As filed with the Securities and Exchange Commission on April 26, 2000
================================================================================
SCHEDULE 14A
SCHEDULE 14A INFORMATION
CONSENT SOLICITATION STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
-----------------------------
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[X] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PAINEWEBBER R&D PARTNERS II, L.P.
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Units of Limited Partnership Interests ("Units")
(2) Aggregate number of securities to which transaction applies: 8257
Units
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: The filing fee of $6,372.24
has been calculated in accordance with Rule 0-11 under the
Exchange Act and is equal to 1/50 of 1% of $31,861,200 (the
aggregate amount of cash to be received by the Registrant).
(4) Proposed maximum aggregate value of transaction: $31,861,200
(5) Total fee paid: $6,372.24
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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Dear Limited Partner:
PaineWebber R&D Partners II, L.P. (the "Partnership") is presenting to
you for your consideration, and we recommend that you vote for, certain
significant proposals regarding the Partnership's assets. The Partnership
currently owns 22 Class A and 111 Class C Centocor Partners III L.P. Contractual
Payment Interests ("CPIs") paid by Centocor, Inc. ("Centocor") relating
primarily to the sale of ReoPro (a dual receptor glycoprotein IIB/IIIA
therapeutic manufactured by Centocor). PaineWebber Technologies II, L.P., the
general partner (the "General Partner") of the Partnership, believes it is in
the best interests of the Partnership to sell all of our CPIs and to make a
related amendment to our agreement of limited partnership dated as of May 15,
1987 (the "Partnership Agreement").
Enclosed is a Consent Solicitation Statement and related information
concerning the following proposals (the "Proposals"):
Proposal 1 -- to sell to Bioventure Investments, kft ("Bioventure") and
Pharmaceutical Royalties, LLC ("Pharma Royalties"), each of whom we have been
advised is an affiliate of Pharmaceutical Partners, LLC, 8.75 Class A and 40.75
Class C CPIs for approximately $16.4 million in cash (subject to adjustment
based on the amount of Centocor's payments prior to the closing of the sale)
and, if the Limited Partners' approve Proposal 3 below, distribute to Bioventure
and Pharma Royalties (the "Pharma Affiliates"), as the holders of 2,328 units of
limited partnership interest in the Partnership (the "Units"), 6.25 Class A and
31.25 Class C CPIs instead of a cash distribution valued at $12.5 million, which
represents the equivalent amount of the cash distribution Bioventure and Pharma
Royalties would have received as a result of the sales contemplated by this
Proposal 1 and Proposal 2 below;
Proposal 2 -- to sell to Drug Royalty USA, Inc. seven Class A and 39
Class C CPIs for approximately $15.4 million in cash (subject to adjustment
based on the amount of Centocor's payments prior to the closing of the sale);
and
Proposal 3 -- to amend the Partnership Agreement to provide that before
entering into any agreement to sell any of its assets, the Partnership will
notify any holder of five percent or more of the Units and any holder of five
percent or more of the Units may elect to receive, in kind, their proportionate
share of the assets to be sold instead of a cash distribution of the proceeds of
such sale.
It is important that you review the enclosed materials before deciding
on the Proposals, which you may vote "FOR" or "AGAINST."
We recommend that you vote "FOR" each of the proposals as we believe
they are in the best interest of the Partnership and the Limited Partners.
If each of the Proposals are approved by a majority of all Limited
Partners, and certain other conditions meet, the aggregate cash proceeds to the
Partnership will be $ (subject to reduction in an amount not less than $ ) or
$_____ per Unit.
Our General Partner has previously advised the Limited Partners that it
anticipates that the winding-up of our operations would be substantially
completed within the next several years, and that the Limited Partners should
receive substantial value from that. Proposals 1 and 2 will result in the
termination and winding-up of the Partnership. In connection with Proposals 1
and 2, Limited Partners should receive after we pay expenses incurred in
connection with the Proposals of approximately $________, a cash distribution of
approximately $________ per Unit distributed pursuant to the terms of the
Partnership Agreement. Subject to Limited Partner approval of Proposal 3, the
Pharma Affiliates, as holders of five percent or more of the Units, will receive
a distribution in kind of 6.25 Class A and 31.25 Class C CPIs instead of a cash
distribution.
It is important to note that Limited Partner approval of each of the
Proposals is necessary for the completion of the sale proposals since the
completion of each sale is conditioned on the completion of the other, and the
Pharma Affiliates will not complete Proposal 1 unless Proposal 3 is approved by
the Limited Partners.
The Partnership has been advised that, as of the Record Date, the
Pharma Affiliates collectively own and have the right to vote 2,328 Units which
represent approximately 28% of the outstanding Units. The Pharma Affiliates have
agreed to vote "FOR" each of the Proposals.
If you need any additional material or have questions regarding any of
the Proposals, please feel free to call us at (212) ________.
We urge you to give your consent immediately because your consent is
important in reaching a quorum and is necessary to have an effective vote on the
Proposals. You may vote by mailing the enclosed consent card in the enclosed
postage- paid envelope addressed to us or by faxing it to us at MAVRICC
Management Systems, Inc. at ____________.
Thank you very much.
PaineWebber Technologies II, L.P.,
General Partner
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TABLE OF CONTENTS
Page
AVAILABLE INFORMATION..........................................................1
SUMMARY........................................................................2
GENERAL................................................................2
PROPOSALS 1 AND 2 - THE SALE PROPOSALS.................................5
PROPOSAL 3-- THE DISTRIBUTION IN KIND AMENDMENT........................9
THE PARTNERSHIP...............................................................11
Background............................................................11
Partnership Management................................................11
Distributions.........................................................11
Security Ownership of Certain Beneficial Owners and Management........12
Background of our Investment in CPIs..................................13
PROPOSALS 1 AND 2
THE SALE PROPOSALS............................................................14
Reasons for the Sales.................................................14
Consequences of the Sales.............................................14
Termination and Winding-Up of the Partnership.........................15
Interest of Parties...................................................17
Distributions on Class A and Class C CPIs.............................17
Background to the Proposed Sales......................................18
Class Action Settlement...............................................21
Certain Income Tax Consequences.......................................21
Recommendation of the General Partner.................................22
THE PURCHASE AGREEMENTS.......................................................23
Purchase Price........................................................23
Adjustments to Purchase Price.........................................24
Additional Payments...................................................24
Closing of the Sale Proposals.........................................24
Conditions Precedent..................................................25
Covenants of the Parties..............................................25
Termination...........................................................26
DR Purchase Agreement-- Right of First Refusal........................26
Pharma Affiliates Purchase Agreement-- Agreement to Vote and No
Solicitation Provision..............................................27
i
PROPOSAL 3
DISTRIBUTION IN KIND AMENDMENT................................................28
Background to the Distribution In Kind Amendment......................28
Reasons and Consequences of the Distribution In Kind Amendment........28
Interest of Parties...................................................29
Certain Income Tax Consequences.......................................29
Recommendation of the General Partner.................................29
INFORMATION CONCERNING THE CONSENT SOLICITATION...............................31
General...............................................................31
Deadline For Consent..................................................31
Record Date; Units Entitled To Vote...................................31
Vote Required.........................................................31
Regulatory Matters....................................................32
Effect of Abstentions.................................................32
Consents; Revocation..................................................32
No Appraisal Rights...................................................33
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...............................34
APPENDIX A
APPENDIX B
APPENDIX C
ii
PAINEWEBBER R&D PARTNERS II, L.P.
1285 Avenue of the Americas
New York, New York 10019
CONSENT SOLICITATION STATEMENT
___________, 2000
- - - - - - - - - - - - - - - - - - - - - - - - -
This Consent Solicitation Statement is being sent to you as a holder (a
"Limited Partner") of units of limited partnership interest ("Units") in
PaineWebber R&D Partners II, L.P. (the "Partnership"), a Delaware limited
partnership, in connection with the solicitation by PaineWebber Technologies II,
L.P., a Delaware limited partnership, as the general partner of the Partnership
(the "General Partner") of written consent ("Consent") to consider and vote on
the following proposals (the "Proposals"):
Proposal 1 -- to sell 8.75 Class A and 40.75 Class C Centocor Partners
III L.P. Contractual Payment Interests ("CPIs") paid by Centocor, Inc.
("Centocor") relating primarily to the sale of ReoPro (a dual receptor
glycoprotein IIB/IIIA therapeutic manufactured by Centocor), to Bioventure
Investments, kft ("Bioventure") and Pharmaceutical Royalties, LLC ("Pharma
Royalties"), each of whom we have been advised is an affiliate of Pharmaceutical
Partners, LLC, for an aggregate purchase price of $16,416,400 in cash (subject
to adjustment based on the amount of Centocor's payments prior to the closing of
the sale) and, if the Limited Partners approve Proposal 3 below, distribute to
Bioventure and Pharma Royalties (the "Pharma Affiliates"), as the holders of
2,328 Units, 6.25 Class A and 31.25 Class C CPIs instead of a cash distribution
valued at $12.5 million in cash, which represents the equivalent amount of the
cash distribution the Pharma Affiliates would have received after the sales
contemplated by Proposal 1 and Proposal 2;
Proposal 2 -- to sell seven Class A and 39 Class C CPIs to Drug Royalty
USA, Inc. for an aggregate purchase price of $15,444,800 in cash (subject to
adjustment based on the amount of Centocor's payments prior to the closing of
the sale); and
Proposal 3 -- to amend our agreement of limited partnership dated as of
May 15, 1987 (the "Partnership Agreement"), to provide that before entering into
any agreement to sell any of our assets, we will notify any holder of five
percent or more of the Units and any holder of five percent or more of the Units
may elect to receive, in kind, their proportionate share of the assets to be
sold instead of a cash distribution of the proceeds of that sale.
Beneficial owners of Units at the close of business on ______, 2000 will
be entitled to vote on the Proposals.
- - - - - - - - - - - - - - - - - - - - - - - - -
These Transactions Have Not Been Approved or Disapproved by the Securities
and Exchange Commission (the "SEC") Nor Has the SEC Passed upon the
Fairness or Merits of these Transactions or upon the Accuracy or Adequacy of
the Information Contained in this Document. Any Representation to the
Contrary is Unlawful.
- - - - - - - - - - - - - - - - - - - - - - - - -
This Consent Solicitation Statement and the Accompanying Consent Card
Are First Being Mailed or Delivered to Limited Partners on or about _________,
2000.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act") and file periodic reports
and other information with the SEC. The reports and other information filed by
us with the SEC can be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington D.C.
20549, and should also be available for inspection at the SEC's Regional Offices
in New York (7 World Trade Center, 13th Floor, New York, New York 10048), Los
Angeles (Suite 500 East, Tishman Building, 5757 Wilshire Boulevard, Los Angeles,
California 90036) and Chicago (500 West Madison Avenue, Suite 1400, Chicago,
Illinois 60661). Copies of this material may also be obtained from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington D.C. 20549.
In addition, we are required to file electronic versions of certain material
with the SEC through the SEC's Electronic Data Gathering, Analysis and Retrieval
(EDGAR) system. The SEC maintains a site on the world wide web at
http://www.sec.gov that contains reports and other information regarding
registrants that file electronically with the SEC.
2
SUMMARY
This summary highlights some information from this Consent Solicitation
Statement, but it is not complete and is qualified by the more detailed
information contained elsewhere in this Consent Solicitation Statement and the
attachments. We encourage you to read this Consent Solicitation Statement, the
attachments and the documents incorporated by reference before making a decision
on how to vote on the Proposals.
This Consent Solicitation Statement contains forward-looking statements.
Such statements are subject to a number of risks and uncertainties. Actual
results in the future could differ materially from those described in the
forward-looking statements as a result of the factors in this Consent
Solicitation Statement generally. We further caution you that the discussion of
these factors may not be exhaustive. We undertake no obligation to publicly
release the result of any revisions to these forward-looking statements that may
be made to reflect any future events or circumstances.
GENERAL
Deadline for Consent............... Consent must be received by MAVRICC
Management Systems, Inc. by mail or
facsimile before _______, 2000, at 5:00
pm (New York time), unless such date or
time is extended for an aggregate of up
to an additional 60 days in the sole
discretion of our General Partner or
unless the necessary vote to approve
each of the proposals is received
earlier. See "INFORMATION CONCERNING THE
CONSENT SOLICITATION -- Deadline for
Consent."
Record Date........................ The General Partner has fixed the close
of business on ___________, 2000 as the
Record Date for determining the Limited
Partners who are entitled to vote on the
proposals by written consent. As of the
Record Date, 8,257 Units were
outstanding and owned of record by
_______ persons. Limited Partners on the
Record Date are entitled to one vote for
each Unit owned by them. See
"INFORMATION CONCERNING THE CONSENT
SOLICITATION -- Record Date; Units
Entitled to Vote."
Matters to be
Considered....................... As a Limited Partner you are being asked
to consider and vote upon the following
proposals (the "Proposals"):
Proposal 1 (which is also referred to as
the "Pharma Affiliates Sale") -- To sell
8.75 Class A and 40.75 Class C Centocor
Partners III, L.P. Contractual Payment
Interests ("CPIs") paid by Centocor, Inc.
("Centocor") relating
3
primarily to the sale of ReoPro (a dual
receptor glyco protein IIB/IIIA
therapeutic manufactured and owned by
Centocor), to Bioventure Investments, kft
("Bioventure") and Pharmaceutical
Royalties, LLC ("Pharma Royalties"
together with Bioventure the "Pharma
Affiliates"), each whom we have been
advised is an affiliate of Pharmaceutical
Partners, LLC ("Pharma Partners"), for a
total purchase price of $16,416,400 in
cash (subject to adjustment based on the
amount of Centocor's payments prior to
the closing of the sale). You are also
being asked to approve, subject to
Limited Partner approval of Proposal 3,
the distribution to the Pharma Affiliates
as the holders of 2,328 Units, 6.25 Class
A and 31.25 Class C CPIs instead of a
cash distribution valued at $12.5
million, which represents the equivalent
amount of the cash distribution the
Pharma Affiliates would have received as
a result of the sales contemplated by
Proposals 1 and 2. See "PROPOSALS 1 AND 2
THE SALE PROPOSALS" and "THE PURCHASE
AGREEMENT";
Proposal 2 (which is also referred to as
the "DR Sale") -- To sell seven Class A
and 39 Class C CPIs to Drug Royalty USA,
Inc. ("DR" and, together with the Pharma
Affiliates, the "Purchasers") for a total
purchase price of $15,444,800 in cash
(subject to adjustment based on the
amount of Centocor's payments prior to
the closing of the sale); and
Proposal 3 (which is also referred to as
the "Distribution In Kind Amendment") --
To amend the Partnership Agreement to
provide that:
o prior to entering into any agreement
to sell any of our assets, we will
notify any holder of five percent or
more of the Units; and
o any holder of five percent or more of
the Units may elect to receive, in
kind, their proportionate share of the
assets to be sold instead of a cash
distribution of the proceeds of the
sale. See "DISTRIBUTION IN KIND
AMENDMENT."
Vote Required...................... Each of the Proposals must be approved by
Limited Partners owning a majority in
interest of the outstanding Units
(constituting 4,129 Units). See
"INFORMATION CONCERNING THE CONSENT
SOLICITATION-- Vote Required."
4
Limited Partner approval of each of the
Proposals is necessary for the completion
of the transactions contemplated by the
Pharma Affiliates Sale and the DR Sale
(together the "Sale Proposals") since the
completion of each sale is conditioned on
the completion of the other, and the
Pharma Affiliates will not consummate the
Pharma Affiliates Sale unless the
Distribution In Kind Amendment is
approved.
We have been advised that, as of the
Record Date, the Pharma Affiliates
together own and have the right to vote
2,328 Units representing approximately
28% of the outstanding Units. The Pharma
Affiliates have agreed to vote "FOR" each
of the Proposals.
No Appraisal Rights................ If the Proposals are approved by Limited
Partners owning a majority in interest of
the outstanding Units, dissenting Limited
Partners will not have appraisal rights
in connection with the Proposals. See
INFORMATION CONCERNING THE CONSENT
SOLICITATION-- No Appraisal Rights."
Regulatory Matters................. No material regulatory approvals are
required in order to effect the
Proposals[, although the consent of
Centocor is required for the transfer of
the CPIs to the Purchasers]. See
"INFORMATION CONCERNING THE CONSENT
SOLICITATION-- Regulatory Matters."
The Partnership.................... We are a Delaware limited partnership
that began operations on September 30,
1987. PWDC Holding Company (the
"Manager") is the general partner of
PaineWebber Technologies II, L.P., which
is our General Partner. PWDC Holding
Company is a wholly-owned subsidiary of
PaineWebber Development Corporation
("PWDC"), an indirect, wholly-owned
subsidiary of Paine Webber Group Inc.
("PWG").
We currently own 22 Class A and 111 Class
C CPIs. The CPIs represent an interest in
a proportionate share of certain royalty
payments paid by Centocor based on the
sale of ReoPro. Approval of the Proposals
will result in the termination of the
Partnership and the winding-up of its
affairs. In connection with our
winding-up, we will terminate our
registration under the Exchange Act and
terminate our existence under Delaware
law. See "THE
5
SALE Proposals--Termination and
Winding-up of the Partnership."
PROPOSALS 1 AND 2 - THE SALE PROPOSALS
Reasons and Consequences
of the Sale Proposals............ o The General Partner has previously
advised the Limited Partners that it
anticipates that the winding-up of our
operations would be substantially
completed within the next several
years, and that the Limited Partners
should receive substantial value from
that. The Sale Proposals will result
in the termination and winding-up of
our operations and the realization of
value for Limited Partners.
o The aggregate cash proceeds we will
receive from the Sale Proposals will
be $31,861,200 (subject to adjustment
as described below based on the amount
of Centocor's payments prior to the
closing of the sale) or approximately
$5,320 per Unit excluding Units held
by the Pharma Affiliates (the
"Non-Pharma Units") who are not
receiving a cash distribution.
o Following completion of the Sale
Proposals, we will distribute to the
Partners their proportionate share of
the net cash proceeds of the Sale
Proposals (each a "Net Cash Proceeds
Distribution").
o Subject to Limited Partner approval of
Proposal 3, we will make a
distribution in kind (each a
"Distribution In Kind") to those
holders of five percent or more of the
Units who elect to receive, in kind,
their proportionate share of the
assets being sold instead of a Net
Cash Proceeds Distribution.
o Each Limited Partner should receive,
following payment of expenses of
approximately $ incurred in connection
with the Proposals, a Net Cash
Proceeds Distribution, or, subject to
Limited Partner approval of Proposal
3, a Distribution In Kind, valued at
approximately $_____ per Unit.
o We will be terminated pursuant to the
terms of the Partnership Agreement,
and we will be wound-up. The
winding-up of our affairs and the
distribution of our
6
remaining assets will be conducted
exclusively by our General Partner (or
its assignees). After completion of
the Sale Proposals, our remaining
non-cash assets (consisting of an
investment in a development program)
will be liquidated and the proceeds,
if any, distributed to the Partners,
or those assets will be distributed in
kind to the Partners pursuant to the
terms of the Partnership Agreement.
See "PROPOSALS 1 AND 2 THE SALE
PROPOSALS -- Consequences of the
Sales."
Pharma Affiliates Sale -
General.......................... The terms of the proposed Pharma
Affiliates Sale are in an Amended and
Restated Contractual Payment Interest
Purchase Agreement dated as of April 14,
2000 (the "Pharma Affiliates Purchase
Agreement"), among the Pharma Affiliates,
Pharma Partners and us. At the closing of
the Pharma Affiliates Sale, we will sell,
and the Pharma Affiliates will buy, an
aggregate of 8.75 Class A and 40.75 Class
C CPIs (the "Pharma Affiliate CPIs"), for
a total purchase price of $16,416,400 in
cash (subject to adjustment based on the
amount of Centocor's payments prior to
the closing of the sale). If the Limited
Partners approve Proposal 3, we will also
make a Distribution In Kind to the Pharma
Affiliates, as the holders of 2,328
Units, of 6.25 Class A and 31.25 Class C
CPIs (the "Distribution In Kind CPIs")
instead of a Net Cash Proceeds
Distribution valued at $12.5 million,
which represents the equivalent amount of
the Net Cash Proceeds Distribution the
Pharma Affiliates would have received
upon completion of the Sale Proposals.
The purchase price payable by the Pharma
Affiliates and the value of the
Distribution In Kind reflect a value of
$194,000 for each Class A CPI and
$361,200 for each Class C CPI (subject to
adjustment).
On February 17, 2000, PWDC and certain of
its affiliates entered into a purchase
agreement (the "Class B Purchase
Agreement") with Pharma Partners and the
Pharma Affiliates. The Class B Purchase
Agreement provides that PWDC, and certain
of its affiliates, will sell, and the
Pharma Affiliates will buy, one Class B
CPI for $5,350,000 (subject to adjustment
based on the amount of Centocor's
payments prior to the closing of the
sale). The completion of the Pharma
Affiliates Sale is a condition to the
obligations of PWDC under the Class B
Purchase
7
Agreement. We have no interest in this
Class B CPI or in the Class B Purchase
Agreement except that the satisfaction or
waiver of the conditions to closing in
the Class B Purchase Agreement and the DR
Agreement are conditions to the
obligation of the Pharma Affiliates to
complete the Pharma Affiliates Sale. See
"SALE PROPOSALS" and "PURCHASE
AGREEMENTS."
A copy of the Pharma Affiliates Purchase
Agreement is attached to this Consent
Solicitation Statement as Appendix A, and
should be read in its entirety.
Interest of Parties................ The Pharma Affiliates together own 2,328
Units representing approximately 28% of
the outstanding Units. Certain of the
members of Pharma Partners were employees
of PWDC or PaineWebber Incorporated
before 1993 and were directly involved in
structuring, negotiating and managing our
operations, including the original
investment in CP III. To our knowledge,
neither DR nor any of its affiliates own,
directly or indirectly, any of our Units.
See "THE PARTNERSHIP-- Security Ownership
of Certain Beneficial Owners and
Management" and "THE SALE PROPOSALS--
Interests of Parties."
DR Sale - General.................. The terms of the proposed DR Sale are in
an Amended and Restated Contractual
Payment Interest Purchase Agreement dated
as of February 17, 2000 as further
amended by the First Amendment to the
Amended and Restated Contractual Payment
Interest Purchase Agreement dated as of
April 4, 2000 (together, the "DR Purchase
Agreement" and, together with the Pharma
Affiliates Purchase Agreement, the
"Purchase Agreements") between DR and us.
At the closing of the DR Sale, we will
sell and DR will buy, seven Class A and
39 Class C CPIs (the "DR CPIs" and
together with the Pharma Affiliates CPIs,
the "Purchased CPIs"), for a total
purchase price of $15,444,800 in cash
(subject to adjustment based on the
amount of Centocor's payments prior to
the closing of the sale). The purchase
price payable by DR reflects a value of
$194,000 for each Class A CPI and
$361,200 for each Class C CPI. See "SALE
PROPOSALS" and "PURCHASE AGREEMENTS."
A copy of the DR Purchase Agreement is
attached to this Consent Solicitation
Statement as Appendix B, and should be
read in its entirety.
8
Adjustment to Purchase
Price............................ The Purchase Agreements provide that all
royalty payments that we receive for the
Purchased CPIs [and the Distribution In
Kind CPIs] until the closing, will reduce
on a dollar-for-dollar basis the purchase
price paid to us from the Sale Proposals
of $31,861.200. We expect that a royalty
payment in an amount that cannot be
calculated at this time will be paid to
us by Centocor in May, 2000. See
"PURCHASE AGREEMENTS -- Adjustments to
Purchase Price."
Conditions of the Sale
Proposals........................ The closing of the Sale Proposals (the
"Closing") are subject to the
satisfaction or waiver before the Closing
of certain conditions including:
o that the Limited Partners having
approved the Proposals; and
o [our obtaining the consent of Centocor
to the transfer of the Purchased CPIs
to each of the Purchasers in form
satisfactory to the Purchasers.] See
"PURCHASE AGREEMENTS-- Conditions
Precedent" and "PURCHASE AGREEMENTS--
Covenants of the Parties."
Closing Date....................... Unless the Purchase Agreements are
terminated as described below, the
Closing will take place within three
business days following the satisfaction
or waiver of the conditions to the Sale
Proposals, anticipated to occur on or
before _____________, 2000. See "PURCHASE
AGREEMENTS-- Closing of the Sale
Proposals."
Certain Income Tax
Consequences...................... Limited Partners should consider the
potential Federal, state and local tax
consequences to them of the Sale
Proposals. Limited Partners are urged to
consult their own tax advisors concerning
these tax consequences on their personal
situations.
State and local income or franchise tax
laws may differ from Federal income tax
laws with respect to the treatment of
partnerships generally or the tax
treatment of the activities of the
Partnership in particular. See "SALE
PROPOSALS -- Certain Income Tax
Consequences."
9
Recommendation of the
General Partner.................. After careful consideration, the General
Partner has determined the Sale Proposals
and the Purchase Agreements to be fair to
and in the best interests of the Limited
Partners and the Partnership and has
approved each of the Sale Proposals and
the Purchase Agreements and recommends
that the Limited Partners vote "FOR" each
of the Sale Proposals.
The Pharma Affiliates, as holders of
2,328 Units representing approximately
28% of the outstanding Units, have agreed
to vote "FOR" the Sale Proposals.
PROPOSAL 3--THE DISTRIBUTION IN KIND AMENDMENT
Background......................... The Pharma Affiliates had advised us that
they wanted to acquire certain of our
CPIs. As a condition to their offer, the
Pharma Affiliates requested that a
portion of our CPIs be distributed to
them rather than purchased for cash to
avoid certain negative tax consequences
anticipated by the Pharma Affiliates. To
enable us to make this distribution to
the Pharma Affiliates, we are seeking
your consent to amend the Partnership
Agreement to provide that prior to
entering into any agreement to sell our
assets, we will notify any holder of five
percent or more of the Units who may
elect to receive, in kind, their
proportionate share of the assets to be
sold rather than a cash distribution of
the proceeds of the sale.
Reasons and Consequences
of the Distribution In
Kind Amendment................... While a Distribution In Kind will not be
made to any Limited Partner holding less
than five percent of the Units (and we
are not aware of any Limited Partner,
other than the Pharma Affiliates, who
holds five percent or more of the Units),
the General Partner believes that the
Distribution In Kind Amendment will not
diminish the value of the Sale Proposals
to the other Limited Partners. The offer
made by the Pharma Affiliates is 7.3%
higher than the initial offer made by DR
and reflected in the Initial DR Purchase
Agreement (as defined below). However, as
a condition to the higher offer, the
Pharma Affiliates requested a
distribution in kind of their
proportionate limited partnership
interest in the Purchased CPIs. If the
Distribution In Kind Amendment is
approved by Limited
10
Partners, the Pharma Affiliates will
receive a Distribution In Kind instead of
a Net Cash Proceeds Distribution that
they would otherwise be entitled to
receive as a result of the Sale
Proposals. See "DISTRIBUTION IN KIND
AMENDMENT."
Certain Income Tax
Consequences..................... If the Pharma Affiliates were to acquire
the Distribution In Kind CPIs for cash,
the sale would trigger a taxable gain to
the Pharma Affiliates in an amount equal
to the entire purchase price of the
assets. This tax would possibly not be
subject to other offset or deduction,
making the tax that would be payable a
significant incremental cost to the
Pharma Affiliates, and reducing the price
that could be paid for the CPIs. The
other Limited Partners will be unaffected
by the Distribution In Kind, and will
receive the same cash consideration that
they would have received if the
Distribution In Kind CPIs were sold for
cash. The second component of the
condition required by the Pharma
Affiliates is that the gain attributable
to the sale of the Purchased CPIs be
allocated to the Partners who are
receiving the Net Cash Proceeds
Distribution. This allocation of gain
will not reduce the Net Cash Proceeds
Distribution to the Limited Partners, and
will result in the reporting to such
Limited Partners of the same amount of
taxable gain as would have been reported
if the Dividend In Kind CPI's were sold
for cash rather than distributed to the
Pharma Affiliates. See "DISTRIBUTION IN
KIND AMENDMENT -- Certain Income Tax
Consequences."
Interest of Parties................ The Pharma Affiliates together own 2,328
Units representing approximately 28% of
the outstanding Units and, as a result,
will receive the Distribution In Kind
CPIs upon the completion of the Sales
Proposals. See "DISTRIBUTION IN KIND
AMENDMENT-- Interests of Parties."
Recommendation of the
General Partner.................. After careful consideration, the General
Partner has deter mined the Distribution
In Kind Amendment to be fair to and in
the best interests of the Limited
Partners and the Partnership and
recommends that the Limited Partners vote
"FOR" the Distribution In Kind Amendment.
11
The Pharma Affiliates, as holders of
2,328 Units representing approximately
28% of the outstanding Units, have agreed
to vote "FOR" the Distribution In Kind
Amendment.
THE PARTNERSHIP
Background
We are a Delaware limited partnership that began operations on September
30, 1987 with a total of $72 million available for investment. The Manager is
the general partner of our General Partner. The Manager is a wholly-owned
subsidiary of PWDC, an indirect, wholly-owned subsidiary of PWG. The Partnership
Agreement provides that we will terminate on December 31, 2012, unless our term
is extended or reduced by our General Partner.
Our principal objective has been to provide long-term capital
appreciation to Limited Partners by investing in the development and
commercialization of new products with technology companies ("Sponsor
Companies"), which were expected to address significant market opportunities. We
have been engaged in diverse product development projects (the "Projects")
including product development contracts, participation in other partnerships and
investments in securities of the Sponsor Companies. Once the product development
phase has been completed, the Sponsor Companies have had the option to license
and commercialize the products resulting from the product development project,
and we have had the right to receive payments based upon the sale of these
products. Our assets now consist primarily of 22 Class A and 111 Class C CPIs.
Partnership Management
We have entered into a management agreement with the Manager, that gives
the Manager responsibility for management and administrative services necessary
for our operation. Under this contract, the Manager is entitled to receive an
annual management fee for management and administrative services provided to us.
As of July 1, 1996, the Manager no longer charges us the management fee for
services rendered.
Distributions
Distributions to the Partners are made proportionately to each in
accordance with a Partner's net capital contributions. The following table sets
forth the proportion of each distribution to be received by the Limited Partners
and the General Partner:
12
Limited General
Partners Partner
I. Until the value of the aggregate distributions for each Unit equals
$10,000 plus simple interest on such amount accrued at 7% per
annum for each Unit sold at the initial closing (6% per annum for
each subsequent Unit sold up to the 5,000th Unit and 5% per annum
for each Unit sold thereafter) ("Contribution Payout"). At
December 31, 1999, Contribution Payout ranged from $15,250 per
Unit to $18,575 per Unit....................................... 99% 1%
II. After Contribution Payout and until the value of the aggregate
distributions for each Unit equals $50,000 ("Final Payout").... 80% 20%
III. After Final Payout............................................. 75% 25%
At December 31, 1999, we made cash and security distributions, as valued
on the dates of the distribution, since inception of $4,466 and $7,206 per Unit,
respectively.
The Net Cash Proceeds Distribution will be received 99% by the Limited
Partners, other than the Pharma Affiliates, and 1% by the General Partner.
Security Ownership of Certain Beneficial Owners and Management
The General Partner knows of no person other than those identified below
who owned beneficially more than five percent of our outstanding Units as of
_________, 2000.
Percentage of
Class Name and Address Amount Class
- ----- ---------------- ------ -----
Limited Partnership Bioventure Investments, kft 1,860 Units 22.5%
Units Budapest, Hungary
Limited Partnership Pharmaceutical Royalties, 468 Units 5.7%
Units LLC
New York, New York
PaineWebber Capital, Inc. ("PWCI") and ATL Inc. ("ATL"), which are
affiliates of us, own 77 and 17.5 Units respectively and have agreed to vote
"FOR" each of the Proposals.
No member of management of the Manager or PWDC has any beneficial
interest in our Units.
13
Background of our Investment in CPIs
In 1987 and 1988, we purchased limited partnership interests in Centocor
Partners III, L.P. ("CP III"), a limited partnership which was established to
develop and sell CentoRX, a Centocor drug now known as ReoPro. Centocor is a
biotechnology company developing therapeutic and diagnostic products to advance
medical practice. It concentrates on research, development and manufacturing
with a technological emphasis on monoclonal antibodies and peptides. ReoPro is
now being sold in the United States by Centocor's marketing partner, Eli Lilly &
Company ("Lilly"). The Partnership owned approximately 25% of the limited
partnership interests of CP III. In 1997, CP III acquired our limited
partnership interest in CP III in exchange for 22 Class A and 111 Class C CPIs.
On July 12, 1995, we commenced a derivative action against Centocor and
Centocor Development Corporation III ("CDC III") in the Delaware Chancery Court
(the "Court") arising from certain agreements entered into by Centocor and Lilly
in July 1992 (the "Centocor Litigation"). Our complaint alleged, among other
things that:
o at least $25 million of $100 million paid by Lilly to Centocor
represented profits from the sale of ReoPro that Centocor is
required to share with CP III; and
o because of the Lilly transaction, Centocor was required to
increase the percentages of profits and revenues from ReoPro that
it pays to CP III investors. Centocor had taken the position that
only $500,000 of the $100 million had to be shared with CP III
and that Centocor had no obligation to increase the percentages
of ReoPro profits and revenues that it pays to CP III investors.
In June 1997, the parties to the Centocor Litigation entered into an
agreement to settle the action. The agreement provides, among other things, for
Centocor to pay to CP III investors (including us, as a former limited partner
in CP III) a total of:
o $10.8 million, net of attorneys' fees and expenses as may be
awarded by the Court;
o an additional $5,099,757, if and when cumulative world-wide sales
of ReoPro exceed $600 million;
o possible additional payments totaling $2.2 million, depending
upon regulatory developments in Japan (we will only receive our
share of these amounts if, and when, payments under the agreement
are remitted by Centocor).
The agreement further provides for revisions to the ReoPro royalties
payable by Centocor to CP III investors through 2007. Under the agreement, those
royalties would
14
be paid based on revenues from end-sales by Lilly and other distributors, as
opposed to Centocor's revenues on its sales to distributors. For 1997 and 1998,
Centocor would pay an aggregate of 6.5% of the first $175 million of United
States end-sale revenues, 3.25% of such revenues above $175 million, and 3.25%
of foreign end-sales revenues. For 1999 through 2007, Centocor would pay an
aggregate of 6.5% of the first $250 million of United States end-sale revenues,
4% of such revenues above $250 million, and 3.25% of foreign end-sales revenues.
The agreement provides that investors will not receive less than Centocor would
otherwise have paid based on Centocor's sales of ReoPro.
On February 17, 2000 the Court signed, and on February 22, 2000 entered,
a final order (the "Final Order") resolving all settlement matters in the
Centocor Litigation. The Final Order was subject to a 30-day appeal period which
expired on March 21, 2000.
PROPOSALS 1 AND 2
THE SALE PROPOSALS
Reasons for the Sales
The General Partner has previously advised the Limited Partners that it
anticipates that the winding-up of our operations would be substantially
completed within the next several years, and that the Limited Partners should
receive substantial value from that. The Sale Proposals will result in the
termination and winding-up of our operations and the realization of value for
Limited Partners.
Consequences of the Sales
If the Sale Proposals are approved by the Limited Partners and
completed, the following will occur:
o we will sell, and the Pharma Affiliates will buy, 8.75 Class A
and 40.75 Class C CPIs for a purchase price of $194,000 for each
Class A CPI and $361,200 for each Class C CPI;
o a total purchase price of $16,416,400 in cash (subject to
adjustment based on the amount of Centocor's payments prior to
the Closing) will be paid to us by the Pharma Affiliates;
o if the Limited Partners approve Proposal 3, we will distribute to
the Pharma Affiliates, as the holders of 2,328 Units, a
Distribution In Kind of 6.25 Class A and 31.25 Class C CPIs
instead of a Net Cash Proceeds Distribution valued at $12.5
million, which represents the equivalent amount of the Net
Proceeds Distribution the Pharma Affiliates would have received
upon completion of the Sale Proposals;
15
o we will sell, and DR will buy, seven Class A and 39 Class C CPIs
for a purchase price of $194,000 for each Class A CPI and
$361,200 for each Class C CPI;
o a total purchase price of $15,444,800 in cash (subject to certain
adjustment based on the amount of Centocor's payments prior to
the Closing) will be paid to us by DR;
o we will receive the aggregate cash proceeds from the Sale
Proposals of $31,861,200 (subject to adjustment as described
below based on the amount of Centocor's payments prior to the
Closing of the sale) or approximately $5,320 per Non-Pharma Unit;
o each Limited Partner should receive, following payment of
expenses of approximately $_______ incurred in connection with
the Proposals, Net Cash Proceeds Distribution of approximately
$_____ per Unit. However, the Pharma Affiliates will not be
eligible to receive a Net Cash Proceeds Distribution as they have
elected to receive a Distribution In Kind;
o we will be terminated pursuant to the terms of the Partnership
Agreement, and we will be wound-up. The winding-up of our affairs
and the distribution of our remaining assets will be conducted
exclusively by our General Partner (or its assignees). After
completion of the Sale Proposals, our remaining non-cash assets
(consisting of an investment in a development program) will be
liquidated and the proceeds, if any, distributed to the Partners
or those assets will be distributed in kind to the Partners
pursuant to the terms of the Partnership Agreement; and
o in connection with our winding-up, we will terminate our
registration under the Exchange Act and terminate our existence
under Delaware law.
Termination and Winding-Up of the Partnership
According to the Partnership Agreement, we will terminate upon the
occurrence of certain events including the sale, authorized by a majority in
interest of the Limited Partners, of all or substantially all of our assets. The
completion of the Sale Proposals will constitute the sale of substantially all
of our assets. Upon our termination, our affairs will be wound-up in accordance
with the Partnership Agreement and Delaware law.
The winding-up of our affairs and the distribution of our assets will be
conducted exclusively by our General Partner (or its assignees). The General
Partner (or its assignees), in carrying out the winding-up and distribution,
will have full power and authority to sell any or all of our remaining assets,
or to distribute the same in kind to the Partners.
16
It is our current intention to dispose of our remaining assets and
distribute the proceeds, if any, to the Partners. However, there can be no
assurance that we will be able to sell these assets and thus we may distribute
same in kind to the Partners. However, there can be no assurance that we will be
able to sell these assets and thus we may distribute them in kind to the
Partners. Although we cannot determine with accuracy at this time the amount, if
any, of a final cash liquidating distribution, we do not expect such amount to
be significant.
Upon the completion of the winding-up process, we will file a
certificate of cancellation with the Secretary of State of the State of Delaware
in accordance with Section 17-203 of the Delaware Revised Uniform Limited
Partnership Act. After the filing of the certificate of cancellation, we will no
longer be authorized to undertake partnership actions other than those necessary
for winding-up our affairs.
Various laws for the protection of creditors may apply to our
termination and winding-up. In this regard, it should be noted that if a court
were to find that we failed to provide sufficient funds for our liabilities, or
that the liquidating distribution to the Partners, if any, rendered us
insolvent, the liquidating distributions to the Partners may be deemed to be
"fraudulent conveyances" or impermissible dividends or distributions under
applicable law, and therefore may be subject to claims of certain of our
creditors, if such creditors have not been paid. In the event that such a claim
is asserted after the liquidation, there is a risk that persons who were
Partners on the distribution record date will be ordered by a court to turn over
to our creditors all or a portion of the liquidating distributions they received
from us.
Following a liquidating distribution, if any, and the termination of our
registration under the Exchange Act and the termination of our existence under
Delaware law the following will occur:
o we will cease to exist and will not have any properties or carry
on any business;
o Limited Partners will not have any interest in the Partnership or
the business that we carried on;
o the provisions of the Exchange Act will not be applicable to the
Limited Partners; and
o except for reports dealing with our final year and our
liquidating distribution, Limited Partners will not receive any
reports under the Exchange Act or Delaware law.
17
Interest of Parties
The Pharma Affiliates together own 2,328 Units representing
approximately 28% of the outstanding Units. To our knowledge, neither DR nor any
of its affiliates own, directly or indirectly, any of our Units.
Stephen Evans-Freke, Rory Riggs and David Madden are members of Pharma
Partners, which manages the Pharma Affiliates. Mr. Evans-Freke was President of
PWDC until May 1990; Mr. Riggs was a Managing Director of PaineWebber
Incorporated ("PWI") until November 1990; and Mr. Madden was a Vice President at
PWDC until February 1992. Messrs. Evans-Freke and Madden were directly involved
in and responsible for identifying and selecting the investments in which we
invested, including the original investment in CP III. In addition, Messrs.
Evans-Freke and Madden were directly involved in structuring, negotiating and
managing us and our assets. Since the termination of their employment, none of
Mr. Evans-Freke, Mr. Riggs or Mr. Madden has been associated with, or employed
by, PWDC, PWI or any of their affiliates.
Under the PaineWebber Development Corporation Carried Interest Sharing
Plan (the "CISP"), fixed percentages of certain warrants and the cash
distributions received by PWDC in respect of certain partnerships in which PWDC
has invested are awarded to participants in the CISP, including Mr. Evans-Freke
and Mr. Madden. Mr. Evans- Freke and Mr. Madden are entitled to receive between
5% and 7% and between 0.85% and 4%, respectively, of amounts distributed to CISP
participants in respect of such partnership investments. Since the respective
dates of their termination of employment with PWDC through December 31, 1999,
Messrs. Evans-Freke and Madden received $2,038,419.77 and $196,472.02,
respectively, in respect of distributions under the CISP.
Distributions on Class A and Class C CPIs
Since January 1, 1998, the following distributions have been paid by
Centocor on the Class A and Class C CPIs in respect of the periods indicated:
Calendar Quarter Ended Per Class A CPI Per Class C CPI
- ---------------------- --------------- ---------------
March 31, 1998 $5,519 $ 9,579
June 30, 1998 5,798 10,064
September 30, 1998 7,040 12,220
December 31, 1998 6,803 11,807
March 31, 1999 7,087 12,301
June 30, 1999 8,020 13,920
18
Calendar Quarter Ended Per Class A CPI Per Class C CPI
- ---------------------- --------------- ---------------
September 30, 1999 9,643 16,737
December 31, 1999 5,216 9,053
From January 1, 1998 until January 1, 2000, we have distributed to
Partners a total of $______ per Unit in connection with distributions paid on
the Class A and Class C CPIs.
Background to the Proposed Sales
On August 15, 1997, Pharma Partners commenced a tender offer (the "1997
Offer") to purchase any and all outstanding Units (which was subsequently
amended to an offer to purchase only up to 4,000 Units) at a price per Unit of
$3,650, net to the seller in cash. On August 18, 1997, following the making of
the 1997 Offer, the board of directors of the Manager (the "Board") considered
the terms of the 1997 Offer, and determined that the 1997 Offer was financially
inadequate and that we should recommend to our Limited Partners that they reject
the 1997 Offer. Management of the General Partner concluded that at the time of
the 1997 Offer a reasonable range of values for our assets on a per Unit basis
was $5,555 to $6,965. Under the 1997 Offer, Pharma Partners purchased 849 Units,
or approximately 10% of the Units then outstanding.
In August 1998, PharmaInvest, LLC ("PILLC"), a Delaware limited
liability company and an affiliate of Pharma Partners, made a tender offer for
all of the outstanding Class A CPIs, including our 22 Class A CPIs, at a price
of $205,000 in cash for each Class A CPI, with holders of the CPIs receiving
distributions for the quarter ended June 30, 1998 and PILLC receiving any
following distributions, including any distributions arising out of the Centocor
Litigation. On August 14, 1998, Pharma Partners sent a letter to the Manager
stating that they "would be willing to acquire the Class C CPIs owned by" us at
a price which would be "equivalent" to the Class A tender offer price, but would
take "into account the greater cash flow payable on the Class C CPIs." On August
27, 1998, the Board determined not to accept the PILCC offer because, in their
opinion, the price being offered was, at that date, financially inadequate.
On February 11, 1999, a representative of Pharma Partners (or an
affiliate) sent a letter requesting our Unitholder's list and stated that the
request was being made with the intention of PILLC "launching a registered
tender offer for Units in the Partnership very shortly . . . at close to three
times" the price offered by SkyRise Investors LLC ("SkyRise"). On February 8,
1999, SkyRise had commenced a tender offer for 4.9% of the Units at a price of
$2,200 per Unit.
On February 24, 1999, the General Partner provided the Limited Partners'
list to PILLC pursuant to an undertaking with respect to the use of the list. On
March 1, 1999, Pharma Partners provided the General Partner with a draft of the
documents relating to
19
its offer (the "1999 Offer"). On March 3, 1999, the General Partner sent a
letter to Pharma Partners stating that the disclosure obligations with respect
to the 1999 Offer documents were PILLC's and, therefore, we would not, at that
time, be passing or commenting on the 1999 Offer documents.
On March 3, 1999, PILLC commenced the 1999 Offer at the price of $6,000
per Unit, less the distribution made March 15, 1999 in the amount of $175 per
Unit.
On March 8, 1999, the Board considered the terms of the 1999 Offer, and
primarily because of uncertainty at that time regarding the Court's approval of
the settlement of the Centocor Litigation, it determined that we should remain
neutral and express no opinion toward the 1999 Offer.
On March 15, 1999, the Court approved the settlement of the Centocor
Litigation. On March 16, 1999 the Board again considered the terms of the 1999
Offer in light of the Court's approval of the settlement, and determined that
the 1999 Offer was financially inadequate and that we should recommend to our
Limited Partners that they reject the 1999 Offer and not tender their Units to
PILLC.
On March 12, 1999, a representative of Drug Royalty Corporation, Inc.,
an affiliate of DR, outlined in a letter certain general terms and conditions
under which Drug Royalty Corporation, Inc. and DR would be prepared to purchase
all of the CPIs owned by us (the "Initial DR Proposal"). The purchase price
offered was $47 million subject to adjustment to the extent we received any
distributions on the CPIs after March 12, 1999. The Initial DR Proposal was
conditional on, among other things, the consent of Centocor.
After March 12, 1999, we engaged in discussions with DR concerning
possible structures of a transaction and discussions relating to the value of
the Class A and Class C CPIs.
On October 12, 1999, the Board met to consider the offer of DR to
purchase 16 Class A and 83 Class C CPIs at a price of $30,808,950, subject to
adjustment. The Board noted that after taking into account payments made on the
CPIs after the 1998 Offer and the 1999 Offer, the price payable under the DR
offer is higher than that indicated by those offers and the Board concluded that
the DR offer was financially adequate and recommended that we should accept the
DR offer.
On December 17, 1999, after further discussions with DR as to the number
of CPIs to be purchased, we entered into a Contractual Payment Interest Purchase
Agreement with DR (the "Initial DR Purchase Agreement") under which we agreed to
sell to DR ten Class A and 50 Class C CPIs for a total purchase price of
$18,624,765 or $180,257 for each Class A CPI and $336,442 for each Class C CPI.
The sale of these CPIs was subject to the fulfillment of conditions
substantially similar to those contained in the Purchase Agreements.
20
On December 17, 1999, we filed with the SEC a Form 8-K disclosing that
we had entered into the Initial DR Purchase Agreement.
By letter dated December 22, 1999 (the "December 1999 Letter") Pharma
Partners informed the General Partner of their desire to discuss, negotiate and
ultimately conclude an agreement reflecting a superior offer than that reflected
by the Initial DR Purchase Agreement. Pharma Partners offered to acquire ten
Class A and 50 Class C CPIs, the same interest as under the Initial DR
Agreement, for a total purchase price of $20 million cash or $194,000 for each
Class A CPI and $361,200 for each Class C CPI. The offer by Pharma Partners was
subject to the entering into of a purchase agreement upon similar terms to those
contained in the Initial DR Purchase Agreement. The Pharma Partners offer
represented an increase of approximately 7.3% above the purchase price to be
paid under the Initial DR Purchase Agreement. The Pharma Partners also indicated
they were willing to purchase all of our other CPIs at the same per CPI price as
set forth in the December 1999 Letter. However, to enable us to conclude the
Centocor Litigation, we informed the Pharma Partners that we could not enter
into an agreement to sell all of our CPIs.
As required by the terms of the Initial DR Agreement, on December 27,
1999, the General Partner furnished a copy of the December 1999 Letter to DR. On
January 3, 2000, DR informed the General Partner that they would be willing to
match the terms of the December 1999 Letter and offer $194,000 for each Class A
CPI and $361,200 for each Class C CPI.
Between January 3, 2000 and February 17, 2000, DR and Pharma Partners
negotiated with each other and with the General Partner to conclude purchase
agreements (the "70% Purchase Agreements") relating to the sale of approximately
70% of our CPIs. On February 17, 2000, the Board, after careful review and
consideration, approved the 70% Purchase Agreements. The 70% Purchase Agreements
reflected a value of $194,000 for each Class A CPI and $361,200 for each Class C
CPI which was equal to the price offered in the December 1999 Letter.
At the same time that the 70% Purchase Agreements were entered into,
PWDC and certain of its affiliates entered into the Class B Purchase Agreement
with Pharma Partners and the Pharma Affiliates. The Class B Purchase Agreement
provides that PWDC, and certain of its affiliates will sell, and the Pharma
Affiliates will purchase, one Class B CPI for an aggregate purchase price of
$5,350,000 (subject to adjustment based on the amount of Centocor's payment
prior to the Closing of the sale). We have no interest in this Class B CPI,
however, the satisfaction or waiver of certain conditions contained in the Class
B Purchase Agreement is a condition to the obligation of the Pharma Affiliates
to close the Pharma Affiliates Sale.
On February 17, 2000 the Court signed, and on February 22, 2000 entered,
the Final Order resolving all settlement matters relating to the Centocor
Litigation. The Final Order was subject to an appeal period which expired on
March 21, 2000.
21
On February 29, 2000, we filed with the SEC a Form 8-K disclosing that
we had entered into the 70% Purchase Agreement.
On March 28, 2000, as required by the 70% Purchase Agreements, we
informed DR and the Pharma Partners that we would be willing to sell our CPIs
that were not subject to the 70% Purchase Agreements. On April 3, 2000, the
Pharma Affiliates offered to purchase 8.75 Class A and 40.75 Class C CPIs and
receive a Distribution In Kind of 6.25 Class A and 31.25 Class C CPIs on the
terms set out in the Pharma Affiliates Purchase Agreement and DR offered to
purchase seven Class A and 39 Class C CPIs on the terms set out in the DR
Purchase Agreement.
On April 3, 2000, the Board met to consider the offers and the Purchase
Agreements. After careful review and consideration, the Board approved the
Proposals and the Purchase Agreements were executed. The Purchase Agreements
reflect a value of $194,000 for each Class A CPI and $361,200 for each Class C
CPI which is equal to the price offered in the 70% Purchase Agreements.
On April 4, 2000, we filed with the SEC a Form 8-K disclosing that we
had entered into the Purchase Agreements.
Class Action Settlement
Pursuant to a certain class action settlement agreement entered into by
PWI in July 1996, class plaintiffs are entitled to obtain, at PWI's expense, a
fairness opinion in connection with certain solicitations of consent by the
General Partner from the Limited Partners and to communicate that opinion to the
Limited Partners. The General Partner has been advised that a valuation firm has
been retained by the class plaintiffs to render such an opinion with respect to
the Sale Proposals and that the opinion will be available within three business
days after this Consent Solicitation Statement has been mailed to the Limited
Partners.
Certain Income Tax Consequences
General
The Sale Proposals, if approved, will have certain tax implications to
the Limited Partners that must be considered. The following summarizes the
material federal income tax consequences arising from the Sale Proposals. This
summary is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury regulations, court decisions and published positions of the
Internal Revenue Service (the "Service"), each as in effect on the date of this
Consent Solicitation Statement. There can be no assurance that the Service will
agree with the conclusions stated herein or that future legislation or
administrative changes or court decisions will not significantly modify the
federal or state income tax law regarding the matters described herein,
potentially with retroactive effect. This summary is not and should not be
considered an opinion respecting the federal or
22
state income tax consequences of the Sale Proposals. Further, this summary is
not intended to provide tax or other legal advice to any Limited Partner.
The following summarizes the material federal income tax consequences of
the Sale Proposals to investors who are individual citizens or residents of the
United States. It does not address, among other things, the special tax
consequences of foreign investors, trusts, tax-exempt entities or corporations.
Federal Income Tax Consequences of the Sale Proposals
The federal income tax consequences to the Partners of the Sale
Proposals will depend upon the individual circumstances of each Partner
(including each Partner's tax basis in the Units owned). In general, however,
upon a sale of assets, gain or loss will be recognized by a partnership measured
by the difference between the partnership's adjusted basis in the assets and the
amount realized on the sale. A partnership's adjusted basis in an asset is
generally determined by its cost, including the amount of debt incurred to
purchase the asset, reduced by depreciation or amortization deductions taken by
the partnership with respect to the asset.
We are not a taxable entity for federal income tax purposes.
Accordingly, any gain or loss recognized by us from the Sale Proposals will be
passed through to the Partners, with a Partner's share of such gain or loss
being determined in accordance with the allocation provisions in the Partnership
Agreement. As set forth in the Section Certain Income Tax Consequences to the
Distribution in Kind Amendment discussion herein, the Partnership Agreement will
be amended to provide that the gain attributable to the sale of the CPIs for
cash will be allocated to the Partners who are receiving the proceeds of the
sale of the CPIs.
Any gain or loss on the Sale Proposals (excluding any amount
attributable to accrued interest, if any) should be taxed as long or short-term
capital gain and losses taxed as long- or short-term capital losses. However, if
we were considered as holding securities primarily for sale to customers in the
ordinary course of its trade or business (i.e., if we were treated as a
"dealer"), then any gain would be treated as ordinary income. While inherently a
factual question based on the facts and circumstances surrounding the purchase,
holding and sales of the CPIs by us, because the CPIs were likely primarily held
for long-term capital appreciation in the value of our assets, we should not be
treated as a dealer.
Recommendation of the General Partner
At a meeting of the Board held on April 3, 2000, the Board unanimously
adopted resolutions expressing the Board's belief that the Pharma Affiliates
Purchase Agreement and the DR Purchase Agreement are each fair to and in the
best interests of the Limited Partners and us and approved each of the Sale
Proposals and the Purchase Agreements and recommends that the Limited Partners
vote "FOR" each of the Sale Proposals. The Board made this determination based
on its assessment of our prospects and the
23
availability, feasibility and effect on the Limited Partners of alternatives to
the Sale Proposals. In assessing our prospects and remaining assets, the Board
considered these factors:
o the financial adequacy of the purchase price per CPI which
represents a price that is 7.3% higher than the initial
offer made by DR and reflected in the Initial DR Purchase
Agreement;
o the fact that despite our public disclosure of our
entering into the Initial DR Purchase Agreement and the
70% Purchase Agreements and the material terms of those
agreements, we received no offer for our CPIs at a price
higher than that reflect in the Purchase Agreements; and
o the fact that our General Partner has determined that it
is in our best interest to wind-up our operations now
which should provide substantial value to Limited
Partners.
o the per Non-Pharma Affiliate Unit value reflected in the
Sale Proposals is higher than the values indicated in
previous offers for our CPIs after taking into account
distributions made since the date of those offers and the
fact that the Limited Partners had the economic benefit of
those payments.
The Pharma Affiliates, as holders of 2,328 Units representing
approximately 28% of the outstanding Units, have agreed to vote "FOR" the Sale
Proposals.
Failure to approve any one of the Sale Proposals may result in the
failure to conclude any of the transactions contemplated by the Purchase
Agreements since the Closing of each sale is conditioned on the Closing of the
other.
THE PURCHASE AGREEMENTS
The description of the Pharma Affiliates Purchase Agreement and the DR
Purchase Agreement below summarizes the material terms of each agreement, but is
not complete and is qualified by the more complete and detailed information set
forth in the Purchase Agreements, copies of which are attached as Appendix A and
Appendix B to this Consent Solicitation Statement and incorporated in this
Consent Solicitation Statement by reference.
Purchase Price
At the Closing of the Pharma Affiliates Sale, we will sell, and the
Pharma Affiliates will buy, an aggregate of 8.75 Class A and 40.75 Class C CPIs,
for a total purchase price of $16,416,400 in cash (subject to adjustment based
on the amount of
24
Centocor's payments prior to the Closing of the sale). If the Limited Partners
approve Proposal 3, we will also distribute to the Pharma Affiliates, as the
holders of 2,328 Units, 6.25 Class A and 31.25 Class C CPIs instead of a cash
distribution valued at $12.5 million, which represents the equivalent amount of
the cash distribution the Pharma Affiliates would have received upon completion
of the Sale Proposals. The purchase price payable by the Pharma Affiliates and
the value of the Distribution In Kind reflect a value of $194,000 for each Class
A CPI and $361,200 for each Class C CPI (subject to adjustment).
At the Closing of the DR Sale, we will sell and DR will buy, seven Class
A and 39 Class C CPIs, for a total purchase price of $15,444,800 in cash
(subject to adjustment based on the amount of Centocor's payments prior to the
Closing of the sale). The purchase price payable by DR reflects a value of
$194,000 for each Class A CPI and $361,200 for each Class C CPI (subject to
adjustment).
Adjustments to Purchase Price
The Purchase Agreements provide that all royalty payments that we
receive for the Purchased CPIs until the Closing, will reduce on a
dollar-for-dollar basis the purchase price paid to us from the Sale Proposals of
$31,861,200. We expect that a royalty payment in an amount that cannot be
calculated at this time will be paid to us by Centocor on , 2000.
Additional Payments
Any payments relating to the Centocor Litigation which are to be paid
upon final Court approval of the Centocor settlement agreement, lump sum
payments to owners of CPIs as a result of the settlement of the Centocor
Litigation, and payments ordered by the Court to adjust for shortfalls or
deficiencies in all periods prior to the first quarter of 1999 are to be paid to
us, and will not result in an adjustment to the purchase price paid to us from
the Sale Proposals. Payments ordered by the Court to adjust for shortfalls or
deficiencies in all periods after the fourth quarter of 1998 are to be paid to
the Purchasers in proportion to the number of CPIs owned by each Purchaser after
the Closing.
According to the settlement agreement entered into in connection with
the Centocor Litigation, Centocor is to make certain payments to owners of the
CPIs if certain payments are received by Centocor from the Fujisawa
Pharmaceutical Company, Ltd. These payments are to be paid to the Purchasers in
proportion to the number of CPIs owned by each Purchaser after the Closing.
Closing of the Sale Proposals
The Closing will take place within three business days following the
completion of the conditions set out in the Purchase Agreements, or at such
other date and time as we and the respective Purchaser may mutually agree.
25
Conditions Precedent
Mutual Conditions Precedent. The Closing of the Sale Proposals are
subject to the satisfaction or waiver of certain conditions, including the
following:
o the truth and accuracy at the time of Closing of our
representations and warranties and those of that Purchaser;
o we and the Purchaser having complied with all covenants at the
time of Closing;
o the completion of all corporate and other proceedings related to
the Purchase Agreements;
o no legal action or proceeding having been instituted or overtly
threatened by any governmental authority that seeks to effect the
completion of the Sale Proposals; and
o [we having obtained the consent of Centocor to the transfer of
the Purchased CPIs to the Purchasers (and, in the case of the
Pharma Affiliates, the consent of Centocor to the transfer of the
Distribution In Kind CPIs).]
Conditions Precedent to Obligations of the Pharma Affiliates and Pharma
Partners. The Closing of the Sale Proposals is also subject to the satisfaction
or waiver of the additional condition that the conditions to the obligations of
the Pharma Affiliates and the Pharma Partners under the Class B Purchase
Agreement having been satisfied or waived.
Conditions Precedent to the Obligations of the Partnership. The Closing
of the Sale Proposals is also subject to the satisfaction or waiver of the
additional conditions that the transactions contemplated by each Purchase
Agreement having been consummated and the Limited Partners having consented to
the Sale Proposals.
Covenants of the Parties
We agreed not to complete the sale of the Purchased CPIs until we are
able to complete the Pharma Affiliates Sale and DR Sale substantially
simultaneously with each other. We further agreed not to amend either the Pharma
Affiliates Purchase Agreement or the DR Purchase Agreement unless the same
amendments are made to both Purchase Agreements.
26
Termination
Each Purchase Agreement may be terminated at any time before the Closing
by:
o the relevant Purchaser or us if any court of competent
jurisdiction in the United States shall have issued a final
unappealable order, decree or ruling or taking any action
prohibiting the completion of the transactions under the Purchase
Agreement;
o the mutual agreement of the relevant Purchaser and us;
o by the relevant Purchaser or us if the Closing shall not have
occurred on or before July 15, 2000; or
o by the relevant Purchaser or us upon a material breach of any
representation, warranty or covenant which remains uncured for a
period of 30 days after receipt of written notice of such breach.
If the DR Purchase Agreement is terminated for any reason, other than as
a result of a material breach by DR of any representation, warranty or covenant
which remains uncured for a period of 30 days after receipt of written notice of
the breach from us, we are required to pay the sum of $400,000 to Drug Royalty
Corporation, Inc., a Canadian corporation and an affiliate of DR, to compensate
DR for its efforts and expense in connection with the DR Purchase Agreement.
If the Pharma Affiliates Purchase Agreement is terminated for any
reason, other than as a result of a material breach by Pharma Partners or the
Pharma Affiliates of any representation, warranty or covenant which remains
uncured for a period of 30 days after receipt of written notice of the breach
from us, we are required to pay the sum of $500,000 to Pharma Partners, to
compensate Pharma Partners for its efforts and expense in connection with the
Pharma Affiliates Purchase Agreement.
DR Purchase Agreement -- Right of First Refusal
Under the DR Purchase Agreement, we are prohibited from soliciting any
offers to purchase the DR CPIs. If we receive a bona fide unsolicited offer from
a third party to purchase on or before the Closing all or a portion of the DR
CPIs or the Pharma Affiliates CPIs, we are required to notify DR of the third
party offer and DR will have the right to purchase the DR CPIs for the same
price and on the same terms as that being offered by the third party (the "Right
of First Refusal"). If DR does not elect to exercise the Right of First Refusal
or if we determine that the price or terms being offered by DR are not the same
or better than those offered by the third party, the DR Purchase Agreement will
terminate without any further liability or obligation of either of the parties
(except for the payment specified above).
27
Pharma Affiliates Purchase Agreement -- Agreement to Vote and No Solicitation
Provision
Under the Pharma Affiliates Purchase Agreement, the Pharma Affiliates
agreed to vote all of their Units in favor of each of the Proposals and to not
encourage or solicit any Limited Partner to vote against any of the Proposals.
Under the Pharma Affiliates Purchase Agreement, we are prohibited from
soliciting offers to purchase the Pharma Affiliates CPIs, including the
Distribution In Kind CPIs. If we receive a bona fide unsolicited offer from a
third party to purchase the Pharma Affiliates CPIs or the DR CPIs, prior to the
Closing which, upon the advice of counsel, our General Partner determines is
legally advisable for us to pursue or accept for the General Partner to comply
with its fiduciary duties, the General Partner will be allowed to discuss and
negotiate with the third party, provided that within three business days of
receipt of the third party offer we notify Pharma Partners of the third party
offer and provide them with a copy of the offer, and, after three business days
of providing them with a copy of the third party offer, the General Partner is
permitted to consummate the third party offer and recommend it to the Limited
Partners without further liability (except for the payment specified above).
28
PROPOSAL 3
DISTRIBUTION IN KIND AMENDMENT
Background to the Distribution In Kind Amendment
The Distribution In Kind Amendment seeks consent to amend the
Partnership Agreement to provide that before entering into any agreement to sell
any of our assets (which would include the sale contemplated by the Sale
Proposals), we will notify any holder of five percent or more of the Units and
any holder of five percent or more of the Units may elect to receive, in kind,
their proportionate share of the assets to be sold instead of a cash
distribution of the proceeds of such sale. A copy of the Distribution In Kind
Amendment is attached as Appendix C.
The Pharma Affiliates had advised us that they wanted to acquire 8.75
Class A and 40.75 Class C CPIs. As a condition to their offer, the Pharma
Affiliates requested that a portion of the CPIs be distributed to them rather
than purchased for cash to avoid certain negative tax consequences anticipated
by the Pharma Affiliates. To enable us to make this distribution to the Pharma
Affiliates, we are seeking your consent to amend the Partnership Agreement to
provide that prior to entering into any agreement to sell our assets, we will
notify any holder of five percent or more of the Units who may elect to receive,
in kind, their proportionate share of the assets to be sold rather than a cash
distribution of the proceeds of the sale.
Reasons and Consequences of the Distribution In Kind Amendment
While a Distribution In Kind will not be made to any Limited Partner
holding less than five percent of the Units (and we are not aware of any Limited
Partner, other than the Pharma Affiliates, who holds five percent or more of the
Units), the General Partner believes that the Distribution In Kind Amendment
will not diminish the value of the Sale Proposals to the other Limited Partners.
The offer made by the Pharma Affiliates is 7.3% higher per CPI than the initial
offer made by DR and reflected in the Initial DR Purchase Agreement. However, as
a condition to the higher offer, the Pharma Affiliates requested a Distribution
In Kind of their proportionate Limited Partnership interest in the Purchased
CPIs.
The Pharma Affiliates, in the aggregate, own 2,328 Units representing
approximately 28% of the aggregate number of outstanding Units. If the
Distribution In Kind Amendment is approved by Limited Partners, the Pharma
Affiliates will receive a distribution in kind of the Distribution in Kind CPIs
instead of a Net Cash Proceeds Distribution they would otherwise be entitled to
as a result of the Sale Proposals.
After the distribution of the Distribution In Kind CPIs, the Pharma
Affiliates will have waived any right to receive a Net Cash Proceeds
Distribution from us relating to the Sale Proposals except that we will
distribute in cash to them an amount equal to the difference, if any, between
the amount of cash that would have been distributed to the Pharma Affiliates had
the Distribution In Kind CPIs been purchased for cash and the
29
value of the Distribution In Kind CPIs (as so determined) (which difference is
calculated to be $7,312 based on the unadjusted purchase price per CPI). This
difference arises because in calculating the number of CPIs that have an
equivalent value to the Net Cash Proceeds Distribution the Pharma Affiliates
would receive from the Sale Proposals, we rounded downward to avoid distributing
fractional CPIs.
A copy of the Distribution In Kind Amendment is attached to this Consent
Solicitation Statement as Appendix C, and should be read in its entirety.
Interest of Parties
The Pharma Affiliates together own 2,328 Units representing
approximately 28% of the outstanding Units and, as a result, will receive the
Distribution In Kind CPIs upon the completion of the Sale Proposals.
Certain Income Tax Consequences
If the Pharma Affiliates were to acquire the Distribution In Kind CPIs
for cash, the sale would trigger a taxable gain to the Pharma Affiliates in an
amount equal to the entire purchase price of the assets. This tax would possibly
not be subject to other offset or deduction, making the tax that would be
payable a significant incremental cost to the Pharma Affiliates, and reducing
the price that could be paid for the CPIs. The other Limited Partners will be
unaffected by the Distribution In Kind, and will receive the same cash
consideration that they would have received if the Distribution In Kind CPIs
were sold for cash. The second component of the condition required by the Pharma
Affiliates is that the gain attributable to the sale of the Purchased CPIs be
allocated to the Partners who are receiving the Net Cash Proceeds Distribution.
This allocation of gain will not reduce the Net Cash Proceeds Distribution to
the Limited Partners, and will result in the reporting to such Limited Partners
of the same amount of taxable gain as would have been reported if the Dividend
In Kind CPI's were sold for cash rather than distributed to the Pharma
Affiliates.
Recommendation of the General Partner
At a meeting of the Board held on April 3, 2000, the Board unanimously
adopted resolutions expressing the Board's belief that the Distribution In Kind
Amendment is fair to and in the best interests of the Limited Partners and us
and has approved the Distribution In Kind Amendment and recommends that the
Limited Partners vote "FOR" the Distribution In Kind Amendment.
The Board made this determination based on its assessment of the
Proposals as a whole and, particularly, on the fact that the Distribution In
Kind Amendment will result in increased value being realized by Limited
Partners. The offer made by the Pharma Affiliates, and matched by DR, is 7.3%
higher than the initial offer made by DR and reflected in the Initial DR
Purchase Agreement. However, as a condition to the higher
30
offer, the Pharma Affiliates requested a Distribution In Kind of their
proportionate limited partnership interest in the Purchased CPIs.
The Pharma Affiliates, as holders of 2,328 Units representing
approximately 28% of the outstanding Units, have agreed to vote "FOR" the
Distribution In Kind Amendment.
Failure to approve the Distribution In Kind Amendment may result in the
failure to consummate either of the Sale Proposals since the Pharma Affiliates
Sale is subject to Limited Partner approval of the Distribution In Kind
Amendment and the Closing of each of the Sale Proposals is conditioned on the
other.
31
INFORMATION CONCERNING THE CONSENT SOLICITATION
General
This Consent Solicitation Statement is being furnished to the Limited
Partners in connection with the solicitation of written consents by the General
Partner to consider and vote on the Proposals.
This Consent Solicitation Statement and the accompanying consent card
are first being mailed to Limited Partners on or about _________, 2000. The cost
of this solicitation will be borne by us.
The General Partner may contact brokers and representatives who
originally sold the Units to investors and request their assistance in
encouraging investors to return their consent cards. These brokers or
representatives would not be compensated for this assistance nor would they be
asked to make any recommendation as to how the investors should vote.
Additionally, the General Partner may retain a consent solicitor to assist in
contracting brokers or investors to encourage the return of consent cards,
although it does not anticipate doing so. We have retained MAVRICC Management
Systems, Inc. ("MAVRICC") to collect the consent cards and tabulate the results.
Deadline For Consent
Consent must be received by MAVRICC by mail or facsimile before _______,
2000, at 5:00 pm (New York time), unless such date or time is extended for an
aggregate of up to an additional 60 days in the sole discretion of our General
Partner or unless the necessary vote to approve each of the proposals is
received earlier.
Record Date; Units Entitled To Vote
The General Partner has fixed the close of business on _______, 2000 as
the Record Date for determining the Limited Partners who are entitled to notice
of the solicitation of Consent and to give their Consent to the Proposals. As of
the Record Date, 8,257 Units were outstanding and owned of record by ____
persons. The persons who are Limited Partners on the Record Date are entitled to
one vote per Unit.
Vote Required
Pursuant to the Partnership Agreement, the approval of the Proposals
requires the affirmative vote of a majority in interest of all Limited Partners
and the General Partner. The approval of the Proposals will be obtained through
this solicitation of written consents of the Limited Partners, and no meeting of
the Limited Partners will be held to vote on the Proposals.
Reference to a majority in interest means Partners whose adjusted
capital contributions aggregate more than 50% of the adjusted capital
contributions of all
32
Partners. Accordingly, the approval of each of the Proposals requires the
consent of the holders of more than 50% of the outstanding Units.
We have been advised that, as of the Record Date, the Pharma Affiliates
collectively owned and have the right to vote 2,328 Units representing
approximately 28% of the outstanding Units. The Pharma Affiliates have agreed to
vote "FOR" each of the Proposals.
Approval of each of the Proposals, including the Pharma Affiliates Sale,
requires only the consent of the holders of more than 50% of all outstanding
Units and does not require the consent of the holders of a majority of the Units
not controlled by the Pharma Affiliates.
Regulatory Matters
No material regulatory approvals are required in order to effect the
Proposals, [although the consent of Centocor is required for the transfer of the
CPIs to the Purchasers].
Effect of Abstentions
For purposes of determining approval of each of the Proposals,
abstentions (including abstentions that result form the failure of a bank,
broker or other nominee to cast a vote) will have the same legal effect as a
vote "AGAINST" each of the Proposals.
Consents; Revocation
A consent card is included with this Consent Solicitation Statement.
Please use the consent card to cast your vote on the proposals.
Consent must be received by __________, 2000, at 5:00 p.m. (New York
time) at the office of MAVRICC unless such date or time is extended for an
aggregate of up to an additional 60 days in the sole discretion of the General
Partner, unless the necessary vote to approve the Proposal is received earlier
(the "Expiration Date").
If the consent card is properly signed and is not revoked by an
investor, the Units it represents will be voted in accordance with the
instructions of the Limited Partner. If no specific instructions are given, the
Units will be counted as a vote "FOR" each of the Proposals. A Unitholder may
revoke his consent card at any time before the Expiration Date. An investor must
advise us of revocation of his or her consent card in writing, which revocation
must be received by the General Partner at 1285 Avenue of the Americas, New
York, NY 10019, prior to the Expiration Date.
33
No Appraisal Rights
If the owners of more that 50% of the outstanding Units consent to the
proposals, all Limited Partners will be bound by such consent (including Limited
Partners who do not consent). Non-consenting Limited Partners are not entitled
to any rights of appraisal or similar rights that may be available to dissenting
shareholders in a corporation.
34
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Our Annual Report on Form 10-K for the year ended December 31, 1999 is
incorporated by reference in this Consent Solicitation Statement.
All documents and reports filed by us pursuant to Section 13(a) or 15(d)
of the Exchange Act subsequent to the date of this Consent Solicitation
Statement and prior to the Expiration Date will be deemed to be incorporated by
reference in this Consent Solicitation Statement and to be a part of this
Statement from the date of filing of such documents or reports. Any statement
contained in a document incorporated or deemed to be incorporated by reference
will be modified or superseded to the extent that a statement contained in this
Consent Solicitation Statement or in any other subsequently filed document which
also is to be incorporated by reference modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Consent Solicitation
Statement.
This Consent Solicitation Statement incorporates documents by reference
with are not presented herein or delivered herewith. A copy of any or all
documents incorporated by reference herein (other than exhibits thereto which
are not specifically incorporated by reference herein) will be provided without
charge to each person to whom this Consent Solicitation Statement is delivered
upon oral or written request within one business day of receipt of such request
to the General Partner.
-----------------
YOUR VOTE IS VERY IMPORTANT. Please sign and return promptly the
enclosed consent card in the envelope provided or fax it to MAVRICC at ________.
_____________, 2000
APPENDIX A
AMENDED AND RESTATED
CONTRACTUAL PAYMENT INTEREST
PURCHASE AGREEMENT
Among
PaineWebber R&D Partners II L.P., a Delaware limited partnership,
and
Bioventure Investments, kft
Pharmaceutical Royalties, LLC
Pharmaceutical Partners, LLC
April 4, 2000
1
AMENDED AND RESTATED CONTRACTUAL PAYMENT
INTEREST PURCHASE AGREEMENT
This Amended and Restated Contractual Payment Interest Purchase
Agreement (the "Agreement") is dated as of April 4, 2000, by and among
PAINEWEBBER R&D PARTNERS II, L.P., a Delaware limited partnership
("PaineWebber"), Bioventure Investments, kft, a Hungarian company
("Bioventure"), Pharmaceutical Royalties, LLC, a Delaware limited liability
company ("Pharma Royalties" and, together with Bioventure, the "Pharma
Affiliates") and Pharmaceutical Partners, LLC, a Delaware limited liability
company and the manager of the Pharma Affiliates ("Pharma Partners").
RECITALS
A. PaineWebber is the owner of certain Centocor Partners III L.P.
Contractual Payment Interests ("CPIs") relating primarily to the sales of
ReoPro(R), a dual receptor glycoprotein IIB/IIIA therapeutic manufactured and
owned by Centocor ("ReoPro") and paid by Centocor, Inc. ("Centocor"). In this
regard, there exist a total of 543.25 units representing contractual payment
interests comprised of 431.25 Class A CPIs, one (1) Class B CPI, and 111 Class C
CPIs. PaineWebber owns twenty-two (22) Class A and one hundred eleven (111)
Class C CPIs. The CPIs represent right, title, and interest in a proportionate
share of certain royalty payments based on the sale of ReoPro. The terms of the
CPIs are set forth more fully in inter alia, that certain Amended and Restated
Partnership Purchase Option Agreement dated as of December 23, 1987, as amended
as of March 23, 1988 (the "Option Agreement") and that certain Partnership
Purchase Agreement by and among Centocor and certain affiliates thereof and
PaineWebber and/or affiliates thereof, attached as Exhibit A to the Option
Agreement; the Stipulation and Agreement of Compromise, Settlement and Release
dated May 1997, as amended by an Agreement dated October 7, 1997 (the
"Settlement Agreement"), together with all other pertinent and relevant
agreements and/or stipulations entered in connection with the case captioned
PaineWebber R&D Partners II, L.P. v. Centocor, Inc., et al.,; Case No. 14405
(New Castle Cty., Del. Chanc. (the "Court")) (the "Centocor Litigation").
B. The Pharma Affiliates wish to purchase certain of the CPIs from
PaineWebber, and PaineWebber wishes to sell certain of the CPIs to the Pharma
Affiliates, subject to the terms and conditions set forth herein.
C. PaineWebber, the Pharma Affiliates and Pharma Partners have
previously entered into a Contractual Contingent Payment Interest Purchase
Agreement dated as of February 17, 2000 (the "Original Agreement") and have
agreed that it is in their mutual best interest to amend and restate in its
entirety the Original Agreement as set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties agree as follows:
2
ARTICLE I
PURCHASE AND SALE OF CPIs
1.1 Sale of CPIs; Purchase Price. PaineWebber hereby agrees to sell to
the Pharma Affiliates, and the Pharma Affiliates hereby agree to purchase from
PaineWebber eight and seventy-five one-hundredths (8.75) Class A and forty and
seventy-five one- hundredths (40.75) Class C CPIs (the "Purchase CPIs") at a
purchase price of US $194,000 per each Class A CPI and US $361,200 per each
Class C CPI, for an aggregate purchase price (the "Purchase Price") of US
$16,416,400, payable in cash, provided that the Purchase Price (and purchase
price per Purchase CPI) shall be subject to adjustment pursuant to Section 1.2
hereof. PaineWebber shall sell the Purchase CPIs and the Pharma Affiliates shall
buy the Purchase CPIs as follows:
Purchaser Class Number Total
- --------- ----- ------ -----
Bioventure A 7.00 $ 1,358,000
C 32.75 11,829,300
Pharma Royalties A 1.75 $ 339,500
C 8.00 2,889,600
Pharma Partners shall cause the Pharma Affiliates to pay the Purchase
Price.
1.1.1 Distribution in Kind. It is understood among the parties
hereto that, as of the date hereof, the Pharma Affiliates in the aggregate own
2,328 units representing limited partnership interests in PaineWebber (the
"Units"). The Units constitute 28.1942594% of the aggregate number of
outstanding Units. At the Closing, (i) PaineWebber hereby agrees to distribute
in kind to the Pharma Affiliates an aggregate of six and twenty-five one
hundredths (6.25) Class A and thirty-one and twenty-five one hundredths (31.25)
Class C CPIs (the "Distribution in Kind CPIs") and (ii) effective upon receipt
of such distribution, the Pharma Affiliates, as holders of limited partnership
interests in PaineWebber, hereby waive any right to receive a cash distribution
from PaineWebber in respect of the transactions contemplated by Section 1.1 of
this Agreement and in respect of the transactions contemplated by the DRI
Agreement (as hereinafter defined), except that PaineWebber will distribute in
cash (the "Rounding Cash Amount") an amount equal to the difference, if any,
between (i) the amount of cash that would have been distributed to the Pharma
Affiliates had the Distribution in Kind CPIs been purchased at the purchase
price per Purchase CPI (determined on the basis of the purchase price per
Purchase CPI as adjusted pursuant to Section 1.2) and (ii) the value of the
Distribution in Kind CPIs (as so determined) (which difference is determined to
be $7,312 based on the unadjusted purchase price per Purchase CPI set forth in
Section 1.1). PaineWebber shall distribute the Distribution in Kind CPIs as
follows:
3
Distributee Class Number Total Value
- ----------- ----- ------ -----------
Bioventure A 5.00 $ 970,000
C 25.00 9,030,000
Pharma Royalties A 1.25 $ 242,500
C 6.25 2,257,500
Upon receipt of the Distribution in Kind CPIs pursuant to this Section
1.1(b), the Pharma Affiliates, without further action on their part, shall be
deemed to have waived their right to receive a cash distribution from
PaineWebber in respect of the transactions contemplated by Section 1.1 of this
Agreement and in respect of the transactions contemplated by the DRI Agreement
except for distribution of the Rounding Cash Amount.
1.2 Adjustment to Purchase Price. (a) The aggregate Purchase Price (and
the purchase price per Purchase CPI) shall be adjusted upwards or downwards, on
a dollar-for- dollar basis, to the extent the royalty payments that PaineWebber
has received for the Purchase CPIs for the first and second quarters of 1999
differ from that set forth in Appendix I attached hereto and made a part hereof.
By way of example, the Purchase Price will be adjusted upwards in the event
royalty payments that have been received by Paine Webber are less than as set
forth in Appendix I, and the Purchase Price will be adjusted downwards in the
event royalty payments that have been received by Paine Webber are more than as
set forth in Appendix I.
(b) The aggregate Purchase Price (and the purchase price per
Purchase CPI) shall also be adjusted downwards, on a dollar-for-dollar basis, to
the extent that PaineWebber receives any royalty payment with respect to the
Purchase CPIs for periods after June 30, 1999. To the extent of any such
reduction, the obligations of PaineWebber in Section 1.3(d) hereof shall be
similarly reduced.
1.3 Additional Payments.
(a) Background. The parties hereto acknowledge that certain
lumpsum payments shall be made to owners of the CPIs as a result of the
settlement of the Centocor Litigation in connection with sales of ReoPro
reaching $600 million (the "Sales Payment"). The parties hereto acknowledge that
certain lumpsum payments to be paid to PaineWebber as an owner of the Purchase
CPIs may relate to deficiencies in CPI payments previously paid to PaineWebber.
Pursuant to the Settlement Agreement, the parties hereto further acknowledge
that Centocor will make certain payments to owners of the CPIs if certain
payments are received by Centocor from the Fujisawa Pharmaceutical Company, Ltd.
(the "Fujisawa Milestone Payments").
(b) Attribution of Lumpsum Payments Pursuant to the Settlement
Agreement. Notwithstanding the foregoing, (i) any payments relating to the
Centocor Litigation which are to be paid upon final judicial approval of the
Settlement Agreement (ii) the Sales Payment, and (iii) payments ordered by the
Court as stipulated to by the parties to the Centocor Litigation to adjust for
shortfalls or deficiencies in all periods prior to the first
4
quarter of 1999 are to inure to the benefit of, and be paid to, PaineWebber, and
payments ordered by the Court as stipulated by the parties to the Centocor
Litigation to adjust for shortfalls or deficiencies in all periods after the
fourth quarter of 1998 are to inure to the benefit of, and be paid to, the
Pharma Affiliates in proportion to the number of CPIs owned by the Pharma
Affiliates after the Closing on the Closing Date.
(c) Payment of Fujisawa Milestone Payments to the Pharma
Affiliates. The parties hereto agree that all right, title, and interest in and
to any Fujisawa Milestone Payments shall inure to the benefit of the Pharma
Affiliates in proportion to the number of CPIs owned by the Pharma Affiliates
after the Closing on the Closing Date.
(d) Attribution of Royalty Payments. The parties hereto agree
that all royalty payments payable with respect to the Purchase CPIs for periods
after June 30, 1999, shall be payable to and inure to the benefit of the Pharma
Affiliates in proportion to the number of CPIs owned by the Pharma Affiliates
after the Closing on the Closing Date if Centocor agrees to pay the Pharma
Affiliates directly. Any such payments made to PaineWebber by Centocor in lieu
of being made directly to the Pharma Affiliates by Centocor shall be held by
PaineWebber in trust for the Pharma Affiliates and paid to the Pharma Affiliates
within two (2) business days of receipt thereof in proportion to the number of
CPIs owned by the Pharma Affiliates after the Closing on the Closing Date.
1.4 Closing.
1.4.1 Closing Date. The closing on the sale of the Purchase CPIs
("Closing") shall take place at the offices of Paul, Weiss, Rifkind, Wharton &
Garrison, within three (3) business days following completion of the conditions
set forth in Article 5, or at such other place or at such other date and time as
PaineWebber and the Pharma Partners may mutually agree (the "Closing Date").
1.4.2 Consent Solicitation Statement.
(a) As promptly as practicable after the execution of this
Agreement, PaineWebber shall prepare and file with the Securities and Exchange
Commission (the "SEC") a consent solicitation statement (together with any
amendments thereto, the "Consent Solicitation Statement") relating to the
solicitation of the consent of PaineWebber's Limited Partners (the "Consent") to
the approval of (i) this Agreement and the transactions contemplated hereby and
(ii) the DRI Agreement and the transactions contemplated thereby (such matters
being the "Approved Matters"). Pharma Partners and the Pharma Affiliates shall
furnish all information concerning them, the offer contemplated by this
Agreement, and, to the extent required by applicable law, their analysis of and
plans for PaineWebber's properties, as PaineWebber may reasonably request in
connection with the preparation of the Consent Solicitation Statement. The
Consent Solicitation Statement shall be mailed to the Limited Partners of
PaineWebber as promptly as practicable following satisfactory response from the
SEC of any matters raised by the SEC with respect to the Consent Solicitation
Statement. PaineWebber shall cause the Consent Solicitation Statement to comply
as to form and substance in all material respects with the applicable
requirements of the Securities Exchange Act of
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1934 and shall use its best efforts so that none of the information included in
the Consent Solicitation Statement shall, at the time the Consent Solicitation
Statement (or any amendment thereof or supplement thereto) is first mailed to
the Limited Partners of Paine Webber contains any untrue statements of a
material fact or omits to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The Consent Solicitation Statement shall include the
recommendation of the General Partner of PaineWebber to PaineWebber's Limited
Partners that they vote in favor of the approval of the Approved Matters (except
that the General Partner may withdraw, modify or refrain from making such
recommendations to the extent that the General Partner of PaineWebber
determines, upon the advice of counsel, that to include such recommendation or
not withdraw such recommendation if previously included would cause PaineWebber
to breach its fiduciary duty to the Limited Partners of PaineWebber under
applicable law).
(c) No amendment or supplement to the Consent Solicitation
Statement filed with the SEC shall be made without the approval of Pharma
Partners, which approval shall not be unreasonably withheld or delayed.
PaineWebber shall promptly advise Pharma Partners of any request by the SEC for
amendment to the Consent Solicitation Statement or comments thereon and
responses thereto or requests by the SEC for additional information.
1.4.3. Consent. PaineWebber shall seek the Consent of its Limited
Partners as promptly as practicable following mailing of the Consent
Solicitation Statement for the purpose of voting upon the approval of the
Approved Matters. PaineWebber shall use its reasonable best efforts to solicit
from its Limited Partners consents in favor of the approval of this Agreement
and the transactions contemplated hereby pursuant to the Consent Solicitation
Statement and shall take such other action as is reasonably necessary or
advisable to secure the vote or consent of Limited Partners required by
applicable law, except to the extent that the General Partner determines, upon
the advice of counsel, that doing so would cause PaineWebber to breach its
fiduciary duties to the Limited Partners of PaineWebber under applicable law.
1.4.4. No Solicitation. PaineWebber shall not, directly or
indirectly, solicit any offers to purchase, or discuss or otherwise negotiate
with any person in respect of the purchase of, the Purchase CPIs; provided,
however, in the event PaineWebber receives a bona fide unsolicited offer from an
unaffiliated third party (the "Third Party Offer") to purchase all or any
portion of the Purchase CPIs, the Distribution in Kind CPIs or the CPIs that are
the subject of the DRI Agreement (while such agreement is in effect) after the
execution and delivery of this Agreement but prior to the Closing Date which,
upon the advice of counsel, PaineWebber's General Partner determines is legally
advisable for PaineWebber to pursue or accept for the General Partner to comply
with its fiduciary duties to the Limited Partners of PaineWebber, (a) after the
General Partner's compliance with the provisions set forth in clause (A) of the
proviso below, the General Partner shall be entitled to discuss or otherwise
negotiate with such unaffiliated third
6
party in respect of the Third Party Offer and (b) after the time specified in
the last sentence of this Section 1.4.4, the General Partner may accept and
consummate such Third Party Offer and recommend its approval by its Limited
Partners without any further liability or obligation of any of the parties
hereto to the other (except as provided in Section 6.5(b)); provided, further,
however, that (A) within three business days of receipt of any Third Party
Offer, Paine Webber shall, subject to any confidentiality restrictions
pertaining to the identity of the third party, notify Pharma Partners and
provide Pharma Partners with a true and complete copy of the Third Party Offer,
if the Third Party Offer is in writing, or a written summary of all material
terms and conditions thereof if it is not in writing, and (B) PaineWebber shall
provide Pharma Partners (simultaneously with the time that such documents are
provided to such third party) with all documents containing or referring to
non-public information of PaineWebber that are supplied to such third party, to
the extent not previously supplied by PaineWebber to Pharma Partners.
Notwithstanding anything in this Agreement to the contrary, PaineWebber shall
not accept or recommend for approval to its Limited Partners, or enter into any
agreement (the "Third Party Agreement") concerning a Third Party Offer for a
period of not less than three business days after PaineWebber furnishes Pharma
Partners with a true and complete copy of such Third Party Offer, if the Third
Party Offer is in writing, or a written summary of all material terms and
conditions thereof, if it is not in writing.
1.4.5. Vote by Pharma Affiliates. Pharma Affiliates (i) shall
vote all of their Units in favor of each of the Approved Matters, (ii) shall not
encourage or solicit any Limited Partner of PaineWebber to vote against any
Approved Matter and (iii) consents to a statement to the foregoing effect
appearing in the Consent Solicitation Statement.
1.4.6. Closing Date. The Closing Date shall occur on the date on
which all conditions to Closing have been satisfied or waived. On the Closing
Date, PaineWebber shall deliver to the Pharma Affiliates the Centocor consent
and applicable assignment documents, certificates and other documentation
required by Section 5.1, and the Pharma Affiliates shall deliver the Purchase
Price to PaineWebber.
ARTICLE 2
[INTENTIONALLY DELETED]
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PAINEWEBBER
PaineWebber makes to Pharma Partners and the Pharma Affiliates the
representations and warranties contained in this Article 3.
3.1 Organization, Good Standing, and Power. PaineWebber has all
requisite power to own and sell the CPIs, to execute and deliver this Agreement,
and to perform such obligations hereunder.
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3.2 CPIs. PaineWebber is the owner of, and holds title to, the number of
CPIs set forth in Recital A hereof. Such CPIs (a) were acquired pursuant to,
inter alia, the Option Agreement and that certain Partnership Purchase Agreement
by and among Centocor, and certain affiliates thereof and PaineWebber and/or
affiliates thereof, attached as Exhibit A to the Option Agreement and as such
documents have been stipulated as true and correct by the parties thereto in
connection with the Centocor Litigation; the Settlement Agreement, the Final
Order, and pleadings, stipulations, or agreements relevant to PaineWebber's
right, title, and interest in and to the CPIs in connection with the Centocor
Litigation (collectively, the "Title Documents"), and such Title Documents
constitute all of the agreements, terms, and conditions pertaining to the CPIs
to which PaineWebber is a party and the Title Documents remain in full force and
effect and binding upon the respective parties thereto in accordance with their
respective terms, unamended; (b) have been held by PaineWebber for at least two
(2) years for the purpose of resale under Rule 144(k) under the Securities Act
of 1933, as amended; and (c) are owned by PaineWebber free and clear of all
pledges, liens, encumbrances, or claims of any kind. PaineWebber does not
control, is not controlled by, nor is under common control with Centocor (with
"control" and similar words having the meaning ascribed to them under the
Securities Act of 1934, as amended, and the rules and regulations thereunder).
There have been no previous splits, subdivisions, recapitalizations, or the like
with respect to the CPIs. PaineWebber has not entered into any agreement with
any third party selling or transferring, or purporting to sell or transfer, any
interest in the Purchase CPIs or suspending, terminating, or waiving any right,
benefit, or entitlement under the Purchase CPIs, except as expressly set forth
in the Settlement Agreement. As of the date hereof, PaineWebber has not (i)
received any royalty payment for Purchase CPIs for any period commencing on or
after October 1, 1999, and (ii) received any payments arising from the Centocor
Litigation reflecting deficiencies of royalty payments previously made.
3.3 Authorization and Binding Effect. The execution, delivery, and
performance of this Agreement by PaineWebber has been duly authorized by all
necessary action. This Agreement has been duly executed and delivered by
PaineWebber and, assuming due authorization, execution and delivery by Pharma
Partners, constitutes the legal, valid, and binding obligation of PaineWebber,
enforceable against it in accordance with its terms except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium, and other laws
that generally affect creditors and except as may be limited by general
principles of equity.
3.4 No Breach. The execution, delivery, and performance of this
Agreement by PaineWebber, and the performance of this Agreement by PaineWebber
will not violate any agreement, charter or partnership documents or any
judgment, award, or decree or any material indenture, agreement, or other
instrument to which it is a party, or by which such member or its properties or
assets are bound, or conflict with, result in a breach of, or constitute (with
due notice or lapse of time or both) a default under, any such indenture,
agreement, or other instrument, or result in the creation or imposition of any
lien, charge, or encumbrance of any nature whatsoever upon any of its properties
or
8
assets except to the extent the effect thereof will not be materially adverse to
PaineWebber's ability to fulfill its obligations under this Agreement and except
for the consent of Centocor required for the sale and transfer of Purchase CPIs
hereunder.
3.5 Third Party Consents. No consent, approval, or authorization of, or
designation, declaration or filing with, any federal or state governmental
authority in the United States or any other third party is required on the part
of PaineWebber in connection with the valid execution and delivery of this
Agreement, the purchase and sale of Purchase CPIs, or the consummation of any
other transaction contemplated hereby, except, (i) if required, qualifications
or filings in connection with the exemptions under applicable state "blue sky"
laws and Federal securities laws, which qualifications or exemptions, if
required, will have been obtained and will be effective on the Closing Date, or
will be obtained or filed after the Closing Date within the prescribed time in
order to secure such exemptions or qualifications (ii) the consent of Centocor
and (iii) the consent of a majority in interest of the Limited Partners of
PaineWebber.
3.6 No Finder's Fee. PaineWebber has not retained a finder or broker in
connection with the transactions contemplated by this Agreement, and hereby
agrees to indemnify and to hold Pharma Partners and the Pharma Affiliates
harmless of and from any liability for commission or compensation in the nature
of a finder's fee to any broker or other person or firm (and the costs and
expenses of defending against such liability or asserted liability) for which
PaineWebber, or any of its employees or representatives, are responsible.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PHARMA PARTNERS
AND THE PHARMA AFFILIATES
Pharma Partners and the Pharma Affiliates represent and warrant to
PaineWebber that:
4.1 Organization, Good Standing, and Power. Each of the Pharma
Affiliates has all requisite power and authority to acquire the Purchase CPIs
and to receive the distribution of the Distribution in Kind CPIs, and Pharma
Partners and each of the Pharma Affiliates has all requisite power and
authority, to execute and deliver this Agreement, and to perform its obligations
hereunder.
4.2 Authorization and Binding Effect. The execution, delivery, and
performance of this Agreement by Pharma Partners and the Pharma Affiliates has
been duly authorized by all necessary action. This Agreement has been duly
executed and delivered by Pharma Partners and the Pharma Affiliates and,
assuming due authorization, execution and delivery by PaineWebber, constitutes
the legal, valid, and binding obligation of Pharma Partners and the Pharma
Affiliates, enforceable against each of them in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, and other laws that generally affect creditors and except as may be
limited by general principles of equity.
9
4.3 No Breach. The execution, delivery, and performance by Pharma
Partners and the Pharma Affiliates of this Agreement will not violate its
organizational documents or any judgment, award, or decree or any material
indenture, agreement, or other instrument to which any of them is a party, or by
which any of them or its properties or assets are bound, or conflict with,
result in a breach of, or constitute (with due notice or lapse of time or both)
a default under, any such indenture, agreement, or other instrument, or result
in the creation or imposition of any lien, charge, or encumbrance of any nature
whatsoever upon any of the properties or assets of any of them, except to the
extent the effect thereof will not be materially adverse to the ability of any
of them to fulfill its obligations under this Agreement.
4.4 No Finder's Fee. Neither Pharma Partners nor either of the Pharma
Affiliates has retained a finder or broker in connection with the transactions
contemplated by this Agreement, and each of the Pharma Affiliates and Pharma
Partners hereby agrees to indemnify and hold PaineWebber harmless of and from
any liability for any commission or compensation in the nature of a finder's fee
to any broker or other person or firm (and the costs and expenses of defending
against such liability or asserted liability) for which Pharma Partners or
either of the Pharma Affiliates, or any of its employees or representatives, is
responsible.
ARTICLE 5
CONDITIONS PRECEDENT AND COVENANTS
5.1 Conditions Precedent to Obligations of Pharma Partners and the
Pharma Affiliates.
The obligations of Pharma Partners and the Pharma Affiliates under this
Agreement are subject, at the option of Pharma Partners, to the satisfaction or
waiver, in whole or in part, of each of the following conditions at or prior to
the Closing Date:
5.1.1 Accuracy of Representations and Warranties. The
representations and warranties of PaineWebber contained in this Agreement and in
the certification of the Title Documents by PaineWebber Development Corp. shall
be true and correct in all material respects when made and on and as of the
Closing Date as though made at and as of that date (except where such
representation and warranty is made as of a date specifically set forth
therein), and PaineWebber shall have delivered to Pharma Partners a certificate
to that effect.
5.1.2 Compliance with Covenants. PaineWebber shall in all
material respects have performed and complied with all terms, agreements,
covenants, and conditions of this Agreement to be performed or complied with by
it at the Closing Date, and PaineWebber shall have delivered to Pharma Partners
a certificate to that effect.
5.1.3 All Proceedings To Be Satisfactory. All corporate and other
proceedings to be taken by PaineWebber in connection with this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to
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Pharma Partners and its counsel and Pharma Partners and its counsel shall have
received all such certified or other copies of such documents as it may
reasonably request.
5.1.4 Legal Action or Proceedings. Except as set forth herein, no
legal action or proceeding shall have been instituted or overtly threatened by
any governmental authority seeking to restrain, prohibit, invalidate, or
otherwise affect the consummation of transactions contemplated by this
Agreement. The parties to this Agreement acknowledge that the Court has rendered
on February 17, 2000 and entered on February 22, 2000 a final order resolving
all settlement matters in the Centocor Litigation.
5.1.5 Consent Obtained. PaineWebber shall request Centocor to
consent to the sale of the Purchase CPIs and the distribution of the
Distribution in Kind CPIs within five (5) business days of the issuance of the
Final Order. Pharma Partners shall receive a copy of such request when delivered
to Centocor. PaineWebber shall have obtained the consent of Centocor in form
satisfactory to the Pharma Affiliates, as to the transfer of the Purchase CPIs
and the distribution of the Distribution in Kind CPIs in each case to the Pharma
Affiliates or their affiliates (or to their nominees).
5.1.6 Delivery of CPI Documentation. Paine Webber shall deliver
to Pharma Partners within five (5) days of the date of execution hereof either
original or true and correct certified copies of all Title Documents, together
with statements or financial reports pertaining to royalty payments made to
PaineWebber for the CPIs for the first and second quarters of 1999. On closing,
PaineWebber Development Corp., a Delaware corporation, shall deliver to Pharma
Partners, in form satisfactory to Pharma Partners and its counsel, a certificate
certifying that the Title Documents are true and correct copies thereof and
remain in full force and effect and have not been amended.
5.1.7 Class B Closing. All of the conditions precedent to the
obligations of Pharma Partners and the Pharma Affiliates as set forth in Section
5.1 of the Contractual Payment Interest Purchase Agreement dated as of the date
hereof among PaineWebber Development Corporation, Pharma Partners and the Pharma
Affiliates shall have been satisfied or waived.
5.2 Conditions Precedent to Obligations of PaineWebber. The obligations
of PaineWebber under this Agreement are subject to the satisfaction or waiver of
each of the following conditions at or prior to the Closing Date:
5.2.1 Accuracy of Representations and Warranties. The
representations and warranties of Pharma Partners and the Pharma Affiliates
contained in this Agreement or in any certificate or document delivered to
PaineWebber pursuant hereto shall be true and correct in all material respects
when made and on and as of the Closing Date as though made at and as of that
date (except where such representation and warranty is made as of a date
specifically set forth therein), and Pharma Partners shall have delivered to
PaineWebber a certificate to such effect.
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5.2.2 Compliance with Covenants. Pharma Partners and the Pharma
Affiliates shall in all material respects have performed and complied with all
terms, agreements, covenants, and conditions of this Agreement to be performed
or complied with by them at the Closing Date, and Pharma Partners shall have
delivered to PaineWebber a certificate to that effect.
5.2.3 All Proceedings To Be Satisfactory. All proceedings to be
taken by Pharma Partners and the Pharma Affiliates in connection with this
Agreement and all documents incident thereto shall be reasonably satisfactory in
form and substance to PaineWebber and its counsel, and PaineWebber and its
counsel shall have received all such certified or other copies of such documents
as it may reasonably request.
5.2.4 Legal Actions or Proceedings. No legal action or proceeding
shall have been instituted or overtly threatened by any governmental authority
seeking to restrain, prohibit, invalidate, or otherwise affect the consummation
of transactions contemplated by this Agreement. The parties to this Agreement
acknowledge that the Court has rendered on February 17, 2000 and entered on
February 22, 2000 a final order resolving all settlement matters in the Centocor
Litigation.
5.2.5 Consent Obtained. PaineWebber shall have obtained the
consent of Centocor to the transfer of the Purchase CPIs and the distribution of
the Distribution in Kind CPIs in each case to the Pharma Affiliates or their
affiliates (or to their nominees).
5.2.6. Limited Partner Consent. The Limited Partners of
PaineWebber shall have consented to this Agreement and the transactions
contemplated hereby in accordance with the provisions of PaineWebber's Agreement
of Limited Partnership and applicable law.
5.2.7. DRI Agreement. The transactions contemplated by the DRI
Agreement shall have been consummated in accordance with the terms thereof;
provided, that in the event DRI fails to satisfy its conditions to closing under
the DRI Agreement, this condition shall be deemed waived. Nothing in this
Section 5.2.7 is intended to affect PaineWebber's right to waive any closing
condition in the DRI Agreement if such waiver complies with the provisions of
Section 5.3(c).
5.3 Covenant of the Parties to Complete Transaction.
5.3.1 PaineWebber and Pharma Partners hereby covenant and agree
to use all reasonable efforts to effect the closing of the transactions
contemplated hereby; provided that the obligations of PaineWebber in this
Section 5.3(a) are subject to the rights of the PaineWebber and the General
Partner as set forth in Section 1.4.4.
5.3.2 Except with the prior written consent of Pharma Partners or
if this Agreement is terminated pursuant to Article 6, PaineWebber agrees not to
complete the sale of CPIs under the Amended and Restated Contractual Payment
Interest Purchase Agreement dated as of the date hereof between PaineWebber and
Drug Royalty Inc. (the "DRI Agreement") until and substantially simultaneously
with the Closing hereunder.
12
5.3.3 Except with the prior written consent of Pharma Partners,
PaineWebber agrees not to amend, modify or waive any provision of the DRI
Agreement unless the same provision in this Agreement is amended, modified or
waived to the same extent; provided that nothing herein shall require
PaineWebber to amend, modify or waive any provision of this Agreement if the
amendment, modification or waiver of the DRI Agreement is not material (it being
understood that, without limitation, amendment, modification or waiver of
Sections 1.1, 1.2, 1.3, 1.4 and 6.5 of the DRI Agreement is agreed to be
material).
ARTICLE 6
TERMINATION
This Agreement may be terminated at any time on or prior to the Closing
Date:
6.1 Injunction. By PaineWebber or Pharma Partners if any court of
competent jurisdiction in the United States shall have issued an order (other
than a temporary restraining order), decree, or ruling or taken any other action
restraining, enjoining, or otherwise prohibiting the consummation of this
Agreement and such order, decree, ruling, or other action shall have become
final and non-appealable.
6.2 Mutual Agreement. By mutual agreement of PaineWebber and Pharma
Partners.
6.3 Termination Date. By PaineWebber or Pharma Partners if the Closing
shall not have occurred on or before July 15, 2000 (provided that the right to
terminate this Agreement pursuant to this Section 6.3 shall not be available to
a party which has materially breached any representation, warranty, or covenant
of this Agreement).
6.4 Material Breach. By PaineWebber or Pharma Partners upon a material
breach of any representation, warranty, or covenant of this Agreement by any
other party which remains uncured for a period of thirty (30) days after receipt
of written notice of such breach from the nonbreaching party.
6.5 Effects of Termination.
6.5.1 If this Agreement is terminated pursuant to Sections 6.1,
6.2, or 6.3, all obligations of the parties hereto shall terminate (except as
provided in Section 6.5(b)) without liability of any party to any other party.
6.5.2 IF THIS AGREEMENT IS TERMINATED FOR ANY REASON (INCLUDING,
WITHOUT LIMITATION, PURSUANT TO SECTION 1.4.4) OTHER THAN AS A RESULT OF A
MATERIAL BREACH BY PHARMA PARTNERS OR THE PHARMA AFFILIATES OF ANY
REPRESENTATION, WARRANTY, OR COVENANT OF THIS AGREEMENT WHICH REMAINS UNCURED
FOR A PERIOD OF THIRTY (30) DAYS AFTER RECEIPT OF WRITTEN NOTICE OF
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SUCH BREACH FROM PAINEWEBBER (AND SUCH BREACH DOES NOT RESULT FROM A PRIOR
MATERIAL BREACH BY PAINEWEBBER), PAINEWEBBER SHALL PAY THE SUM OF US $500,000 TO
PHARMA PARTNERS, AS LIQUIDATED AND AGREED DAMAGES AND NOT AS A PENALTY TO
COMPENSATE PHARMA PARTNERS FOR ITS EFFORTS AND EXPENSE IN CONNECTION WITH THIS
AGREEMENT.
ARTICLE 7
MISCELLANEOUS
7.1 Confidentiality. Subject to the provisions of Section 5.3(c), each
party hereto agrees to keep such information or knowledge obtained pursuant to
the negotiation and execution of this Agreement, or the effectuation of the
transactions contemplated hereby, confidential ("Confidential Information");
provided, however, that the foregoing shall not apply to information or
knowledge which (a) is generally known to the public and did not become so known
through any violation of law, (b) became known to the public through no fault of
such party, (c) is required to be disclosed by law or regulation or by court
order or government agency with subpoena powers (provided that such disclosing
party shall give to the other party whose Confidential Information is to be
disclosed prior notice of such order and a reasonable opportunity to object or
take other available action), or (d) is disclosed in the course of any
litigation between any of the parties hereto.
7.2 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, none of the parties hereto shall have any obligation
to pay any of the fees and expenses of any other party incident to the
negotiation, preparation, and execution of this Agreement, including the fees
and expenses of counsel, accountants, investment bankers, and other experts
except as provided in Section 6.5(b).
7.3 Waiver. PaineWebber and Pharma Partners may, by written notice to
the other parties: (a) extend the time for the performance of any of the
obligations or other actions of any party under this Agreement; (b) waive any
inaccuracies in the representations or warranties of any other party contained
in this Agreement or in any document delivered pursuant to this Agreement; (c)
waive compliance with any of the conditions or covenants of another contained in
this Agreement; or (d) waive performance of any of the obligations of the other
party under this Agreement. With regard to any power, remedy, or right provided
herein or otherwise available to any party hereunder: (i) no waiver or extension
of time will be effective unless expressly contained in a writing signed by the
waiving party; and (ii) no alteration, modification, or impairment will be
implied by reason of any previous waiver, extension of time, delay, or omission
in exercise or other indulgence. No investigations made by or on behalf of
Pharma Partners or the Pharma Affiliates at any time shall waive, diminish the
scope of or otherwise affect any representation or warranty made by PaineWebber
in this Agreement.
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7.4 Amendments, Supplements. This Agreement may be amended or
supplemented at any time by the mutual written consent of the parties.
7.5 Entire Agreement. This Agreement, its exhibits, and the documents
executed on the Closing Date in connection herewith, constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior agreements and understandings, oral and written, between
the parties hereto with respect to the subject matter hereof. No representation,
warranty, promise, inducement, or statement of intention has been made by any
party which is not embodied in this Agreement or such other documents, and no
party shall be bound by, or be liable for, any alleged representation, warranty,
promise, inducement, or statement of intention not embodied herein or therein.
7.6 Binding Effect; Benefits. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is intended
to confer on any person other than the parties hereto or their respective
successors and assigns, any rights, remedies, obligations, or liabilities under
or by reason of this Agreement. All obligations, agreements, covenants,
representations, warranties and undertakings of either of the Pharma Affiliates
or Pharma Partners contained herein are joint and several among the Pharma
Affiliates and Pharma Partners.
7.7 Assignability. Neither this Agreement nor any of the parties' rights
hereunder shall be assignable by a party without the prior written consent of
the other parties; provided that, without the prior written consent of
PaineWebber, either of the Pharma Affiliates may assign any of its rights and
obligations hereunder to any affiliate of the assignor, but no such assignment
shall relieve the assignor of its obligations hereunder.
7.8 Notices. All notices under this Agreement will be in writing and
will be delivered by personal service or telegram, Federal Express or similar
courier (for overnight delivery), telecopy or certified mail (if such service is
not available, then by first class mail), postage or freight prepaid, to such
address as may be designated from time to time by the relevant party, and which
will initially be as set forth below. Notices pursuant to Section 1.4.4 or 1.4.5
shall be delivered by telecopy (with receipt confirmed by telephone) and by
overnight courier. Any notice sent by certified mail will be deemed to have been
given three (3) days after the date on which it is mailed and any notice sent by
Federal Express or similar courier (for overnight delivery) shall be deemed to
have been given one (1) business day after the business day on which it is sent.
All other notices will be deemed given when received. No objection may be made
to the manner of delivery of any notice actually received in writing by an
authorized agent of a party. Notices will be addressed as follows or to such
other address as the party to whom the same is directed will have specified in
conformity with the foregoing:
If to Pharma Partners or the Pharma Affiliates, to such party:
15
c/o Pharmaceutical Partners, L.L.C.
675 Third Avenue, Suite 3000
New York, NY 10017
Attention: Pablo Legorreta
David Madden
Telecopy: (917) 368-0021
with a copy to:
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02110
Attn: F. George Davitt
Telecopy: (617) 248-7100
If to PaineWebber:
PaineWebber Development Corporation
1285 Avenue of the Americas
New York, New York 10019
Attn: Dhan Pai
Telecopy: (212) 713-1464
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attn: James M. Dubin, Esq.
Telecopy: (212) 757-3990
7.9 Governing Law; Jurisdiction. This Agreement has been negotiated and
entered into in the State of New York, and all questions with respect to the
Agreement and the rights and liabilities of the parties will be governed by the
laws of the State of New York, regardless of the choice of laws provisions of
New York or any other jurisdiction. Any and all disputes between the parties
which may arise pursuant to this Agreement will be heard and determined before
an appropriate federal or state court located in New York, New York. The parties
hereto acknowledge that such court has the jurisdiction to interpret and enforce
the provisions of this Agreement, and the parties waive any and all objections
that they may have as to jurisdiction or venue in any of the above courts.
7.10 Rules of Construction.
7.10.1 Headings. The Article, Section, and Subsection headings in
this Agreement are inserted only as a matter of convenience, and in no way
define, limit, or
16
extend or interpret the scope of this Agreement or of any particular Article,
Section, or Subsection.
7.10.2 Tense and Case. Throughout this Agreement, as the context
may require, references to any word used in one tense or case shall include all
other appropriate tenses or cases.
7.10.3 Severability. The validity, legality or enforceability of
the remainder of this Agreement will not be affected even if one or more of the
provisions of this Agreement will be held to be invalid, illegal, or
unenforceable in any respect.
7.10.4 Waiver of Jury Trial. The parties hereto waive any right
to trial by jury in any court of competent jurisdiction in connection with any
claims arising out of this Agreement and the transactions contemplated hereby.
7.10.5 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
IN WITNESS WHEREOF, this Contractual Payment Interest Purchase Agreement
has been duly-executed and delivered by the duly authorized officers of the
parties hereto as of the date first above written.
PAINEWEBBER R&D PARTNERS II, L.P., a
Delaware limited partnership
By: PAINEWEBBER TECHNOLOGIES II, L.P.,
a Delaware limited partnership, its General
Partner
By: PWDC HOLDING COMPANY,
A Delaware corporation, its General Partner
By: /s/ Dhananjay Pai
-----------------
Name: Dhananjay Pai
BIOVENTURE INVESTMENTS, Kft
By: /s/ Istvan Zentai
-----------------
Istvan Zentai
Managing Director
PHARMACEUTICAL ROYALTIES, LLC
By: Pharmaceutical Royalties, LLC
Managing Member
By: /s/ Pablo Legorreta
-------------------
Pablo Legorreta
Managing Member
By: /s/ David Madden
----------------
David Madden
Managing Member
PHARMACEUTICAL PARTNERS, L.L.C.
By: /s/ Pablo Legorreta
-------------------
Pablo Legorreta
Managing Member
18
By: /s/ David Madden
----------------
David Madden
Managing Member
ACCEPTED AND AGREED ONLY WITH REGARD
TO THE LAST SENTENCE OF SECTION 5.1.7 HEREOF
PAINEWEBBER DEVELOPMENT CORPORATION
By: /s/ Dhananjay Pai
-----------------
Name: Dhananjay Pai
APPENDIX I
Valuation on 22 Class A CPIs and 111 Class C CPIs
(U.S. Dollars)
Valuation for 100% previously agreed to,
including settlement payments: $51,000,000
Deduction for settlement payments, net of
expenses: ($5,770,000)
Value agreed to before Q1 payment: $45,230,000
Deduction for Q1 royalty payments: ($1,870,450)
Deduction for Q2 royalty payments: ($2,048,625)
Total Purchase Price: $41,310,925
Adjustment to Purchase Price: $ 3,050,275
Revised Total Purchase Price for 100%: $44,361,200
90.4% of valuation for 111 Class C CPIs
($361,200.00 per CPI)
$40,093,200
90.6% of valuation for 22 Class A CPIs
($194,000.00 per CPI)
$4,268,000
- ----------
$44,361,200
Note:
15 x $194,000.00 = $ 2,910,000
72 x $361,200.00 = $26,006,400
$28,916,400
APPENDIX B
FIRST AMENDMENT TO
AMENDED AND RESTATED
CONTRACTUAL PAYMENT INTEREST
PURCHASE AGREEMENT
Among
PaineWebber R&D Partners II L.P., a Delaware limited partnership,
and
Drug Royalty USA, Inc., a Nevada corporation
April 4, 2000
1
FIRST AMENDMENT TO AMENDED AND RESTATED CONTRACTUAL
PAYMENT INTEREST PURCHASE AGREEMENT
This First Amendment to the Amended and Restated Contractual Payment
Interest Purchase Agreement is dated as of April 4, 2000, by and among
PAINEWEBBER R&D PARTNERS II, L.P., a Delaware limited partnership
("PaineWebber"), and DRUG ROYALTY USA, INC., a Nevada corporation ("DR").
RECITALS
A. The Parties hereto had previously entered into that certain
Contractual Payment Interest Purchase Agreement dated November 22, 1999 (the
"November Agreement") and subsequently entered into that certain Amended and
Restated Contractual Payment Interest Purchase Agreement dated as of February
17, 2000 (the "Amended Agreement) which amended and restated the November
Agreement in accordance with Section 7.4 thereof. A copy of the Amended
Agreement is attached hereto for reference.
B. The parties hereto have agreed that it is in their mutual best
interest to amend and restate certain provisions of the Amended Agreement to
reflect: (1) an increase in the number of Class C CPIs to be purchased by DR
from thirty-seven (37) to thirty-nine (39), as set forth more fully herein.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants hereinafter set forth and pursuant to Section 7.4 of the Amended
Agreement, the parties hereto agree as follows:
1. Paragraph 1.1 of the Amended Agreement is hereby amended and restated
as follows:
1.1 Sale of CPIs; Purchase Price. PaineWebber hereby agrees to
sell to DR, and DR hereby agrees to purchase from PaineWebber seven (7) Class A
and thirty-nine (39) Class C CPIs (the "Purchase CPIs") at a purchase price of
US $194,000 per each Class A CPI and US $361,200 per each Class C CPI, for an
aggregate purchase price (the "Purchase Price") of US $15,444,800, payable in
cash, provided that the Purchase Price (and purchase price per Purchase CPI)
shall be subject to adjustment pursuant to Section 1.2 hereof.
2. Paragraph 1.4.6 of the Amended Agreement is hereby intentionally
deleted.
3. Paragraphs 1.4.7 and 1.4.8 of the Amended Agreement are hereby
amended and restated as follows:
1.4.7 Consent Solicitation Statement
(a) As promptly as practicable after the execution of
this Agreement, PaineWebber shall prepare and file with the Securities and
Exchange
2
Commission (the "SEC") a consent solicitation statement (together with any
amendments thereto, the "Consent Solicitation Statement") relating to the
solicitation of the consent of PaineWebber's Limited Partners (the "Consent") to
the approval of (i) this Agreement and the transactions contemplated hereby, and
(ii) the PP Agreement and the transactions contemplated thereby (such matters
being the "Approved Matters"). DR shall furnish all information as PaineWebber
may reasonably request in connection with the preparation of the Consent
Solicitation Statement. The Consent Solicitation Statement shall be mailed to
the Limited Partners of PaineWebber as promptly as practicable following
satisfactory response from the SEC of any matters raised by the SEC with respect
to the Consent Solicitation Statement. PaineWebber shall cause the Consent
Solicitation Statement to comply as to form and substance in all material
respects with the applicable requirements of the Securities Exchange Act of 1934
and shall use its best efforts so that none of the information included in the
Consent Solicitation Statement shall, at the time the Consent Solicitation
Statement (or any amendment thereof or supplement thereto) is first mailed to
the Limited Partners of PaineWebber, contain any untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) The Consent Solicitation Statement shall include the
recommendation of the General Partner of PaineWebber to PaineWebber's Limited
Partners that they vote in favor of the approval of the Approved Matters.
(c) No amendment or supplement to the Consent
Solicitation Statement filed with the SEC shall be made without the approval of
DR, which approval shall not be unreasonably withheld or delayed. PaineWebber
shall promptly advise DR of any request by the SEC for amendment of the Consent
Solicitation Statement or comments thereon and responses thereto or requests by
the SEC for additional information.
1.4.8 Consent. PaineWebber shall seek the consent of its Limited
Partners as promptly as practicable following mailing of the Consent
Solicitation Statement for the purpose of voting upon the approval of the
Approved Matters. PaineWebber shall use its reasonable best efforts to solicit
from its Limited Partners consents in favor of the approval of this Agreement
and the transactions contemplated hereby pursuant to the Consent Solicitation
Statement and shall take such other action as is reasonably necessary or
advisable to secure the vote or consent of Limited Partners required by
applicable law, except to the extent that the General Partner determines that
doing so would cause PaineWebber to breach its fiduciary duties to the Limited
Partners of PaineWebber under applicable law.
2. Paragraph 5.1.4 of the Amended Agreement is hereby amended and
restated as follows:
5.1.4 Legal Actions or Proceedings. Except as set forth herein,
no legal action or proceeding shall have been instituted or overtly threatened
by any governmental authority seeking to restrain, prohibit, invalidate, or
otherwise affect the consummation of
3
transactions contemplated by this Amended Agreement. The parties hereto
acknowledge that the Court has rendered on February 17, 2000 and entered on
February 22, 2000 a final order resolving all settlement matters in the Centocor
Litigation.
3. Paragraph 5.2.4 of the Amended Agreement is hereby amended and
restated as follows:
5.2.4 Legal Actions or Proceedings. No legal action or proceeding
shall have been instituted or overtly threatened by any governmental authority
seeking to restrain, prohibit, invalidate, or otherwise affect the consummation
of transactions contemplated by this Amended Agreement. The parties hereto
acknowledge that the Court has rendered on February 17, 2000 and entered on
February 22, 2000 a final order resolving all settlement matters in the Centocor
Litigation.
4. Paragraph 6.5(b) of the Amended Agreement is hereby amended and
restated as follows:
6.5(b).IF THIS AMENDED AGREEMENT IS TERMINATED FOR ANY REASON,
INCLUDING DR'S ELECTION NOT TO EXERCISE ITS RIGHT OF FIRST REFUSAL PURSUANT TO
SECTION 1.4.5 HEREOF, OTHER THAN AS A RESULT OF A MATERIAL BREACH BY DR OF ANY
REPRESENTATION, WARRANTY, OR COVENANT OF THIS AMENDED AGREEMENT WHICH REMAINS
UNCURED FOR A PERIOD OF THIRTY (30) DAYS AFTER RECEIPT OF WRITTEN NOTICE OF SUCH
BREACH FROM PAINEWEBBER (AND SUCH BREACH DOES NOT RESULT FROM A PRIOR MATERIAL
BREACH BY PAINEWEBBER), PAINEWEBBER SHALL PAY THE SUM OF US $400,000 TO DRUG
ROYALTY CORPORATION, INC., A CANADIAN CORPORATION, AS LIQUIDATED AND AGREED
DAMAGES AND NOT AS A PENALTY TO COMPENSATE DR FOR ITS EFFORTS AND EXPENSE IN
CONNECTION WITH THIS AMENDED AGREEMENT.
5. Appendix I to the Amended Agreement is amended and restated as set
forth in "Appendix I" attached hereto and made a part hereof.
4
6. All provisions, terms and conditions set forth in the Amended
Agreement not modified or amended hereby shall remain in full force and effect.
IN WITNESS WHEREOF, this First Amendment to the Amended and Restated
Contractual Payment Interest Purchase Agreement dated February 17, 2000 has been
duly- executed and delivered by the duly authorized officers of the parties
hereto as of the date first written above.
PAINEWEBBER R&D PARTNERS II, L.P., a
Delaware limited partnership
By: PAINEWEBBER TECHNOLOGIES II, L.P.,
a Delaware limited partnership, its General
Partner
By: PWDC HOLDING COMPANY,
A Delaware corporation, its General Partner
By: /s/ Dhananjay Pai
-----------------
Name: Dhananjay Pai
DRUG ROYALTY USA, INC., a Nevada
corporation
By: /s/ Monte Miller
----------------
Name: Monte Miller
Title: Vice President
5
AMENDED AND RESTATED
APPENDIX I
Valuation on 22 Class A CPIs and 111 Class C CPIs
(U.S. Dollars)
Valuation for 100% previously agreed to,
including settlement payments: $51,000,000
Deduction for settlement payments, net of
expenses: ($5,770,000)
Value agreed to before Q1 payment: $45,230,000
Deduction for Q1 royalty payments: ($1,870,450)
Deduction for Q2 royalty payments: ($2,048,625)
Total Purchase Price: $41,310,925
Adjustment to Purchase Price: $3,050,275
Revised Total Purchase Price for 100%: $44,361,200
90.4% of valuation for 111 Class C CPIs ($361,200.00 per CPI): $40,093,200
90.6% of valuation for 22 Class A CPIs ($194,000.00 per CPI): 4,268,000
----------
$44,361,200
Note:
7 x $194,000.00 = $1,358,000
39 x $361,200.00 = $14,086,800
-----------
$15,444,800
AMENDED AND RESTATED
CONTRACTUAL PAYMENT INTEREST
PURCHASE AGREEMENT
Among
PaineWebber R&D Partners II L.P., a Delaware limited partnership,
and
Drug Royalty USA, Inc., a Nevada corporation
February 17, 2000
AMENDED AND RESTATED CONTRACTUAL PAYMENT INTEREST
PURCHASE AGREEMENT
This Amended and Restated Contractual Payment Interest Purchase
Agreement (the "Amended Agreement") is dated as of February 17, 2000, by and
among PAINEWEBBER R&D PARTNERS II, L.P., a Delaware limited partnership
("PaineWebber"), and DRUG ROYALTY USA, INC., a Nevada corporation ("DR").
RECITALS
A. The Parties hereto had entered into that certain Contractual Payment
Interest Purchase Agreement dated November 22, 1999 (the "November Agreement"),
and desire that this Amended and Restated Contractual Payment Interest Purchase
Agreement amend and restate the November Agreement in accordance with Section
7.4 thereof
B. PaineWebber is the owner of certain Centocor Partners III L.P.
Contractual Payment Interests ("CPIs") relating primarily to the sales of
Reopro(TM), a dual receptor glycoprotein IIB/IIIA therapeutic manufactured and
owned by Centocor ("Reopro") and paid by Centocor, Inc. ("Centocor"). In this
regard, there exist a total of 543.25 units representing contractual payment
interests comprised of 431.25 Class A CPIs, one (1) Class B CPI, and 111 Class C
CPIs. PaineWebber owns twenty-two (22) Class A and one hundred eleven (111)
Class C CPIs. The CPIs represent right, title, and interest in a proportionate
share of certain royalty payments based on the sale of Reopro. The terms of the
CPIs are set forth more fully in inter alia, that certain Amended and Restated
Partnership Purchase Option Agreement dated as of December 23, 1987, as amended
as of March 23, 1988 (the "Option Agreement") and that certain Partnership
Purchase Agreement by and among Centocor and certain affiliates thereof and
PaineWebber and/or affiliates thereof, attached as Exhibit A to the Option
Agreement; the Stipulation and Agreement of Compromise, Settlement and Release
dated May 1997, as amended by an Agreement dated October 7, 1997 (the
"Settlement Agreement"), together with all other pertinent and relevant
agreements and/or stipulations entered in connection with the case captioned
PaineWebber R&D Partners II, L.P. v. Centocor, Inc., et al.,; Case No. 14405
(New Castle Cty., Del. Chanc. (the "Court")) (the "Centocor Litigation").
C. PaineWebber has entered into a Contractual Payment Interest Purchase
Agreement with Pharmaceutical Partners, LLC, a Delaware limited liability
company, and certain affiliates thereof (the "PP Agreement") for the purchase or
distribution of eight (8) Class A and forty-one (41) Class C CPIs under
materially similar terms and conditions as set forth herein and a separate
Agreement for the purchase of the Class B CPI.
D. DR wishes to purchase certain of the CPIs from PaineWebber, and
PaineWebber wishes to sell certain of the CPIs to DR, subject to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF CPIs
1.1 Sale of CPIs; Purchase Price. PaineWebber hereby agrees to sell
to DR, and DR hereby agrees to purchase from PaineWebber seven (7) Class A and
thirty-seven (37) Class C CPIs (the "Purchase CPIs") at a purchase price of US
$194,000 per each Class A CPI and US $361,200 per each Class C CPI, for an
aggregate purchase price (the "Purchase Price") of US $14,722,400, payable in
cash, provided that the Purchase Price (and purchase price per Purchase CPI)
shall be subject to adjustment pursuant to Section 1.2 hereof.
1.2 Adjustment to Purchase Price.
(a) The aggregate Purchase Price (and the purchase price per
Purchase CPI) shall be adjusted upwards or downwards, on a dollar-for-dollar
basis, to the extent the royalty payments that PaineWebber has received for the
Purchase CPIs for the first and second quarters of 1999 differ from that set
forth in Appendix I attached hereto and made a part hereof. By way of example,
the Purchase Price will be adjusted upwards in the event royalty payments that
have been received by Paine Webber are less than as set forth in Appendix I, and
the Purchase Price will be adjusted downwards in the event royalty payments that
have been received by Paine Webber are more than as set forth in Appendix I.
(b) The aggregate Purchase Price (and the purchase price per
Purchase CPI) shall also be adjusted downward, on a dollar-for-dollar basis, to
the extent that PaineWebber receives any royalty payment with respect to the
Purchase CPIs for the period after June 30, 1999. To the extent of any such
reduction, the obligations of PaineWebber in Section 1.3(d) hereof shall be
similarly reduced.
1.3 Additional Payments.
(a) Background. The parties hereto acknowledge that certain
lumpsum payments shall be made to owners of the CPIs as a result of the
settlement of the Centocor Litigation in connection with sales of Reopro
reaching $600 million (the "Sales Payment"). The parties hereto acknowledge that
certain lumpsum payments to be paid to PaineWebber as an owner of the Purchase
CPIs may relate to deficiencies in CPI payments previously paid to PaineWebber.
Pursuant to the Settlement Agreement, the parties hereto further acknowledge
that Centocor will make certain payments to owners of the CPIs if certain
payments are received by Centocor from the Fujisawa
Pharmaceutical Company, Ltd. (the "Fujisawa Milestone Payments").
(b) Attribution of Lumpsum Payments Pursuant to the Settlement
Agreement. Notwithstanding the foregoing, (i) any payments relating to the
Centocor Litigation which are to be paid upon final judicial approval of the
Settlement Agreement (ii) the Sales Payment, and (iii) payments ordered by the
Court as stipulated to by the parties to the Centocor Litigation to adjust for
shortfalls or deficiencies in all periods prior to the first quarter of 1999 are
to inure to the benefit of, and be paid to, PaineWebber, and payments ordered by
the Court as stipulated by the parties to the Centocor Litigation to adjust for
shortfalls or deficiencies in all periods after the fourth quarter of 1998 are
to inure to the benefit of, and be paid to, DR in proportion to the number of
CPIs owned by DR on the Closing Date.
(c) Payment of Fujisawa Milestone Payments to DR. The parties
hereto agree that all right, title, and interest in and to any Fujisawa
Milestone Payments shall inure to the benefit of DR in proportion to the number
of CPIs owned by DR on the Closing Date.
(d) Attribution of Royalty Payments. The parties hereto agree
that all royalty payments payable with respect to the Purchase CPIs for periods
after June 30, 1999, shall be payable to and inure to the benefit of DR in
proportion to the number of CPIs owned by DR on the Closing Date if Centocor
agrees to pay DR directly. Any such payments made to PaineWebber by Centocor in
lieu of being made directly to DR by Centocor shall be held by PaineWebber in
trust for DR and paid to DR within two (2) business days of receipt thereof.
1.4 Closing.
1.4.1 Closing Date. The closing on the sale of the Purchase CPIs
("Closing") shall take place at the offices of Paul, Weiss, Rifkind, Wharton &
Garrison, on the date determined under Section 1.4.4 hereof, within three (3)
business days following completion of the conditions set forth in Article 5, or
at such other place or at such other date and time as PaineWebber and DR may
mutually agree (the "Closing Date").
1.4.2. [INTENTIONALLY DELETED]
1.4.3 [INTENTIONALLY DELETED]
1.4.4. Closing Date. The Closing Date shall occur on the date on
which PaineWebber has received (i) the Purchase Price and (ii) all conditions to
Closing to be satisfied have been satisfied or waived. On the Closing Date,
PaineWebber shall deliver to DR the Centocor consent and applicable assignment
documents required by Section 5.1.5 and 5.1.6 hereof, and DR shall deliver the
Purchase Price to PaineWebber
1.4.5 Right of First Refusal. PaineWebber shall not solicit any
offers to purchase the Purchase CPIs. Notwithstanding the foregoing, in the
event PaineWebber receives a bona fide
unsolicited offer from an unaffiliated third party ("Third Party") to purchase
on or before the Closing Date all or any portion of the Purchase CPIs or the
CPIs that are the subject of the PP Agreement (while such Agreement is in
effect) after the execution of this Amended Agreement but prior to the Closing
Date, PaineWebber shall, subject to any confidentiality restrictions pertaining
to the identity of the Third Party, deliver notice of such together with all
terms of the proposed purchase and a true and correct copy of the offer made by
the Third Party, with the identity of the Third Party redacted if necessary, to
DR within three (3) days of PaineWebber's receipt thereof ("Notice"). DR shall
possess the right to purchase the Purchase CPIs, subject to the third party
offer, for the same price and on the same terms as that being offered by said
Third Party ("Right of First Refusal"). DR shall have three (3) business days
from receipt of said Notice to notify PaineWebber of its election to exercise
its Right of First Refusal. All terms, conditions, representations, and
warranties set forth in this Amended Agreement shall be amended to conform to
the third party offer in the event the purchase of Purchase CPIs occurs by DR
electing to exercise its Right of First Refusal hereunder. In the event (i) DR
does not notify PaineWebber of its election to exercise its Right of First
Refusal within three (3) business days from receipt of the Notice or (ii) DR so
exercises its Right of First Refusal but the price and other terms being offered
by DR pursuant thereto are not, in PaineWebber's determination acting
reasonably, the same or better as those being offered by the Third Party, this
Amended Agreement shall terminate without any further liability or obligation of
either of the parties hereto to the other (except as provided in Section 6.5(b))
and PaineWebber may consummate with the Third Party the transaction described in
the Notice and recommend its approval by its Limited Partners. It is understood
and agreed that the execution and delivery by PaineWebber of the PP Agreement
with respect to the sale or distribution by PaineWebber of eight (8) Class A
CPIs and forty-one (41) Class C CPIs, and the consummation of the transactions
contemplated thereby, shall not give any rights to DR or its affiliates under
this Section 1.4.5 or otherwise.
1.4.6 Sale of Remaining CPIs. In the event PaineWebber determines
to sell, or pursue any possible sale of, any or all of the CPIs owned by it and
not being sold pursuant to this Agreement or the PP Agreement, PaineWebber will
notify DR thereof; provided that PaineWebber shall provide such notification not
less than three (3) days after making such determination and not less than two
(2) days prior to entering into any agreement in respect of such a sale.
1.4.7 Proxy Statement.
(a) As promptly as practicable after the execution of this
Agreement, PaineWebber shall prepare and file with the Securities and Exchange
Commission (the "SEC") a proxy statement (together with any amendments thereto,
the "Proxy Statement") relating to a special meeting of PaineWebber's Limited
Partners (the "Special Meeting") to be held to consider the approval of (i) this
Agreement and the transactions contemplated hereby, (ii) the PP Agreement and
the transactions contemplated thereby, and (iii) the sale by PaineWebber of all
assets of PaineWebber not being sold pursuant hereto or the PP Agreement in such
manner as the General Partner of PaineWebber deems advisable (such matters being
the "Approved Matters"). DR shall
furnish all information as PaineWebber may reasonably request in connection with
the preparation of the Proxy Statement. The Proxy Statement shall be mailed to
the Limited Partners of PaineWebber as promptly as practicable following
satisfactory response from the SEC of any matters raised by the SEC with respect
to the Proxy Statement. PaineWebber shall cause the Proxy Statement to comply as
to form and substance in all material respects with the applicable requirements
of the Securities Exchange Act of 1934 and shall use its best efforts so that
none of the information included in the Proxy Statement shall, at (i) the time
the Proxy Statement (or any amendment thereof or supplement thereto) is first
mailed to the Limited Partners of PaineWebber or (ii) the time of the Special
Meeting, contains any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) The Proxy Statement shall include the recommendation
of the General Partner of PaineWebber to PaineWebber's Limited Partners that
they vote in favor of the approval of the Approved Matters.
(c) No amendment or supplement to the Proxy Statement
filed with the SEC shall be made without the approval of DR, which approval
shall not be unreasonably withheld or delayed. PaineWebber shall promptly advise
DR of any request by the SEC for amendment of the Proxy Statement or comments
thereon and responses thereto or requests by the SEC for additional information.
1.4.8 Special Meeting. PaineWebber shall call and hold the
Special Meeting as promptly as practicable following mailing of the Proxy
Statement for the purpose of voting upon the approval of the Approved Matters.
PaineWebber shall use its reasonable best efforts to solicit from its Limited
Partners proxies in favor of the approval of this Agreement and the transactions
contemplated hereby pursuant to the Proxy Statement and shall take such other
action as is reasonably necessary or advisable to secure the vote or consent of
Limited Partners required by applicable law, except to the extent that the
General Partner determines that doing so would cause PaineWebber to breach its
fiduciary duties to the Limited Partners of PaineWebber under applicable law.
ARTICLE 2
[INTENTIONALLY DELETED]
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PAINEWEBBER
PaineWebber makes to DR the representations and warranties contained in
this Article 3.
3.1 Organization, Good Standing, and Power. PaineWebber has all
requisite power to
own and sell the CPIs, to execute and deliver this Amended Agreement, and to
perform such obligations hereunder.
3.2 CPIs. PaineWebber is the owner of, and holds title to, the number
of CPIs set forth in Recital A hereof. Such CPIs (a) were acquired pursuant to,
inter alia, the Option Agreement and that certain Partnership Purchase Agreement
by and among Centocor, and certain affiliates thereof and PaineWebber and/or
affiliates thereof, attached as Exhibit A to the Option Agreement and as such
documents have been stipulated as true and correct by the parties thereto in
connection with the Centocor Litigation; the Settlement Agreement, the Final
Order, and pleadings, stipulations, or agreements relevant to PaineWebber's
right, title, and interest in and to the CPIs in connection with the Centocor
Litigation (collectively, the "Title Documents"), and such Title Documents
constitute all of the agreements, terms, and conditions pertaining to the CPIs
to which PaineWebber is a party and the Title Documents remain in full force and
effect and binding upon the respective parties thereto in accordance with their
respective terms, unamended; (b) have been held by PaineWebber for at least two
(2) years for the purpose of resale under Rule 144(k) under the Securities Act
of 1933, as amended; and (c) are owned by PaineWebber free and clear of all
pledges, liens, encumbrances, or claims of any kind. PaineWebber does not
control, is not controlled by, nor is under common control with Centocor (with
"control" and similar words having the meaning ascribed to them under the
Securities Act of 1934, as amended, and the rules and regulations thereunder).
There have been no previous splits, subdivisions, recapitalizations, or the like
with respect to the CPIs. PaineWebber has not entered into any agreement with
any third party selling or transferring, or purporting to sell or transfer, any
interest in the Purchase CPIs or suspending, terminating, or waiving any right,
benefit, or entitlement under the Purchase CPIs, except as expressly set forth
in the Settlement Agreement. As of the date hereof, PaineWebber has not (i)
received any royalty payment for Purchase CPIs for any period commencing on or
after October 1, 1999, and (ii) received any payments arising from the Centocor
Litigation reflecting deficiencies of royalty payments previously made.
3.3 Authorization and Binding Effect. The execution, delivery, and
performance of this Amended Agreement by PaineWebber has been duly authorized by
all necessary action. This Amended Agreement has been duly executed and
delivered by PaineWebber and, assuming due authorization, execution and delivery
by DR, constitutes the legal, valid, and binding obligation of PaineWebber,
enforceable against it in accordance with its terms except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium, and other laws
that generally affect creditors and except as may be limited by general
principles of equity.
3.4 No Breach. The execution, delivery, and performance of this
Amended Agreement by PaineWebber, and the performance of this Amended Agreement
by PaineWebber will not violate any agreement, charter or partnership documents
or any judgment, award, or decree or any material indenture, agreement, or other
instrument to which it is a party, or by which such member or its properties or
assets are bound, or conflict with, result in a breach of, or constitute (with
due notice or lapse of time or both) a default under, any such indenture,
agreement, or other instrument, or
result in the creation or imposition of any lien, charge, or encumbrance of any
nature whatsoever upon any of its properties or assets except to the extent the
effect thereof will not be materially adverse to PaineWebber's ability to
fulfill its obligations under this Amended Agreement and except for the consent
of Centocor required for the sale and transfer of Purchase CPIs hereunder.
3.5 Third Party Consents. No consent, approval, or authorization of,
or designation, declaration or filing with, any federal or state governmental
authority in the United States or any other third party is required on the part
of PaineWebber in connection with the valid execution and delivery of this
Amended Agreement, the purchase and sale of Purchase CPIs, or the consummation
of any other transaction contemplated hereby, except, (i) if required,
qualifications or filings in connection with the exemptions under applicable
state "blue sky" laws and Federal securities laws, which qualifications or
exemptions, if required, will have been obtained and will be effective on the
Closing Date, or will be obtained or filed after the Closing Date within the
prescribed time in order to secure such exemptions or qualifications, (ii) the
consent of Centocor, and (iii) the consent of the limited partners of
PaineWebber in accordance with PaineWebber's Agreement of Limited Partnership
and applicable law.
3.6 No Finder's Fee. PaineWebber has not retained a finder or broker
in connection with the transactions contemplated by this Amended Agreement, and
hereby agrees to indemnify and to hold DR harmless of and from any liability for
commission or compensation in the nature of a finder's fee to any broker or
other person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which PaineWebber, or any of its employees
or representatives, are responsible.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF DR
DR represents and warrants to PaineWebber that:
4.1 Organization, Good Standing, and Power. DR has all requisite
power and authority to acquire the Purchase CPIs, to execute and deliver this
Amended Agreement, and to perform its obligations hereunder.
4.2 Authorization and Binding Effect. The execution, delivery, and
performance of this Amended Agreement by DR has been duly authorized by all
necessary action. This Amended Agreement has been duly executed and delivered by
DR and, assuming due authorization, execution and delivery by PaineWebber,
constitutes the legal, valid, and binding obligation of DR, enforceable against
DR in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium, and other laws that
generally affect creditors and except as may be limited by general principles of
equity.
4.3 No Breach. The execution, delivery, and performance by DR of this
Amended Agreement
will not violate its charter documents or any judgment, award, or decree or any
material indenture, agreement, or other instrument to which DR is a party, or by
which DR or its properties or assets are bound, or conflict with, result in a
breach of, or constitute (with due notice or lapse of time or both) a default
under, any such indenture, agreement, or other instrument, or result in the
creation or imposition of any lien, charge, or encumbrance of any nature
whatsoever upon any of the properties or assets of DR, except to the extent the
effect thereof will not be materially adverse to DR's ability to fulfill its
obligations under this Amended Agreement.
4.4 No Finder's Fee. DR has retained no finder or broker in connection
with the transactions contemplated by this Amended Agreement, and DR hereby
agrees to indemnify and hold PaineWebber harmless of and from any liability for
any commission or compensation in the nature of a finder's fee to any broker or
other person or firm (and the costs and expenses of defending against such
liability or asserted liability) for which DR, or any of its employees or
representatives, is responsible.
ARTICLE 5
CONDITIONS PRECEDENT AND COVENANTS
5.1 Conditions Precedent to Obligations of DR.
The obligations of DR under this Amended Agreement are subject, at the
option of DR, to the satisfaction or waiver, in whole or in part, of each of the
following conditions at or prior to the Closing Date:
5.1.1 Accuracy of Representations and Warranties. The
representations and warranties of PaineWebber contained in this Amended
Agreement and in the certification of the Title Documents by PaineWebber
Development Corp. shall be true and correct in all material respects when made
and on and as of the Closing Date as though made at and as of that date (except
where such representation and warranty is made as of a date specifically set
forth therein), and PaineWebber shall have delivered to DR a certificate to that
effect.
5.1.2 Compliance with Covenants. PaineWebber shall in all
material respects have performed and complied with all terms, agreements,
covenants, and conditions of this Amended Agreement to be performed or complied
with by it at the Closing Date, and PaineWebber shall have delivered to DR a
certificate to that effect.
5.1.3 All Proceedings To Be Satisfactory. All corporate and other
proceedings to be taken by PaineWebber in connection with this Amended Agreement
and all documents incident
thereto shall be reasonably satisfactory in form and substance to DR and its
counsel and DR and its counsel shall have received all such certified or other
copies of such documents as it may reasonably request.
5.1.4 Legal Action or Proceedings. Except as set forth herein, no
legal action or proceeding shall have been instituted or overtly threatened by
any governmental authority seeking to restrain, prohibit, invalidate, or
otherwise affect the consummation of transactions contemplated by this Amended
Agreement. The Court shall have rendered an unappealable final order resolving
all settlement matters in the Centocor Litigation.
5.1.5 Consent Obtained. PaineWebber shall request Centocor to
consent to the sale of the Purchase CPIs within five (5) business days of the
issuance of the Final Order. DR shall receive a copy of such request when
delivered to Centocor. PaineWebber shall have obtained the consent of Centocor
in form satisfactory to DR, as to the transfer of the Purchase CPIs to DR or its
affiliates (or to its nominee), and such consent shall have been delivered to
DR.
5.1.6 Assignments Delivered. PaineWebber shall have duly-executed
assignments in form and substance satisfactory to DR and its legal counsel
assigning to DR or its affiliates (or its nominee) all of PaineWebber's right,
title, and interest in and to the Purchase CPIs being acquired by DR.
5.1.7 Delivery of CPI Documentation. On closing, PaineWebber
Development Corp., a Delaware corporation, shall deliver to DR, in form
satisfactory to DR and its counsel, a certificate certifying that the Title
Documents are true and correct copies thereof and remain in full force and
effect and have not been amended.
5.2 Conditions Precedent to Obligations of PaineWebber. The
obligations of PaineWebber under this Amended Agreement are subject to the
satisfaction or waiver of each of the following conditions at or prior to the
Closing Date:
5.2.1 Accuracy of Representations and Warranties. The
representations and warranties of DR contained in this Amended Agreement or in
any certificate or document delivered to PaineWebber pursuant hereto shall be
true and correct in all material respects when made and on and as of the Closing
Date as though made at and as of that date (except where such representation and
warranty is made as of a date specifically set forth therein), and DR shall have
delivered to PaineWebber a certificate to such effect.
5.2.2 Compliance with Covenants. DR shall in all material
respects have performed and complied with all terms, agreements, covenants, and
conditions of this Amended Agreement to be performed or complied with by it at
the Closing Date, and DR shall have delivered to PaineWebber a certificate to
that effect.
5.2.3 All Proceedings To Be Satisfactory. All proceedings to be
taken by DR in
connection with this Amended Agreement and all documents incident thereto shall
be reasonably satisfactory in form and substance to PaineWebber and its counsel,
and PaineWebber and its counsel shall have received all such certified or other
copies of such documents as it may reasonably request.
5.2.4 Legal Actions or Proceedings. No legal action or proceeding
shall have been instituted or overtly threatened by any governmental authority
seeking to restrain, prohibit, invalidate, or otherwise affect the consummation
of transactions contemplated by this Amended Agreement. The Court shall have
rendered an unappealable final order resolving all settlement matters in the
Centocor Litigation.
5.2.5 Consent Obtained. PaineWebber shall have obtained the
consent of Centocor to the transfer of the Purchase CPIs to DR or its affiliates
(or to its nominee), and notice of such consent shall have been delivered to DR.
5.2.6 Limited Partner Consent. The Limited Partners shall have
consented to this Agreement and the transactions contemplated hereby in
accordance with the provisions of PaineWebber's Agreement of Limited Partnership
and applicable law.
5.2.7 PP Agreement. The transactions contemplated by the PP
Agreement shall have been consummated in accordance with the terms thereof;
provided that in the event PP fails to satisfy its conditions to closing under
the PP Agreement and such failure is not waived by PaineWebber, this condition
shall be deemed waived.
5.3 Covenant of the Parties to Complete Transaction.
(a) PaineWebber and DR hereby covenant and agree to use all
reasonable efforts to effect the closing of the transactions contemplated
hereby.
(b) Except with the prior written consent of DR or if this
Agreement is terminated pursuant to Article 6 or if the General Partner of
PaineWebber determines, upon the advice of counsel, that compliance by
PaineWebber with this Section 5.3(b) would cause PaineWebber to breach its
fiduciary duty to its Limited Partners under applicable law, PaineWebber agrees
not to complete the sale of CPIs under the PP Agreement until and substantially
simultaneously with the closing hereunder.
(c) Except with the prior written consent of DR, PaineWebber
agrees not to amend, modify, or waive any provision of the PP Agreement unless
the same provision in this Agreement is amended, modified, or waived to the same
extent.
ARTICLE 6
TERMINATION
This Amended Agreement may be terminated at any time on or prior to the
Closing Date:
6.1 Injunction. By PaineWebber or DR if any court of competent
jurisdiction in the United States shall have issued an order (other than a
temporary restraining order), decree, or ruling or taken any other action
restraining, enjoining, or otherwise prohibiting the consummation of this
Amended Agreement and such order, decree, ruling, or other action shall have
become final and non- appealable.
6.2 Mutual Agreement. By mutual agreement of PaineWebber and DR.
6.3 Termination Date. By PaineWebber or DR if the Closing shall not
have occurred on or before July 15, 2000 (provided that the right to terminate
this Amended Agreement pursuant to this Section 6.3 shall not be available to a
party which has materially breached any representation, warranty, or covenant of
this Amended Agreement).
6.4 Material Breach. By PaineWebber or DR upon a material breach of
any representation, warranty, or covenant of this Amended Agreement by any other
party which remains uncured for a period of thirty (30) days after receipt of
written notice of such breach from the nonbreaching party.
6.5 Effects of Termination.
(a) If this Amended Agreement is terminated pursuant to Sections
6.1, 6.2, or 6.3, all obligations of the parties hereto shall terminate (except
as provided in Section 6.5(b)) without liability of any party to any other
party.
(b) IF THIS AMENDED AGREEMENT IS TERMINATED FOR ANY REASON,
INCLUDING DR'S ELECTION NOT TO EXERCISE ITS RIGHT OF FIRST REFUSAL PURSUANT TO
SECTION 1.4.5 HEREOF, OTHER THAN AS A RESULT OF A MATERIAL BREACH BY DR OF ANY
REPRESENTATION, WARRANTY, OR COVENANT OF THIS AMENDED AGREEMENT WHICH REMAINS
UNCURED FOR A PERIOD OF THIRTY (30) DAYS AFTER RECEIPT OF WRITTEN NOTICE OF SUCH
BREACH FROM PAINEWEBBER (AND SUCH BREACH DOES NOT RESULT FROM A PRIOR MATERIAL
BREACH BY PAINEWEBBER), PAINEWEBBER SHALL PAY THE SUM OF US $325,000 TO DRUG
ROYALTY CORPORATION, INC., A CANADIAN CORPORATION, AS LIQUIDATED AND AGREED
DAMAGES AND NOT AS A PENALTY TO COMPENSATE DR FOR ITS EFFORTS AND EXPENSE IN
CONNECTION WITH THIS AMENDED AGREEMENT.
ARTICLE 7
MISCELLANEOUS
7.1 Confidentiality. Subject to the provisions of Section 5.3(c).
Each party hereto agrees to keep such information or knowledge obtained pursuant
to the negotiation and execution of this Amended Agreement, or the effectuation
of the transactions contemplated hereby, confidential ("Confidential
Information"); provided, however, that the foregoing shall not apply to
information or knowledge which (a) is generally known to the public and did not
become so known through any violation of law, (b) became known to the public
through no fault of such party, (c) is required to be disclosed by law or
regulation or by court order or government agency with subpoena powers (provided
that such disclosing party shall give to the other party whose Confidential
Information is to be disclosed prior notice of such order and a reasonable
opportunity to object or take other available action), or (d) is disclosed in
the course of any litigation between any of the parties hereto.
7.2 Expenses. Whether or not the transactions contemplated by this
Amended Agreement are consummated, none of the parties hereto shall have any
obligation to pay any of the fees and expenses of any other party incident to
the negotiation, preparation, and execution of this Amended Agreement, including
the fees and expenses of counsel, accountants, investment bankers, and other
experts, except as provided in Section 6.5(b).
7.3 Waiver. PaineWebber and DR may, by written notice to the other
parties: (a) extend the time for the performance of any of the obligations or
other actions of any party under this Amended Agreement; (b) waive any
inaccuracies in the representations or warranties of any other party contained
in this Amended Agreement or in any document delivered pursuant to this Amended
Agreement; (c) waive compliance with any of the conditions or covenants of
another contained in this Amended Agreement; or (d) waive performance of any of
the obligations of the other party under this Amended Agreement. With regard to
any power, remedy, or right provided herein or otherwise available to any party
hereunder: (i) no waiver or extension of time will be effective unless expressly
contained in a writing signed by the waiving party; and (ii) no alteration,
modification, or impairment will be implied by reason of any previous waiver,
extension of time, delay, or omission in exercise or other indulgence. No
investigations made by or on behalf of DR at any time shall waive, diminish the
scope of or otherwise affect any representation or warranty made by PaineWebber
in this Amended Agreement.
7.4 Amendments, Supplements. This Amended Agreement may be amended
or supplemented at any time by the mutual written consent of the parties.
7.5 Entire Agreement. This Amended Agreement, its exhibits, and the
documents executed on the Closing Date in connection herewith, constitute the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral and written,
between the parties hereto with respect to the subject matter hereof. No
representation, warranty, promise, inducement, or statement of intention has
been made by any party which is not embodied in this Amended Agreement or such
other documents, and no party shall be bound by, or be liable for, any alleged
representation, warranty, promise, inducement, or statement of intention not
embodied herein or therein.
7.6 Binding Effect; Benefits. This Amended Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as to Drug Royalty Corporation, Inc. as
set forth in Section 6.5(b) hereof, nothing in this Amended Agreement, expressed
or implied, is intended to confer on any person other than the parties hereto or
their respective successors and assigns, any rights, remedies, obligations, or
liabilities under or by reason of this Amended Agreement.
7.7 Assignability. Neither this Amended Agreement nor any of the
parties' rights hereunder shall be assignable by a party without the prior
written consent of the other parties.
7.8 Notices. All notices under this Amended Agreement will be in
writing and will be delivered by personal service or telegram, Federal Express
or similar courier (for overnight delivery), telecopy or certified mail (if such
service is not available, then by first class mail), postage or freight prepaid,
to such address as may be designated from time to time by the relevant party,
and which will initially be as set forth below. Any notice sent by certified
mail will be deemed to have been given three (3) days after the date on which it
is mailed and any notice sent by Federal Express or similar courier (for
overnight delivery) shall be deemed to have been given one (1) business day
after the business day on which it is sent. All other notices will be deemed
given when received. No objection may be made to the manner of delivery of any
notice actually received in writing by an authorized agent of a party. Notices
will be addressed as follows or to such other address as the party to whom the
same is directed will have specified in conformity with the foregoing:
If to DR:
Drug Royalty USA, Inc.
101 Convention Center Drive
Suite 850
Las Vegas, Nevada 89109
Attn: Monte L. Miller, Vice President
Telecopy: (702) 598-3651
with a copy to:
Kolesar & Leatham, Chtd.
3320 West Sahara Avenue
Suite 380
Las Vegas, Nevada 89102
Attn: Matthew D. Saltzman, Esq.
Telecopy: (702) 362-9472
If to PaineWebber:
PaineWebber Development Corporation
1285 Avenue of the Americas
New York, New York 10019
Attn: Dhan Pai
Telecopy: (212) 713-1464
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attn: James M. Dubin, Esq.
Telecopy: (212) 757-3990
7.9 Governing Law; Jurisdiction. This Amended Agreement has been
negotiated and entered into in the State of New York, and all questions with
respect to the Amended Agreement and the rights and liabilities of the parties
will be governed by the laws of the State of New York, regardless of the choice
of laws provisions of New York or any other jurisdiction. Any and all disputes
between the parties which may arise pursuant to this Amended Agreement will be
heard and determined before an appropriate federal or state court located in New
York, New York. The parties hereto acknowledge that such court has the
jurisdiction to interpret and enforce the provisions of this Amended Agreement,
and the parties waive any and all objections that they may have as to
jurisdiction or venue in any of the above courts.
7.10 Rules of Construction.
7.10.1 Headings. The Article, Section, and Subsection headings in
this Amended Agreement are inserted only as a matter of convenience, and in no
way define, limit, or extend or interpret the scope of this Amended Agreement or
of any particular Article, Section, or Subsection.
7.10.2 Tense and Case. Throughout this Amended Agreement, as the
context may require, references to any word used in one tense or case shall
include all other appropriate tenses or cases.
7.10.3 Severability. The validity, legality or enforceability of
the remainder of this Amended Agreement will not be affected even if one or more
of the provisions of this Amended Agreement will be held to be invalid, illegal,
or unenforceable in any respect.
7.10.4 Waiver of Jury Trial. The parties hereto waive any right
to trial by jury in any court of competent jurisdiction in connection with any
claims arising out of this Amended Agreement and the transactions contemplated
hereby.
[THIS SPACE INTENTIONALLY LEFT BLANK]
7.10.5 Counterparts. This Amended Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, this Amended and Restated Contractual Payment
Interest Purchase Agreement has been duly-executed and delivered by the duly
authorized officers of the parties hereto as of the date first above written.
PAINEWEBBER R&D PARTNERS II, L.P., a Delaware
limited partnership
By: PAINEWEBBER TECHNOLOGIES II, L.P.,
a Delaware limited partnership, its General Partner
By: PWDC HOLDING COMPANY,
A Delaware corporation, its General Partner
By: /s/ Dhananjay Pai
-----------------
Name: Dhananjay Pai
DRUG ROYALTY USA, INC., a Nevada corporation
By: /s/ Monte Miller
----------------
Name: Monte Miller
Title: Vice President
ACCEPTED AND AGREED ONLY WITH REGARD
TO THE LAST SENTENCE OF SECTION 5.1.7 HEREOF
PAINEWEBBER DEVELOPMENT CORPORATION
By: /s/ Dhananjay Pai
- ---------------------
Name: Dhananjay Pai
AMENDED AND RESTATED
APPENDIX I
Valuation on 7 Class A CPIs and 37 Class C CPIs
-----------------------------------------------
(U.S. Dollars)
Valuation for 100% previously agreed to,
including settlement payments: $ 51,000,000
Deduction for settlement payments, net of
expenses: $ (5,770,000)
Value agreed to before Q1 payment: $ 45,230,000
Deduction for Q1 royalty payments: $ (1,870,450)
Deduction for Q2 royalty payments: $ (2,048,625)
Total Purchase Price: $ 41,310,925
Adjustment to Purchase Price $ 3,050,275
Revised Total Purchase Price for 100% $ 44,361,200
90.4% of valuation for 111 Class C CPIs
($361,200.00 per CPI) $ 40,093,200
90.6% of valuation for 22 Class A CPIs
($194,000.00 per CPI) $ 4,268,000
--------------
$ 44,361,200
Note:
7 x $194,000.00 = $ 1,358,000.00
37 x $361,200.00 = $13,364,400.00
--------------
$14,722,400.00
APPENDIX C
AMENDMENT NO. [ ]
TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
PAINEWEBBER R&D PARTNERS II, L.P.
This AMENDMENT NO. [ ] (the "Amendment") is made as of this __
day of __________, 2000 by and among PaineWebber Technologies II, L.P. (the
"General Partner"), and the limited partners (the "Limited Partners") under that
certain Agreement of Limited Partnership of PaineWebber R&D Partners II, L.P.
(the "Partnership Agreement") dated as of May 15, 1987.
W I T N E S S E T H
WHEREAS, the General Partner and the Limited Partners are parties
to the Partnership Agreement.
WHEREAS, the General Partner and the Partners desire to amend the
Partnership Agreement as provided herein.
WHEREAS, the General Partner under Power of Attorney in the
Partnership Agreement has executed this Amendment on behalf of all Limited
Partners SUBJECT TO obtaining the consent of the majority in interest of the
Limited Partners.
WHEREAS, this Amendment shall become effective automatically upon
the obtaining of such majority consent but until then this Amendment shall not
be legally binding on the Partnership.
NOW, THEREFORE, in consideration of the promises and agreements
herein contained, and pursuant to Section 10.02 of the Partnership Agreement,
the General Partner and the undersigned Partners do hereby covenant and agree as
follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. (a) For all purposes of this Amendment, except
as otherwise expressly provided or unless the context requires, (i) the terms
defined in this Amendment have the meanings assigned to them in this Amendment
and include the plural as well as the singular and (ii) all capitalized terms
used in this Amendment but not defined herein have the meanings ascribed to them
in the Partnership Agreement.
2
ARTICLE II
AMENDMENT
2.1. Amendment of Section 4.05. Section 4.05 of the Partnership
Agreement is hereby amended by adding a subparagraph (e) as follows:
(e)(i) For purposes of this Section 4.05(s), the sale, transfer,
distribution or other disposition of any Divested Assets
(as defined in Section 7.01(s) hereof) shall constitute a
"Capital Event", and the net proceeds from such Capital
Event are referred to herein as the "Capital Event Cash
Flow".
(ii) Prior to effecting or entering into any agreement to
affect a Capital Event, any Partner (or group of
affiliated partners, as "group" is defined in Rule 13d-3
under the Securities Exchange Act of 1934) holding five
percent (5%) or more of the limited partnership interests
in the Partnership shall have the opportunity to receive
its pro rata share of the Divested Assets (the "Electing
Partners") as a distribution in kind (the "Distribution in
Kind Assets"). Divested Assets other than the Distribution
in Kind Assets shall be disposed of in the manner that the
General Partner deems advisable (the "Sale Assets").
(iii) The General Partner shall debit or credit the book capital
accounts of all of the Partners in an amount equal to the
gain or loss realized by the Partnership as if all of the
Divested Assets were sold based on the actual per unit
sales proceeds of the Sale Assets.
(iv) The Partners, other than the Electing Partners (the
"Non-Electing Partners"), shall be allocated any taxable
gain or loss realized in connection with the sale of the
Sale Assets.
(v) The General Partner shall distribute the Capital Event
Cash Flow received by the Partnership in connection with
the sale of the Sale Assets, to the Non-Electing Partners,
pro rata to each Non-Electing Partner according to his or
its respective Adjusted Capital Contributions.
(vi) The General Partner shall distribute the Distribution in
Kind Assets to the Electing Partners, pro rata to each
Electing Partner according to his or its respective
Adjusted Capital Contributions.
(vii) The Capital Accounts of the Non-Electing Partners shall be
debited by the amount of the distributions made pursuant
to clause (e)(v) and
3
the Capital Accounts of the Electing Partners shall be
debited by the value of the Distribution in Kind Assets
distributed pursuant to clause (e)(vi) (with such value
based on the selling price per unit of Sale Assets
pursuant to clause (e)(iii)).
2.2. Amendment of Section 7.01. Section 7.01 of the Partnership
Agreement is hereby amended by adding a subparagraph (s) as follows:
(s) sell, transfer, distribute or otherwise dispose of any
assets of the Partnership, including the sale, transfer,
distribution or disposition of all or substantially all of
the Partnership's assets (such assets which are to be
sold, transferred, distributed or disposed of being
sometimes referred to herein as the "Divested Assets"), in
each case without approval from the Limited Partners;
provided that, in connection with any such sale, transfer,
distribution or disposal, (i) the General Partner may
round to the nearest whole asset or appropriate fraction
of a whole asset (as determined conclusively by the
General Partner) in order to give effect to the terms of
such sale, transfer or distribution, (ii) the General
Partner may allocate and pay to any Limited Partner
receiving a distribution of assets in kind a cash amount
in respect of such rounding (such cash amount to be
determined conclusively by the General Partner) and (iii)
prior to effecting or entering into any agreement to
effect any sale, transfer or other disposition of assets,
the General Partner shall provide notice in writing to
each Limited Partner (or group of affiliated partners, as
determined pursuant to Section 4.05(e)(ii) hereof) holding
five percent (5%) or more of the limited partnership
interests in the Partnership pursuant to Section
4.05(e)(ii) hereof.
ARTICLE III
MISCELLANEOUS
3.1. Entire Agreement. The Partnership Agreement, as amended
hereby, constitutes the full and entire understanding among the parties
regarding the subject matter herein. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
3.2. Full Force and Effect. Except as amended hereby, the
Partnership Agreement shall remain in full force and effect.
3.3. Counterparts. This Amendment may be executed in any number
of counterparts, each of which shall constitute an original and all of which,
when taken together, shall constitute one agreement.
4
3.4. Governing Law. This Amendment shall be construed in
accordance with the laws of the State of Delaware, without regard to conflicts
of laws provisions thereof.
3.5. Headings. Headings in this Amendment are included for
reference only and have no effect upon the construction or interpretation of any
part of this Amendment.
3.6. Effect. This Amendment shall have no force and effect until
the consent of the majority in interest of the Limited Partners shall have been
obtained and, when such consent is obtained, it shall become automatically
effective.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
GENERAL PARTNER
PAINEWEBBER TECHNOLOGIES II, L.P.,
a Delaware limited partnership
By: PWDC HOLDING COMPANY,
a Delaware corporation, General Partner
By:____________________________
Name:__________________________
Title:_________________________
LIMITED PARTNERS
PAINEWEBBER TECHNOLOGIES II, L.P.,
a Delaware limited partnership, Attorney-in-Fact
Pursuant to Article XII of the Partnership
Agreement
By: PWDC HOLDING COMPANY,
A Delaware corporation, its General Partner
By:____________________________
Name:__________________________
Title:_________________________
PAINEWEBBER R&D PARTNERS II, L.P.
CONSENT OF LIMITED PARTNER
This Consent is solicited by and on behalf of PaineWebber R&D Partners
II, L.P. (the "Partnership") by PaineWebber Technologies II, L.P., the General
Partner (the "General Partner") of the Partnership. The General Partner
recommends that you vote "FOR" each of the Proposals as defined in the
accompanying Consent Solicitation Statement. A vote "FOR" each of the Proposals
also will constitute your consent to all actions necessary to consummate all
transactions with respect to the Proposals contemplated by the Consent
Solicitation Statement. All capitalized terms used herein without definition
have the meanings assigned to them in the Consent Solicitation Statement.
This Consent will be recorded in accordance with the instructions below.
If no instructions are indicated, you will be deemed by your signature below to
have voted "FOR" each of the Proposals.
The General Partner Recommends that you vote "FOR" each of the
Proposals. Please mark the appropriate box with respect to each of the
Proposals.
0.0.1 Approval of the Pharma Affiliates Sale, including the distribution
of the Distribution In Kind CPIs, all in accordance with the terms of the Pharma
Affiliates Purchase Agreement:
[ ] FOR [ ] AGAINST [ ] ABSTAINS
0.0.2 Approval of the DR Sale in accordance with the terms of the DRI
Purchase Agreement:
[ ] FOR [ ] AGAINST [ ] ABSTAINS
0.0.3 Approval of the Distribution In Kind Amendment:
[ ] FOR [ ] AGAINST [ ] ABSTAINS
2
The undersigned acknowledges receipt from the General Partner of the
Consent Solicitation Statement dated _________, 2000 pertaining to the
Proposals.
Dated: ___________, 2000
Signature____________________________
Signature (if held jointly)__________
Title________________________________
Please sign exactly in the same manner as the name(s) in which ownership of the
Units is registered. When Units are held by two or more joint holders, all such
holders should sign. When signing as an attorney-in-fact, executor,
administrator, trustee or guardian, please state your full title. If a
corporation, please sign in full corporate name by the President or other
authorized officer. If a partnership, please sign in partnership name by an
authorized person.
Please mark, sign, date and return this Consent Card, Prior to 5:00 p.m. (New
York time) on _____________, 2000 (unless such time is extended pursuant to the
Consent Solicitation Statement), by facsimile to MAVRICC Management Systems,
Inc. ("MAVRICC") at _____________ or by mail, using the enclosed prepaid
envelope to MAVRICC at _______________________________________.
If you have any questions or need assistance in filling out this Consent, please
call ____________________________.