SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
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PAINEWEBBER R&D PARTNERS II, L.P.
(Name of Subject Company)
PAINEWEBBER R&D PARTNERS II, L.P.
(Name of Person(s) Filing Statement)
---------------
LIMITED PARTNERSHIP UNITS
(Title of Class of Securities)
NONE
(CUSIP Number of Class of Securities)
---------------
Dhananjay M. Pai
President
PaineWebber Development Corporation
1285 Avenue of the Americas
New York, New York 10019
(212) 713-2000
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of the Person(s) Filing Statement)
with a copy to:
James M. Dubin, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
(212) 373-3000
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Item 1. Security and Subject Company
The name of the subject company to which this Solicitation/
Recommendation Statement on Schedule 14D-9 (this "Schedule 14D-9") relates is
PaineWebber R&D Partners II, L.P., a Delaware limited partnership (the
"Partnership"). The address of the principal executive offices of the
Partnership is 1285 Avenue of the Americas, New York, New York 10019. The equity
securities to which this Schedule 14D-9 relates are the limited partnership
units (the "Units") of the Partnership.
Item 2. Tender Offer of the Bidder
This Schedule 14D-9 relates to the tender offer by BioRoyalties,
L.L.C., a Delaware limited liability company (the "Offeror"), on behalf of
Pharmaceutical Royalties, L.L.C., a Delaware limited liability company, and
Pharmaceuticals Royalty Investments Ltd., a Bermuda company (together, the
"Funds"), to purchase any and all outstanding Units at a price per Unit of
$3,650, net to the seller in cash, which price will be automatically reduced by
the aggregate amount of any cash or asset distributions made or declared by the
Partnership on or after June 30, 1997 (distributions since June 30, 1997 to date
have totaled $50 per Unit) upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated August 15, 1997, and the related Letter of
Transmittal (which together constitute the "Offer").
According to the Tender Offer Statement on Schedule 14D-1, dated
August 15, 1997, filed by the Offeror with the Securities and Exchange
Commission (the "Commission"), the address of the principal executive offices of
the Offeror is 70 East 55th Street, New York, NY 10022.
Item 3. Identity and Background
(a) The name and business address of the Partnership, which is the
person filing this Schedule 14D-9, are set forth in Item 1 above. PWDC Holding
Company (the "Manager") is the general partner of PaineWebber Technologies II,
L.P. (the "General Partner"), which is the general partner of the Partnership.
The Manager is a wholly-owned subsidiary of PaineWebber Development Corporation
("PWDC"), an indirect wholly-owned subsidiary of Paine Webber Group Inc.
(b) Each material contract, agreement, arrangement or understanding
and actual or potential conflict of interest between the Partnership and its
affiliates and (i) its executive officers, directors or affiliates and (ii) the
Offeror, its executive officers, directors or affiliates, is set forth below.
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(i) Arrangements with Executive Officers, Directors and
Affiliates of the Partnership.
Prior to July 1, 1996, the Manager received an annual management fee
for management and administrative services provided to the Partnership in an
amount equal to 2% of the aggregate gross proceeds received by the Partnership,
reduced by the Partnership's capital commitment in projects that have been
concluded, and the final proceeds of which, if any, have been distributed to the
General Partner and the limited partners in the Partnership (the "Limited
Partners"). The management fee was payable quarterly in advance and was adjusted
annually on the first day of each fiscal year in an amount proportionate to the
increase in the prior year in the Consumer Price Index by the United States
Department of Labor. Commencing July 1, 1996, the Manager elected to discontinue
the management fee charged to the Partnership.
PaineWebber Capital, Inc. and ATL Inc., which are affiliates of the
Partnership, own 77.0 and 17.5 Units, respectively.
In July 1996, PaineWebber Incorporated ("PWI") entered into a
settlement agreement (the "Settlement") in connection with a class action
lawsuit against PWI and a number of its affiliates relating to PWI's sale of 70
direct investment offerings, including the offering of interests in the
Partnership. Under the terms of the Settlement, PWI has, among other things,
agreed to pay the class $125 million (which had previously been deposited in
escrow with the United States Court for the Southern District of New York) and
certain additional consideration. The additional consideration includes the
assignment of fees and income attributable to the general partnership interest
of the Partnership as well as guarantees of certain minimum returns to class
members. PWI will guarantee that members of the plaintiff class will receive in
distributions and fair market value as of December 31, 2000 at least the par
value (of $10,000) per Unit. To date, the Partnership has distributed $9,721 per
Unit in cash and in kind and the General Partner estimates a reasonable range of
values of the assets underlying each Unit to be between $5,555 and $6,965. See
Item 4(c). Accordingly, the Partnership does not expect any amounts to be
payable by PWI under the guarantee provided for in the Settlement with respect
to the Units.
(ii) Arrangements with Executive Officers, Directors and
Affiliates of the Offeror.
The Offer states that Stephen Evans-Freke, Rory Riggs and David
Madden are members of Pharmaceutical Partners, L.L.C., which manages the Offeror
and the Funds and is the sole member of the Offeror. Mr. Evans-Freke was
President of PWDC until May 1990; Mr. Riggs was a Managing Director of PWI until
November 1990; and Mr. Madden was an associate at PWDC until February 1992.
Messrs. Evans-Freke and Madden were directly involved in and responsible for
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4
identifying and selecting the investments in which the Partnership invested. In
addition, Messrs. Evans-Freke and Madden were directly involved in structuring,
negotiating and managing the Partnership and its assets. Since the termination
of their employment as indicated, none of Mr. Evans-Freke, Mr. Riggs or Mr.
Madden has been associated with, or employed by, PWDC, PWI or any of their
affiliates.
Under the PaineWebber Development Corporation Carried Interest
Sharing Plan (the "CISP"), fixed percentages of certain warrants and the cash
distributions received by PWDC in respect of certain partnerships in which PWDC
has invested are awarded to participants in the CISP, including Mr. Evans-Freke
and Mr. Madden. Mr. Evans-Freke and Mr. Madden are entitled to receive between
5% and 7% and between 0.85% and 4%, respectively, of amounts distributed to CISP
participants in respect of such partnership investments. Since the respective
dates of their termination of employment with PWDC through March 31, 1997,
Messrs. Evans-Freke and Madden received $560,808 and $54,487, respectively, in
respect of distributions under the CISP.
Pursuant to a confidentiality agreement, dated May 13, 1997 (the
"Confidentiality Agreement"), between an affiliate of the Offeror and the
Partnership, the Partnership agreed to make available to such affiliate, in
connection with its consideration of a possible transaction with the
Partnership, and such affiliate of the Offeror agreed to keep confidential,
certain information concerning the Partnership's pending derivative action (the
"Centocor Litigation") against Centocor, Inc. ("Centocor") and Centocor
Development Corporation III in the Chancery Court of Delaware (the "Court")
arising from the Partnership's former partnership interest in Centocor Partners
III, L.P. ("CPIII") and certain agreements entered into by Centocor and Eli
Lilly & Company (which is more fully described in the Partnership's Form 10- Q
for the quarter ended June 30, 1997). The affiliate of the Offeror also agreed
that until the earlier of (a) public disclosure by the Partnership or Centocor
of the effectiveness of any settlement of the Centocor Litigation or (b) August
15, 1997, unless specifically invited in writing by the Partnership, neither
such affiliate nor any of its affiliates or representatives will, among other
things, effect or seek to effect any tender or exchange offer, merger or other
business combination involving the Partnership. A copy of the Confidentiality
Agreement is attached to this Schedule 14D-9 as Exhibit 3 and is incorporated
herein by reference.
By letter to the General Partner, dated July 23, 1997 (the "List
Undertaking") (the terms of which letter had been negotiated with
representatives of the General Partner), an affiliate of the Offeror requested
use of the list (the "List") of the names and addresses of the Limited Partners.
In support of the request for the List, representatives of the Offeror stated in
such letter, among other things, that such affiliate (i) will hold the List in
strict confidence, and will not give any information derived from the List to
any third party for any purpose whatsoever, except that it may
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provide the List to any information or other agent retained to act on its behalf
in connection with any tender offer for the Units so long as such information or
other agent is advised of the confidential nature of the List and agrees to use
the List solely in connection with such proposed tender offer (with the Offeror
responsible for any breach of these undertakings by such information or other
agent); (ii) will comply fully with the requirements of the Securities Exchange
Act of 1934 and the rules of the Commission thereunder, including full
disclosure of all material facts and, in the case of any tender offer, rights of
proration and withdrawal rights, irrespective of the number of Units sought to
be acquired in such tender offer; (iii) acknowledges that the Partnership's
Agreement of Limited Partnership provides that, prior to the transfer of any
Units, the General Partner shall have consented in writing to the assignment,
which consent may be withheld in the absolute discretion of the General Partner;
(iv) acknowledges that the General Partner may withhold consent, if, among other
reasons, the General Partner concludes based upon the advice of counsel, that
such acquisition would increase the risk of adverse tax consequences to the
Partnership or its partners and that in the event the General Partner withholds
its consent for any number of Units sought to be purchased, it will refrain from
acquiring Units of the number so withheld (see Item 8); (v) undertakes not to
solicit directly, and will instruct its information and other agents not to
solicit directly, any PaineWebber broker with respect to the tender offer,
provided that if a PaineWebber broker contacts the Offeror or its information
agent, either may provide such person with the same information as is provided
to any other person who contacts the Offeror or its information agent with
respect to such tender offer; (vi) within 30 days after the completion of such
tender offer, will return the List including any and all copies of the List and
any related summary material together with any other materials provided by the
Partnership; and (vii) will ensure that any solicitation of Limited Partners
that will be undertaken by it or its information or other agents will be
conducted in a professional and reasonable manner which will respect the privacy
and rights of Limited Partners. A copy of the List Undertaking is attached to
this Schedule 14D-9 as Exhibit 4 and is incorporated herein by reference.
On July 25, 1997, the General Partner consented to the transfer of
2.5 Units by persons the General Partner has been advised are affiliates of the
Offeror, effective as of October 1, 1997.
The Partnership charges each purchaser of Units a $50 processing fee
for each purchase of Units, which fee was charged in connection with the
purchases described above and will be charged to the Offeror with respect to
each purchase of Units by the Offeror pursuant to the Offer.
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Item 4. The Solicitation or Recommendation
(a) Recommendation of the General Partner.
AS MORE FULLY DESCRIBED BELOW, THE GENERAL PARTNER HAS RECOMMENDED
THAT THE LIMITED PARTNERS REJECT THE OFFER AND NOT TENDER THEIR UNITS PURSUANT
TO THE OFFER.
(b) Background of the Offer.
On March 26, 1997, the Partnership received an unsolicited letter
from an affiliate of the Offeror in which such affiliate offered to purchase for
$23 million in cash all of the assets of the Partnership reported in the
Partnership's Form 10-Q for the quarter ended September 30, 1996. The affiliate
of the Offeror also stated in such letter that in "lieu of acquiring all of the
assets of the Partnership, [it] would consider an offer of equivalent value
(taking into account the then existing and potential liabilities of the
Partnership) in a negotiated merger transaction in which [it] would acquire for
cash all of the outstanding" Units.
During April 1997, representatives of the Partnership, including Mr.
Dhananjay Pai, the President of PWDC, had several telephone conversations with
representatives of the Offeror in which the representatives of the Partnership
stated that a material development concerning the settlement negotiations of the
Centocor Litigation may occur shortly and the Partnership's requirement that
before any further information concerning such settlement negotiations could be
disclosed to the Offeror, the Offeror would be required to enter into a
confidentiality agreement. On May 13, 1997, the Offeror and the Partnership
entered into the Confidentiality Agreement and certain information concerning
the Centocor Litigation was disclosed to the Offeror.
The Offeror requested a meeting with Mr. Pai. In a meeting on June
9, 1997 between representatives of the Partnership, including Mr. Pai and
counsel to the Partnership, and representatives of the Offeror, the Offeror
advised the Partnership that it believed that adequate consideration for the
purchase by the Offeror of all of the Partnership's assets described in the
Partnership's Form 10-K for the year ended December 31, 1996 would be $29
million in cash, or approximately $3,500 per Unit. Representatives of the
Offeror stated that if their indication of value of the Partnership's assets was
in accord with the Partnership's valuation of its assets, the Offeror would
proceed with a definitive offer for such assets. Representatives of the
Partnership responded that the Partnership would consider the Offeror's
indication of value of the Partnership's assets and would reexamine the
valuation of the Partnership's assets that it had prepared in preparation for
such meeting, but that based on such valuation, the Offeror's indication of
value of the Partnership's assets was substantially below the Partnership's
valuation of its assets.
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By letter, dated June 10, 1997, to the General Partner, an affiliate
of the Offeror outlined certain assumptions used by it in arriving at its
valuation of the Partnership's assets. On June 19, 1997, the Board of Directors
of the Manager (the "Board") met to consider the Offeror's indication of value
of the Partnership's assets and the valuation issues addressed in the letter of
June 10, 1997. At this meeting, the Board, together with representatives of the
Manager and PWDC, reviewed the valuation prepared by such representatives
following the June 9, 1997 meeting, including the assumptions and methodologies
used in the valuation of each of the Partnership's assets, and unanimously
determined that the Offeror's indication of value of $29 million for the
Partnership's assets was financially inadequate. Subsequent to the Board meeting
of June 19, 1997, representatives of the Partnership informed the Offeror of the
Board's determination.
On July 7, 1997, representatives of the Offeror orally requested the
List. On July 23, 1997, following certain discussions between representatives of
the Partnership and an affiliate of the Offeror, the General Partner received
the List Undertaking. (See Item 3(b)(ii) for a description of the List
Undertaking.) On August 8, 1997, the General Partner provided to the Offeror the
List pursuant to the List Undertaking.
On August 15, 1997, the Offeror commenced the Offer.
On August 18, 1997, following the making of the Offer, the Board
considered the terms of the Offer, and for the reasons discussed below,
determined that the Offer was financially inadequate and that the Partnership
should recommend to the Limited Partners that they reject the Offer and not
tender their Units to the Offeror in the Offer.
As previously disclosed to the Limited Partners, the parties to the
Centocor Litigation entered into an agreement in June 1997 to settle the
Centocor Litigation. In June 1997, the Court entered an order preliminarily
approving the settlement agreement, and the Court scheduled a hearing for
September 4, 1997 to determine whether the proposed settlement should be
approved. In determining the fairness of the Offer, the Board based its
determination of the value of its former CPIII interest on the assumption that
the terms of the proposed settlement of the Centocor Litigation would be
approved and believes that the Offeror made its determination of value of such
CPIII interest based on the same assumption. Counsel to another limited partner
of CPIII, who has filed a complaint against Centocor similar to the
Partnership's complaint, has stated that he intends to object to the proposed
settlement. In addition, an entity named Pharmaceutical Partners II, L.P., which
the Partnership believes was formerly, but is no longer, affiliated with the
Offeror, has also indicated its intention to object to the proposed settlement.
If the Court were to reject the
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proposed settlement, the Partnership cannot predict what actions, if any, the
Offeror may take in response thereto.
(c) Factors Considered by the Board
The Board's determination that the Offer is financially inadequate
and its recommendation that the Limited Partners reject the Offer and not tender
their Units to the Offeror in the Offer are based on a number of factors
including, but not limited to, the following:
1. The General Partner's knowledge of and experience with (i)
the Partnership's business, assets, financial condition and future prospects,
including the terms of the proposed settlement of the Centocor Litigation and
(ii) the value of assets of other entities with assets similar to those of the
Partnership.
2. The opinion of management of PWDC and the Manager that the
Offer is financially inadequate. In response to the Offer, management undertook
a valuation of each of the Partnership's assets, relying generally on the
knowledge and experience described above and, with respect to assets of the
Partnership (including the amounts payable to the Partnership under the proposed
settlement of the Centocor Litigation) whose value is dependent on third-party
product sales, relying on sales projections for such products prepared by Wall
Street and other industry analysts not affiliated with the Partnership. In
addition, in valuing certain assets, management relied on non-public information
furnished to it by the sponsor companies pursuant to confidentiality agreements.
Based on the foregoing, management concluded that a reasonable range of values
for the Partnership's assets on a per Unit basis to be $5,555 to $6,965, making
the Offer a discounted amount of 35% to 48% of such range of values. Management
noted, however, that in arriving at such range of values, it was generally
required to rely on confidential and non-public information provided by sponsor
companies and to make certain assumptions regarding product sales, timing of
regulatory approvals, competitive products and general company conditions, many
of which assumptions are based on factors beyond the control of the General
Partner, the Partnership or any of its affiliates. It is possible that the
actual value of the Partnership's assets may be significantly more or less than
indicated, and management, the General Partner and the Partnership are unable to
provide any assurance that the actual value that may be realized by the
Partnership or any Limited Partner would be as indicated by such range of
values.
In the Offer, the Offeror stated that the price being
offered by it for the Units "is greater than the $29 million valuation of the
Partnership prepared by the General Partner in July 1996 for ERISA purposes. In
addition, since the date of the General Partner's valuation, the Partnership has
distributed approximately $7.7 million in cash." The valuation referred to in
the Offer is a
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valuation prepared by the General Partner for ERISA purposes as of December 31,
1995. The General Partner elected to report "price not available" for the Units
for ERISA purposes as of December 31, 1996 because at that time the parties had
not yet entered into a settlement agreement with respect to the Centocor
Litigation. The General Partner believes that a reasonable current range of
value for the Partnership's assets is as set forth above.
3. The General Partner's belief that in order for the Offeror
to realize any significant return on its investment, the Offeror is required to
purchase the Units at a substantial discount from fair market value. The General
Partner bases this belief on the passive nature of the assets held by the
Partnership, which consist primarily of product royalty rights whose value is
derived from product sales and whose value cannot be affected by the holder of
the royalty right.
4. The General Partner's commitment to protecting the
interests of the Limited Partners. Neither the General Partner nor any of its
affiliates currently receives any fees or other economic benefit from the
Partnership, and the General Partner is making its recommendation to the Limited
Partners not to tender their Units in the Offer based solely on its commitment
to protect the interests of the Limited Partners. (See Item 3(b)(i).)
5. The fact that the General Partner is in the process of
winding-up its operations, which it anticipates will be substantially completed
within the next several years, and that the Limited Partners should receive
substantial value in connection therewith, including a pro rata distribution of
the proceeds of the proposed settlement of the Centocor Litigation, which
distribution may be in the form of cash or other property.
The Board of Directors did not assign relative weights to the
foregoing factors or determine that any factor was of particular importance.
Rather, the Board arrived at its position and recommendation based on the
totality of the information presented to and considered by it.
Item 5. Persons Retained, Employed or to be Compensated
Neither the Partnership nor any person acting on its behalf has
employed, retained or compensated any other person to make solicitations or
recommendations to Limited Partners in connection with the Offer.
Item 6. Recent Transactions and Intent with Respect to Securities
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(a) There have been no transactions in the Units during the past 60
days by the Partnership or, to the best of the Partnership's knowledge, by any
executive officer, director, affiliate or subsidiary of the Partnership.
(b) To the best of the Partnership's knowledge, none of its
executive officers, directors, affiliates or subsidiaries currently intends to
tender, pursuant to the Offer, any Units held of record or beneficially owned by
such persons.
Item 7. Certain Negotiations and Transactions by the Subject
Company
(a) The Partnership is not currently engaged in any negotiation in
response to the Offer which relates to or would result in (i) an extraordinary
transaction, such as a merger or reorganization, involving the Partnership; (ii)
a purchase, sale or transfer of a material amount of assets by the Partnership;
(iii) a tender offer for or other acquisition of securities by or of the
Partnership; or (iv) any material change in the present capitalization or
distribution policy of the Partnership.
(b) There are no transactions, board resolutions, agreements in
principle or signed contracts in response to the Offer which relate to or would
result in one or more of the matters referred to in paragraph (a) of this Item
7.
Item 8. Additional Information to be Furnished
Pursuant to the Partnership's Agreement of Limited
Partnership, the General Partner cannot in any event consent to any transfer of
Units which would result in a termination of the Partnership for federal income
tax purposes. Such a termination results from a sale or exchange of 50% or more
of the Units within a 12- month period. During the 12-month period preceding the
date of the Offer, 0.53% of the outstanding Units were sold or exchanged. As a
result, the General Partner cannot consent to any sale of Units in the Offer
aggregating more than 4,084.5 Units, or 49.47% of the outstanding Units.
Item 9. Material to be Filed as Exhibits
Exhibit 1. Letter, dated August 19, 1997, from the General Partner
to the Limited Partners, concerning the Offer (included with the Schedule 14D-9)
Exhibit 2. Letter, dated August 19, 1997, to PaineWebber Investment
Executives
Exhibit 3. Confidentiality Agreement
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Exhibit 4. List Undertaking
Exhibit 5. CISP
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SIGNATURE
After reasonable inquiry and to the best of its knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
PAINEWEBBER R&D PARTNERS II, L.P.
By: PaineWebber Technologies II, L.P.,
its general partner
By: PWDC Holding Company
its general partner
By:/s/Dhananjay M. Pai
-------------------
Name: Dhananjay M. Pai
Title: President
Dated: August 19, 1997
1
August 19, 1997
TO: The Limited Partners of PaineWebber R&D Partners II, L.P.
An entity by the name of BioRoyalties, L.L.C. ("BRLLC" or the "Offeror")
has made an offer to purchase any and all Limited Partner units ("Units") in
PaineWebber R&D Partners II, L.P. ("R&D II" or the "Partnership") at a purchase
price per Unit of $3,650, net to the seller in cash. This price will be
automatically reduced by the aggregate amount of any cash or asset distributions
made or declared by the Partnership on or after June 30, 1997 (distributions
since June 30, 1997 to date have totaled $50 per Unit). BRLLC's offer commenced
without the endorsement or approval of the general partner of R&D II (the
"General Partner"). BRLLC is not an affiliate of R&D II, its General Partner or
PaineWebber Incorporated.
THE GENERAL PARTNER BELIEVES BRLLC's OFFER OF $3,650 PER UNIT (AS ADJUSTED
AS DESCRIBED ABOVE) TO BE FINANCIALLY INADEQUATE AND RECOMMENDS THAT LIMITED
PARTNERS NOT TENDER THEIR UNITS TO BRLLC IN THE OFFER.
As described in the attached Schedule 14D-9 prepared by the General
Partner, which we urge you to read in its entirety, as a Limited Partner, you
should be aware of and consider the following:
|X| The General Partner believes BRLLC's offer of $3,650 per Unit (as
adjusted in the manner described above) to be financially
inadequate. The General Partner estimates a reasonable range of
value of the assets underlying the Units, as described in the
attached Schedule 14D-9, to be $5,555 to $6,965.
|X| The General Partner believes that in order for the Offeror to
realize any significant return on its investment, the Offeror is
required to purchase your Units at a substantial discount from fair
market value (based on the above- stated range of values, the offer
represents between a 35% to 48% discount). The General Partner bases
this belief on the passive nature of the assets held by the
Partnership, which consist primarily of product royalty rights whose
value is derived from product sales and whose value cannot be
affected by the holder of the royalty right.
|X| Neither the General Partner nor any of its affiliates currently
receives any fees or other economic benefit from the Partnership,
and the General Partner is making its recommendation to the Limited
Partners not to tender their Units to BRLLC based solely on its
commitment to protect the interests of the Limited Partners.
<PAGE>
The Offeror states that its reason for making the Offer is it believes
"that the Units represent an attractive investment at the price offered." Most
of the principals of BRLLC are former employees of PaineWebber Development
Corporation ("PWDC"), an affiliate of the Partnership, including Mr. Stephen
Evans-Freke, who were involved in identifying and selecting the Partnership's
investments; accordingly, they are familiar with and understand the value of the
Partnership's assets.
You may be hearing directly from BRLLC regarding their tender offer. You
have a right not to be bothered or harassed by them, and BRLLC has agreed with
the General Partner to respect your privacy. Please contact PWDC's Investor
Services Group if you feel that BRLLC is not abiding by its commitment, or if
you would prefer that they not solicit you directly.
Each Unit represents an original investment of $10,000. To date, Limited
Partners have received cash distributions of $2,516 and distributions of
securities totaling $7,205 per Unit, as valued on the date of distribution.
The Units were intended to be a long-term investment. The Units are
illiquid, so there is no efficient trading market for your Units. There is a
limited secondary market for the Units, but the prices which may be realized by
a seller in such market are generally significantly discounted from the values
of the assets underlying such Units and have historically been and may be lower
than the price BRLLC is offering. Before making a decision with regard to
BRLLC's offer, please review the matters disclosed in the attached Schedule
14D-9 filed by the Partnership with the Securities and Exchange Commission, and
please consult with your tax advisor regarding the possible sale of your Units.
For the reasons set forth in this letter and in the Schedule 14D-9, we
recommend that you not tender your Units in the BRLLC offer. If you have already
tendered your Units to BRLLC and wish to change your mind, you may withdraw them
by following the procedure of withdrawal as described in BRLLC's offer
materials.
If you have any further questions, please contact PaineWebber Development
Corporation Investor Services at 1-800-852-6570.
Sincerely,
PaineWebber Development Corporation,
on behalf of the General Partner
cc: Investment Executive
To: Investment Executives with clients in PaineWebber
R&D Partners II, L.P.
From: PaineWebber Development Corporation
Re: Notice of Offer to Purchase Limited Partnership Units
of PaineWebber R&D Partners II, L.P. (the "Partnership")
Date: August 19, 1997
BioRoyalties, L.L.C. ("BRLLC") has commenced a tender offer to purchase any and
all outstanding limited partner units of the Partnership at a price of $3,650
per Unit, net to the seller in cash (each Unit representing an original
investment of $10,000). This price will be automatically reduced by the
aggregate amount of any cash or asset distribution made or declared by the
Partnership on or after June 30, 1997 (distributions since June 30, 1997 to date
have totaled $50 per Unit). BRLLC is not an affiliate of the Partnership, its
general partner (the "General Partner") or PaineWebber Incorporated. The offer
was commenced without the endorsement or approval of the General Partner.
THE GENERAL PARTNER BELIEVES BRLLC'S OFFER TO BE FINANCIALLY INADEQUATE AND
RECOMMENDS THAT LIMITED PARTNERS REJECT THE OFFER.
For your information, we are enclosing a copy of our letter to the limited
partners and the Schedule 14D-9 prepared by the General Partner in response to
the tender offer.
Please note that BRLLC is not authorized to solicit directly any PaineWebber
Investment Executive (unless such executive is also a limited partner), make any
in- person presentations or visit any PaineWebber offices. If you are contacted
directly by a representative of BRLLC, please contact us as soon as possible.
If you have any questions, please call PaineWebber Development Investor Services
at 1-800-852-6570.
Enclosure
Pharmaceutical Partners, LLC
May 13, 1997
Page 1
Exhibit 3
PaineWebber R&D Partners II, LP
May 13, 1997
Pharmaceutical Partners, LLC
70 East 55th Street
New York, NY 10022
Attn: Pablo Legorreta
David Madden
CONFIDENTIALITY AGREEMENT
Gentlemen:
In connection with your consideration of a possible transaction with
PaineWebber R&D Partners II, L.P., a Delaware limited partnership (the
"Partnership"), the Partnership, either directly or through its financial
advisor PaineWebber Development Corporation ("PaineWebber"), is prepared to make
available to you certain information concerning the Partnership's litigation
with Centocor. As a condition to such information being furnished to you and
your members, officers, employees, agents or advisors (including, without
limitation, attorneys, accountants, consultants, bankers and financial advisors)
(collectively, "Representatives"), you agree to treat any such information which
is furnished to you or to your Representatives now or in the future by or on
behalf of the Partnership (herein collectively referred to as the "Evaluation
Material") in accordance with the provisions of this letter agreement. The
Partnership agrees that you have not requested, and the Partnership will not
provide, any information not related to the Centocor litigation.
The term "Evaluation Material" also shall be deemed to include all notes,
analyses, compilations, studies, interpretations or other documents prepared by
you or your Representatives which contain or are based upon, in whole or in
part, the information furnished to you or your Representatives pursuant hereto.
The term "Evaluation Material" does not include information which (i) is or
becomes generally available to the public other than as a result of disclosure
by you or your Representatives, (ii) was within your possession prior to its
being furnished to you by or on behalf of the Partnership, provided that the
source of such information was not
<PAGE>
Pharmaceutical Partners, LLC
May 13, 1997
Page 2
known by you to be bound by a confidentiality agreement with the Partnership
with respect to such information, (iii) becomes available to you on a
non-confidential basis from a source other than the Partnership or any of its
Representatives, provided that such source is not known by you to be bound by a
confidentiality agreement with the Partnership with respect to such information
or (iv) is or was independently developed by you without using the Evaluation
Material.
You hereby agree that you and your Representatives shall use the
Evaluation Material solely for the purpose of evaluating a possible transaction
between the Partnership and you, that, subject to the terms of this agreement,
the Evaluation Material will be kept confidential and that you and your
Representatives will not disclose any of the Evaluation Material in any manner
whatsoever; provided that (i) you may make any disclosure of such information to
which the Partnership gives its prior written consent and (ii) any of such
information may be disclosed to your Representatives who need to know such
information for the sole purpose of evaluating a possible transaction with the
Partnership. You shall be responsible for any breach of this letter agreement by
any of your Representatives.
In addition, you agree that, without the prior written consent of the
Partnership, you and your Representatives will not disclose to any other person
the fact that the Evaluation Material has been made available to you, that
discussions or negotiations are taking place concerning a possible transaction
involving the Partnership or any of the terms, conditions or other facts with
respect thereto (including the status thereof), provided that you may make such
disclosure if you have received advice in writing from your outside counsel that
such disclosure is required by law and not as a result of your actions. The term
"person" as used in this letter agreement shall be broadly interpreted to
include the media and any corporation, partnership, group, individual or other
entity.
In the event that you or any of your Representatives are requested or
required (by oral questions, interrogatories, requests for information or
documents in legal proceedings, arbitration, subpoena, civil investigative
demand or other similar process) to disclose (i) any of the Evaluation Material,
(ii) the fact that the Evaluation Material has been made available to you, (iii)
that discussions or negotiations are taking place concerning a possible
transaction involving the Partnership, or (iv) any of the terms or conditions or
other facts with respect thereto, you shall provide the Partnership with written
notice of any such request or requirement so that the Partnership may seek a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this letter agreement. If, in the absence of a protective order or
other remedy or the receipt of a waiver by the Partnership, you or any of your
Representatives are nonetheless, upon the advice of your outside counsel,
legally required to disclose Evaluation Material or other information described
in clauses (ii) through (iv) of the preceding sentence (the "Required
Information"), you or your
<PAGE>
Pharmaceutical Partners, LLC
May 13, 1997
Page 3
Representatives may, without liability hereunder, disclose to only that portion
of the Required Information which such counsel advises you is legally required
to be disclosed.
<PAGE>
Pharmaceutical Partners, LLC
May 13, 1997
Page 4
If you decide that you do not wish to proceed with a transaction with the
Partnership, you will promptly inform the Partnership of that decision. In that
case, or at any time upon the request of the Partnership for any reason, you
will promptly destroy or deliver to the Partnership all Evaluation Material (and
all copies thereof) furnished to you or your Representatives by or on behalf of
the Partnership. In the event of such a decision or request, all other
Evaluation Material prepared by you or your Representatives shall be destroyed
and no copy thereof shall be retained.
You understand and acknowledge that neither the Partnership nor any of its
Representatives (including without limitation PaineWebber and any of the
Partnership's partners, employees and agents) makes any representation or
warranty, express or implied, as to the accuracy or completeness of the
Evaluation Material except as may be set forth in a definitive agreement. You
agree that neither the Partnership nor any of its Representatives (including
without limitation PaineWebber and any of the Partnership's partners, employees
and agents) shall have any liability to you or to any of your Representatives
relating to our resulting from the use of the Evaluation Material or any errors
therein or omissions therefrom. Only those representations or warranties which
are made in a final definitive agreement regarding any transactions contemplated
hereby, when, as and if executed, and subject to such limitations and
restrictions as may be specified therein, will have any legal effect.
You agree that, until the earlier of (a) public disclosure by the
Partnership or Centocor of the effectiveness of any settlement of the Centocor
litigation or (b) August 15, 1997, unless specifically invited in writing by the
Partnership, neither you nor any of your affiliates (as such term is defined
under the Securities Exchange Act of 1934, as amended (the "1934 Act")) or
Representatives will in any manner, directly or indirectly, (a) effect or seek,
offer or propose (whether publicly or otherwise) to effect, cause or participate
in or in any way assist any other person to effect or seek, offer or propose
(whether publicly or otherwise) to effect or participate in, (i) any acquisition
of any securities (or beneficial ownership thereof) or assets of the Partnership
or any of its subsidiaries; (ii) any tender or exchange offer, merger or other
business combination involving the Partnership or any of its subsidiaries; (iii)
any recapitalization, restructuring, liquidation, dissolution or other
extraordinary transaction with respect to the Partnership or any of its
subsidiaries; or (iv) any "solicitation" or "proxies" (as such terms are used in
the proxy rules of the Securities and Exchange Commission) or consent to vote
any voting securities of the Partnership; (b) form, join or in any way
participate in a "group" (as defined under the 1934 Act); (c) otherwise act,
alone or in concert with others, to seek to control or influence the management,
Board of Directors or policies of the Partnership; (d) take any action which
might force the Partnership to make a pubic announcement regarding any of the
types of matters set forth in (a) above; or (e) enter into any discussions or
arrangements with any third party with respect to any of the foregoing. You also
agree during such period not to request the Partnership (or its directors,
officers, employees or agents), directly or indirectly, to amend or waive any
provision of this paragraph (including this sentence). In addition, you hereby
acknowledge that
<PAGE>
Pharmaceutical Partners, LLC
May 13, 1997
Page 5
you are aware and that your Representatives have been advised that the United
States securities laws prohibit any person who has material non-public
information about an issuer from purchasing or selling securities of such
issuer.
You understand and agree that no contract or agreement providing for any
transaction involving the Partnership shall be deemed to exist between you and
the Partnership unless and until a final definitive agreement has been executed
and delivered, and you hereby waive in advance any claims (including, without
limitation, breach of contract) in connection with any transaction involving the
Partnership unless and until you and the Partnership shall have entered into a
final definitive agreement. You also agree that unless and until a final
definitive agreement regarding a transaction between the Partnership and you has
been executed and delivered, neither the Partnership nor you will be under any
legal obligation of any kind whatsoever with respect to such a transaction by
virtue of this letter agreement except for the matters specifically agreed to
herein. You further acknowledge and agree that the Partnership reserves the
right, in its sole discretion, to reject any and all proposals made by you or
any of your Representatives with regard to a transaction between the Partnership
and you, and to terminate discussions and negotiations with you at any time.
Neither this paragraph nor any other provision in this agreement can be waived
or amended except by written consent of the Partnership, which consent shall
specifically refer to this paragraph (or such provision) and explicitly make
such waiver or amendment.
It is understood and agreed that no failure or delay by the Partnership in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
future exercise thereof or the exercise of any other right, power or privilege
hereunder.
It is further understood and agreed that money damages would not be a
sufficient remedy for any breach of this letter agreement by you or any of your
Representatives and that the Partnership shall be entitled to equitable relief,
including injunction and specific performance, as a remedy for any such breach.
Such remedies shall not be deemed to be the exclusive remedies for a breach by
you of this letter agreement but shall be in addition to all other remedies
available at law or equity to the Partnership.
This letter agreement is for the benefit of the Partnership and shall be
governed by and construed in accordance with the laws of the State of New York.
This letter agreement shall expire on the earliest of (i) the effective date of
settlement of the Centocor litigation or (ii) August 15, 1997.
<PAGE>
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned, whereupon this letter agreement
shall become a binding agreement between you and the Partnership.
Very truly yours,
PAINEWEBBER R&D PARTNERS II, LP
BY PAINEWEBBER TECHNOLOGIES II, LP
its General Partner
BY PAINEWEBBER DEVELOPMENT
CORPORATION, its General Partner
By /s/ Dhananjay Pai
----------------------------
Name: Dhananjay Pai
Title: President
Accepted and agreed as of the date first written above:
PHARMACEUTICAL PARTNERS, LLC
By /s/ D. Madden
--------------------------
Name: D. Madden
Title:Managing Member
1
Exhibit 4
PHARMACEUTICAL PARTNERS, L.L.C.
July 23, 1997
PaineWebber Technologies ll, L.P.
c/o PaineWebber Development Corporation
1285 Avenue of the Americas
New York, NY 10023
Attention: Rick McCormick
Dear Rick:
Further to our letter dated October 22nd, 1996, Pharmaceutical Partners, LLC
("PPLLC") is requesting use of the list of the names and addresses (the "List")
of the limited partners in PaineWebber R&D Partners II, L.P. ("R&D Partners
II"). PPLLC and two funds it manages, Pharmaceutical Royalties, LLC and
Pharmaceutical Royalty Investments Ltd. are limited partners in R&D Partners II.
The purpose of the request for the List is to increase such investment in R&D
Partners II through a tender offer, and PPLLC agrees to use the List for no
other purpose.
In support of PPLLC's request for the List, we, Pablo Legorreta and Dave Madden,
on penalty of perjury affirm that we, acting on behalf of PPLLC, have authority
to give, and do hereby give, the following assurances:
1. PPLLC will hold the List in strict confidence, and will not give any
information derived from the List to any third party for any purpose
whatsoever, except that PPLLC may provide the List to any information or
other agent retained to act on PPLLC's behalf in connection with the
tender offer so long as such information or other agent is advised of the
confidential nature of the List and agrees to use such List solely in
connection with the proposed tender offer (it being understood that PPLLC
shall be responsible for any breach of this undertaking by such
information or other agent).
2. PPLLC will reimburse R&D Partners II for costs incurred in connection with
the request and for the List, including confirming compliance with these
undertakings (it being understood that such costs will not exceed $5,000
in the aggregate except in the case of breach by PPLLC of its obligations
pursuant to these undertakings).
<PAGE>
2
3. PPLLC will submit to the jurisdiction of the courts of the State of
Delaware in any dispute arising in connection with this request for the
List and hereby appoints and will maintain RL & F Service Corp., One
Rodney Square, Tenth Floor, Wilmington, New Castle County, Delaware 19801
as its agent in the State of Delaware for acceptance of legal process in
connection with any such action.
4. PPLLC will comply fully with the requirements of the Securities and
Exchange Act of 1934 and the rules of the Securities and Exchange
Commission thereunder, including full disclosure of all material facts
and, in the case of any tender offer, rights of proration and withdrawal
rights, irrespective of the number of units sought to be acquired in such
tender offer.
5. PPLLC acknowledges that Section 8.03(a)(iii) provides that, prior to the
transfer of any limited partnership interest in the Partnership, the
General Partner shall have consented in writing to the assignment, which
consent may be withheld in the absolute discretion of the General Partner.
Accordingly, PPLLC acknowledges that the General Partner may withhold
consent if, among other reasons, the General Partner concludes, based upon
the advice of counsel, that such acquisition would increase the risk of
adverse tax consequences to the Partnership or its partners. In the event
the General Partner withholds its consent for any number of units sought
to be purchased, PPLLC will refrain from acquiring interests or units of
the number so withheld.
6. PPLLC is acting on behalf of itself, certain accounts it manages and two
funds under management, namely Pharmaceutical Royalties, LLC and
Pharmaceutical Royalty Investments Ltd., and not on behalf of any other
third party.
7. PPLLC undertakes not to solicit directly, and will instruct its
information and other agents not to solicit directly, any PaineWebber
broker with respect to the tender offer. However, if a PaineWebber broker
contacts PPLLC or its information agent, either may provide such person
with the same information as is provided to any other person who contacts
PPLLC or its information agent with respect to the tender offer. This
undertaking excludes any PaineWebber broker who holds an interest who is
contacted in the normal course because he or she is an investor.
8. PPLLC undertakes not to make any in-person presentations to any
PaineWebber brokers or to visit PaineWebber offices with a view to meeting
with brokers. PPLLC will similarly instruct its information and other
agents.
<PAGE>
9. Within 30 days after the completion of the tender offer, PPLLC agrees to
return the Lists, including any and all copies of such lists and any
related summary material, together with any other materials provided by
R&D Partners II.
10. Any solicitation of limited partners that will be undertaken by PPLLC or
its information or other agents will be conducted in a professional and
reasonable manner which will respect the privacy and rights of limited
partners.
11. Provision of the List pursuant to this letter shall be deemed to
constitute compliance by R&D Partners II and its General Partner of their
obligations pursuant to Rule 14d-5 under the Securities Exchange Act of
1934, and PPLLC shall comply with the provisions of Rule 14d-5(f)(4) of
the Act.
We trust that these undertakings will satisfy your concerns regarding the
proposed offer.
Very truly yours,
Pharmaceutical Partners, LLC
By: /s/ Pablo Legoretta
------------------------
Name: Pablo Legoretta
Title: Managing Member
By: /s/ Dave Madden
------------------------
Name: Dave Madden
Title: Managing Member
1
Exhibit 5
PAINEWEBBER DEVELOPMENT CORPORATION
REVISED CARRIED INTEREST PLAN
1 Purpose. This Plan is intended to provide an incentive to key employees of
PaineWebber Development Corporation ("PWDC") and members of its Advisory Board.
PWDC shall award to Participants Incentive Shares representing in aggregate 42%
of the Cash Distributions and Warrants in respect of Public Partnerships and in
aggregate 15% of the Cash Distributions and Warrants in respect of Private
Partnerships. Key employees of PWDC and members of the Advisory Board shall be
eligible to participate in the Plan. Capitalized terms are defined in Exhibit I.
2. Allocations. (a) Allocations of Incentive Shares will be made by the
Chairman of the Board of PWDC based on recommendations by the President of PWDC
and subject to the approval of the Director of Human Resources of PaineWebber.
Such allocations will be awarded promptly following the final closing of each
Partnership.
(b) The Incentive Shares awarded to a Participant pursuant to Section 2(a)
may be increased from time to time to the extent that unallocated Cash
Distributions and Warrants exist.
(c) Prior to the end of the vesting period for each Partnership, Cash
Distributions and Warrants not yet allocated shall be allocated according to
Section 2(a); provided that if such allocations are not made within twenty days
of the end of the vesting period, such allocations shall be made pro rata to the
Account of each Participant who has not died or become Disabled. The
Participant's pro rata portion shall equal that proportion which the Incentive
Share already awarded to the Participant bears to the Incentive Shares awarded
to all other Participants in respect of that Partnership (excluding any
Participant who has died or become Disabled).
3. Vesting. (a) One-sixth of any Incentive Share shall vest for each Year
of Service for Partnerships with an Effective Date in 1990 or 1991.
(b) For Partnerships with a Effective Date in 1992 or later, one-seventh
of the Cash Distribution portion of any Incentive Share and one-sixth of the
Warrant portion of any Incentive Share shall vest for each Year of Service.
(c) In the event that a Participant's Incentive Share with respect to a
Partnership is increased under Sections 2(b-c), the vesting period for the newly
allocated Incentive Share shall match that of the Participant's original
allocation.
(d) If a Participant shall die or become Disabled after the Effective
Date, he or his beneficiary shall become 100% vested in his Incentive Shares and
shall be entitled to receive all distributions of the amounts in his Account
pursuant to Section 4(a).
4. Distribution from Accounts. (a) Following the end of each calendar
quarter,PWDC shall distribute the vested portions of the Incentive Shares
credited to each Participant's account during such quarter plus the increase in
the vested portions, if any, of the Incentive Shares credited to each
Participant's Account and not previously
<PAGE>
2
distributed. Participants shall not be allowed to defer distributions.
(b) The amounts of the Cash Distributions available for distribution to
Participants' Accounts shall be calculated, as long as the Plan is in existence
and in respect of each Partnership individually, as 42% PWDC's general
partnership interest in each Public Partnership on the Effective Date of such
Partnership, and as 15% of PWDC's Class B partnership interest in each Private
Partnership on the Effective Date of such Partnership.
(c) The Board may make special distributions to a Participant from his
Account upon a showing by that Participant of a hardship arising from causes
beyond his control.
5. Termination. (a) Upon a Participant's Termination Date, the Participant shall
forfeit to PWDC any Incentive Shares awarded to him in which he is not vested.
The vested percentage of the cash portion of the Participant's Incentive Share
shall continue to be credited to his Account, and shall be distributed to him
pursuant to Section 4(a). Vested Warrants which have not yet been distributed
shall be distributed upon a Participant's termination.
(b) If a Participant is terminated for Cause, the Participant shall
forfeit to PWDC the unvested cash portion of his Incentive Share, all vested and
unvested Warrants previously undistributed and any balance in his Account, all
as of his Termination Date.
6. Administration. (a) The Plan shall be administered by the Board. The
Chairman of the Board is authorized, subject to the provisions of the Plan, in
his discretion and upon recommendations put forth by the President of PWDC, to
grant awards of Incentive Shares under the Plan; to establish, modify, or
rescind such rules and regulations as he deems necessary for the proper
administration of the Plan; and to make such determinations and interpretations
and to take such steps in connection with the Plan or the awards of Incentive
Shares granted thereunder as he deems necessary or advisable.
(b) PWDC shall indemnify and hold harmless each of the members of the
Board acting in good faith from and against any loss, liability, cost or expense
arising from the performance of their duties under the Plan.
(c) Subject to approval by the Board, reasonable legal and other costs
associated with the administration of the Plan (including costs incurred in the
collection of distributions) will be reimbursed by the Plan.
7. Accounts. (a) The vested and unvested amounts of each Participant's
Incentive Share shall be credited to the Participant's Account.
(b) Each Account shall constitute only a bookkeeping account for the
purpose of computing the benefits to which such Participant may become entitled
under the Plan, and the Participant's interest in his benefits under the Plan
shall be only that of an unsecured creditor of PWDC. No assets of PWDC shall in
any way be held in trust for, or be subject to, any prior claim by any
Participant.
(c) Incentive Shares shall be evidenced by allocation letters
substantially in the form as that found in Exhibit II (see attached).
<PAGE>
3
8. Effective Date; Amendments. (a) The Plan shall be effective
(in perpetuity untilterminated by the Board) with respect to all Partnerships
having an Effective Date after October 1, 1990.
(b) The Board may amend, modify or terminate the Plan; provided, however
that without the consent of the affected Participants no amendment, modification
or termination shall reduce a Participant's rights in respect of his allocated
Incentive Shares.
9. Miscellaneous. (a) Cash received in respect of PWDC's (i) general partnership
interest in each Publish Partnership and (ii) Class B limited partnership
interest in each Private Partnership shall become distributable as a Cash
Distribution only when and to the extent that the aggregate amount of cash so
received by PaineWebber in respect of each such interest exceeds the amount of
cash contributed by PaineWebber to each Partnership in exchange for PWDC's right
to such interest
(b) No interest of any Participant (or his beneficiary) shall be
transferred, assigned, pledged, anticipated or alienated by the Participant (or
his beneficiary) in any manner (except by will or the laws of descent and
distribution) nor shall it be subject to attachment, bankruptcy proceedings or
to any other legal process or the interference or control of creditors of the
Participant (or any beneficiary); provided, however that PWDC may offset any
amounts payable by such Participant to PaineWebber from any amount due to a
Participant (or his beneficiary) under the Plan.
(c) Each Participant may designate any person or legal entity as his
beneficiary to receive the amounts in his Account upon his death.
(d) PWDC shall be entitled to deduct and withhold from all payments from
any Account all Federal, state and local income, employment, or withholding
taxes required to be deducted or withheld. For any terminated employee, all tax
obligations will be paid by the employee prior to the distribution of the
terminated employee's vested Incentive Share.
(e) Nothing contained in the Plan shall be construed as a contract of
employment between PaineWebber and any Participant, or as creating a right of
any Participant to be retained in the employ of, or as a consultant to,
PaineWebber or as a member of the Advisory Board or as a limitation on the right
of PaineWebber to discharge any Participant with or without Cause.
(f) PWDC shall have no fiduciary duty to any Participant to (i) cause any
distributions to be made by any Partnership or (ii) exercise its judgment as to
the time of any distributions from the Partnership. PWDC shall not have any
obligation to any Participant to maximize the amount of Cash Distributions or
Warrants from any Partnership.
(g) This plan shall be governed by, and construed in accordance with, the
laws of the State of New York.
(h) This Plan shall replace the PWDC Carried Interest Sharing Plan with
respect to Partnerships whose Effective Date is after October 1, 1990.
<PAGE>
EXHIBIT I: DEFINED TERMS
(a) "Account" shall mean the bookkeeping account established for each
Participant in respect of his Incentive Shares.
(b) "Advisory Board" shall mean the Advisory Board of PWDC.
(c) "Board" shall mean the Board of Directors of PWDC.
(d) "Cash Distributions" shall mean the money or property (other than Warrants)
distributed to PWDC in respect of PWDC's general partnership interests in Public
Partnerships or of PWDC's Class B limited partnership interest in Private
Partnerships. Amounts paid to PWDC as compensation, sales commissions, project
fees, annual management fees or other similar payments shall not constitute Cash
Distributions.
(e) "Cause" shall mean the Participant's being charged by any governmental
authority or administrative tribunal with (i) any crime or offense involving
money or other property of PaineWebber or a Partnership, or any customer or
client of PaineWebber or a Partnership, (ii) any crime or offense involving
securities or transactions effected on any organized securities exchange or
(iii) any other crime that, if the Participant were convicted of it, would
constitute a felony if committed in the State of New York or in the jurisdiction
in which any elements of the crime were committed.
(f) "Disabled" shall mean any medically determinable physical or mental
impairment which precludes engaging in any substantial gainful activity and
which is expected to last for a continuous period of not less than twelve months
or to result in death.
(g) "Effective Date" shall mean, with respect to any Public Partnership, the
date of the first prospectus, and in the case of any Private Partnership the
date of the first private placement memorandum.
(h) "Incentive Share" shall meanthat percentage of the Cash Distributions and
Warrants awarded to each Participant.
(i) "PaineWebber" shall mean Paine Webber Group Inc. and any corporation more
than 50% of whose voting power or value at the time of reference is owned,
directly or indirectly, by Paine Webber Group Inc.
(j) "Participant" shall mean an eligible person who has been selected to receive
an award of an Incentive Share.
(k) "Partnership" shall mean any partnership, trust
or investment company (as defined in the Investment Company Act of 1940) which
is originated or managed by PWDC.
(l) "Plan" shall mean this Revised Carried Interest Plan as described herein and
as amended from time to time.
(m) "Private Partnership" shall mean any Partnership not registered with the
Securities and Exchange Commission.
(n) "Public Partnership" shall mean any Partnership registered with the
Securities and Exchange Commission.
(o) "Termination Date"
shall mean the date on which a Participant ceases to be an employee of PWDC or
PaineWebber or a member of the Advisory Board.
(p) "Warrants" shall mean the
warrants, options or other similar property distributed to PWDC by a
Partnership.
(q) "Year of Service" shall mean each consecutive twelve month period beginning
on the later of (i) the Effective Date and (ii) the date the Participant becomes
an employee of PWDC or the date of his election to the Advisory Board, and
ending on his Termination Date. In the event that any person becomes an employee
of PWDC or is appointed to the Advisory Board within six months of the Effective
Date, such person shall be treated as if his Year of Service began on the
Effective Date.
