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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
VIPONT ROYALTY INCOME FUND, Ltd.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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MEMORANDUM
TO: SOLICITATION PARTICIPANTS
FROM: ATRIX LABORATORIES, INC.
DATE: AUGUST 23, 1995
SUBJECT: SCRIPT: VIPONT ROYALTY INCOME FUND, LTD.
PARTICIPANT: Hello! My Name is ______. I am calling on behalf of
Vipont Royalty Income Fund, Ltd., the partnership in
which you invested in 1987. I am calling to confirm that
you have received the Prospectus/Proxy Statement
containing a proposal whereby the partnership will be
merged into Atrix, L.P. Did you receive the materials?
RESPONSE: Yes/No
PARTICIPANT: Have you mailed in your proxy card yet?
RESPONSE: Yes/No
PARTICIPANT: Do you have any questions?
RESPONSE: Yes/No
PARTICIPANT: Since you have not mailed your proxy card, would you like
me to explain what is in the materials?
RESPONSE: Yes or No
IF YES: It is a proposal by the General Partner, Atrix
Laboratories, Inc., to merge the partnership into Atrix,
L.P., a to-be-formed Colorado limited partnership. If
this transaction is approved, the Limited Partners will
receive approximately 100 shares of Atrix common stock
and the Partnership will be liquidated.
The General Partner is proposing this exchange because:
1.) The Partnership funds were depleted in 1991.
As Atrix continues to expend its funds to
pursue the Perio Product containing
doxycycline, the Limited Partners' share of
royalty payments continues to decline.
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Currently, as a partner you are entitled to
share in royalties and/or proceeds from the
sale of rights for the Perio Product
containing doxycycline, only, on a percentage
basis based upon total costs of development.
For purposes of determining the value of the
Partnership, the Company estimated that the
Partnership will be entitled to 40% of all
royalties and/or proceeds.
2.) Maintaining the Partnership as a separate
entity is costly, time-consuming and
represents an added impediment to potential
corporate partners and prospective investors.
3.) Furthermore, approval of the transaction
would unite the Limited Partners' and
shareholders' interests. As a shareholder of
Atrix, you can share in the potential
increased value of the common stock and the
added flexibility to liquidate your
investment by selling that stock at your
discretion.
The proposal, if approved, will provide
greater asset diversification to Limited
Partners because of the additional products
under development by Atrix in addition to the
Perio Product. As a shareholder, you would
benefit from Atrix's product closest to
commercialization: the ATRISORB(tm) GTR
Barrier Product. This product will be
submitted as a device application to the FDA
in late 1995. Commercial sales on this
product are expected in 1997. However, there
can be no assurance that any of Atrix's
products will receive the necessary
regulatory approval or clearance or that any
of Atrix's products can be successfully and
profitably developed, produced or marketed.
In making your decision on whether to vote "For" or "Against" the
Merger, you are urged to read the section entitled "RISK FACTORS" in
the Prospectus/Proxy Statement for a description of the risk factors
relating to the Merger and an investment in Atrix.
Do you need any more information to assist you in completing your
proxy card?
I would like to thank you for your time and encourage you to send in
your completed proxy card as soon as possible.
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MEMORANDUM
TO: SOLICITATION PARTICIPANTS
FROM: ATRIX LABORATORIES, INC.
JOHN E. URHEIM, CHIEF EXECUTIVE OFFICER/VICE CHAIRMAN
DATE: AUGUST 23, 1995
SUBJECT: QUESTIONS AND ANSWERS REGARDING VIPONT ROYALTY INCOME FUND,
LTD.
I.
QUESTION. Why is the Company's Management proposing the Merger at this
time?
ANSWER. 1. The Partnership funds were depleted in 1991. As the Company
continues to expend its funds to pursue the Perio Product
containing doxycycline, the Limited Partners' share of royalty
payments continues to decline.
2. Maintaining the Partnership as a separate entity is costly,
time-consuming and represents an added impediment to potential
corporate partners and prospective investors.
3. Approval of the transaction would unite the Limited Partners'
and shareholders' interests.
II.
QUESTION. Why didn't you retain independent representation or obtain an
independent appraisal to determine the fairness of the valuation?
ANSWER. 1. First, no such independent representation or independent
appraisal is required by either the Partnership Agreement, or by
Colorado Partnership Law.
2. Second, the Company believes the consideration being offered and
the method used to determine the value of the Partnership
(Assigned Value) are fair to the Limited Partners. However, had
an independent representative been retained or an independent
appraisal been obtained, the terms and conditions of the Merger
may have been more favorable to the Limited Partners and the
consideration received by the Limited Partners in the Merger may
have been greater.
III.
QUESTION. Are the Company's directors in a position of conflict by virtue of
it representing both the shareholders and the Limited Partners, in
its capacity as general partner, in this transaction?
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ANSWER: 1. Their fiduciary duties require the directors to act in good
faith, exercise good business judgement, and carry out their
duties with conscientious care.
The Company has met the above requirements in that the directors
have approved the Merger, which they believe to be fair to the
Limited Partners. The Limited Partners have the opportunity to
control their investment in the Company through the sale of
stock, or holding the stock in order to share potential future
earnings/profits of the Company. In addition, the limited
partners will not be limited to sharing in just earnings from
the Perio Product containing doxycycline, but they will benefit
from any products the Company may develop.
The Company, as the general partner of the Partnership, has a
conflict of interest with respect to the Merger. Specifically,
the Company will benefit from the termination of the agreements
between the Company and the Limited Partnership.
IV.
QUESTION. Why am I only getting 34c. back for each dollar I invested?
ANSWER: 1. First, if you exercised Vipont and Atrix Warrants that came with
each Partnership unit that you bought, you may have already
recouped some, all or even more than your original investment.
As you recall, the Partnership Agreement provided 3 ways to
realize a return on your investment: 1) VPI warrants; 2) Atrix
warrants; and 3) royalty payments upon the commercialization of
a product.
2. The project the Partnership was originally formed to fund (i.e.,
the Perio Product containing Sanguinarium) failed. Most of the
R & D Partnerships that are not successful provide no return to
investors whatsoever. The 1992 amendments to the agreements
between the Partnership and the Company provided you with the
opportunity to avoid a total loss on the investment - an
opportunity which you and the other partners wisely chose to
accept. The proposed Merger allows further upside potential to
you as an Atrix shareholder, while providing the option for you
to liquidate your holdings altogether and at your discretion.
V.
QUESTION. How did the Company decide on a valuation of 34c. on the dollar?
ANSWER. 1. We established the valuation based upon an estimate of the
future royalty payments that you (as a Limited Partner) might
expect to receive, based upon the reduced royalty rates and
amounts agreed to in the amendments adopted by the Limited
Partners at the Special Meeting of Limited Partners in 1992.
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A. The original Partnership Agreement terms were royalty
payments potentially equal to 6 times your investment, paid
at rates of 12%, 8% and 4%.
B. The 1992 amendments reduced those royalty payments and
rates to a prorated basis, which as of June 30, 1995 was
approximately 49% and which is estimated to be 40% at
December 31, 1995.
2. Next, we applied a discount factor to those projected payments
to allow for: a) the time value of money; and b) the risk (i.e.,
uncertainty that the product would never be approved or the
sales forecasts would not be met).
3. A 30% discount rate was used by Atrix because of the inherent
risks in the biotech/pharmaceutical industry. In addition,
Atrix is small in size, maintains an R&D operating status and
has limited resources, which increases risks. The primary risks
considered included: failure to obtain approval for
commercialization, competition, product obsolescence, and
absence of funding.
In determining the discount rate used in the calculation, the
Company considered discount rates ranging from 15%-30%. This
represents the range that has been used in similar
transaction(s) involving the exchange by merger of partnership
interests. In such other transactions, a lower discount rate
was used primarily where a partnership had existing operations,
revenue, cash flow and/or ascertainable assets, such as real
estate. In transactions involving research and development
limited partnerships, a higher discount rate was used to reflect
the risks relating to uncertainty of the development of a
product, competition, lack of revenues or cash flow, the
uncertainty of regulatory approval and the uncertainty of
whether a commercial market will develop for a perio product.
VI.
QUESTION. What happens if the Merger is not approved?
ANSWER. If the Merger is not approved, the Partnership will continue to
operate as a separate legal entity and the contractual obligations
between the Partnership and the Company will continue under their
present terms. The percentage of the original royalty to which you
are entitled will continue to decline. You will continue to hold a
non-liquid asset and you will not enjoy the potential upside of Atrix
stock appreciation.
On the other hand, if the product takes less time and money allocated
for development and our sales are more than has been forecasted, you
may realize more royalty revenues than are incorporated in the
Assigned Value.
VII.
QUESTION. Describe the effects if Atrix signs a Corporate Marketing Partner
for the Perio Product before this transaction is approved.
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ANSWER. 1. Depending on the terms in any such agreement, the Limited
Partners may or may not share in funds received from a Corporate
Marketing Partner for the Perio Product with Doxycycline
depending on the type of payments. The intent of the payments
in the Agreements contemplate royalties on a commercially
successful Perio Product and not milestone or other incentive
payments to Atrix.
It is expected that the sharing ratio would be fixed upon a
signed Agreement. Any non-royalty payments would be used for
further development of the product and would not effect the
sharing ratio.
2. Royalty and/or proceeds from the sale of rights to the Perio
Product with Doxycycline would be shared as provided for in the
Agreements, as amended.
VIII.
QUESTION. Without the Merger, would the Partnership have rights to the
ATRISORB(TM) GTR Barrier with a drug?
ANSWER. No. The Partnership Agreement specifically describes the rights of the
Limited Partners in a time-released Perio Product, the primary purpose
of which is to lower bacteria levels in the periodontal pocket in
humans.
The ATRISORB(TM) GTR Barrier is a medical device designed to enhance
healing following gum surgery, an invasive technique used in severe
cases of periodontal disease where patients are at risk of losing
teeth.
IX.
QUESTION. Since the Partnership units were sold without issuance of
certificates or any other paper trail, how will the Merger be
recorded (processed), if approved?
ANSWER: A. If the Merger is approved, each Limited Partner will receive a
stock certificate for the number of shares of Atrix common stock
they receive in accordance with the terms of the Merger. The
number of shares to be exchanged for each unit is estimated to
be approximately 100. The exact number of shares will be
calculated at a later date as described in the Prospectus/Proxy
Statement.
B. The Company relies on a report of the Partnership unit holders
maintained by our transfer agent and K-1s for proof of
ownership. Together these reports document the names of unit
holders, addresses and the number of units owned.
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