-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N2eCNcvUEln57FkrVkHx4gs+HSuO9uhcMZSfz8+bls1MmIW2j/Qn52dra3hCqgyB PN2fjOMPnJ4psUW8JEwZNQ== 0001012870-97-001709.txt : 19970912 0001012870-97-001709.hdr.sgml : 19970912 ACCESSION NUMBER: 0001012870-97-001709 CONFORMED SUBMISSION TYPE: SC 13E3/A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19970905 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: THERAPEUTIC DISCOVERY CORP CENTRAL INDEX KEY: 0000899753 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 943173191 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3/A SEC ACT: SEC FILE NUMBER: 005-45501 FILM NUMBER: 97675862 BUSINESS ADDRESS: STREET 1: 1375 CALIFORNIA AVENUE STREET 2: P O BOX 10051 CITY: PALO ALTO STATE: CA ZIP: 94303 BUSINESS PHONE: 4154968203 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ALZA CORP CENTRAL INDEX KEY: 0000004310 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 770142070 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13E3/A BUSINESS ADDRESS: STREET 1: 950 PAGE MILL RD STREET 2: PO BOX 10950 CITY: PALO ALTO STATE: CA ZIP: 94303-0802 BUSINESS PHONE: 4154945000 MAIL ADDRESS: STREET 1: 950 PAGE MILL RD STREET 2: PO BOX 10950 CITY: PALO ALTO STATE: CA ZIP: 94303 SC 13E3/A 1 AMENDMENT #1 TO SCHEDULE 13E-3/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 _____________ SCHEDULE 13E-3 (Amendment No. 1) RULE 13E-3 TRANSACTION STATEMENT (PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934) THERAPEUTIC DISCOVERY CORPORATION - -------------------------------------------------------------------------------- (Name of the Issuer) ALZA CORPORATION - -------------------------------------------------------------------------------- (Name of Person(s) Filing Statement) CLASS A COMMON STOCK, PAR VALUE $0.01 - -------------------------------------------------------------------------------- (Title of Class of Securities) 883376105 - -------------------------------------------------------------------------------- (CUSIP Number of Class of Securities) Bruce Cozadd, 950 Page Mill Road, Palo Alto, CA 94304, (650) 494-5000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Person(s) Filing Statement) This statement is filed in connection with (check the appropriate box): (a) [ ] The filing of solicitation materials or an information statement subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the Securities Exchange Act of 1934. (b) [ ] The filing of a registration statement under the Securities Act of 1933. (c) [ ] A tender offer. (d) [X] None of the above. Check the following box if the soliciting materials or information statement referred to in checking box (a) are preliminary copies. [ ] Calculation of Filing Fee - -------------------------------------------------------------------------------- Transaction Valuation/1/: $100 million Amount of Filing Fee/2/: $20,000 - -------------------------------------------------------------------------------- - ----------------------- /1/ For purposes of calculating the filing fee only. This calculation is based upon the purchase price of $100 million for all issued and outstanding shares of Class A Common Stock of the Issuer to be acquired pursuant to this transaction. /2/ The amount of the filing fee, calculated in accordance with Section 13 of the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent of the aggregate value of cash to be paid by ALZA Corporation for such Class A Common Stock. [X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount previously paid: $20,000 Filing party: ALZA Corporation ----------------- ----------------- Form or registration no.: Schedule 13E3 Date filed: August 27, 1997 ----------------- ------------------ 2 Introduction. - ------------- This Amendment No. 1 to Schedule 13E-3 Transaction Statement (the "Statement") relates to the exercise by ALZA Corporation, a Delaware corporation ("ALZA"), of its option to purchase all issued and outstanding shares of Class A Common Stock of Therapeutic Discovery Corporation, a Delaware corporation ("TDC"). This Statement is being filed by ALZA. Notwithstanding this Statement, ALZA does not admit that the transaction reported herein is subject to the application of Rule 13e-3 under the Securities Exchange Act of 1934, as amended. Item 7. - ------- (a) The purpose of this transaction is to acquire the rights to all products and product candidates developed or under development by ALZA and TDC pursuant to the Development Agreement dated March 10, 1993 between ALZA and TDC. ALZA believes that it is in the best interests of ALZA and ALZA's stockholders to exercise the Purchase Option at this time. (b) ALZA holds options to license individual products of TDC. However, compared to the purchase of all of the issued and outstanding Class A Common Stock of TDC, the exercise of individual license options was not considered by ALZA to be the most effective and comprehensive means to acquire all of TDC's products and product candidates. (c) The transaction is structured pursuant to the terms of the previously granted Purchase Option as set forth in TDC's Restated Certificate. This transaction is being undertaken at this time because TDC has no significant funds remaining to expend on product development and the Purchase Option otherwise would have expired no later than January 15, 1998. 3 (d) The transaction reported herein will cause TDC to become a wholly- owned subsidiary of ALZA. TDC will be de-listed from the Nasdaq National Market and will have its public reporting obligations suspended. The federal tax consequences to TDC are that utilization of TDC's losses and other tax carryovers may be limited under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). The transaction reported herein will cause ALZA to own 100% of TDC. As a result, ALZA will indirectly own all of the assets of TDC. Accordingly, ALZA will report 100% of the net book value and net earnings of TDC. There will be no significant federal tax consequences to ALZA as a result of the exercise of the Purchase Option. The transaction reported herein will cause each stockholder of Class A Common Stock to dispose of his or her Class A Common Stock for consideration equal to that stockholder's pro rata share of the exercise price identified in Item 4(a) above. This consideration is the amount specified in the Restated Certificate provided in 1993. The federal income tax consequences to such stockholder, in general terms, are set forth below. The following discussion sets forth federal income tax considerations under the Code for stockholders with respect to cash received by stockholders of TDC for the Class A Common Stock. This discussion is intended only to provide general information to stockholders that are subject to United States federal income tax; it may not address all relevant federal income tax consequences to such persons or to other categories of stockholders, e.g., foreign persons, dealers in securities, and stockholders that are exempt from federal income tax. This discussion is based upon present federal income tax laws and does not attempt to anticipate changes, including changes in tax rates, that may be made under currently pending legislative proposals. This discussion assumes that the Class A Common Stock was at all relevant times capital assets of the stockholders. This discussion does not address state, local or foreign tax considerations. ALL STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS. Holders of Class A Common Stock will have a capital gain or loss due to ALZA's exercise of the Purchase Option equal to the difference between (a) 4 the amount of the cash received, and (b) their basis in the Class A Common Stock surrendered. Gain or loss due to the exercise of the Purchase Option should be long-term if the Class A Common Stock has been held for more than one year at the time of exercise of the Purchase Option. The Internal Revenue Service ("IRS") may assert, however, that the holding period of the Class A Common Stock does not begin until such date as the Purchase Option is exercised and that capital gain or loss upon exercise of the Purchase Option is therefore short-term. Limitations may apply to deduction of capital loss. To the extent that holders of Class A Common Stock have not provided appropriate taxpayer identification numbers on IRS Form W-9 or a substitute therefor, such stockholders may be subject to backup withholding by ALZA. Item 8. - ------- (a) ALZA reasonably believes that the transaction reported herein is fair to the holders of TDC Class A Common Stock. None of ALZA's directors dissented to the transaction. Julian N. Stern and Dr. Alejandro Zaffaroni abstained from voting on such transaction because they each own shares of Class A Common Stock. (b) The material factor upon which the belief stated in Item 8(a) is based is set forth below. (i) Stockholder Awareness of Purchase Option The initial public holders of the Class A Common Stock received such stock as a dividend from ALZA in 1993. The Purchase Option was a feature of the Class A Common Stock at that time and was described in the ALZA Information Statement, dated March 10, 1993, distributed in connection with this distribution. The Purchase Option was also set forth in the Restated Certificate, which was publicly filed both with the Delaware Secretary of State and the Commission prior to the distribution. Pursuant to the Restated Certificate, the stock certificates for the Class A Common Stock were legended to put the holders thereof on further notice about the Purchase Option. Stockholders were also advised of the Purchase Option in each Form 10-K (since the date of the distribution) and each recent Form 10-Q public filing made by each of ALZA and TDC with the Commission. Accordingly, the Purchase Option was present in the initial public distribution of the Class A Common Stock, was disseminated in TDC's charter documents, was discussed 5 in ALZA's and TDC's periodic filings and was legended on each stock certificate for the Class A Common Stock. As a result, every TDC Class A Common stockholder received substantial notice as to the terms of the Purchase Option prior to making any investment decision with respect to the Class A Common Stock. In addition, recent public filings by both ALZA and TDC have indicated the status of funds available for product development and therefore when the potential exercise of the Purchase Option was likely to be triggered. During 1997, both parties have indicated that these funds would likely be exhausted during the third quarter of 1997. ALZA decided to exercise the Purchase Option at this time because TDC's Available Funds were exhausted in the third quarter of 1997 as anticipated, and TDC had no further funding available to expend on products and product development. Accordingly, ALZA exercised the Purchase Option in order to continue product development without interruption. ALZA decided to pay the exercise price to TDC Class A Common stockholders in cash because ALZA had sufficient available cash, cash provides immediately liquid proceeds at a readily determined value and a payment of cash would not be dilutive to the value of existing ALZA stockholders. ALZA reasonably believes the form of such payment to be fair to TDC Class A Common stockholders. 6 (c) The Restated Certificate does not require any approval of the stockholders of TDC for the exercise of the Purchase Option. (d) After making reasonable inquiry of management of TDC, ALZA believes that no directors of TDC have retained an unaffiliated representative to act solely on behalf of any security holders of TDC as no action is required by either TDC's directors or security holders to effect the Purchase Option. (e) See Item 8(d) above. (f) Not applicable. Item 17. - -------- 17(d) Notice to Stockholders of Therapeutic Discovery Corporation (for purposes of this Statement only, Annex A thereto being Item 17(c) to the Schedule 13E-3 filed by ALZA Corporation on August 27, 1997). 7 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. September 5, 1997 ALZA CORPORATION By: /s/ PETER D. STAPLE ---------------------------- Peter D. Staple, Senior Vice President and General Counsel The original statement shall be signed by each person on whose behalf the statement is filed or his authorized representative. If the statement is signed on behalf of a person by his authorized representative (other than an executive officer or general partner of the person filing this statement), evidence of the representative's authority to sign on behalf of such person shall be filed with the statement. The name and any title of each person who signs the statement shall be typed or printed beneath his signature. ANNEX 17(d) - -------------------------------------------------------------------------------- ALZA CORPORATION EXERCISE OF OPTION TO PURCHASE ALL CLASS A COMMON STOCK OF THERAPEUTIC DISCOVERY CORPORATION ------------------------------------ NOTICE TO STOCKHOLDERS OF THERAPEUTIC DISCOVERY CORPORATION ------------------------------------ This information is disseminated pursuant to Rule 13e-3 of the Securities Exchange Act of 1934, as amended. THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. - -------------------------------------------------------------------------------- THE TRANSACTION --------------- ALZA Corporation, a Delaware corporation ("ALZA"), wishes to advise holders of the Class A Common Stock of Therapeutic Discovery Corporation, a Delaware corporation ("TDC"), that, on August 25, 1997, ALZA exercised its option to purchase all of the issued and outstanding shares of Class A Common Stock of TDC (the "Purchase Option") as provided in TDC's Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware on April 1, 1993 (the "Restated Certificate"). The closing date for this purchase will be September 29, 1997 (the "Closing Date"). A copy of the Restated Certificate is appended hereto as Annex A. ------- The purchase price for all issued and outstanding shares of Class A Common Stock is $100 million. As of August 25, 1997, there are 7,734,424 shares of Class A Common Stock issued and outstanding and options to purchase 395,000 shares of Class A Common Stock currently exercisable. Accordingly, assuming all outstanding options are exercised, you will receive approximately $12.30 for each share of Class A Common Stock that you hold as of the close of business on the Closing Date. In accordance with the Restated Certificate, ALZA will deposit $100 million with Boston EquiServe, L.P. (the "Payment Agent") on or before September 29, 1997 and will provide the Payment Agent with an irrevocable direction to pay these funds to the holders as of the close of business on September 29, 1997 of Class A Common Stock. AFTER COMPLYING WITH THESE CONDITIONS, OWNERSHIP OF ALL TDC CLASS A COMMON STOCK WILL AUTOMATICALLY TRANSFER TO ALZA ON SEPTEMBER 29, 1997. If you hold your Class A Common Stock certificates, the Payment Agent will be instructing you on how to tender your certificates for payment. You will receive your payment from the Payment Agent after you tender the certificates. If you hold your Class A Common Stock in a brokerage account, your broker will credit your account with the purchase price. NATURE OF DISCLOSURE -------------------- ALZA is providing this information to the security holders of TDC in compliance with Rule 13e-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Notwithstanding the provision of this information, ALZA does not admit that it is an "affiliate" of TDC as such term is used in Rule 13e-3 of the Exchange Act. SPECIAL FACTORS --------------- Purpose ------- The purpose of this transaction is to acquire the rights to all products and product candidates developed or under development by ALZA and TDC pursuant to the Development Agreement dated March 10, 1993 between ALZA and TDC. ALZA believes that it is in the best interests of ALZA and ALZA's stockholders to exercise the Purchase Option at this time. ALZA holds options to license individual products of TDC. However, compared to the purchase of all of the issued and outstanding Class A Common Stock of TDC, the exercise of individual license options was not considered by ALZA to be the most effective and comprehensive means to acquire all of TDC's products and product candidates. The transaction is structured pursuant to the terms of the previously granted Purchase Option as set forth in TDC's Restated Certificate. This transaction is being undertaken at this time because TDC has no significant funds remaining to expend on product development and the Purchase Option otherwise would have expired no later than January 15, 1998. Consequences ------------ The transaction reported herein will cause TDC to become a wholly-owned subsidiary of ALZA. ALZA anticipates that TDC will be de-listed from the Nasdaq National Market and will have its public reporting obligations suspended. The federal tax consequences to TDC are that utilization of TDC's losses and other tax carryovers may be limited under Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"). The transaction reported herein will cause ALZA to own 100% of TDC. As a result, ALZA will indirectly own all of the assets of TDC. Accordingly, ALZA will report 100% of the net book value and net earnings of TDC. There will be no significant federal tax consequences to ALZA as a result of the exercise of the Purchase Option. 3 The transaction reported herein will cause each stockholder of Class A Common Stock to dispose of his or her Class A Common Stock for consideration equal to that stockholder's pro rata share of the exercise price identified above. This consideration is the amount specified in the Restated Certificate provided in 1993. The federal income tax consequences to such stockholder, in general terms, are set forth below. The following discussion sets forth federal income tax considerations under the Code for stockholders with respect to cash received by stockholders for the Class A Common Stock. This discussion is intended only to provide general information to stockholders that are subject to United States federal income tax; it may not address all relevant federal income tax consequences to such persons or to other categories of stockholders, e.g., foreign persons, dealers in securities, and stockholders that are exempt from federal income tax. This discussion is based upon present federal income tax laws and does not attempt to anticipate changes, including changes in tax rates, that may be made under currently pending legislative proposals. This discussion assumes that the Class A Common Stock was at all relevant times capital assets of the stockholders. This discussion does not address state, local or foreign tax considerations. ALL STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS. Holders of Class A Common Stock will have a capital gain or loss due to ALZA's exercise of the Purchase Option equal to the difference between (a) the amount of the cash received, and (b) their basis in the Class A Common Stock surrendered. Gain or loss due to the exercise of the Purchase Option should be long-term if the Class A Common Stock has been held for more than one year at the time of exercise of the Purchase Option. The Internal Revenue Service ("IRS") may assert, however, that the holding period of the Class A Common Stock does not begin until such date as the Purchase Option is exercised and that capital gain or loss upon exercise of the Purchase Option is therefore short-term. Limitations may apply to deduction of capital loss. To the extent that holders of Class A Common Stock have not provided appropriate taxpayer identification numbers on IRS Form W-9 or a substitute therefor, such stockholders may be subject to backup withholding by ALZA. Fairness -------- ALZA reasonably believes that the transaction reported herein is fair to the holders of TDC Class A Common Stock. None of ALZA's directors dissented to the transaction. 4 Julian N. Stern and Dr. Alejandro Zaffaroni abstained from voting on such transaction because they each own shares of Class A Common Stock. The material factor upon which this belief is based is set forth below. Stockholder Awareness of Purchase Option The initial public holders of the Class A Common Stock received such stock as a dividend from ALZA in 1993. The Purchase Option was a feature of the Class A Common Stock at that time and was described in the ALZA Information Statement dated March 10, 1993 distributed in connection with this distribution. The Purchase Option was also set forth in the Restated Certificate, which was publicly filed both with the Delaware Secretary of State and the Securities and Exchange Commission (the "Commission") prior to the distribution. Pursuant to the Restated Certificate, the stock certificates for the Class A Common Stock were legended to put the holders thereof on further notice about the Purchase Option. Stockholders were also advised of the Purchase Option in each Form 10-K (since the date of the distribution) and each recent Form 10-Q public filing made by each of ALZA and TDC with the Commission. Accordingly, the Purchase Option was present in the initial public distribution of the Class A Common Stock, was disseminated in TDC's charter documents, was discussed in ALZA's and TDC's periodic filings and was legended on each stock certificate for the Class A Common Stock. As a result, each TDC Class A Common stockholder received substantial notice as to the terms of the Purchase Option prior to making any investment decision with respect to the Class A Common Stock. In addition, recent public filings by both ALZA and TDC have indicated the status of funds available for product development and therefore when the potential exercise of the Purchase Option was likely to be triggered. During 1997, both parties have indicated that these funds would likely be exhausted during the third quarter of 1997. ALZA decided to exercise the Purchase Option at this time because TDC's Available Funds were exhausted in the third quarter of 1997 as anticipated, and TDC had no further funding available to expend on products and product development. Accordingly, ALZA exercised the Purchase Option in order to continue product development without interruption. ALZA decided to pay the exercise price to TDC Class A Common stockholders in cash because ALZA had sufficient available cash, cash provides immediately liquid proceeds at a readily determined value and a payment of cash would not be dilutive to the value of existing ALZA stockholders. ALZA reasonably believes the form of such payment to be fair to TDC Class A Common stockholders. The Restated Certificate does not require any approval of the stockholders of TDC for the exercise of the Purchase Option. After making reasonable inquiry of management of TDC, ALZA believes that no directors of TDC have retained an unaffiliated representative to act solely on behalf of any security holders of TDC as no action is required by either TDC's directors or security holders to effect the Purchase Option. Reports ------- Neither ALZA nor, to the best of ALZA's knowledge after reasonable inquiry of management of TDC, TDC, has received any report, opinion (other than an opinion of counsel) or 5 appraisal from an outside party which is materially related to the transaction described herein. BACKGROUND AND SUMMARY OF TRANSACTION ------------------------------------- Identification of ALZA: This filing is being made by ALZA. Its principal business is pharmaceutical research and development and the commercialization of pharmaceutical products. The address of its principal executive offices are 950 Page Mill Road, Palo Alto, CA 94304. During the last five years, ALZA has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). During the last five years, ALZA has not been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining further violations of, or prohibiting activities, subject to, federal or state securities laws or finding any violation of such laws. Identification and Securities of TDC: The issuer of the Class A Common Stock and the address of its principal executive offices is: Therapeutic Discovery Corporation 1454 Page Mill Road Palo Alto, CA 94303-0806 The exact title of the class of security which is the subject of this filing is Class A Common Stock, par value $0.01, of TDC. The amount of Class A Common Stock outstanding as of August 25, 1997, the most recent practicable date, is 7,734,424. As of that date, there were also options to purchase 395,000 shares of Class A Common Stock immediately exercisable. The approximate number of holders of record of such Class A Common Stock as of August 25, 1997, the most recent practicable date, is 5,604. The principal market in which the Class A Common Stock is being traded is the Nasdaq National Market. The range of high and low bid quotations for the Class A Common Stock for each quarterly period during the past two years is:
Period High Low - ----------------------- ---------- --------- June 30, 1995 7.875 6.00 September 30, 1995 7.75 6.75 December 31, 1995 7.25 6.75 March 31, 1996 10.625 7.125 June 30, 1996 9.875 8.875 September 30, 1996 10.00 8.00 December 31, 1996 11.375 9.375 March 31, 1997 11.375 10.50 June 30, 1997 11.375 10.625
6 To the best of ALZA's knowledge, after making reasonable inquiry, TDC has not paid any dividends on the Class A Common Stock in the past two years. TDC is restricted from paying any dividends on the Class A Common Stock if, after payment of such dividend, the amount of TDC's cash, cash equivalents and short-term and long-term investments would be less than the Available Funds as such term is defined in the Restated Certificate. Past Contacts, Transactions or Negotiations: The nature and approximate amount in dollars of any transaction which has occurred since the commencement of TDC's second full fiscal year preceding the date of this Statement between ALZA and TDC are as follows: (i) Since the commencement of TDC's second full fiscal year preceding the date of this Statement, TDC paid approximately $225,000,000 to ALZA pursuant to a Development Agreement between ALZA and TDC dated March 10, 1993 whereby ALZA was retained by TDC to undertake activities related to the selection and development of pharmaceutical products. (ii) Since the commencement of TDC's second full fiscal year preceding the date of this Statement, TDC paid approximately $500,000 to ALZA pursuant to a Services Agreement 7 between ALZA and TDC dated March 10, 1993 whereby ALZA was retained by TDC to provide certain administrative services to TDC (such as legal and accounting) in exchange for payment of ALZA's costs in the provision of such services. (iii) There is also (a) a Technology License Agreement dated March 10, 1993 between ALZA and TDC, whereby ALZA licensed certain proprietary technology to TDC, and (b) a License Option Agreement dated March 10, 1993 between ALZA and TDC, whereby TDC granted ALZA an option to license certain products from TDC. No amounts have been paid by either of ALZA or TDC to the other pursuant to such agreements since the commencement of TDC's second full fiscal year preceding the date of this Statement except as set forth in section (iv) below. (iv) In January of 1997, ALZA exercised its option to license from TDC for 12 European countries a second-generation transdermal testosterone product to follow ALZA's existing Testoderm(R) product. ALZA entered into an agreement with Ferring N.V. to market the TDC product in such countries. As a result of ALZA's exercise of this license and the arrangement with Ferring, ALZA paid TDC $580,000, a portion of the upfront payment ALZA received from Ferring, and will receive payments from ALZA based on sales of the product in the 12 European countries covered by ALZA's agreement with Ferring. (v) In February of 1997, ALZA exercised its option to license from TDC a once-daily OROS(R) hydromorphone product on a worldwide basis. ALZA entered into an agreement with Knoll Pharmaceutical Company and Knoll A.G. (together "Knoll") for the further clinical development and worldwide commercialization of that product. As a result of ALZA's exercise of the license, TDC will receive a portion of the amounts ALZA receives from Knoll based on worldwide sales of the product, and a portion of certain milestone payments made by Knoll to ALZA. 8 Terms of the Transaction: ALZA exercised its option to purchase all of TDC's Class A Common Stock on August 25, 1997 by delivering an exercise notice to TDC. The terms of the Purchase Option are set forth in TDC's Restated Certificate. Pursuant to the Restated Certificate, the exercise price of the Purchase Option is $100 million. ALZA has determined that September 29, 1997 will be the Closing Date. ALZA will deposit the exercise price with Boston EquiServe, L.P., as Payment Agent, on or prior to that date. Promptly following the Closing Date, and upon receipt of stock certificates for the Class A Common Stock as instructed by the Payment Agent, the Payment Agent will distribute the exercise price pro rata to each person or entity who was a holder of Class A Common Stock at the close of business on the Closing Date. In the case of any person or entity holding Class A Common Stock in a brokerage account, the broker will credit the relevant account with such amount. In accordance with the terms of the Restated Certificate, the stockholders of the Class A Common Stock do not need to take any steps to approve the purchase. Title to the Class A Common Stock will automatically vest in ALZA on the Closing Date and the exercise price will be paid to such stockholders, upon tender of their stock certificates directly or through their brokers, in accordance with their respective interests. Plans or Proposals of ALZA: Subsequent to the purchase of the Class A Common Stock by ALZA, TDC will be a wholly-owned subsidiary of ALZA. ALZA anticipates de-listing TDC from the Nasdaq National Market and suspending its reporting requirements with the Securities and Exchange Commission by filing a Form 15. ALZA intends to replace TDC's officers and Board of Directors with ALZA employees. Interest in Securities of TDC: As of August 25, 1997, no shares of Class A Common Stock of TDC are beneficially owned by ALZA, by any pension, profit sharing or similar plan of ALZA or, to ALZA's knowledge after reasonable inquiry of management of TDC, by TDC, by each executive officer and director of either ALZA, TDC, any person controlling either ALZA or TDC or any executive officer of any corporation ultimately in control of either ALZA or TDC, or by any associate or majority owned subsidiary of either ALZA or TDC except as set out on the following table: 9
Immediately Direct Indirect Exercisable Name Position Ownership Ownership Options - ---- -------- --------- --------- ----------- Blaschke, Dr. Terrence F. Director of TDC 4,500 6,200 40,000 Cozadd, Bruce C. Senior Vice President and 15 Chief Financial Officer of ALZA Fethe, Harold Vice President, Human 3,304 Resources of ALZA Fulscher, Dr. Gary V. Senior Vice President, 4,489 4,693 Operations of ALZA Hoffmann, David R. Vice President, Finance and 1,622 6,223 Secretary of TDC Lairson, Dr. Paul D. Director of TDC 40,000 Martin, Suzanne G. Vice President, Research and 695 Development Administration of TDC Neil, Gary L., Ph.D. Director, President and Chief 12,000 160,000 Executive Officer of TDC Phipps, Allen M. Chairman of the Board of TDC 10,000 60,000 Sommers, William P, Ph.D. Director of TDC 2,919 40,000 Stern, Julian N. Director and Secretary of ALZA 9,393 Theeuwes, Dr. Felix President, New Ventures and 413 17,064 Chief Scientist of ALZA Zaffaroni, Dr. Alejandro Co-Chairman of the Board and 95,594 Founder of ALZA
As of December 31, 1996 ALZA's 401(k) tax deferral investment plan owned 18,902 shares of Class A Common Stock for the accounts of certain ALZA employees. The employees direct the investment of these accounts. Some of the shares reported as indirectly owned by ALZA employees in the table above are included in the foregoing amount. 10 CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO TDC'S CLASS A COMMON STOCK: Article FIFTH of the Restated Certificate provides ALZA with the Purchase Option. The Purchase Option provides that ALZA may purchase all, but not less than all, of the issued and outstanding Class A Common Stock at any time prior to the earlier of: (i) 60 days after the later of (a) the date of filing with the Commission or (b) the due date of TDC's Form 10-K or Form 10-Q containing a balance sheet showing that TDC has less than an aggregate of $5 million in cash, cash equivalents, and short-term and long-term investments, or (ii) June 30, 1999. ALZA may exercise the Purchase Option at any time prior to such expiration date by mailing an exercise notice to TDC. This exercise notice must identify certain information, including a Closing Date for the purchase and the exercise price and form of consideration to be paid to TDC stockholders. The Closing Date must be within 90 days of the exercise date but may be extended by ALZA in certain circumstances outlined in the Restated Certificate, such as the need for regulatory clearance. ALZA exercised the Purchase Option by providing the foregoing exercise notice to TDC on August 25, 1997. The Closing Date has been set for September 29, 1997. From the date of exercise of the Purchase Option until the Closing Date, TDC is prohibited by the terms of the Restated Certificate from engaging in any extraordinary corporate activity without the prior written consent of ALZA. Article FOURTH of the Restated Certificate provides that as soon as ALZA exercises the Purchase Option, TDC's board shall cease to be classified, the number of authorized TDC directors shall be increased in accordance with a formula set forth in the Restated Certificate and the holders of TDC's Class B Common Stock (currently ALZA) shall have the sole right to appoint the directors thereafter. Within 15 days after the mailing of the exercise notice to TDC, TDC must provide ALZA with a status statement containing certain financial information. This financial information includes all actual and contingent liabilities of TDC. ALZA then may reduce the exercise price by the amount of such liabilities. It is not anticipated that any reduction will occur in the current circumstances of this transaction. ALZA must designate a Payment Agent who will distribute the exercise price to the TDC stockholders. ALZA must also deposit both the exercise price, and irrevocable instructions to pay the exercise price to TDC stockholders of record as of the close of business on the Closing Date, with the Payment Agent on or prior to the Closing Date. 11 On the Closing Date, title to the Class A Common Stock will automatically transfer to and vest in ALZA without further act of any person. The Payment Agent will then disburse the exercise price to TDC stockholders upon tender of stock certificates to the Payment Agent as instructed thereby. OTHER PROVISIONS OF THE TRANSACTION ----------------------------------- Appraisal rights are not afforded under either applicable law or the Restated Certificate to TDC stockholders in respect of the exercise of the Purchase Option and none will be afforded by either ALZA or TDC. ALZA is not aware of any rights available to objecting holders of Class A Common Stock under applicable law. ALZA is unaware, after making reasonable inquiry of TDC, of any grant of access to unaffiliated security holders to the corporate files of either TDC or ALZA or the appointment of counsel or appraisal services for unaffiliated security holders at the expense of either TDC or ALZA. SUMMARY OF FINANCIAL STATEMENTS ------------------------------- Selected Consolidated Financial Data Set forth below is a summary of TDC's selected consolidated financial data, which has been excerpted or derived from the information contained in TDC's Annual Reports on Form 10-K for the years ended December 31, 1996 and 1995, and its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997. More comprehensive information is included in such reports and other documents filed by TDC with the Commission, and the following information should be read in conjunction with such reports and other documents and the financial information (including any related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations) contained therein. Statement of Income Data: (in millions, except per share amounts)
Year ended December 31, Six Months ended June 30, 1996 1995 1997 1996 ------------------------------------------------------- Total revenues $ 8.2 $ 11.5 $ 1.5 $ 4.7 Net loss $ 94.8 $ 59.4 $ 48.3 $ 46.5 Loss per share $ 12.25 $ 7.68 $ 6.24 $ 6.01 Ratio of earnings to fixed changes N/A N/A N/A N/A
Balance Sheet Data: (in millions, except per share amounts) December 31, 1996 June 30, 1997 ----------------- ------------- Working capital $67.9 $20.9 Total assets 88.5 40.5 Total stockholders' equity 69.1 21.8 Book value per share $8.94 $2.82
Note to Selected Consolidated Financial Data: (1) TDC had no material fixed charges for the periods presented. CONCLUSION ---------- If you have any questions with respect to this transaction, please contact ALZA Corporate and Investor Relations at (650) 494-5222. ALZA and TDC wish to thank you for your investment and interest in TDC. We sincerely hope that you are pleased with your return on this investment. 12 -----END PRIVACY-ENHANCED MESSAGE-----