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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. 10)
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)
December 20, 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
- ------------------------------------------------------------------
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 1,165,400
REPORTING -----------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
-----------------------------------------
10 SHARED DISPOSITIVE POWER
1,165,400
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,165,400
- ------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
- ------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.7%
- ------------------------------------------------------------------
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 1,165,400
REPORTING -----------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 32,400
-----------------------------------------
10 SHARED DISPOSITIVE POWER
1,165,400
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,197,800
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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)
15.1%
- ------------------------------------------------------------------
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 515,400
REPORTING -----------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
-----------------------------------------
10 SHARED DISPOSITIVE POWER
515,400
- ------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
515,400
- ------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* / /
- ------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
6.5%
- ------------------------------------------------------------------
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* $7,749,501.31
Edwards Working Capital $ 204,867.00
Micro Cap Working Capital $3,726,330.83
* 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.
In a letter dated December 20, 1999, Micro Cap notified the Issuer of Micro
Cap's intention to present for the vote of shareholders at the Issuer's
2000 annual meeting a proposed amendment to the Issuer's Bylaws that would
require at least 66 percent of the Issuer's directors, as well as the
chairman of the Issuer's Board, to be independent. Micro Cap requested
that its proposal be included in the Issuer's proxy statement relating to
the meeting. A copy of Micro Cap's letter, with the proposal and
supporting statement attached, is attached hereto as Exhibit A and
incorporated herein by reference.
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
October 20, 1999:
Purchase Number Price
Name or Sale Date of Shares per Share
Micro Cap P 11-19-99 50,000 $9.0625
PAI S 11-19-99 50,000 $9.0625
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. Letter dated as of December 20, 1999, from Micro Cap to the Issuer
(with Exhibits).
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: January 6, 2000
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
December 20, 1999
VIA FACSIMILE (919) 941-5186 &
REGISTERED MAIL/RETURN RECEIPT REQUESTED
Embrex, Inc.
P.O. Box 13989
Research Triangle Park
Durham, NC 27709
Attention: Don T. Seaquist, Corporate Secretary
Re: Notice of Intention to Present Shareholder Proposal
for a Vote of Shareholders At the 2000 Annual Meeting
of Embrex, Inc. ("Embrex" or the "Company")
Dear Mr. Seaquist:
I intend to present for a vote of shareholders at the Company's 2000 annual
meeting of shareholders (the "Meeting") the proposal reflected in Exhibit A
to this letter (the "Proposal"), and I request that the Proposal and the
Supporting Statement, attached hereto as Exhibit B, be included in Embrex's
proxy statement and form of proxy relating to the Meeting.
Please be advised that Micro Cap Partners, L.P. ("Micro Cap") has owned
shares of the Company's common stock with a market value of at least $2,000
(the "Shares") continuously for at least the preceding year and intends to
maintain such ownership through the date of the Meeting. I have enclosed a
copy of a letter from Bear, Stearns Securities Corp. confirming Micro Cap's
ownership of the shares.
If you would like to discuss the Proposal, or intend to object to including
the Proposal or the supporting statement in the Company's proxy statement
and form of proxy, please contact me at the address below.
Very truly yours,
MICRO CAP PARTNERS, L.P.
By: Palo Alto Investors, General Partner
By: /s/ William L. Edwards
William L. Edwards
President
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CUSIP No. 290817105 13D Page 9 of 10 Pages
EXHIBIT A
Proposal
WHEREAS, the board of directors should be an independent body elected
by shareholders and owes fiduciary obligations to shareholders; and
WHEREAS, the chairman of the board of directors should be elected
annually by the independent directors.
NOW THEREFORE, BE IT RESOLVED that pursuant to Section 11 of Article
III of the Bylaws of Embrex, Inc. ("Embrex" or the "Company"), the
Company's shareholders hereby amend Section 7 of Article IV of the
Company's Bylaws in the manner provided below, and amend Article V thereof
to add the following Section 10, such amendments to become effective 30
days following approval by the shareholders.
ARTICLE IV
SECTION 7. CHAIRMAN OF THE BOARD. The Independent Directors
(defined in Section 10 of Article V) shall elect a chairman of the board
annually. The chairman of the board shall be an Independent Director and
shall preside at all meetings of the board of directors and the
shareholders and shall perform such other duties as may be prescribed from
time to time by the board of directors.
ARTICLE V
SECTION 10. INDEPENDENT BOARD OF DIRECTORS. At least sixty-six
percent (66%) of the directors on the Board shall be Independent Directors.
At the end of each meeting of the Board, the Independent Directors shall
meet in executive session, separately from other directors, to discuss such
matters as they deem appropriate. The Independent Directors shall elect a
Chairman of the Board annually, who shall be an Independent Director. The
Independent Directors as a group shall constitute the Nominating Committee
of the Board, which shall have sole responsibility for recommending and
nominating candidates to the Board.
An "Independent Director" is one who, at any time during the past five
years, has had (i) no familial relationship with any of Embrex's executive
officers or directors and (ii) no direct or indirect financial relationship
with Embrex or any affiliate other than as a director or shareholder of the
Company, except those past relationships which are (a) fully disclosed in
the Company's proxy statements, and (b) deemed insignificant and non-
material by a majority of the other Independent Directors. Notwithstanding
any other provision of these Bylaws, this Section 10 shall govern in the
event of any inconsistency with other provisions of these Bylaws and may
not be altered, amended or repealed, without the approval of the
shareholders.
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CUSIP No. 290817105 13D Page 10 of 10 Pages
EXHIBIT B
Supporting Statement
Although Embrex's board of directors is composed of a majority of
independent directors, Embrex's bylaws do not require that the board be so
constituted. This proposal amends the bylaws to ensure that the board will
remain independent.
In addition, although the present chairman of the board is an independent
director, the bylaws do not require that the chairman be independent, nor
do they require that the board members elect a chairman annually. This
proposal adds a new bylaw to ensure that the chairman will be independent
and elected annually.
We hope the board embraces these simple and reasonable measures aimed at
ensuring that the board remains independent and able to act effectively in
the interest of their constituency, the shareholders of Embrex.
CSR\4325\011\1080713.01
