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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
PAINEWEBBER R&D PARTNERS II, L.P.
(Name of subject company)
BIOROYALTIES, L.L.C.
PHARMACEUTICAL ROYALTIES, L.L.C.
PHARMACEUTICAL ROYALTY INVESTMENTS LTD.
(Bidder)
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of class of securities)
695922 20 3
(CUSIP Number)
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PABLO LEGORRETA, DAVE MADDEN
BIOROYALTIES, L.L.C.
70 E. 55th St., 23rd Floor
New York, NY 10022
(800) 600-1450
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COPIES TO:
F. GEORGE DAVITT, ESQ.
TESTA, HURWITZ & THIBEAULT, LLP
HIGH STREET TOWER
125 HIGH STREET
BOSTON, MA 02110
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CALCULATION OF FILING FEE
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Transaction Valuation* Amount of Filing Fee
$30,138,050 $6,028
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
* Estimated for purposes of calculating the amount of the filing fee only. The
amount assumes the purchase of 8,257 units of limited partnership interest
(the "Units") of the subject company at $3,650 per Unit in cash.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount Previously Paid: None Filing Party: Not Applicable
Form or Registration No: Not Date Filed: Not Applicable
Applicable
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
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This Tender Offer Statement on Schedule 14D-1 is filed by BioRoyalties,
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"), relating to the offer by Purchaser to purchase outstanding Units of
Limited Partnership Interest (the "Units"), of PaineWebber R&D Partners II,
L.P. (the "Partnership"), a Delaware limited partnership, at $3,650 per Unit,
net to the seller in cash, on the terms and subject to the conditions set
forth in the Offer to Purchase, dated August 15, 1997 (the "Offer to
Purchase"), and in the related Letter of Transmittal and any amendments or
supplements thereto, copies of which are attached hereto as Exhibits (a)(1)
and (a)(2), respectively (which collectively constitute the "Offer").
ITEM 1. SECURITY AND SUBJECT COMPANY
(a) The name of the subject company is PaineWebber R&D Partners II,
L.P., a Delaware limited partnership. The address of the Partnership's
principal executive office is 1285 Avenue of the Americas, New York, NY 10019.
(b) The information set forth on the cover page and under "Introduction"
in the Offer to Purchase is incorporated herein by reference.
(c) The information set forth in Section 6 of the Offer to Purchase is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND
(a)-(d), (g) This Statement is filed by the Purchaser and the Funds.
The information set forth on the cover page, under "Introduction" in Section
9, and in Schedule I of the Offer to Purchase is incorporated herein by
reference.
(e)-(f) During the last five years, neither Purchaser, the Funds or, to
their knowledge, any of the persons listed in Schedule I to the Offer to
Purchase, (i) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) has been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and
as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS, OR NEGOTIATIONS WITH THE SUBJECT COMPANY
(a) The information set forth in Section 11 of the Offer to Purchase is
incorporated herein by reference.
(b) The information set forth under "Introduction" and in Sections 9, 11
and 12 of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a) The information set forth in Section 10 of the Offer to Purchase is
incorporated herein by reference.
(b)-(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER
(a)-(e) The information set forth in Section 12 of the Offer to Purchase
is incorporated herein by reference.
(f)-(g) The information set forth in Section 7 of the Offer to Purchase
is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
(a)-(b) The information set forth under "Introduction" and in Sections
9, 11 and 12 of the Offer to Purchase is incorporated herein by reference.
<PAGE>
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE SUBJECT COMPANY'S SECURITIES
The information set forth under "Introduction" and in Sections 9, 11 and
12 of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The information set forth under "Introduction" and in Section 16 of the
Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
(a) The information set forth under "Introduction" and in Sections 11
and 12 of the Offer to Purchase is incorporated herein by reference.
(b)(c) and (e) The information set forth in Section 15 of the Offer to
Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 of the Offer to Purchase is
incorporated herein by reference.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and
(a)(2), respectively, is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
(a)(1) Offer to Purchase dated August 15, 1997.
(a)(2) Letter of Transmittal and Instructions.
(a)(3) Cover letter from BioRoyalties, L.L.C.
(b)(c)(d) None.
(e) Not applicable.
(f) None.
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SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
Dated: August 15, 1997 BIOROYALTIES, L.L.C.
By: /s/ David Madden
-------------------------------------
Title: Managing Member of Pharmaceutical
Partners, L.L.C., the Manager
----------------------------------
PHARMACEUTICAL ROYALTIES, L.L.C.
By: /s/ Pablo Legorreta
-------------------------------------
Title: Managing Member of Pharmaceutical
Partners, L.L.C., the Manager
----------------------------------
PHARMACEUTICAL ROYALTY
INVESTMENTS LTD.
By: /s/ Pablo Legorreta
-------------------------------------
Title: Managing Member of Pharmaceutical
Partners, L.L.C., the Manager
----------------------------------
3
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
(a)(1) Offer to Purchase dated August 15, 1997
(a)(2) Letter of Transmittal and Instructions
(a)(3) Cover letter from BioRoyalties, L.L.C.
<PAGE>
EXHIBIT (a)(1)
<PAGE>
OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING UNITS OF LIMITED PARTNERSHIP INTEREST
OF
PAINEWEBBER R&D PARTNERS II, L.P.
AT
$3,650 NET PER UNIT
BY
BIOROYALTIES, L.L.C.
BioRoyalties, 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 any and
all 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 $3,650 (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 June 30, 1997 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 beneficial owners of Units (each a "Holder").
---------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME ON SEPTEMBER 12, 1997, 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, IN
ITS SOLE 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 IT AND/OR ITS 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.
<PAGE>
---------------
IMPORTANT
Any Holder wishing to tender all or a portion of his or her Units should
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 and the
Instructions attached to the Letter of Transmittal.
There is no established trading market for the Units. The Purchase Price
has been established by the Purchaser, in its sole 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 in the Instructions attached to the Letter of Transmittal and 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.
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2
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TABLE OF CONTENTS
PAGE
----
INTRODUCTION............................................................. 4
1. TERMS OF THE OFFER................................................... 6
2. PRORATION; ACCEPTANCE FOR PAYMENT AND PAYMENT........................ 7
3. PROCEDURE FOR TENDERING UNITS........................................ 8
4. WITHDRAWAL RIGHTS.................................................... 9
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER................. 10
6. PRICE RANGE OF THE UNITS............................................. 12
7. EFFECT OF THE OFFER ON EXCHANGE ACT REGISTRATION..................... 13
8. CERTAIN INFORMATION CONCERNING THE PARTNERSHIP....................... 13
9. CERTAIN INFORMATION CONCERNING PURCHASER............................. 17
10. SOURCE AND AMOUNT OF FUNDS........................................... 18
11. BACKGROUND OF THE OFFER.............................................. 18
12. PURPOSE OF THE OFFER; PLANS FOR THE PARTNERSHIP...................... 19
13. DISTRIBUTIONS TO LIMITED PARTNERS.................................... 20
14. CERTAIN CONDITIONS OF THE OFFER...................................... 20
15. CERTAIN LEGAL MATTERS................................................ 22
16. FEES AND EXPENSES.................................................... 22
17. MISCELLANEOUS........................................................ 23
SCHEDULE I............................................................... 1
3
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To Holders of Units of Limited Partnership Interest in PaineWebber R&D
Partners II, L.P.:
INTRODUCTION
BioRoyalties, 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 any and all
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 $3,650, 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 June 30, 1997 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 beneficial owners of Units (each a "Holder").
The Purchaser and the Funds are making this Offer because the Funds
believe that the Units represent an attractive investment at the price offered.
There can be no assurance, however, that this belief is correct and, as a
result, ownership of Units (either by the Purchaser, the Funds or Holders who
retain their Units) remains a speculative investment. The Funds are acquiring
the Units for investment purposes and do not currently intend to make any
effort to change the management or operations of the Partnership and have 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, in its sole 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 it,
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 this Offer to Purchase. See
Sections 2 and 14.
According to a Quarterly Report on Form 10-Q for the quarter ended June
30, 1997 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, except transfer taxes, if applicable, on the purchase of Units
pursuant to the Offer. Purchaser will pay all charges and expenses of The
Herman Group, as the depositary (the "Depositary") and information agent (the
"Information Agent") incurred in connection with the Offer. See Section 16.
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
4
<PAGE>
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 June 30, 1997, each Holder had received
cumulative distributions of $9,722 per $10,000 Unit, consisting of cash
distributions of $2,516 and in kind distributions (stock and warrants) valued
at $7,206 at the time of distribution. See Section 13.
From time to time during the past 6 months, the Purchaser has discussed
with the General Partner the possibility of purchasing for cash all of the
remaining assets of the Partnership. On March 26, 1997, the Purchaser made an
offer to the General Partner to acquire all of the assets of the Partnership
for $23 million in cash (equivalent to $2,785 per Unit). On June 9, 1997,
following the Partnership's agreement to settle pending litigation with
Centocor, the Purchaser made an offer to the General Partner to acquire all of
the assets of the Partnership for $29 million in cash (equivalent to $3,500 per
Unit). The General Partner declined both offers. As a result of its inability
to negotiate the purchase of all of the assets of the Partnership, the
Purchaser has made the Offer directly to each Holder in order that such Holder
can decide whether to tender his or her Units at the Purchase Price.
A Holder may wish to tender Units for a number of reasons:
- - LIQUIDITY OPPORTUNITY. 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). 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 Partnership's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996 (the "Partnership 10-K") "there is no
established trading market for the limited partnership interests, and no
such market is expected to develop."
- - PURCHASE PRICE GREATER THAN GENERAL PARTNER'S JULY 1996 VALUATION FOR
ERISA PURPOSES. The aggregate Purchase Price 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.
- - PREMIUM TO HISTORICAL PRICES. The Purchase Price represents a premium of
46% to the most recent and highest selling price ($2,500 per Unit) of a
Unit traded on the Chicago Partnership Board or in any other transaction
of which Purchaser is aware.
- - POTENTIAL TAX BENEFIT, ENHANCED BY CHANGE IN CAPITAL GAIN RATES TO 20%.
Each holder is generally taxable on his or her allocable share of
Partnership profits, a portion of which are ordinary income. Ordinary
income is taxed to individuals at rates of up to 39.6%. A portion of the
gain resulting from the sale of a Unit should be taxed to non-corporate
Holders at capital gain rates (currently 20% for most individuals
disposing of capital assets held more than 18 months), possibly resulting
in tax savings. In addition, the sale of a Unit may enable a Holder to
use previously disallowed passive loss carryforwards, accelerating their
recognition. THE PURCHASER IS NOT EXPRESSING AN OPINION AS TO THE TAX
CONSEQUENCES OF TENDERING UNITS. Holders are strongly advised to consult
their tax advisors with respect to the tax consequences of accepting the
Offer.
- - RESOLUTION OF LITIGATION. On June 6, 1997, Centocor and the Partnership
reached an agreement to settle a dispute over payments owed to investors
in Centocor Partners III, L.P. The settlement is subject to court
approval, for which a hearing is scheduled on September 4, 1997. If
approved, the agreement would result in one-time cash payments per Unit
of approximately $420 in 1997, $280 in 1998, and $95 if and when ReoPro
is approved for marketing in Japan. The Partnership is also entitled to
receive payments based on the sales of ReoPro over the next 10 years,
which have been revised under the settlement agreement. The Purchaser
has considered the value of these payments in determining the Purchase
Price.
5
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- - SIMPLIFIED TAX RETURNS. The Offer may be attractive to certain Holders
who wish in the future to avoid the expenses, delays and complications of
filing complex income tax returns resulting from Form K-1s necessitated
by ownership of Units.
- - VALUE DEPENDENT ON ONE PRODUCT. The Purchaser believes that a
substantial portion of the value of the Partnership is attributable to
the right to receive cash payments based on the future sales of ReoPro.
There are at least four other products having a mechanism of action
similar to that of ReoPro that are in clinical development for the same
or similar indications. There can be no assurance that the sales of
ReoPro will not be adversely affected by these products.
- - POSSIBLE REGULATORY ISSUES. The Partnership's Centocor CPRs may be
considered securities under the Investment Company Act of 1940 (the
"Act"). As a result, the Partnership will need to determine whether it
is subject to the Act and possible implications for its future business
strategy. One possible way to avoid issues that might arise under the
Act is to distribute the CPRs. In a partnership with similar investments,
PaineWebber R&D Partners, L.P., the partnership distributed to its
limited partners securities similar to the CPRs. If the General Partner
were to distribute to each Holder his or her PRO RATA share of CPRs,
each Holder would receive an asset for which there is not likely to be a
market, and for which the value depends exclusively on the sales of a
single pharmaceutical product over a 10 year period. The Purchaser
believes that if this strategy were pursued it would negatively impact
the ability of a Holder to maximize the value of his or her interest.
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
September 12, 1997, 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(c)(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.
Following the expiration of the Offer or if the Offer is not consummated,
the Purchaser and the Funds 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.
6
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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 the number of Units validly tendered (and not properly withdrawn) on or
before the Expiration Date is greater than the number (the "Number of Valid
Units") for which Purchaser is satisfied, in its sole discretion, that it
and/or its nominee will have all of the rights of a limited partner, the
Purchaser will accept for payment (and thereby purchase) only the Number of
Valid Units. The Purchaser will acquire the Number of Valid Units PRO RATA to
the number of Units validly tendered (and not properly withdrawn) on or before
the Expiration Date, with appropriate adjustments to avoid purchases in
fractions of other than half Units. If the number of Units validly tendered
(and not properly withdrawn) on or before the Expiration Date is not greater
than the Number of Valid Units, Purchaser will purchase all Units validly
tendered (and not properly withdrawn) on or before the Expiration Date, upon
the terms and subject to the conditions of the Offer.
In the event that proration is required as a result of the General
Partner's limiting transfers, Purchaser may not be able to announce the final
results of such proration until at least ten business days after the Expiration
Date. Subject to the Purchaser's obligation under Rule 14e-1(c) under the
Exchange Act to pay Holders the Purchase Price in respect of Units tendered or
return those Units promptly after the termination or withdrawal of the Offer,
the Purchaser does not intend to pay for any Units accepted for payment
pursuant to the Offer until the final proration results are known and it has
received notice from the Partnership or its transfer agent that the Units are
eligible for transfer to the Purchaser.
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) and subject to the foregoing paragraphs, 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 after the later to occur of: (i) the Expiration Date and (ii) the date
of satisfaction or waiver of all the conditions to the Offer set forth in this
Offer to Purchase. Subject to the applicable rules of the Commission,
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 manually signed facsimile thereof), properly completed and duly
executed with a Medallion signature guarantee 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.
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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
Depositary, 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 Depositary 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
Depositary 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, as well as any
charges and expenses of the Depositary and the Information 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 a Medallion signature guarantee 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.
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 2 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 2 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
8
<PAGE>
transfer agent for the Units, and a Letter of Transmittal (or a manually
signed facsimile), properly completed and duly executed, with a Medallion
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 sole 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. 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 sole
discretion may deem proper, including, 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 absolute 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 October 14, 1997. 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
9
<PAGE>
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
it address set forth on the back cover of 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 sole 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 Holder'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 investment companies or Holders that do not hold
Units as 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
10
<PAGE>
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 using 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.
The Taxpayer Relief Act of 1997 (HR 2014) (the "Act"), enacted into law on
August 5, 1997, generally reduces the maximum rate of tax on net capital gain
for individuals, estates and trusts from 28% to 20% (in addition, the Act
provides for additional rate reductions on gains attributable to dispositions
of certain property for the taxable years beginning after December 31, 2000).
However, for sales or exchanges of capital assets after July 28, 1997, the 20%
rate applies only to gains attributable to such assets that were held for more
than 18 months. The maximum rate of 20% does not apply to gain on the sale of
collectibles and to certain other gain. The 28% rate continues to apply to
gains attributable to sales or exchanges of capital assets held for more than
one year but not more than 18 months. 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.
EFFECT OF PASSIVE LOSS RULES. Under Section 469 of the Code, a non-
corporate taxpayer 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 closely held corporations may not offset
such losses against so-called "portfolio" income. Provided that a Holder is
subject to the passive activity loss rules in connection with the ownership of
Units, a Holder with "suspended" passive activity losses generally should 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 certain other limitations).
If a Holder does not sell all of his or her Units, the passive activity loss
limitations would continue to apply until the Holder disposes of all of his or
her 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 or she provides a taxpayer identification number ("TIN") and
certifies that the TIN is correct or properly certifies that he or she 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.
11
<PAGE>
POSSIBLE LEGISLATIVE TAX CHANGES. There have been a number of proposals
made in Congress and by the Treasury Department and other government agencies
for changes in the federal income tax laws. In addition, the Internal Revenue
Service has proposed and may still be considering changes in regulations and
procedures. It is likely that further proposals will be forthcoming or that
previous proposals will be revived in some form in the future. It is
impossible to predict with any degree of certainty what past proposals may be
revived or what new proposals may be forthcoming, the likelihood of adoption of
any such proposals, the likely effect of any such proposals upon investment in
the Partnership or upon the sale of Units, or the effective date of any
legislation which may derive from any such past or future proposals. Holders
are strongly urged to consider ongoing developments in this uncertain area.
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, 1996 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 trades in certain limited partnership
interests, for the twelve months ended May 31, 1997, 29.5 Units traded at per
Unit prices between $580 and $2,301 with a weighted average of $1,215 per Unit.
The most recent issue of the Partnership Spectrum (May/June, 1997) indicates
that 3.0 Units traded in the period April 1, 1997 through May 31, 1997 at
between $2,200 and $2,301.38 per Unit, with a weighted average of $2,267.58 per
Unit.
Trading Activity for the Twelve-Month Period Ended May 31, 1997
<TABLE>
Weighted Low Price/ Number of Number Total
Average Price High Price Units Traded of Trades Volume
------------- ------------- ------------ --------- ------
<S> <C> <C> <C> <C> <C>
June 1, 1996 - July 31, 1996 $ 669 $ 580/$770 8.5 9.0 $ 5,683
August 1, 1996 - September 30, 1996 $ 706 $ 670/$755 3.5 5.0 $ 2,473
October 1, 1996 - November 30, 1996 $1,234 $ 657/$1,840 10.0 9.0 $12,342
December 1, 1996 - January 31, 1997 $1,395 $1,040/$1,920 2.0 3.0 $ 2,790
February 1, 1997 - March 31, 1997 $2,300 $2,300/$2,300 2.5 1.0 $ 5,750
April 1, 1997 - May 31, 1997 $2,268 $2,200/$2,301 3.0 2.0 $ 6,803
</TABLE>
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, trades 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 information. Not all trades
are reported in the Partnership Spectrum.
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
12
<PAGE>
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 with a total of $72 million available for
investment. 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 either terminated or are near termination.
On January 31, 1997, pursuant to the provisions of the Partnership
Purchase Option Agreement between Centocor and each limited partner, Centocor
exercised its option to purchase the limited partnership interests of Centocor
Partners III, L.P. ("CPIII"), including those owned by the Partnership. The
Partnership received a one-time payment of $3,325,000 and will receive future
payments based on sales of certain products developed by CPIII. In June 1997,
the Partnership and Centocor entered into an agreement to settle litigation
initiated by the Partnership in July 1995. The settlement agreement provides
for, among other things, the method by which the payments to former limited
partners of CPIII will be made and for future cash payments to such former
limited partners to be made upon and after the effective date of the settlement
if certain events occur. The settlement agreement will be reviewed at a
hearing scheduled for September 4, 1997, at which time it will be approved or
not. Upon request, a copy of the settlement agreement as filed with the court
will be provided by the Purchaser or the Information Agent.
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
13
<PAGE>
distributions have been made to the Partnership. Genzyme Development
Corporation II, the general partner of GDP, has indicated that no cash
distributions will be made to its limited partners in 1997. Genzyme has an
option to purchase the outstanding partnership interests in GDP for a
lump-sum cash payment and certain future royalty payments.
The Partnership owns approximately 11% of the Class A limited partnership
interests in Synergen Clinical Partners, L.P. ("SCP"). In 1991, Synergen
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 "Johnson Action"). The complaint sought damages
on behalf of a class including limited partners of SCP and limited partners of
the Partnership. In February 1997, the parties announced a proposed settlement
of the Johnson Action, pursuant to which the defendants would pay $14,550,000,
less attorney's fees and costs, to class members, (of which approximately 11%
would go to the Partnership) and the limited partners' interests in SCP would
be terminated. The settlement is conditioned on, among other things, the
approval of two-thirds of the current limited partnership interests in SCP and
final court approval. The General Partner has concluded that the proposed
settlement is inadequate and not in the best interests of the Partnership.
Accordingly, the General Partner, on behalf of the Partnership, has opposed the
proposed settlement. On June 19, 1997 the parties and the General Partner
advised the court that they had reached an agreement in principal to supplement
the proposed settlement and to resolve the Partnership's objection. The
agreement was subject to final documentation. The court ordered that such
documentation be filed by July 3, 1997. On July 3, the parties informed the
court that they had been unable to reach agreement on final documentation.
In addition to these investments, as of June 30, 1997, the Partnership
held cash, marketable securities, and warrants in the amounts indicated in the
abstracted portion of the Partnership 10-Q outlined below.
Market Value
At 6/30/97
------------
Cash $1,052,821
Centocor stock
2,800 shares 86,975
Cygnus warrant
255,000 shares at $9.90 1,874,252
Cayenne Software, Inc. warrant
193,000 shares at $16.19 -- (1)
----------
Total 3,014,048
----------
----------
-----------------------
(1) Expired in June 1997.
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
14
<PAGE>
documents should be available for inspection and copies should be obtainable
in the manner set forth below under "Available Information."
Selected Statements of Operations
(unaudited)
<TABLE>
6 Months
ended For the Years ended December 31,
June 30, -----------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991
------------- -------- ---------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $6,337,549(1) $583,230 $7,133,197 $10,743,055 $8,957,023 $ 1,759,829 $ 3,283,164
Net Income 6,219,793 226,748 6,431,753 9,385,257 1,429,144 (9,317,951) (14,703,417)
Net Income (loss) per Unit
Limited Partners $ 746(2) $ 27 $ 771 $ 1,125 $ 171 $ (1,116) $ (1,763)
General Partner 62,198 2,267 64,318 93,853 14,291 (101,832) (147,034)
</TABLE>
- --------------------
(1) 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.
(2) Includes $520 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.
15
<PAGE>
Statements of Operations
(unaudited)
Six Months Ended
June 30,
-------------------
1997 1996
---- ----
Revenues:
Interest Income $ 56,322 $ 21,111
Income from product development project 5,053,100(1) 205,487
Unrealized (depreciation) appreciation
of investments and marketable securities 688,127 (1,955,300)
Gain on sale of investment 540,000 (53,421)
---------- ------------
$6,337,549 ($1,782,123)
Expenses:
Expenditures under product development projects 20,483 --
Management fee -- 137,010
General and administrative costs 97,273 103,328
---------- ------------
$117,756 $ 240,338
---------- ------------
Net income (loss) $6,219,793 ($2,022,461)
---------- ------------
---------- ------------
Net income (loss) per unit
Limited partner $746(2) ($242)
General partner 62,198 (20,224)
- --------------------
(1) 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.
(2) Includes $520 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.
Selected Statements of Financial Condition
(unaudited)
For the Periods Ended
--------------------------------
June 30, 1997 December 31, 1996
------------- -----------------
Assets
Cash $ 6,998 $ 5,028
Marketable securities, at market value 1,139,796 899,197
Investments, at fair value 1,874,252 1,633,000
Due from product development project 900,000 --
Advances to product development projects -- 135,519
Royalty income receivable 6,600 774,834
---------- ----------
Total Assets $3,927,646 $3,447,578
---------- ----------
---------- ----------
Liabilities and partners' capital
Due to product development project -- $ 297,000
Accrued liabilities 75,725 97,188
Partners' capital 3,851,921 3,053,390
---------- ----------
Total liabilities and partners' capital $3,927,646 $3,447,578
---------- ----------
---------- ----------
16
<PAGE>
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 450 Fifth Street,
N.W., Washington, D.C. 20549, and also should be available for inspection and
copying at the regional offices of the Commission located at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511; 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 450 Fifth Street, N.W., Washington, D.C.
20549. Such material can also be obtained at the office of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington,
D.C. 20006-1506. In addition, the Commission maintains a Web site
(http://www.sec.gov) 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 the
Purchaser and the Funds do not have any knowledge that any such information
is untrue, the Purchaser and the Funds take 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
BioRoyalties, 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. Units acquired by Pharmaceutical
Royalty Investments Ltd. pursuant to the Offer will be assigned to certain of
its subsidiaries. The Purchaser and the Funds are managed by Pharmaceutical
Partners, L.L.C. ("PPLLC"). The principal executive offices of PPLLC are
located at 70 East 55th Street, 23rd Floor, New York, NY 10022. PPLLC is the
sole member of the Purchaser. The name, business address, present principal
occupation or employment, five-year employment history and citizenship of
each member of PPLLC are set forth in Schedule I hereto.
Except as described in this Offer to Purchase, during the last five
years neither Purchaser, the Funds nor, to the best knowledge of Purchaser
and the Funds, any of the persons listed in Schedule I hereto (i) has been
convicted in a 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,
the Funds or, to the best knowledge of Purchaser and the Funds, 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, the Funds or, to the best knowledge of Purchaser and the Funds,
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,
the Funds or, to the best knowledge of Purchaser and the Funds, 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
17
<PAGE>
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, the Funds or any of their affiliates or, to
the best knowledge of Purchaser and the Funds, 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.
The following trades for 14.5 Units have been entered into by the
Purchaser, the Funds or their affiliates and are awaiting effective transfer
by the General Partner.
Trade Date Price per Unit Number of Units
----------------- -------------- ---------------
December 17, 1996 $1,580 0.50
March 31, 1997 $1,750 2.50
March 31, 1997 $1,750 0.50
March 31, 1997 $1,750 0.50
March 31, 1997 $1,750 0.50
March 31, 1997 $1,750 0.50
May 6, 1997 $2,301 2.00
July 9, 1997 $2,500 7.50
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 $30.5 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 of the Purchaser and
the Funds.
11. BACKGROUND OF THE OFFER
BioRoyalties, 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 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. After a
number of telephone calls to PaineWebber Development Corporation ("PWDC"),
the Manager of the Partnership, in which PPLLC was unable to schedule a
meeting to discuss its interest, on March 26, 1997, PPLLC made a written
offer to PWDC to acquire all of the assets of the Partnership for $23 million
in cash. PWDC did not respond to PPLLC's offer. 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 for
a period of time. As no announcement was made with respect to the litigation
18
<PAGE>
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 refused to 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.
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 the Offer.
12. PURPOSE OF THE OFFER; PLANS FOR THE PARTNERSHIP
The purpose of the Offer is to enable the Purchaser and the Funds to
acquire Units in the Partnership. The Purchaser and the Funds are making
this Offer because the Funds believe that the Units represent an attractive
investment at the price offered. There can be no assurance, however, that
this belief is correct and, as a result, ownership of Units (either by the
Purchaser, the Funds or Holders who retain their Units) remains a speculative
investment. The Funds are acquiring the Units for investment purposes and do
not currently intend to make any effort to change the management or
operations of the Partnership and have no current plans for any extraordinary
transaction regarding the Partnership. Following the completion of the
Offer, the Purchaser, the Funds and their affiliates may acquire additional
Units. Any such acquisition may be made through private purchases, through
one or more future tender offers or by
19
<PAGE>
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 and the Funds have 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.
13. DISTRIBUTIONS TO LIMITED PARTNERS
From inception through June 30, 1997, the Partnership distributed to its
limited partners $2,516 in cash and $7,206 in warrants and stock for total
distributions of $9,722 per Unit. Revenues received from Partnership
investments in the first quarter arose mostly from non-recurring distributions
from product development programs and liquidation of equity positions. During
the first six months of 1997, the Partnership received one-time payments
totaling $4,325,000 or $520 per Unit. Of this amount, the Partnership received
a one-time payment of $3,325,000, or approximately $400 per Unit, from its
investment in CPIII. The Partnership also received proceeds of $1,000,000, or
approximately $120 per Unit, from the sale of its warrant in OEC Medical
Systems, Inc.
<TABLE>
6 Months
For the Years ended December 31, ended Inception
----------------------------------------------------------- June 30, to June 30,
1987-89 1990 1991 1992 1993 1994 1995 1996 1997 1997
------- ---- ---- ---- ------ ---- ----- ---- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Distributions per Unit
Cash Distributions -- $100 $100 $650 $ 555 $ 50 $ 130 $281 $650 $2,516
Non-cash Distributions 3,695 -- -- 305 1,421 238 1,547 -- -- 7,206
------ ---- ---- ---- ------ ---- ------ ---- ---- ------
Total Distributions $3,695 $100 $100 $955 $1,976 $288 $1,677 $281 $650 $9,722
------ ---- ---- ---- ------ ---- ------ ---- ---- ------
------ ---- ---- ---- ------ ---- ------ ---- ---- ------
</TABLE>
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 applicable 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 (whether or not any Units have theretofore been
purchased or paid for) if, (i) Purchaser is not satisfied, in its sole
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, or (iii) at any time before acceptance
for payment of, or payment for, such Units 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,
20
<PAGE>
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 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 sole judgment 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 sole judgment of the Purchaser, has, or may have, materially adverse
significance with respect to the Partnership; or
(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.
21
<PAGE>
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 in its sole discretion. The failure
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 Hart-Scott-Rodino 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 The Herman Group to act as the Information Agent
and Depositary in connection with the Offer. The Herman Group will receive
reasonable and customary compensation for its services, will be reimbursed for
certain reasonable out-of-pocket expenses and will be indemnified against
22
<PAGE>
certain liabilities and expenses in connection therewith, including certain
liabilities under the federal securities laws.
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.
August 15, 1997
BIOROYALTIES, L.L.C.
PHARMACEUTICAL ROYALTIES, L.L.C.
PHARMACEUTICAL ROYALTY INVESTMENTS LTD.
23
<PAGE>
SCHEDULE I
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 and the Funds. The
Manager, Pharmaceutical Partners, L.L.C. is the sole member of the Purchaser.
The business address of each such person is 70 East 55th Street, 23rd Floor,
New York, NY, 10022. Unless otherwise indicated below, each person is a
citizen of the United States.
STEPHEN EVANS-FREKE, 45 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. Mr. Evans-Freke 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 Marion Merrell Dow in 1995. Prior to
founding SUGEN and Selectide, Mr. Evans-Freke 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. Mr. Evans-Freke received a degree in Law from Trinity College, University
of Cambridge, England in 1972. Mr. Evans-Freke is a British citizen.
PABLO LEGORRETA, 33 years old, is a Managing Member of PPLLC. Prior to
joining Pharmaceutical Partners in 1996, Mr. Legorreta was employed by Lazard
Freres in New York. Prior to joining Lazard Freres in 1991, Mr. Legorreta was
employed by the Lazard Houses in Paris, which he joined in 1988. Mr. Legorreta
earned a degree in Industrial Engineering from Universidad Iberoamericana in
Mexico City, Mexico, in 1985. Mr. Legorreta is a citizen of Mexico.
DAVID MADDEN, 34 years old, has been a Managing Member of PPLLC since
February 1997. Mr. Madden was most recently President, Chief Executive Officer
and Director of Selectide Corporation. Mr. Madden was employed by Selectide
from 1992 until the sale of the company to Marion Merrell Dow in 1995. Prior
to joining Selectide, Mr. Madden was a Vice President of PaineWebber
Development Corporation, which he joined in 1987 as an Associate. Mr. Madden
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.
RORY RIGGS, 44 years old, is a Managing Member of PPLLC. He currently
serves as President of Biomatrix Corporation, which he joined in 1986. Prior
to joining Biomatrix Corporation, Mr. Riggs was interim President and Chief
Executive Officer of the RF&P Corporation from 1991 through 1995. Mr. Riggs
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.
<PAGE>
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:
THE HERMAN GROUP
BY TELEPHONE: BY MAIL: BY FACSIMILE:
(800) 243-3399 2121 San Jacinto Street, 26th Floor (214) 999-9323
(214) 999-9393 Dallas, TX 75201 (214) 999-9348
THE PURCHASER IS:
BIOROYALTIES, L.L.C.
BY TELEPHONE: BY MAIL: BY FACSIMILE:
(800) 600-1450 70 East 55th Street, 23rd Floor (212) 751-9324
(212) 751-9300 New York, NY 10022 (212) 759-9157
BY E-MAIL:
[email protected]
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.
<PAGE>
Exhibit (a)(2)
<PAGE>
<TABLE>
LETTER OF TRANSMITTAL
TO
TENDER UNITS OF LIMITED PARTNERSHIP INTEREST
IN
PAINEWEBBER R&D PARTNERS II, L.P.
PURSUANT TO THE OFFER TO PURCHASE DATED AUGUST 15, 1997
BY
BIOROYALTIES, L.L.C.
NUMBER OF NUMBER OF(1) PURCHASE PRICE(2) TOTAL PURCHASE PRICE
UNITS OWNED UNITS TENDERED PER UNIT IF ALL UNITS TENDERED
----------- -------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
(1) If no indication is marked above, all Units held will be deemed to have been tendered.
(2) Reduced by the amount of any distributions made or declared by the Partnership after June 30, 1997.
</TABLE>
(PLEASE INDICATE CHANGES OR CORRECTIONS TO THE ADDRESS ABOVE, IF NECESSARY.)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT,
EASTERN TIME, ON SEPTEMBER 12, 1997 (THE "EXPIRATION DATE") UNLESS SUCH OFFER
IS EXTENDED.
The undersigned hereby tender(s) to BioRoyalties, L.L.C., a Delaware
limited liability company (the "Purchaser"), the number of units of limited
partnership interest ("Units") in PaineWebber R&D Partners II, L.P., a
Delaware limited partnership (the "Partnership"), specified above, pursuant
to the Purchaser's offer to purchase any and all of the 8,257 issued and
outstanding Units at a purchase price of $3,650 per Unit, net to the seller
in cash (the "Purchase Price"), without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated August 15,
1997 (the "Offer to Purchase") and this Letter of Transmittal (the "Letter of
Transmittal"), which, together with the Offer to Purchase and any
supplements, modifications or amendments thereto, constitute the Offer (the
"Offer"), all as more fully described in the Offer to Purchase. HOLDERS WHO
TENDER THEIR UNITS WILL NOT BE OBLIGATED TO PAY ANY COMMISSIONS OR
PARTNERSHIP TRANSFER FEES. Receipt of the Offer to Purchase is hereby
acknowledged. Capitalized terms used but not defined herein have the
respective meanings ascribed to them in the Offer to Purchase.
By executing and delivering this 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, 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 will 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 sole discretion may deem proper, including, 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 absolute 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.
Pursuant to such appointment as proxies and attorneys-in-fact, the
Purchaser and its designees each will have the power, among other things, (i)
to seek to transfer ownership of such Units on the books and records of the
Partnership (and execute and deliver any accompanying evidences of transfer
and authenticity any of them may deem necessary or appropriate in connection
therewith, including, without limitation, any documents or instruments
required to be executed under the Partnership Agreement or a "Transferor's
(Sellers) Application for Transfer" created by the NASD, if required), (ii)
upon receipt by the Information Agent/Depositary (as the tendering Holder's
agent) of the Purchase Price, to be allocated Tax Credits and tax losses and
to receive any and all distributions made or declared by the Partnership
after June 30, 1997 in respect of the Units tendered by such Holder and
accepted for payment by the Purchaser, regardless of the fact that the record
date for any such distribution may be a date prior to or after the Expiration
Date, (iii) the right to transfer or assign, in whole or from time to time in
part, to any third party, the right to purchase Units tendered pursuant to
the Offer, together with its rights under the Letter of Transmittal, but any
such transfer or assignment will not relieve the assigned party of its
obligations under the Offer or prejudice the right of tendering Holders to
receive payment for Units validly tendered and accepted for payment pursuant
to the Offer, and (iv) to execute and deliver to the Partnership, the General
Partner and/or designee (as the case may be) a change of address form
instructing the Partnership to send any and all future distributions to which
the Purchaser is entitled pursuant to the terms of the Offer in respect of
tendered Units to the address specified in such form and to endorse any check
payable to or upon the order of such Holder representing a distribution, if
any, to which the Purchaser is entitled pursuant to the terms of the Offer,
in each case on behalf of the tendering Holder. This power of attorney shall
not be affected by the subsequent mental disability of the Holder, and the
Purchaser shall not be required to post bond in any nature in connection with
this power of attorney. The Purchaser may assign such power of attorney to
any person with or without assigning the related Units with respect to which
such power of attorney was granted. If legal title to the Units is held
through an IRA or KEOGH or similar account, the Holder understands that this
Letter of Transmittal must be signed by the custodian of such IRA or KEOGH
account and the Holder hereby authorizes and directs the custodian of
such IRA or KEOGH to confirm this Letter of Transmittal.
By executing this Letter of Transmittal, the undersigned represents that
either (a) the undersigned is not a plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or Section 4975
of the Internal Revenue Code of 1986, as amended (the "Code), or an entity
deemed to hold "plan assets" within the meaning of 29 C.F.R. Section
2510.3-101 of any such plan; or (b) the tender and acceptance of Units
pursuant to the Offer will not result in a non-exempt prohibited transaction
under Section 406 of ERISA or Section 4975 of the Code.
(Continued on Reverse Side)
<PAGE>
<TABLE>
<S> <C>
By executing this Letter of Transmittal, the undersigned represents that this transfer has not been effected through an
established securities market or through a broker-dealer or matching agent which makes a market in Units or which provides a
widely available, regular and on-gong opportunity to the Holder of Units to sell or exchange their Units through a public means
of obtaining or providing information of offers to buy, sell or exchange Units.
The undersigned recognizes that if proration is required pursuant to the terms of the Offer, the Purchaser will accept for
payment from among those Units validly tendered and not properly withdrawn on or prior to the Expiration Date, the maximum number
of Units permitted pursuant to the Offer on a pro rata basis with adjustments to avoid purchases which would violate the terms of
the Offer, based upon the number of Units validly tendered prior to the Expiration Date and not properly withdrawn.
The undersigned understands that a tender of Units to the Purchaser will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of the Offer. The undersigned recognizes that under
certain circumstances set forth in Section 2 ("Proration: Acceptance for Payment for Units") and Section 14 ("Conditions of the
Offer") of the Offer to Purchase, the Purchaser may not be required to accept for payment any of the Units tendered hereby. In
such event, the undersigned understands that any Letter of Transmittal for Units not accepted for payment will be destroyed by
the Purchaser. Except as stated in Section 4 ("Withdrawal Rights") of the Offer to Purchaser, this tender is irrevocable,
provided Units tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date. The undersigned
acknowledges that (i) upon acceptance of, and payment for, tendered Units, the undersigned shall no longer be entitled to any
benefits as a Holder.
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
SIGNATURE BOX - MEDALLION GUARANTEE
- ---------------------------------------------------------------------------------------------------------------------------------
Please sign exactly as your name is printed on the front of THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT
this Letter of Transmittal. For joint owners, each joint TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE
owner must sign. All signatures must be Medallion Signature CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
Guaranteed by an Eligible Institution. (SEE INSTRUCTION 2.)
The signatory hereto hereby certifies under penalties of X
perjury that the address as printed or corrected on the --------------------------------------------------------------
front of this Letter of Transmittal and the Taxpayer (Signature of Holder) (Date)
Identification Number (i.e., the social security number)
furnished in the blank provided in this Signature Box is X
correct. The undersigned hereby represents and warrants for --------------------------------------------------------------
the benefit of the Partnership and the Purchaser that the Taxpayer Identification Number (See Instruction 4)
Holder owns the Units tendered hereby and has full power and
authority to validly tender, sell, assign, transfer, convey X
and deliver the Units tendered hereby and that when the same --------------------------------------------------------------
are accepted for payment by the Purchaser, the Purchaser (Signature of Co-Holder) (Date)
will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, charges, (Title)
encumbrances, conditional sales agreements or other ---------------------------------------------------------
obligations relating to the sale or transfer thereof, and
such Units will not be subject to any adverse claims, and Telephone (Day) ( ) Telephone (Eve) ( )
that the transfer and the assignment contemplated herein is ---------------- -----------------
in compliance with all applicable laws and regulations and
not in conflict with the Partnership Agreement. All MEDALLION GUARANTEE OF SIGNATURE (SEE INSTRUCTION 2)
authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned and any Name of Eligible Institution:
obligations of the undersigned shall be binding upon the ----------------------------------
heirs, personal representatives, successors and assigns of
the undersigned. Authorized Signature:
-------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
TAX CERTIFICATIONS
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
The person signing this Letter of Transmittal hereby certifies the following to the Purchaser under penalties of perjury:
(i) The Taxpayer Identification Number ("TIN") furnished in the space provided for that purpose in the Signature Box of this
Letter of Transmittal is the correct TIN of the Holder; or if this / / is checked, the Holder has applied for a TIN. If the
Holder has applied for a TIN, a TIN has not been issued to the Holder, and either: (a) the Holder has mailed or delivered an
application to receive a TIN to the appropriate Internal Revenue Service ("IRS") Center or Social Security Administration Office,
or (b) the Holder intends to mail or deliver an application in the near future, it is hereby understood that if the Holder does
not provide a TIN to the Purchaser within sixty (60) days 31% of all reportable payments made to the Holder thereafter will be
withheld until a TIN is provided to the Purchaser; and
(ii) Unless this box / / is checked, the Holder is not subject to backup withholding either because the Holder: (a) is exempt
from backup withholding, (b) has not been notified by the IRS that the Holder is subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) has been notified by the IRS that such Holder is no longer subject to backup
withholding.
Note: Place an "X" in the box in (ii) above, ONLY if you are unable to certify that the Holder is not subject to backup
withholding.
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
PLEASE CAREFULLY READ THE FOLLOWING INSTRUCTIONS FOR THIS LETTER OF TRANSMITTAL
FOR INFORMATION CALL (800) 243-3399
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT,
EASTERN TIME, ON SEPTEMBER 12, 1997 (THE "EXPIRATION DATE") UNLESS SUCH OFFER
IS EXTENDED.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1. DELIVERY OF LETTER OF TRANSMITTAL. For convenience in responding to the
Offer, a pre-addressed, postage-paid envelope has been enclosed with the
Offer to Purchase. HOWEVER, TO ENSURE RECEIPT OF THE LETTER OF TRANSMITTAL
IT IS SUGGESTED THAT YOU USE OVERNIGHT COURIER DELIVERY OR, IF THE LETTER
OF TRANSMITTAL IS TO BE DELIVERED BY UNITED STATES MAIL, THAT YOU USE
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED.
TENDER REQUIREMENTS. To be effective, a duly completed and signed
Letter of Transmittal, and any other required documents must be received by
the Information Agent/Depositary at the address set forth below before the
Expiration Date, unless extended. Letters of Transmittal which have been
duly executed, but where no indication is marked in the "No. of Units
Tendered" space, shall be deemed to have tendered all Units pursuant to the
Offer.
BY MAIL, COURIER OR THE HERMAN GROUP, INC.
HAND DELIVERY 2121 San Jacinto Street
26th Floor
Dallas, Texas 75201-9821
FOR ADDITIONAL INFORMATION CALL: (800) 243-3399
UNITS IN BROKERAGE ACCOUNT. All Units are registered in the records of
the Partnership in the name of the purchasing Holder (or Custodian for the
purchasing Holder, if a retirement account). IN ORDER TO ACCEPT THE OFFER
AND TENDER UNITS, THE LETTER OF TRANSMITTAL SHOULD BE COMPLETED ONLY BY THE
HOLDER(S) LISTED ON THE FRONT OF THE LETTER OF TRANSMITTAL AND RETURNED TO
THE INFORMATION AGENT/DEPOSITARY AT THE ADDRESS LISTED ABOVE. Therefore,
the Letter of Transmittal need not be submitted through a broker or
brokerage firm.
THE METHOD OF DELIVERY OF THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING HOLDER AND DELIVERY
WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE INFORMATION
AGENT/DEPOSITARY. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY.
2. SIGNATURE REQUIREMENTS.
INDIVIDUAL AND JOINT OWNERS. After carefully reading and completing the
Letter of Transmittal, in order to tender Units, Holders must sign at the
"X" in the SIGNATURE BOX of the Letter of Transmittal. The signature(s)
must correspond exactly with the name printed (or corrected) on the front
of the Letter of Transmittal, without any change whatsoever. IF ANY UNITS
ARE REGISTERED IN THE NAMES OF TWO OR MORE JOINT HOLDERS, ALL SUCH HOLDERS
MUST SIGN THE LETTER OF TRANSMITTAL.
CUSTODIANS, TRUSTEES, CORPORATIONS AND FIDUCIARIES. Custodian(s) and/or
trustee(s) (if the Units are held in an IRA, KEOGH, pension or similar
account), or executors, administrators, guardians, attorneys-in-fact,
officers of a corporation, authorized partner of a partnership or other
persons acting in a fiduciary or representative capacity must sign at the
"X" in the SIGNATURE BOX and must submit proper evidence satisfactory to
the Purchaser of their authority to so act. (See Instruction 3 herein).
MEDALLION SIGNATURE GUARANTEE. ALL SIGNATURES ON THE LETTER OF
TRANSMITTAL MUST BE MEDALLION GUARANTEED by a commercial bank, savings
bank, credit union, savings and loan association or trust company having
an office, branch or agency in the United States, a brokerage firm that is
a member firm of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc., which is 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").
3. DOCUMENTATION REQUIREMENTS. In addition to information required to be
completed on the Letter of Transmittal, additional documentation may be
required by the Purchaser under certain circumstances including, BUT NOT
LIMITED TO THOSE LISTED BELOW. Questions on documentation should be
directed to The Herman Group, Inc. at (800) 243-3399. Project
Administration Department. ALL SIGNATURES MUST BE MEDALLION GUARANTEED
(SEE INSTRUCTION 2).
DECEASED OWNER (JOINT TENANT) - Certified Copy of Death Certificate.
DECEASED OWNER (OTHERS) - Certified Copy of Death Certificate.
(SEE ALSO EXECUTOR/ADMINISTRATOR/GUARDIAN BELOW).
<PAGE>
EXECUTOR/ADMINISTRATOR/GUARDIAN - Certified Copies of Court Appointment
Documents for Executor or
Administrator dated within 60 days;
and
(i) A copy of applicable provisions
of the Will (Title Page, Executor(s)
powers, asset distribution);
OR
(ii) Certified copy of Estate
distribution documents.
ATTORNEY-IN-FACT - Current Power of Attorney.
CORPORATIONS/PARTNERSHIPS - Certified copy of Corporate
Resolution(s), (with raised corporate
seal), or other evidence of authority
to act. Partnerships should furnish
copy of Partnership Agreement.
TRUST/PENSIONS - Copy of cover page of the Trust or
Pension Plan, along with copy of the
section(s) setting forth names and
powers of Trustees(s) and any
amendments to such sections or
appointment of Successor Trustee(s).
4. TAX CERTIFICATIONS. Holders tendering Units to the Purchaser pursuant
to the Offer must certify correctness of the address as printed or
corrected on the front of the Letter of Transmittal and his, her or its
Taxpayer Identification Number ("TIN") as inserted in the Signature Box.
SUBSTITUTE FORM W-9.
PART (i), TAXPAYER IDENTIFICATION NUMBER - The persons signing this Letter
of Transmittal must provide to the Purchaser the Holder's correct TIN and
certify its correctness as inserted in the Signature Box, under penalties
of perjury. If a correct TIN is not provided, penalties may be imposed by
the Internal Revenue Service ("IRS"), in addition to the Holder's being
subject to Backup Withholding.
PART (ii), BACKUP WITHHOLDING - in order to avoid 31% federal income tax
Backup Withholding, the person signing this Letter of Transmittal must
certify, under penalties of perjury, that such Holder is not subject to
Backup Withholding. Certain Holders (including, among others, all
Corporations and certain exempt non-profit organizations) are not subject
to Backup Withholding. Backup Withholding is not an additional tax. If
withholding results in an overpayment of taxes, a refund may be obtained
from the IRS. DO NOT CHECK THE BOX IN THE SUBSTITUTE FORM W-9 PART (ii),
UNLESS YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP
WITHHOLDING.
When Determining the TIN to Be Furnished, Please Refer to the Following
NOTE as a Guideline:
INDIVIDUAL ACCOUNTS should reflect their own TIN. JOINT ACCOUNTS should
reflect the TIN of the person whose name appears first. TRUST ACCOUNTS
should reflect the TIN assigned to the Trust. IRA CUSTODIAL ACCOUNTS should
reflect the TIN of the custodian (not necessary to obtain). CUSTODIAL
ACCOUNTS FOR THE BENEFIT OF MINORS should reflect the TIN of the minor.
CORPORATIONS OR OTHER BUSINESS ENTITIES should reflect the TIN assigned to
that entity.
5. VALIDITY OF LETTER OF TRANSMITTAL. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of a Letter of
Transmittal will be determined by the Purchaser and such determination will
be final and binding. The Letter of Transmittal will not be valid until any
irregularities have been cured or waived. Neither the Purchaser nor The
Herman Group, Inc. is under any duty to give notification of defects in a
Letter of Transmittal and neither will incur liability for failure to give
such notification.
6. CONDITIONAL TENDERS. No alternative, conditional or contingent tenders
will be accepted.
7. ASSIGNEE STATUS. Assignees of Holders must provide documentation to the
Information Agent/Depositary which demonstrates, to the satisfaction of the
Purchaser, such person's status as an Assignee.
===========================================================================
EACH HOLDER IS URGED TO READ CAREFULLY THE ENTIRE OFFER TO PURCHASE,
THE LETTER OF TRANSMITTAL AND RELATED DOCUMENTS BEFORE MAKING A
DECISION TO TENDER.
===========================================================================
<PAGE>
Exhibit (a)(3)
<PAGE>
August 15, 1997
OFFER TO PURCHASE AT $3,650 PER UNIT IN CASH
Dear Limited Partner of PaineWebber R&D Partners II, L.P.:
BioRoyalties, L.L.C., a Delaware limited liability company (the "Purchaser"),
is offering to purchase from holders (each a "Holder") any and all of the 8,257
outstanding units of limited partnership interest (the "Units") in PaineWebber
R&D Partners II, L.P. (the "Partnership") at a cash purchase price of $3,650
per Unit (the "Purchase Price"). The terms and conditions of the offer are set
forth in the Offer to Purchase, which is enclosed with this letter. IT IS
IMPORTANT THAT YOU READ THE ENCLOSED MATERIAL CAREFULLY IN ORDER TO EVALUATE
THE OFFER.
From the inception of the Partnership in 1987 through the second quarter of
this year, Holders have received cumulative distributions totaling $9,722 per
Unit, of which $2,516 were in cash and $7,206 were in stock and warrants. The
Purchase Price, together with cumulative distributions to date, will enable a
Holder who purchased Units pursuant to the original offering in 1987 to recover
the remainder of his or her original $10,000 per Unit investment and realize a
$3,372 profit. In the alternative, a Holder may need to wait an additional 10-
12 years to realize the full value of the assets held by the Partnership.
Following are some important features of the Offer:
- - LIQUIDITY OPPORTUNITY. 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). 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 Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, "there is no established trading market for the limited
partnership interests, and no such market is expected to develop."
- - PURCHASE PRICE GREATER THAN GENERAL PARTNER'S JULY 1996 VALUATION FOR
ERISA PURPOSES. The aggregate Purchase Price 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.
- - PREMIUM TO HISTORICAL PRICES. The Purchase Price represents a premium of
46% to the most recent and highest selling price ($2,500 per Unit) of a
Unit traded on the Chicago Partnership Board or in any other transaction
of which Purchaser is aware.
- - POTENTIAL TAX BENEFIT, ENHANCED BY CHANGE IN CAPITAL GAIN RATES TO 20%.
Each holder is generally taxable on his or her allocable share of
Partnership profits, a portion of which are ordinary income. Ordinary
income is taxed to individuals at rates of up to 39.6%. A portion of the
gain resulting from the sale of a Unit should be taxed to non-corporate
Holders at capital gain rates (currently 20% for most individuals)
disposing of capital assets held more than 18 months, possibly resulting
in tax savings. In addition, the sale of a Unit may enable a Holder to
use previously disallowed passive loss carryforwards, accelerating their
recognition. THE PURCHASER IS NOT EXPRESSING AN OPINION AS TO THE TAX
CONSEQUENCES OF TENDERING UNITS. Holders are strongly advised to consult
their tax advisors with respect to the tax consequences of accepting the
Offer.
<PAGE>
- - RESOLUTION OF LITIGATION. On June 6, 1997, Centocor and the Partnership
reached an agreement to settle a dispute over payments owed to investors
in Centocor Partners III, L.P. The settlement is subject to court
approval, for which a hearing is scheduled on September 4, 1997. If
approved, the agreement would result in one-time cash payments per Unit of
approximately $420 in 1997, $280 in 1998, and $95 if and when ReoPro is
approved for marketing in Japan. The Partnership is also entitled to
receive payments based on the sales of ReoPro over the next 10 years,
which have been revised under the settlement agreement. The Purchaser has
considered the value of these payments in determining the Purchase Price.
- - SIMPLIFIED TAX RETURNS. The Offer may be attractive to certain Holders
who wish in the future to avoid the expenses, delays and complications of
filing complex income tax returns resulting from Form K-1s necessitated by
ownership of Units.
- - VALUE DEPENDENT ON ONE PRODUCT. The Purchaser believes that a substantial
portion of the value of the Partnership is attributable to the right to
receive cash payments based on the future sales of ReoPro. There are at
least four other products having a mechanism of action similar to that of
ReoPro that are in clinical development for the same or similar
indications. There can be no assurance that the sales of ReoPro will not
be adversely affected by these products.
- - POSSIBLE REGULATORY ISSUES. The Partnership's Centocor CPRs may be
considered securities under the Investment Company Act of 1940 (the
"Act"). As a result, the Partnership will need to determine whether it is
subject to the Act and possible implications for its future business
strategy. One possible way to avoid issues that might arise under the Act
is to distribute the CPRs. In a partnership with similar investments,
PaineWebber R&D Partners, L.P., the partnership distributed to its limited
partners securities similar to the CPRs. If the General Partner were to
distribute to each Holder his or her PRO RATA share of CPRs, each Holder
would receive an asset for which there is not likely to be a market, and
for which the value depends exclusively on the sales of a single
pharmaceutical product over a 10 year period. The Purchaser believes that
if this strategy were pursued it would negatively impact the ability of a
Holder to maximize the value of his or her interest.
In purchasing these Units, BioRoyalties is assuming the performance risk of
ReoPro over the next several years. The Purchaser is engaged in a long-term
investment program to create a diversified portfolio of assets that derive cash
flow from the sales of biotechnology and pharmaceutical drugs. The Purchaser's
financial structure and strategic plan are geared to address risk factors such
as illiquidity, single-product risk, competition, and other factors which
affect the value of assets such as those held by the Partnership, and its
financial returns are largely dependent on the success of its overall program,
rather than any individual investment.
Please review the enclosed Offer to Purchase carefully. As this Offer is
available for a limited period of time, we urge you to tender your Units
promptly by completing and signing page 2 of the Letter of Transmittal and
returning the Letter of Transmittal in the enclosed postage-paid envelope or by
facsimile to the information agent. The Offer will expire at 12:00 midnight,
New York City time, September 12, 1997.
If you have any questions or need assistance, please call the Herman Group at
(800) 243-3399, or call BioRoyalties, L.L.C. at (800) 600-1450.
Sincerely,
BioRoyalties, L.L.C.
