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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 9)
EMBREX, INC.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
290817105
(CUSIP Number)
Carolyn S. Reiser, Esq.
Shartsis Friese & Ginsburg LLP
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
(415) 421-6500
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
September 23, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check
the following box / /.
Note: Schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7(b) for
other parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
Potential persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays
a currently valid OMB control number.
SEC 1746 (10-97)
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CUSIP No. 290817105 13D Page 2 of 10 Pages
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1 NAME OF REPORTING PERSON
IRS IDENTIFICATION NO. OF ABOVE PERSON
Palo Alto Investors
IRS No.: 94-3088699
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*(a)/X/ (b)/ /
- ------------------------------------------------------------------
3 SEC USE ONLY
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4 SOURCE OF FUNDS
AF
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5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e)
- ------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
- ------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY -----------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 1,168,900
REPORTING -----------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
-----------------------------------------
10 SHARED DISPOSITIVE POWER
1,168,900
- ------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,168,900
- ------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
- ------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.2%
- ------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO, IA
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CUSIP No. 290817105 13D Page 3 of 10 Pages
- ------------------------------------------------------------------
1 NAME OF REPORTING PERSON
IRS IDENTIFICATION NO. OF ABOVE PERSON
William Leland Edwards
- ------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*(a)/X/ (b)/ /
- ------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------
4 SOURCE OF FUNDS
AF, PF
- ------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e)
- ------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
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NUMBER OF 7 SOLE VOTING POWER
SHARES 32,400
BENEFICIALLY -----------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 1,168,900
REPORTING -----------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 32,400
-----------------------------------------
10 SHARED DISPOSITIVE POWER
1,168,900
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,201,300
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
- ------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.6%
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14 TYPE OF REPORTING PERSON*
IN
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CUSIP No. 290817105 13D Page 4 of 10 Pages
- ------------------------------------------------------------------
1 NAME OF REPORTING PERSON
IRS IDENTIFICATION NO. OF ABOVE PERSON
Micro Cap Partners, L.P.
- ------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*(a)/X/ (b)/ /
- ------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- ------------------------------------------------------------------
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e)
- ------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- ------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES -0-
BENEFICIALLY -----------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 465,400
REPORTING -----------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
-----------------------------------------
10 SHARED DISPOSITIVE POWER
465,400
- ------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
465,400
- ------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
- ------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.7%
- ------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
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CUSIP No. 290817105 13D Page 5 of 10 Pages
ITEM 1. SECURITY AND ISSUER.
This statement relates to shares of Common Stock (the "Stock") of Embrex,
Inc. (the "Issuer"). The principal executive office of the Issuer is
located at 1035 Swabia Court, Durham, NC 27703.
ITEM 2. IDENTITY AND BACKGROUND.
The persons filing this statement and the persons enumerated in Instruction
C of Schedule 13D and, where applicable, their respective places of
organization, general partners, directors, executive officers and
controlling persons, and the information regarding them, are as follows:
(a) The names of the persons filing this statement are Palo Alto
Investors ("PAI"), William Leland Edwards ("Edwards") and Micro Cap
Partners, L.P. ("Micro Cap") (collectively, the "Filers").
(b) The business address of the Filers is located at 470 University
Avenue, Palo Alto, CA 94301.
(c) PAI is an investment adviser registered under the Investment
Advisers Act of 1940. Edwards is the President and sole shareholder of
PAI. Micro Cap is an investment limited partnership of which PAI is the
general partner.
(d) During the last five years, neither of the Filers has been convicted
in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) During the last five years, neither of the Filers was a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.
(f) PAI is a California corporation. Edwards is a citizen of the
United States of America. Micro Cap is a Delaware limited partnership.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The source and amount of funds used in purchasing the Stock were as
follows:
Purchaser Source of Funds Amount
PAI Funds Under Management* $7,668,795.82
Edwards Working Capital $ 204,867.00
Micro Cap Working Capital $3,272,680.83
* Includes funds of Micro Cap and PAI's other advisory clients invested in
the Stock.
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CUSIP No. 290817105 13D Page 6 of 10 Pages
ITEM 4. PURPOSE OF TRANSACTION.
PAI's principal purpose for acquiring the Stock is equity investment.
On April 18, 1999, the Issuer, Micro Cap Partners, L.P., a Delaware limited
partnership of which PAI is the General Partner ("Micro Cap"), PAI, Walter
Smiley ("Smiley") and Edwards entered into an agreement (the "Settlement
Agreement") pursuant to which: (a) the Issuer agreed, among other things,
(i) to increase the size of its Board of Directors by one and to elect
Smiley to fill the vacancy created thereby, (ii) to nominate Smiley for
election as a director of the Issuer at the Issuer's Annual Meeting of
Shareholders scheduled for May 20, 1999 (the "1999 Annual Meeting") and
(iii) to amend the Issuer's Amended and Restated Bylaws (the "Bylaws") to
allow any two directors to call a special meeting of shareholders; and (b)
Micro Cap and PAI agreed, among other things, (i) to withdraw all of their
preliminary proxy materials filed with respect to the Issuer, the request
that the Issuer include in its proxy statement for the 1999 Annual Meeting
a proposal for the Issuer to retain an investment banking firm and the
notice made on behalf of Micro Cap regarding the presentation at the 1999
Annual Meeting of a proposal to amend the Bylaws and (ii) not to bring any
matters before the 1999 Annual Meeting. The Settlement Agreement is
attached hereto as Exhibit A and incorporated herein by reference.
Pursuant to the Settlement Agreement, on April 19, 1999, Micro Cap and
Edwards notified the Securities and Exchange Commission that Micro Cap
would not be filing a definitive proxy statement for the 1999 Annual
Meeting.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Each Filer's beneficial ownership of the Stock at the date hereof is
reflected on the cover sheet for that Filer.
The Filers have effected the following transactions in the Stock since
September 2, 1999:
Purchase Number Price
Name or Sale Date of Shares per Share
Micro Cap P 9-7-99 5,000 $8.375
Micro Cap P 9-23-99 50,000 8.5625
PAI S 9-23-99 50,000 8.5625
Micro Cap P 9-24-99 25,000 8.5625
PAI S 9-24-99 25,000 8.5625
PAI is a registered investment adviser whose clients have the right to
receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, the Stock. No individual client's holdings of
the Stock, other than Micro Cap, are more than 5% of the class.
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CUSIP No. 290817105 13D Page 7 of 10 Pages
ITEM. 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
PAI is a registered investment adviser whose clients have the right to
receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, the various securities in which their assets are
invested, including the Stock.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
A. Agreement dated as of April 18, 1999, among the Issuer, Micro Cap, PAI,
Smiley and Edwards.
SIGNATURES
After reasonable inquiry and to the best of my knowledge, I certify
that the information set forth in this statement is true, complete and
correct.
DATED: September 27, 1999
Palo Alto Investors
By: /s/ William L. Edwards
William L. Edwards
President
/s/ William L. Edwards
William L. Edwards
Micro Cap Partners, L.P.
By: Palo Alto Investors
By: /s/ William L. Edwards
President
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CUSIP No. 290817105 13D Page 8 of 10 Pages
Exhibit A
AGREEMENT
This Agreement is made and dated as of April 18, 1999 among Embrex,
Inc., a North Carolina corporation ("Embrex"), Micro Cap Partners, L.P., a
Delaware limited partnership ("Micro Cap"), Palo Alto Investors, Inc., a
California corporation ("Palo Alto"), Walter Smiley, a resident of
Arkansas, and William L. Edwards, a resident of California. Mr. Smiley and
Mr. Edwards are executing this Agreement only for purposes of Sections 3(a)
and Sections 3(b) and (c), respectively.
For good and valuable consideration, the receipt and sufficiency of
which the parties acknowledge, the parties hereby agree as follows:
1. Agreements of Embrex.
(a) As soon as practicable, but no later than Friday, April 23,
1999, Embrex shall increase the number of directors of Embrex from seven to
eight, thereby creating a vacancy, and shall elect Mr. Smiley as a director
of Embrex.
(b) Embrex shall include Mr. Smiley as a nominee for director at
Embrex's next Annual Meeting of Shareholders, scheduled for May 20, 1999
(the "1999 Annual Meeting").
(c) As soon as practical, but no later than Friday, April 23,
1999, Embrex shall amend its Amended and Restated Bylaws (restated
effective May 21, 1998) so that Article III, Section 4 shall read in its
entirety as follows:
"SECTION 4. Special Meetings. Special meetings of
shareholders may be called at any time by any two
directors. Only business within the purpose or
purposes described in the meeting notice specified in
Section 6 of this Article may be conducted at a special
meeting of shareholders."
(d) Embrex shall immediately withdraw its preliminary proxy
materials filed with the Securities and Exchange Commission ("SEC") on
April 9, 1999 and on April 16, 1999.
(e) The Board of Directors of Embrex shall not at any time prior
to the Embrex 2000 Annual Meeting: (i) remove Mr. Smiley as a director; or
(ii) amend or directly or indirectly render ineffective Article III,
Section 4 of the Embrex Amended and Restated Bylaws.
(f) If Mr. Smiley shall be unable to fulfill his term as a
director of Embrex by reason of his death, disability or resignation
because of unexpected personal or family circumstances, Micro Cap shall
have the right to recommend to the Board of Directors another person or
persons as candidates to fill his vacancy and the Board of Directors shall
consider such person or persons. The Board of Directors and Micro Cap
shall use their reasonable best efforts to reach mutual agreement on a
substitute for Mr. Smiley and the Board of Directors shall elect such
mutually agreeable substitute to fill the vacancy as soon as practicable
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CUSIP No. 290817105 13D Page 9 of 10 Pages
2. Agreements of Micro Cap and Palo Alto.
(a) Micro Cap and Palo Alto shall immediately withdraw all of
their preliminary proxy materials regarding Embrex, including the
preliminary proxy materials filed with the SEC on April 14, 1999.
(b) Micro Cap and Palo Alto hereby withdraw in its entirety the
request dated December 17, 1999 that Embrex include in its proxy statement
for the 1999 Annual Meeting a proposal for Embrex to retain an investment
banking firm.
(c) Micro Cap and Palo Alto hereby withdraw in its entirety the
notice dated March 29, 1999, which was made by CEDE & Co. on behalf of
Micro Cap, regarding the presentation at the 1999 Annual Meeting of a
proposal to amend the provisions of Embrex's Bylaws pertaining to the call
of special meetings of shareholders and a proposal to retain an investment
banking firm.
(d) Micro Cap and Palo Alto will not directly or indirectly make
any proposals at, or bring any matters before, the 1999 Annual Meeting.
(e) Micro Cap and Palo Alto acknowledge and agree that the only
proposals to be included in Embrex's proxy materials for the 1999 Annual
Meeting shall be the election of directors and the ratification of
accountants.
(f) Micro Cap and Palo Alto acknowledge and agree that all
requests for inspection of corporate records and other information of
Embrex made by or on behalf of Micro Cap and Palo Alto have been satisfied
or withdrawn.
3. Other Agreements.
(a) Mr. Smiley consents and agrees to be nominated and elected,
and to serve, as a director of Embrex as contemplated by this Agreement.
(b) Mr. Edwards shall not make any proposals at, or bring any
matters before, the 1999 Annual Meeting. Mr. Edwards shall cause each of
Micro Cap and Palo Alto to perform its obligations under this Agreement.
(c) Micro Cap, Palo Alto and Mr. Edwards release Embrex, and
Embrex releases Micro Cap, Palo Alto and Mr. Edwards, from any and all
claims, causes of action, liabilities, costs and expenses, known or
unknown, arising out of related to any of the matters or materials referred
to in this Agreement, including, without limitation, relating to any
proposals for the 1999 Annual Meeting. The provisions of this Section 3(c)
also shall apply to any affiliate, director, officer, employee, agent,
partner, or representative of Embrex, Micro Cap, Palo Alto and Mr. Edwards.
Nothing in this Agreement shall be construed as an admission of any
liability or otherwise by any party.
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CUSIP No. 290817105 13D Page 10 of 10 Pages
(d) This Agreement constitutes the full understanding of the
parties and a complete statement of the terms of their agreement with
respect to the subject matter contained herein and supersedes and cancels
all prior agreements, negotiations, correspondence, undertakings and
communications of the parties, oral or written, respecting such subject
matter. This Agreement, or any provision hereof, may not be amended,
changed, modified or waived, except by written instrument signed by the
parties hereto. This Agreement shall be governed by and construed under the
laws of the State of North Carolina.
(e) The parties acknowledge and agree that an award of money
damages would be inadequate for the breach of this Agreement, and any such
breach would cause irreparable harm; accordingly, the parties agree that in
the event of any breach of this Agreement, a party will be entitled,
without the requirement of posting a bond or other security, to equitable
relief, including injunctive relief and specific performance.
(f) This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to
be and original and all of which counterparts taken together shall
constitute but one and the same instrument. This Agreement may be executed
and delivered by facsimile.
EMBREX, INC.
By: /s/ Randall L. Marcuson
Randall L. Marcuson
President and Chief Executive Officer
MICRO CAP PARTNERS, L.P.
By: Its General Partner,
Palo Alto Investors, Inc.
By: /s/ William L. Edwards
Name: William L. Edwards
Title: President
PALO ALTO INVESTORS, INC.
By: /s/ William L. Edwards
Name: William L. Edwards
Title: President
/s/ Walter Smiley
WALTER SMILEY
/s/ William L. Edwards
WILLIAM L. EDWARDS
BLD\4325\011\1065530.01
