units will be
revoked, without further action, and no subsequent powers of attorney and
proxies may be given (and, if given, will not be deemed effective) by the
Holder. Designees of Purchaser will be empowered to exercise all voting and
other rights of the Holder with respect to such Units as they in their
reasonable discretion may deem proper, including,
11
without limitation, in respect of any annual or special meeting of the Holders,
or any adjournment or postponement of any such meeting, or in connection with
any action by written consent in lieu of any such meeting or otherwise.
Purchaser reserves the right to require that, in order for Units to be validly
tendered, immediately upon Purchaser's acceptance for payment of the Units,
Purchaser must be able to exercise full voting and other rights with respect to
the Units.
A tender of Units pursuant to any of the procedures described above
will constitute the tendering Holder's acceptance of the terms and conditions of
the Offer. Purchaser's acceptance for payment of Units tendered pursuant to the
Offer will constitute a binding agreement between the tendering Holder and
Purchaser upon the terms and conditions of the Offer.
4. WITHDRAWAL RIGHTS
Tenders of Units made pursuant to the Offer are irrevocable, except as
otherwise provided in this Section 4. Units tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment by Purchaser as provided in this Offer to Purchase, may
also be withdrawn at any time after May 3, 1999. If Purchaser extends the Offer,
is delayed in its purchase of or payment for Units, or is unable to purchase or
pay for Units for any reason then, without prejudice to the rights of Purchaser,
tendered Units may be retained by the Depositary on behalf of Purchaser and may
not be withdrawn, except to the extent that tendering Holders are entitled to
withdrawal rights as set forth in this Section 4.
The reservation by Purchaser of the right to delay the acceptance or
purchase of or payment for Units is subject to the provisions of Rule 14e-1(c)
under the Exchange Act, which requires Purchaser to pay the consideration
offered or to return Units deposited by or on behalf of Holders promptly after
the termination or withdrawal of the Offer.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
its address set forth on the back cover or this Offer to Purchase. Any such
notice of withdrawal must specify the name of the persons who tendered the Units
to be withdrawn, the number of Units to be withdrawn and the name of the
registered Holder, if different from that of the person who tendered the Units.
All questions as to the form and validity (including time of receipt) of notices
of withdrawal will be determined by Purchaser, in its reasonable discretion,
whose determination will be final and binding on all parties. No withdrawal of
Units will be deemed to have been made properly until all defects and
irregularities have been cured or waived. None of Purchaser, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failing to give such notification.
Any Units properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be tendered at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 3 above.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER
The following is a general discussion of certain federal income tax
consequences of a sale of Units pursuant to the Offer, assuming that the
Partnership is treated and taxable as a partnership for federal income tax
purposes. This summary is of a general nature only and does not discuss all
aspects of federal income taxation that may be relevant to each Holder in light
of such Xxxxxx's particular circumstances. In addition, the summary does not
discuss aspects of federal income taxation that may be relevant to Holders
subject to special treatment under the federal income tax laws, such as foreign
persons, dealers in securities, insurance companies, tax-exempt organizations,
banks, thrifts, regulated
12
investment companies or Holders that hold Units as assets other than capital
assets (within the meaning of Section 1221 of the Internal Revenue Code of 1986,
as amended (the "Code")). This summary is based on the Code, Treasury
regulations thereunder, and administrative and judicial interpretations thereof,
as of the date hereof, all of which are subject to change, possibly on a
retroactive basis.
EACH HOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO SUCH HOLDER OF SELLING UNITS PURSUANT TO THIS OFFER. THIS
SUMMARY DOES NOT DISCUSS ANY FOREIGN, STATE OR LOCAL TAX CONSEQUENCES OF SELLING
UNITS PURSUANT TO THIS OFFER.
CONSEQUENCES TO HOLDERS WHO TENDER UNITS. A Holder who tenders Units
pursuant to the Offer generally will recognize gain or loss equal to the
difference between (i) the Holder's "amount realized" and (ii) the Holder's
adjusted tax basis in the Units tendered. The amount realized with respect to a
Unit sold pursuant to the Offer is the sum of the amount of cash received by the
Holder for such Unit and such Holder's share of Partnership liabilities
allocable to such Unit (as determined under Section 752 of the Code). The amount
of a Holder's adjusted tax basis in his or her Units will vary depending on the
Holder's particular circumstances, and will be affected by both allocations of
Partnership income, gain and loss during the year in which Units are tendered,
and distributions, if any, made by the Partnership to a Holder with respect to
such Units during such year. The Partnership's taxable income, gain and loss for
the taxable year will be allocated between the Purchaser and tendering Holders
in accordance with the terms of the Partnership Agreement.
TAX BASIS IN UNITS. The IRS has ruled that a partner has one basis for
the partner's entire interest in a partnership even if a partner bought
partnership interests in different transactions. Upon a sale of a portion of
such aggregate interest (e.g., in a partial tender of Units) a Holder would be
required to allocate such Holder's aggregate tax basis between the Units sold
and the Units retained by some equitable apportionment method, such as the
relative fair market value of such Units on the date of sale. It is not entirely
clear whether the aggregation rule results in the tacking of the holding period
of earlier purchased Units to more recently acquired Units.
CHARACTERIZATION OF GAIN OR LOSS. Gain or loss recognized by a Holder
on the sale of Units pursuant to the Offer generally will be capital gain or
loss. However, under Section 751 of the Code, the difference between the portion
of the amount realized by a Holder that is attributable to "unrealized
receivables" and "inventory" (together, "Section 751 Property") over the portion
of the Holder's adjusted tax basis in the Unit that is allocated to Section 751
Property will be treated as ordinary income or loss, rather than capital gain or
loss. In certain cases, ordinary income recognized under section 751 of the Code
may exceed net taxable gain realized on the sale of a Unit and may be recognized
even if there is a net taxable loss realized on the sale of a Unit. Existing
Treasury regulations require each person who transfers an interest in a
partnership possessing Section 751 Property to file a statement with such
person's tax return reporting the transfer and certain other information
relating thereto.
For non-corporate taxpayers, such as individuals, trusts and estates,
net capital gains attributed to property held for more than twelve months is
taxed at a rated of 20%. For non-corporate taxpayers, capital losses are
deductible only to the extent of capital gains plus up to $3,000 of ordinary
income. If capital losses are not used in a tax year, such losses generally can
be carried forward to succeeding tax years indefinitely. Non-corporate taxpayers
are not entitled to carry back capital losses to prior taxable years.
Under current law, the maximum federal income tax rate applicable to
capital gains and ordinary income for corporations is 35%. Corporations may only
offset capital losses against capital gains. Corporations are entitled to carry
back unused capital losses to the three preceding taxable years and carry
forward unused capital losses to the succeeding five taxable years.
13
EFFECT OF PASSIVE LOSS RULES. Under Section 469 of the Code, a
non-corporate taxpayer, closely held corporation or personal service corporation
generally can deduct passive activity losses in any year only to the extent of
such person's passive activity income for such year, and may not offset such
losses against so-called "portfolio" income. A Holder with "suspended" passive
activity losses generally will be entitled to offset such losses against any
income or gain recognized by the Holder on a sale of all of such Units (subject
to any other applicable limitations). If a Holder does not sell all of his
Units, the passive activity loss limitations would continue to apply until the
Holder disposes of all of his remaining Units.
BACK-UP WITHHOLDING. A Holder (other than corporations and certain
foreign individuals) who tenders Units may be subject to 31% backup withholding
unless he provides a taxpayer identification number ("TIN") and certifies that
the TIN is correct or properly certifies that he is awaiting a TIN. A Holder may
avoid backup withholding by properly completing and signing the Substitute Form
W-9 included as part of the Letter of Transmittal. IF A HOLDER WHO IS SUBJECT TO
BACKUP WITHHOLDING DOES NOT PROPERLY COMPLETE AND SIGN THE SUBSTITUTE FORM W-9,
THE PURCHASER WILL WITHHOLD 31% FROM PAYMENTS TO SUCH HOLDER. SEE INSTRUCTION 4
TO THE LETTER OF TRANSMITTAL.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION PURPOSES ONLY. LIMITED PARTNERS SHOULD CONSULT THEIR OWN TAX
ADVISORS TO DETERMINE THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF
THE OFFER.
6. PRICE RANGE OF THE UNITS
According to the Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 filed by the Partnership (the "Partnership 10-K") "there is no
existing public market for the Units, and no such market is expected to
develop." According to Partnership Spectrum, an independent third-party industry
publication that tracks recent purchases of certain limited partnership
interests, for the twelve months ended November 30, 1998, 39.5 Units were
purchased at per Unit prices between $2,500 and $3,872 with a weighted average
of $2,994 per Unit. The most recent issue of the Partnership Spectrum
(November/December, 1998) indicates that 2.0 Units were purchased in the period
October 1, 1998 through November 30, 1998 at between $2,603 and $3,002 per Unit,
with a weighted average of $2,867 per Unit.
Purchase Activity for the Twelve-Month Period Ended November 30, 1998
WEIGHTED NUMBER OF NUMBER TOTAL
PERIOD AVERAGE LOW/HIGH UNITS TRADED OF TRADES VOLUME
------ -------- ------------- ------------ --------- --------
December 1, 1997 - January 31, 1998 $0 N/A 0.0 0.0 $0
February 1, 1998 - March 31, 1998 $2,908 $2,500/$3,300 20.0 6.0 $58,155
April 1, 1998 - May 31, 1998 $3,038 $2,500/$3,872 8.0 11.0 $24,300
June 1, 1998 - July 31, 1998 $3,167 $2,500/$3,783 9.5 10.0 $30,089
August 1,1998- September 30, 1998 $0 N/A 0.0 0.0 $0
October 1,1998 - November 30, 1998 $2,867 $2,603/$3,002 2.0 3.0 $5,734
Holders are advised, however, that such gross sales prices reported by
The Partnership Spectrum do not necessarily reflect the net sales proceeds
received by sellers of Units, which typically are reduced by commissions and
other secondary market transaction costs to amounts less than the reported
prices. Also, purchases may have occurred at higher or lower prices which were
not reported by the Partnership Spectrum and the Purchaser makes no
representation as to the accuracy or completeness of the trade
14
information. Not all purchases are reported in the Partnership Spectrum,
including certain of those made by the Purchaser. See Certain Information
Concerning the Purchaser, Section 9.
The Purchase Price represents the price at which the Purchaser is
willing to purchase Units. No independent person has been retained to evaluate
or render any opinion with respect to the fairness of the Purchase Price and no
representation is made by the Purchaser or any affiliate of the Purchaser as to
such fairness. Purchaser did not attempt to obtain current independent
valuations or appraisals of the underlying assets owned by the Partnership.
Other measures of the value of the Units may be relevant to Holders. HOLDERS ARE
URGED TO CONSIDER CAREFULLY ALL OF THE INFORMATION CONTAINED HEREIN AND CONSULT
WITH THE OWN ADVISORS, TAX, FINANCIAL OR OTHERWISE, IN EVALUATING THE TERMS OF
THE OFFER BEFORE DECIDING WHETHER TO TENDER UNITS.
7. EFFECT OF THE OFFER ON EXCHANGE ACT REGISTRATION
The Units are currently registered under the Exchange Act. Such
registration may be terminated upon application of the Partnership to the
Commission if the Units are neither listed on a national securities exchange nor
held by 300 or more holders of record. Termination of the registration of the
Units under the Exchange Act would substantially reduce the information required
to be furnished by the Partnership to Holders and to the Commission and would
make certain of the provisions of the Exchange Act no longer applicable to the
Units. Although the Purchaser would consider causing the Partnership to
terminate registration of the Units under the Exchange Act if the requirements
for termination of registration of the Units are met, the Purchaser currently
has no plans to seek to cause the Partnership to terminate such registration.
8. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP
The Partnership is a Delaware limited partnership that commenced
operations on September 30, 1987. PWDC Holding Company (the "Manager") is the
general partner of PaineWebber Technologies II, L.P., which is the general
partner (the "General Partner") of the Partnership. PWDC Holding Company is a
wholly owned subsidiary of PaineWebber Development Corporation ("PWDC"), an
indirect wholly- owned subsidiary of PaineWebber Group Inc. ("PWG"). According
to the prospectus dated July 16, 1987, the General Partner was to seek to obtain
substantial returns for investors over six to eight years through the
development and commercialization of new products (the "Projects"). The
Partnership 10-Q states that the principal objective of the Partnership is to
provide long-term capital appreciation to investors through investing in the
development and commercialization of new products. The Partnership will
terminate on December 31, 2012, unless its term is extended or reduced by the
General Partner.
The Partnership has completely funded its ten Projects at an aggregate
investment of $65.2 million. Only three of the ten Projects, those with
Centocor, Inc. ("Centocor"), Genzyme Corporation ("Genzyme") and Synergen, Inc.
("Synergen"), are currently ongoing programs. The remaining seven Projects have
terminated.
PharmaInvest believes that approximately 92% of the value of the
Partnership is comprised of its ReoPro CPRs.
CENTOCOR PARTNERS III, L.P. - REOPRO CPRS
On January 31, 1997, pursuant to the provisions of the Partnership
Purchase Option Agreement between Centocor and each limited partner of Centocor
Partners III, L.P. ("CPIII"), Centocor exercised its option to purchase the
limited partnership interests of CPIII, including those owned by the
Partnership. The Partnership received a one-time payment of $3,325,000 and
ReoPro Contingent Payment Rights ("CPRs") which entitle the Partnership to
receive future payments based on sales of ReoPro, a
15
pharmaceutical drug developed by CPIII and marketed by Centocor, Inc. and Xxx
Xxxxx & Co. ("Lilly"). The Partnership owns 22 Class A CPRs (out of a total of
431.5 Class C CPRs) and all of the Class C CPRs (consisting of 111 Class C
CPRs). ReoPro royalty payments will continue for 9 more years and will cease
after the payment related to ReoPro sales in the fourth quarter of 2007. ReoPro,
is a monoclonal antibody that blocks the function of platelets. The drug was
initially developed for use in conjunction with high-risk angioplasty in order
to reduce the risk of reocclusion, or the closing of a coronary artery, after it
has been opened by angioplasty. The drug has subsequently been developed for all
angioplasties. The product was approved by the FDA in late 1994 and was
introduced to the market in early 1995. ReoPro is marketed by Xxx Xxxxx & Co.
("Lilly") and co-marketed by Centocor in the United States, Lilly in Europe and
certain other countries around the world. The product is not yet approved for
sale in Japan, but is under development by Fujisawa, which will exclusively
market the product if it is approved by Japanese regulatory authorities. ReoPro
is also under development for a number of additional indications relating to
coronary artery disease, disease including as an adjunct to thrombolytic therapy
in acute myocardial infarction.
LEGAL PROCEEDINGS
In July 1995, PaineWebber Development Corporation, a wholly-owned
subsidiary of PaineWebber Group Inc., caused suits to be filed against Centocor
by PaineWebber R&D Partners II, L.P. ("PWR&DII"), a research and development
partnership formed in 1987 by XxxxxXxxxxx and managed by it since then.
PaineWebber R&D Partners II, L.P. was a limited partner of Centocor Partners
III, L.P. ("CPIII"). The suit by PWR&DII was filed in July 1995 in the Court of
Chancery of the State of Delaware. In the complaint in this action, the
plaintiff seeks to sue derivatively on behalf of CPIII. CPIII is named as a
nominal defendant and Centocor and Centocor Development Corporation III
("CDCIII"), a wholly owned subsidiary of Centocor, which acts as the general
partner of CPIII, are named as defendants against whom relief is sought. The
claim is that at least $25,000,000 of the money paid by Lilly to Centocor in
1992 represented profits from the marketing of ReoPro, obligating Centocor to
pay a portion thereof to CPIII, and that Centocor is obligated to pay an
increased percentage of the profits from ReoPro to the former CPIII limited
partners going forward. Centocor answered the complaint in the Delaware action
and filed a cross-claim against nominal defendant CPIII and a third-party
complaint against PaineWebber Group Inc. and PaineWebber Development
Corporation. The cross-claim seeks an offset against any damages awarded the
partners based on theories of unjust enrichment and quasi contract. The
third-party claims (later amended to add additional theories of liability and to
make PaineWebber, Inc. an additional third-party defendant) seek to hold the
PaineWebber entities liable for some or all of any alleged injury to the
partnership. On November 1, 1995, an additional suit was commenced in the
Delaware Court of Chancery by Xxxx X. Xxxx, a limited partner of CPIII, against
Centocor, CDCIII and certain of their officers and directors. The complaint,
filed derivatively on behalf of CPIII, asserts claims, INTER ALIA, for breach of
contract, breach of fiduciary duty, common law fraud, and conspiracy and aiding
and abetting. Xxxxxxxx answered this complaint and also filed a cross-claim
against nominal defendant CPIII and a third party complaint against PaineWebber
Group Inc. and PaineWebber Development Corporation, later amended to add
additional theories of liability and to name PaineWebber, Inc. as a further
third-party defendant. Xxxx moved to amend his complaint to assert claims
against the persons appointed by PaineWebber to the CDCIII Board of Directors.
That motion was granted. Motions to disqualify PWR&DII from serving as the
derivative plaintiff were filed in July 1996 by CPIII and in August 1996 by
Centocor and CDCIII. Xxxx joined those motions. No decision has been issued on
those motions.
In June 1997, CPIII and Xxxxxxxx entered into an agreement to settle
the litigation brought by PWR&DII, subject to final approval of the settlement
by the Court. The terms of the settlement of the litigation brought by PWR&DII
provide that Centocor will pay to CPIII investors:
16
A) $10.8 million, net of attorneys fees and expenses as may be
awarded by the Court, which are not to exceed $1.5 million. After
deducting from such $10.8 million attorneys' fees and expenses,
59.513% shall be allocated to the Class A CPRs, 0.229% to the
Class B CPRs and 40.258% to the Class C CPRs.
B) An additional $5.0 million, if and when cumulative world-wide
sales of ReoPro exceed $600 million. Such amount, shall be
allocated 56.7936% to the Class A CPRs, 0.2189% to the Class B
CPRs and 42.9876% to the Class C CPRs.
C) A one-time make-up payment that represents the difference between
the quarterly payments based on the revised royalty rates under
the settlement agreement and the actual payments made by Centocor
over the last six quarters.
D) Possible additional payments totaling $2.2 million, depending upon
regulatory approval and launch of ReoPro in Japan. Such amounts,
shall be allocated 67.3659% to the Class A CPRs, 0.2604% to the
Class B CPRs and 32.3737% to the Class C CPRs.
E) A revision to the royalties payable by Centocor to CPR Holders
with respect to ReoPro through 2007, as follows:
i) for each quarter of the calendar years 1997 and 1998, 6.5% of
the first $175 million of end sales revenues and 3.25% of any
end-sales revenues above $175 million for sales made within
the United States and 3.25% of any end-sales revenues for
foreign sales,
ii) for each quarter of the calendar years 1999 through 2007,
6.5% of the first $250 million of end sales revenues and
4.00% of any end-sales revenues above $250 million for sales
made within the United States and 3.25% of any end-sales
revenues for foreign sales.
At the date of this Offer the settlement agreement has not been
approved by the Court. Upon request, a copy of the settlement agreement as
originally filed with the court will be provided by the Purchaser or the
Information Agent.
GENZYME DEVELOPMENT PARTNERS, L.P.
The Partnership owns a limited partnership interest in Genzyme
Development Partners, L.P. ("GDP"). Of the products funded by GDP, only
Seprafilm has been approved for marketing in the United States by the Food and
Drug Administration ("FDA"). A second product, Sepracoat, was not recommended
for approval by an FDA advisory panel on May 5, 1997. GDP has entered into a
joint venture to manufacture and market Seprafilm, and shares profits of the
joint venture with Genzyme. As of the date of this Offer, there has been no
income resulting from the joint venture and, as a result, no distributions have
been made to the Partnership. Genzyme has an option to purchase the outstanding
partnership interests in GDP for a lump-sum cash payment and certain future
royalty payments.
SYNERGEN CLINICAL PARTNERS - SETTLEMENT OF LITIGATION, DISSOLUTION OF
PARTNERSHIP
The Partnership owns approximately 11% of the Class A limited
partnership interests in Synergen Clinical Partners, L.P. ("SCP"). In 1991,
Xxxxxxxx formed SCP to fund the research and development of Interleukin-Receptor
Antagonist ("IL-lra") as a potential treatment of various inflammatory diseases,
with an emphasis on sepsis and rheumatoid arthritis. Synergen terminated its
research and development program for sepsis in August 1994, and, in December
1994, Synergen was acquired by Amgen Inc. Research into the potential use of
IL-lra for rheumatoid arthritis is ongoing. In February 1995, a Class A limited
partner of SCP commenced an action against the general partner of SCP and others
(the "Xxxxxxx Action"). The complaint alleged that the defendants caused or
permitted the release of misleading statements regarding the potential market
for Interleukin-Receptor Antagonist ("IL-1ra") (a potential treatment of
inflammatory diseases), preclinical and clinical trial results, and the
possibility of IL-1ra becoming licensed for sale either in the United States or
Europe. The complaint
17
sought damages on behalf of a class including limited partners of SCP and
limited partners of the Partnership (the "SCP Class"). On December 2, 1997, the
parties entered into a proposed settlement (the "SCP Settlement") whereby the
initial settlement payment to the SCP Class would aggregate $16.5 million; class
counsel would limit their request for attorney's fees and costs to $3.0 million;
and the SCP Class would be entitled to receive rights to additional payments of
$9.0 million (approximately $120 per Unit) if and when the Food and Drug
Administration approves an IL-1ra product for marketing and $50.0 million
(approximately $660 per Unit) if IL-1ra product sales exceed $650 million before
the year 2020. On January 16, 1998, the SCP Settlement received final approval
from the court. On January 26, 1998, class counsel was awarded $3.0 million in
fees and costs to be paid out of the initial settlement payment. On March 3,
1998, the Partnership received and recorded as income the amount of $1,248,624
($150 per Unit) representing its share of the initial settlement payment as a
Class A limited partner of SCP and, simultaneously, SCP was terminated. Proceeds
from the SCP Settlement have already been distributed to Holders of Units.
OTHER ASSETS
In addition to these investments, as of September 30, 1998, the
Partnership held cash and marketable securities in the amounts indicated in the
abstracted portion of the Partnership 10-Q outlined below.
Market Value
At 9/30/98
------------
Cash $1,525,626
Cygnus stock (240,000 shares) 840,002
------------
Total $2,365,628
------------
------------
Distributions to the limited partners from the Partnership have been
made PRO RATA in accordance with their respective net capital contributions. See
Section 13.
Set forth below is certain selected consolidated financial information,
with respect to the Partnership excerpted from annual and quarterly reports of
the Partnership. More comprehensive financial information is included in such
reports and other documents filed by the Partnership with the Commission, and
the following summary is qualified in its entirety by reference to such reports
and other documents and all the financial information (including any related
notes) contained therein. Such reports and other documents should be available
for inspection and copies should be obtainable in the manner set forth below
under "Available Information."
18
Selected Statements of Operation Information
Nine Months
ended For the Years ended December 31,
September 30, ----------------------------------------------------------------
1998 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ----------
Revenues $1,245,719 (1) $9,430,203 (3) $583,230 $7,133,197 $10,743,055 $8,957,023
Net Income (loss) 1,110,524 9,073,034 226,748 6,431,753 9,385,257 1,429,144
Net Income (loss) per Unit
Limited Partners $133 (2) $1,088 (4) $27 $771 $1,125 $171
General Partner 11,105 90,730 2,267 64,318 93,853 14,291
---------------
(1) Includes $1,248,624 from one-time settlement of Synergen (Amgen Boulder)
litigation.
(2) Includes $150 per Unit from one-time settlement of Synergen (Amgen
Boulder) litigation.
(3) Includes $4,325,000 from one-time sales of Partnership assets, consisting
of $3,325,000 from the exercise of Centocor's purchase option to acquire
the Partnership's limited partnership interest in CPIII and $1,000,000 from
sale of OEC warrant.
(4) Includes $520 per Unit from one-time sales of Partnership assets,
consisting of: $400 from the exercise of Centocor's purchase option to
acquire the Partnership's limited partnership interest in CPIII and $120
from sale of OEC warrant.
Statements of Operations
(unaudited)
Nine Months Ended
September 30,
-----------------------------
1998 1997
----------- -----------
Revenues:
Interest income $26,485 $71,305
Income from product development project 5,151,173 (1) 6,552,481 (3)
Unrealized (depreciation) appreciation
of investments and marketable securities (3,930,000) 1,371,828
Realized gain (loss) on sale of investments
and marketable securities (1,939) 540,000
----------- -----------
$ 1,245,719 $ 8,535,614
Expenses:
Expenditures under product development projects -- 20,483
General and administrative costs 135,195 222,608
----------- -----------
135,195 243,091
Net income (loss) $ 1,110,524 $ 8,292,523
----------- -----------
----------- -----------
Net income (loss) per unit
Limited partner $133 (2) $994 (4)
General partner 11,105 82,925
---------------
(1) Includes $1,248,624 from one-time settlement of Synergen (Amgen Boulder)
litigation.
(2) Includes $150 per Unit from one-time settlement of Synergen (Amgen
Boulder) litigation.
(3) Includes $4,325,000 from one-time sales of Partnership assets, consisting
of: $3,325,000 from the exercise of Centocor's purchase option to acquire
the Partnership's limited partnership interest in CPIII and $1,000,000
from sale of OEC warrant.
(4) Includes $520 per Unit from one-time sales of Partnership assets,
consisting of: $400 from the exercise of Centocor's purchase option to
acquire the Partnership's limited partnership interest in CPIII and $120
from sale of OEC warrant.
19
Selected Statements of Financial Condition
For the Periods Ended
-------------------------------------
September 30, 1998 December 31, 1997
------------------ -----------------
Assets
Cash $6,998 $6,998
Marketable securities, at market value 2,365,628 5,166,462
Royalty income receivable 1,461,326 1,105,048
Other asset -- 5,000
------------------ -----------------
Total Assets $3,833,952 $6,283,508
------------------ -----------------
------------------ -----------------
Liabilities and partners' capital
Accrued liabilities 63,361 78,770
Partners' capital 3,770,591 6,204,738
------------------ -----------------
Total liabilities and partners' capital $3,833,952 $6,283,508
------------------ -----------------
------------------ -----------------
AVAILABLE INFORMATION. The Partnership is subject to the information
filing requirements of the Exchange Act. In accordance with the requirements of
the Exchange Act, the Partnership files periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. Such reports, proxy statements and other
information may be inspected at the Commission's office at 000 Xxxxx Xxxxxx,
X.X., Xxxxxxxxxx, X.X. 00000, and also should be available for inspection and
copying at the regional offices of the Commission located at Northwestern Atrium
Center, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000-0000; and 7
World Trade Center, 13th Floor, New York, New York 10048. Copies may be obtained
upon payment of the Commission's prescribed fees by writing to its principal
office at 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000. Such material can also
be obtained at the office of the National Association of Securities Dealers,
Inc., 0000 X Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000-1506. In addition, the
Commission maintains a Web site (xxxx://xxx.xxx.xxx) that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission.
Except as otherwise stated in this Offer to Purchase, the information
concerning the Partnership contained in this Offer to Purchase has been taken
from or is based upon publicly available documents on file with the Commission
or a court and other publicly available information. Although Purchaser does not
have any knowledge that any such information is untrue, Purchaser takes no
responsibility for the accuracy or completeness of such information or for any
failure by the Partnership to disclose events that may have occurred and may
affect the significance or accuracy of any such information.
9. CERTAIN INFORMATION CONCERNING PURCHASER
PharmaInvest, L.L.C., a Delaware limited liability company, was formed
in August 1997 to act as nominee for Pharmaceutical Royalties, L.L.C., a
Delaware limited liability company formed in July 1996 and Pharmaceutical
Royalty Investments Ltd., a Bermuda company formed in May 1996, each of which
has been organized to invest in royalty interests and contingent payment rights
("CPRs") which derive cash payments based on the sale of pharmaceutical and
biotechnology products. The Purchaser and the Funds are managed by
Pharmaceutical Partners, L.L.C. ("PPLLC"). The principal executive offices of
PPLLC are located at 00 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000. The
name, business address, present principal occupation or employment, five-year
employment history and citizenship of each member of Purchaser are set forth in
Schedule I hereto.
Except as described in this Offer to Purchase, during the last five
years neither Purchaser nor, to the best knowledge of Purchaser, any of the
persons listed in Schedule I hereto (i) has been convicted in a
20
criminal proceeding (excluding traffic violations and similar misdemeanors) or
(ii) was 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
activities subject to, Federal or state securities laws or finding any violation
of such laws.
Except as described in this Offer to Purchase, (i) neither Purchaser
or, to the best knowledge of Purchaser, any of the persons listed in Schedule I
hereto or any affiliate of any such person, beneficially owns or has a right to
acquire any Unit and (ii) neither Purchaser, or, to the best knowledge of
Purchaser, any of the other persons referred to above, or any affiliate of any
of the foregoing, has effected any transaction in the Units during the past 60
days.
Except as described in this Offer to Purchase, (i) neither Purchaser
or, to the best knowledge of Purchaser, any of the persons listed in Schedule I
has any contract, arrangement, understanding or relationship (whether or not
legally enforceable) with any other person with respect to any Units, including,
but not limited to, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any Units, joint ventures, loan or
option arrangements, puts or calls, guarantees of loans, guarantees against loss
or the giving or withholding of proxies and (ii) there have been no contacts,
negotiations or transactions between Purchaser or any of its affiliates or, to
the best knowledge of Purchaser, any of the persons listed in Schedule I hereto,
on the one hand, and the Partnership or any of its affiliates, on the other
hand, that are required to be disclosed pursuant to the rules and regulations of
the Commission.
From October 8, 1997 through October 1, 1998, the Purchaser or its
affiliates entered into 26 privately negotiated transactions, pursuant to which
affiliates of the Purchaser acquired beneficial ownership of an additional 54
Units.
On January 8, 1999, affiliates of the Purchaser were notified of the
approval of the transfer of beneficial ownership of 559 Units, effective January
1, 1999. Between January 8, 1999 and the commencement of the Offer, affiliates
of the Purchaser were notified of the approval of the transfer of an additional
55 Units, also effective January 1, 1999.
Number Effective Price
of Units Date Per Unit
-------- --------- --------
112.0 1/1/99 $6,073
447.0 1/1/99 $6,082
1.0 1/1/99 $3,000
10.5 1/1/99 $6,000
1.0 1/1/99 $3,002
10.0 1/1/99 $6,000
20.0 1/1/99 $6,000
12.5 1/1/99 $6,000
The following purchases for an aggregate of 6 Units have been entered
into by the Purchaser or its affiliates and are awaiting effective transfer by
the General Partner.
Number Effective Price
of Units Date Per Unit
-------- --------- --------
2.0 1/1/99 $6,000
2.0 1/1/99 $6,000
2.0 4/1/99 $3,510
21
10. SOURCE AND AMOUNT OF FUNDS
Purchaser estimates that the maximum amount of funds required to
purchase Units pursuant to the Offer and to pay related costs and expenses will
be approximately $18.2 million. The Purchaser presently anticipates that all
amounts required for the purchase of Units and to pay related costs and expenses
will be funded from existing cash balances and irrevocable funding commitments
made to the Purchaser and its affiliates.
11. BACKGROUND OF THE OFFER
Purchaser has been organized to invest in royalty interests and CPRs
which derive cash payments based on the sale of pharmaceutical and biotechnology
products. Purchaser is managed by PPLLC. As a result, it is the business of the
PPLLC to identify, evaluate and acquire pharmaceutical royalty interests and
CPRs. The Partnership holds CPRs and limited partnership interests, the
principal value of which is in CPRs resulting from the Partnership's investment
in CPIII.
PPLLC, on behalf of the Purchaser and the Funds, first formally
expressed its interest in the assets of the Partnership on February 27, 1997 in
a letter addressed to the General Partner of the Partnership. On March 26, 1997,
PPLLC made a written offer to PaineWebber Development Corporation ("PWDC"), the
Manager of the Partnership, to acquire all of the assets of the Partnership for
$23 million in cash. Following the March 26 letter, PPLLC had a number of
telephone conversations with PWDC regarding its desire to meet in person to
discuss the offer. PWDC expressed a desire to delay the meetings until
resolution of the litigation pending between the Partnership and Centocor
regarding a dispute over the payments to be made to the holders of CPIII CPRs.
During April, PPLLC had a number of conversations regarding PWDC's
desire to delay discussions pending resolution of the litigation. In an effort
to accommodate the desires of PWDC, PPLLC agreed to delay meeting with PWDC.
Since no announcement was made with respect to the litigation within the
specified time period, PPLLC had a number of discussions and written
correspondence with PWDC as to how to proceed.
On May 13, 1997, PPLLC executed a confidentiality agreement with PWDC
under which PWDC agreed to disclose to PPLLC the terms of a proposed settlement
agreement in the litigation, so that PPLLC could make a more informed valuation
of the assets of the Partnership. On May 21, 1997, PPLLC met with PWDC, and was
provided with a summary statement of the terms of the proposed settlement. The
summary did not disclose all of the terms of the settlement, and PWDC did not
disclose the proposed settlement agreement until it had been filed with the
Delaware court and made public.
Following public disclosure of the settlement on June 6, 1997, PPLLC
revised its valuation of the CPIII CPRs held by the Partnership. On June 9,
1997, PPLLC again met with PWDC in order to make a revised offer for the assets
of the Partnership. At this meeting, PPLLC offered $29 million in cash for all
of the assets of the Partnership. PWDC indicated to PPLLC that it would respond
to PPLLC's offer within one week. PWDC also indicated that the $29 million offer
might be less than PWDC's opinion as to the value of the assets.
On June 10, 1997, PPLLC sent PWDC a letter which included an analysis
of the required rate of return on an asset such as the CPIII CPRs, taking into
consideration that it is an asset with no liquid market and for which all of the
value is dependent on the future sales of a single pharmaceutical product. On
June 13, 1997, PWDC called PPLLC to inform PPLLC that PWDC still believed that
the value of the assets was greater than the price offered by PPLLC.
22
Since there remained a continuing disagreement on the value of the
assets, PPLLC requested a meeting with PWDC to discuss possible approaches going
forward. On July 7, 1997, PPLLC met with PWDC again to discuss its valuation of
the Partnership and to inform PWDC that since PPLLC believed that the offer it
made was fair, the limited partners in the Partnership should decide for
themselves whether the offer was adequate. Consequently, PPLLC requested from
PWDC the list of names and addresses of limited partners in order to make an
offer to all Holders.
On July 8 and 9, 1997, PPLLC had a number of discussions with PWDC
regarding the conditions under which PWDC would provide the list of Holders. On
July 11, 1997, PPLLC received an indication from PWDC that, consistent with the
Partnership's policy for making available lists of limited partners, there were
a number of undertakings that PPLLC would have to make in order to obtain the
list. On July 14, 1997, PPLLC sent to PWDC a modified version of these
undertakings, and after an additional period of negotiations, arrived on July
23, 1997 at an agreement under which PWDC would provide the list to PPLLC.
Following receipt of the list, PPLLC retained the Information Agent and
commenced an offer on August 15, 1997 to purchase up to 4,000 of the Units for
$3,650 per Unit. As a result of this offer, which expired on October 7, 1997,
PPLLC, on behalf of the Purchaser and the Funds purchased 849 Units from
approximately 750 Holders, representing approximately 10% of the Partnership and
approximately 12% of the Holders.
Since the expiration of this offer, funds managed by the Purchaser have
purchased an additional 659.5 Units from 26 Holders in 34 privately negotiated
transactions (see Certain Information Concerning Purchaser, SECTION 9).
Effective January 1, 1999, the Funds and their affiliates owned 1,517 Units, or
approximately 18% of the Partnership. In addition, the Funds and their
affiliates have entered into agreements to acquire an additional 6 Units which
are in the process of being transferred.
During December 1998, Pharmaceutical Partners, L.L.C. ("PPLLC"), an
affiliate of the Purchaser, had several conversations with PWDC regarding its
possible intention to make and offer. On February 11, 1999, PPLLC requested the
list of Holders from PaineWebber Technologies II, L.P. an offer for Units, after
executing the undertakings referred to above, received the list on February 24,
1999.
12. PURPOSE OF THE OFFER; PLANS FOR THE PARTNERSHIP
The purpose of the Offer is to enable Purchaser to acquire Units in the
Partnership. The Purchaser is making this Offer because it believes that the
Units represent an attractive investment at the price offered. There can be no
assurance, however, that the Purchaser's judgment is correct and, as a result,
ownership of Units (either by the Purchaser or Holders who retain their Units)
remains a speculative investment. The Purchaser is acquiring the Units for
investment purposes and does not currently intend to make any effort to change
the management or operations of the Partnership and has no current plans for any
extraordinary transaction regarding the Partnership. Following the completion of
the Offer, the Purchaser and its affiliates may acquire additional Units. Any
such acquisition may be made through private purchases, through one or more
future tender offers or by any other means deemed advisable, and may be at
prices higher or lower than the price to be paid for the Units purchased in the
Offer.
Except as noted in this Offer to Purchase, Purchaser has no present
plans or proposals that would result in an extraordinary corporate transaction,
such as a merger, reorganization, liquidation or sale or transfer of a material
amount of assets involving the Partnership or any subsidiary, or any other
material changes in the partnership's capitalization, composition, distribution
policy, structure or business.
No appraisal rights are available to Holders in connection with the
Offer.
23
13. DISTRIBUTIONS TO LIMITED PARTNERS
From inception through December 31, 1998, the Partnership distributed
to its limited partners $3,332 in cash and $7,206 in warrants and stock for
total distributions of $10,538 per Unit. For the twelve months ended December
31, 1998, the Partnership distributed to its limited partners $756 in cash. The
purchase price of $6,000 represents nearly 8 times these last twelve months
distributions. Excluding one-time payments of $185 per Unit, for the twelve
months ended December 31, 1998, the Partnership distributed to its limited
partners $571 in cash. The purchase price of $6,000 represents 10.5 times these
last twelve months distributions from ongoing investments. A portion of the
revenues received from Partnership investments in 1998 arose from non-recurring
distributions from product development programs and liquidation of equity
positions. During the first three quarters of 1998, the Partnership received a
one-time payment of $1,246,624 or $150 per Unit as its share of the SCP
Settlement. In addition, the Partnership sold 15,000 shares of Cygnus stock for
proceeds, net of commissions, of $296,186 or $36 per Unit. The remaining $571
per Unit was distributed during 1998 as a result of the Partnership's investment
in Centocor Partners III, L.P.
For the Years ended December 31, Inception to
---------------------------------------------------------------------- December 31,
1987-1992 1993 1994 1995 1996 1997 1998 1998
--------- ------ ------ ------ ------ ------ ------ ------------
Distributions to LPs per Unit
Cash Distributions............. $ 850 $ 555 $ 50 $ 130 $281 $710 $756 $ 3,332
Non-cash Distributions......... 4,000 1,421 238 1,547 -- -- -- 7,206
------ ------ ---- ------ ---- ---- ---- -------
Total Distributions............ $4,850 $1,976 $288 $1,677 $281 $710 $756 $10,538
------ ------ ---- ------ ---- ---- ---- -------
------ ------ ---- ------ ---- ---- ---- -------
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, Purchaser shall not
be required to accept for payment or, subject to any application rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to Purchaser's obligation to pay for or return tendered Units promptly
after expiration or termination of the Offer), to pay for any Units tendered,
and may postpone the acceptance for payment or, subject to the restriction
referred to above, payment for any Units tendered, and may amend or terminate
the Offer if, (i) Purchaser is not satisfied, prior to the Expiration Date, in
its reasonable discretion, that, upon purchase of the Units pursuant to the
Offer, it and/or its nominee will have full rights to ownership as to all such
Units and that it or its nominee will become assignees of the purchased Units
and a substitute limited partner with respect to all such Units, (ii) all
material regulatory and related approvals have not been obtained or made on
terms reasonably satisfactory to Purchaser prior to the Expiration Date, or
(iii) at any time prior to the Expiration Date any of the following events shall
occur or shall be deemed by Purchaser to have occurred:
(A) there shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by or before any court or
governmental, regulatory or administrative agency, authority or tribunal,
domestic, foreign or supranational (other than actions, proceedings,
applications or counterclaims filed or initiated by Purchaser), which (i)
seeks to challenge the acquisition by Purchaser of the Units, restrain,
prohibit or delay the making or consummation of the Offer, or obtain any
damages in connection with any of the foregoing, (ii) seeks to make the
purchase of or payment for, some or all of the Units pursuant to the Offer
or otherwise, illegal, (iii) seeks to impose limitations on the ability of
Purchaser or the Partnership or any of their
24
respective affiliates effectively to acquire or hold, or requiring
Purchaser, the Partnership or any of their respective affiliates to dispose
of or hold separate, any portion of the assets or the business of Purchaser
or its affiliates or the Partnership or its affiliates, or impose
limitations on the ability of Purchaser, the Partnership or any of their
respective affiliates to continue to conduct, own or operate all or any
portion of their businesses and assets as heretofore conducted, owned or
operated, (iv) seeks to impose or may result in material limitations on the
ability of Purchaser or any of its affiliates to exercise full rights of
ownership of the Units purchased by them, (v) is reasonably likely to result
in a material diminution in the benefits expected to be derived by Purchaser
as a result of the transactions contemplated by the Offer or (vi) seeks to
impose voting, procedural, price or other requirements in addition to those
under Delaware law and federal securities laws (each as in effect on the
date of the Offer to Purchase) or any material condition to the Offer that
is unacceptable (in its reasonable judgment) to Purchaser;
(B) there shall have been proposed, sought, promulgated, enacted,
entered, enforced or deemed applicable to the Offer by any domestic, foreign
or supranational government or any governmental, administrative or
regulatory authority or agency or by any court or tribunal, domestic,
foreign or supranational, any statute, rule, regulation, judgment, decree,
order or injunction that might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (vii) of paragraph (A)
above;
(C) there shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market in the United States, (ii) the declaration
of a banking moratorium or any suspension of payments in respect of banks in
the United States, (iii) any material adverse change (or any existing or
threatened condition, event or development involving a prospective material
adverse change) in United States or any other currency exchange rates or a
suspension of, or a limitation on, the markets therefor, (iv) the
commencement of a war, armed hostilities or other international or national
calamity, directly or indirectly involving the United States, (v) any
limitations (whether or not mandatory) imposed by any governmental authority
on, or any event which might have material adverse significance with respect
to, the nature or extension of credit or further extension of credit by
banks or other lending institutions, (vi) any significant adverse change in
securities or financial markets in the United States or abroad or (vii) in
the case of any of the foregoing, a material acceleration or worsening
thereof;
(D) Any change (or any development involving a prospective change)
shall have occurred or be threatened in the business, financial condition,
results of operations, or prospects of the Partnership which, in the
reasonable discretion of the Purchaser, is, or may be, materially adverse to
the Partnership, or the Purchaser shall become aware of any fact (including
without limitation any such change or development) which, in the reasonable
judgment of the Purchaser, has, or may have, materially adverse significance
with respect to the Partnership;
(E) a tender offer or exchange offer for some portion or all of the
Units shall have been commenced or publicly proposed to be made by any other
person or entity, or it shall have been publicly disclosed or the Purchaser
shall have learned or the Purchaser shall have cause to believe that any
other person or entity shall have entered into a definitive agreement or an
agreement in principle or made a proposal with respect to a tender offer or
exchange offer for some portion or all of the Units, or the Partnership
shall have authorized, recommended, or proposed, or shall have announced an
intention to authorize, recommend, or propose, any other material change in
its capitalization; or
(F) any person or group shall have entered into a definitive agreement
or agreement in principle with the Partnership with respect to a merger,
consolidation or other business combination with the Partnership.
The foregoing conditions are for the sole benefit of Purchaser and its
affiliates and may be asserted by Purchaser regardless of the circumstances
(other than any action or inaction by Parent, Purchaser or any of their
affiliates) giving rise to any such condition or may be waived by Purchaser, in
whole or in part, from time to time prior to the Expiration Date in its
reasonable discretion. The failure
25
by Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right and may be asserted at any time and from time to time. Any reasonable
determination by Purchaser concerning any of the events described herein shall
be final and binding.
15. CERTAIN LEGAL MATTERS
The Purchaser is not aware of any license or other regulatory permit
which appears to be material to the business of the Partnership and that might
be adversely affected by the Purchaser's acquisition of Units pursuant to the
Offer, any approval or other action by any domestic or foreign governmental or
administrative agency that would be required prior to the acquisition of Units
by the Purchaser pursuant to the Offer, or any state takeover statute that is
applicable to the Offer. Should any such approval or other action be required,
or any such state takeover statute be applicable, the Purchaser will evaluate at
such time whether such approval or action will be sought or compliance with such
takeover statute will be effected. There can be no assurance that any such
approval, action, or compliance, if needed, would be obtained or effected or, if
obtained or effected, would be obtained or effected without substantial
conditions or adverse consequences. The Purchaser's obligation to purchase and
pay for the tendering Units is subject to certain conditions, including
conditions relating to the legal matters discussed herein. Section 14 above for
certain conditions to the offer.
APPRAISAL RIGHTS. Holders will not have appraisal rights as a result of
the Offer.
MARGIN REQUIREMENTS. The Units are not "margin securities" under the
regulations of the Board of Governors and the Federal Reserve System and,
accordingly, those regulations generally are not applicable to the Offer.
ANTITRUST. Under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the rules and regulations that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated until certain information and
documentary material has been furnished for review by the Antitrust Division of
the Department of Justice (the "Antitrust Division") and the FTC and certain
waiting period requirements have been satisfied. The Purchaser does not
currently believe any filing is required under the HSR Act with respect to its
acquisition of Units contemplated by the Offer.
In addition, the Antitrust Division and the FTC scrutinize the legality
of acquisitions, mergers, and other commercial transactions. At any time before
or after the Purchaser's purchase of Units, the Antitrust Division of the FTC
could take such action as either deems necessary or desirable in the public
interest regarding such purchase, including seeking to enjoin the purchase of
Units pursuant to the Offer, the divestiture of Units purchased thereunder or
the divestiture of substantial assets of the Partnership. Private parties as
well as state attorneys general may also bring legal actions under the antitrust
laws under certain circumstances. There can be no assurance that a challenge to
the Offer on antitrust grounds will not be made or, if such challenge is made,
what the result will be.
16. FEES AND EXPENSES
Purchaser has retained XxxXxxxxx to act as the Information Agent and
Depositary and IBJ to act as Paying Agent in connection with the Offer. Both
XxxXxxxxx and IBJ will receive reasonable and customary compensation for its
services, will be reimbursed for certain reasonable out-of-pocket expenses and
will be indemnified against certain liabilities and expenses in connection
therewith, including certain liabilities under the federal securities laws.
26
Except as set forth above, Purchaser will not pay any fees or
commissions to any broker or dealer or other person for soliciting tenders of
Units pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies will be reimbursed by Purchaser for customary mailing and handling
expenses incurred by them in forwarding the offering materials to their
customers.
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) Holders residing in any jurisdiction in which the making of the Offer
or the acceptance thereof would not be in compliance with the securities, blue
sky or other laws of the jurisdiction. However, Purchaser may, in its
discretion, take such action as it may deem necessary to make the Offer in any
jurisdiction and extend the Offer to Holders. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer will be deemed to be made on behalf of Purchaser by
one or more registered brokers or dealers that are licensed under the laws of
the jurisdiction.
Purchaser has filed with the Commission the Schedule 14D-1 pursuant to
Rule 14d-1 under the Exchange Act containing certain additional information with
respect to the Offer. The Schedule and any amendments to the Schedule, including
exhibits, may be examined and copies may be obtained from the principal office
of the Commission in the manner set forth in Section 9 above (except that they
will not be available at the regional offices of the Commission).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE OR
IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, THE INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
March 3, 1999 PHARMAINVEST, L.L.C.
PHARMACEUTICAL ROYALTIES, L.L.C.
PHARMACEUTICAL ROYALTY INVESTMENTS, LTD.
PHARMACEUTICAL PARTNERS, L.L.C.
27
SCHEDULE I
MEMBERS OF PURCHASER
The following sets forth the name, present principal occupation or employment
and material occupation, positions, offices or employment for the past five
years of each member of the Manager of the Purchaser. The Manager,
Pharmaceutical Partners, L.L.C. is the sole member of the Purchaser. The
business address of each such person is 00 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx
Xxxx, XX, 00000. Unless otherwise indicated below, each person is a citizen of
the United States.
XXXXXXX XXXXX-XXXXX, 47 years old, is a managing member of
Pharmaceutical Partners, L.L.C. ("PPLLC"), the Manager of the Purchaser. He
currently serves as Chairman and Chief Executive Officer of SUGEN, Inc., a
biotechnology company that he founded in 1991. Xx. Xxxxx-Xxxxx also served as
non-executive Chairman of the Board of Selectide Corporation, a drug discovery
company he founded in 1990, until the sale of that company to Xxxxxx Xxxxxxx Dow
in 1995. Prior to founding SUGEN and Selectide, Xx. Xxxxx-Xxxxx had a 14 year
career with PaineWebber Inc. in which his last position was President of
PaineWebber Development Corporation and member of the Board of Directors of
PaineWebber Inc. Xx. Xxxxx-Xxxxx received a degree in Law from Trinity College,
University of Cambridge, England in 1972. Xx. Xxxxx-Xxxxx is a British citizen.
XXXXX XXXXXXXXX, 35 years old, is a Managing Member of PPLLC. Prior to
joining Pharmaceutical Partners in 1996, Xx. Xxxxxxxxx was employed by Lazard
Freres in New York. Prior to joining Lazard Freres in 1991, Xx. Xxxxxxxxx was
employed by the Lazard Houses in Paris, which he joined in 1988. Xx. Xxxxxxxxx
earned a degree in Industrial Engineering from Universidad Iberoamericana in
Mexico City, Mexico, in 1985. Xx. Xxxxxxxxx is a citizen of Mexico.
XXXXX XXXXXX, 36 years old, has been a Managing Member of PPLLC since
February 1997. Xx. Xxxxxx was most recently President, Chief Executive Officer
and Director of Selectide Corporation. Xx. Xxxxxx was employed by Selectide from
1992 until the sale of the company to Xxxxxx Xxxxxxx Xxx in 1995. Prior to
joining Selectide, Xx. Xxxxxx was a Vice President of PaineWebber Development
Corporation, which he joined in 1987 as an Associate. Xx. Xxxxxx received a
B.S.E.E. degree, MAGNA CUM LAUDE, from Union College in Schenectady, NY in 1984
and an M.B.A. from Columbia University in New York, NY in 1986.
XXXX XXXXX, 45 years old, is a Managing Member of PPLLC. He currently
serves as President and Director of Biomatrix Corporation, which he joined in
1996. Prior to joining Biomatrix Corporation, Xx. Xxxxx was interim President
and Chief Executive Officer of the RF&P Corporation from 1991 through 1995. Xx.
Xxxxx received a B.A. in Economics and Mathematics from Middlebury College in
Middlebury, VT and an M.B.A. from Columbia University in New York, NY.
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal and any other required
documents should be sent or delivered by each Holder or his or her broker,
dealer, commercial bank, trust company or other nominee to the Depositary or the
Purchaser, at one of the addresses set forth below:
THE DEPOSITARY AND INFORMATION AGENT FOR THE OFFER IS:
MACKENZIE PARTNERS
BY TELEPHONE: BY MAIL: BY FACSIMILE:
(000) 000-0000 (toll-free) 000 Xxxxx Xxxxxx (000) 000-0000
(000) 000-0000 (call collect) New York, NY 10010
THE PAYING AGENT FOR THE OFFER IS:
IBJ WHITEHALL BANK & TRUST COMPANY
BY TELEPHONE: BY MAIL: BY FACSIMILE:
(000) 000-0000 Xxx Xxxxx Xxxxxx (212) 858-0000
Xxx Xxxx, XX 00000
THE REGISTRAR AND TRANSFER AGENT FOR THE UNITS IS:
MMS ESCROW AND TRANSFER AGENCY, INC.
BY TELEPHONE: BY MAIL: BY FACSIMILE:
(000) 000-0000 1845 Xxxxxxx St. (000) 000-0000
Troy, MI 48084
THE PURCHASER IS:
PHARMAINVEST, L.L.C.
BY TELEPHONE: BY MAIL: BY FACSIMILE:
(800) 600-0000 00 Xxxx 00xx Xxxxxx, 00xx Floor (000) 000-0000
(000) 000-0000 New York, NY 10022 (000) 000-0000
BY E-MAIL:
Xxx@xxxxxx-xxxxxxxx.xxx
Questions and requests for assistance may be directed to the Information Agent
or Purchaser. Additional copies of this Offer to Purchase, the Letter of
Transmittal and other tender offer materials may be obtained from the
Information Agent or the Purchaser and will be furnished promptly at Purchaser's
expense. You may also contact your broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Offer.
