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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
METRA BIOSYSTEMS, INC.
(Name of Subject Company)
METRA BIOSYSTEMS, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(Including the Associated Preferred Shares Purchase Rights)
(Title of Class of Securities)
591591-10-2
(CUSIP Number of Class of Securities)
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GEORGE W. DUNBAR, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
METRA BIOSYSTEMS, INC.
265 NORTH WHISMAN ROAD
MOUNTAIN VIEW, CALIFORNIA 94043
(650) 903-9100
(Name, address and telephone number of person authorized
to receive notice and communications on behalf of the person(s) filing
statement)
COPY TO:
ALAN TALKINGTON, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE LLP
OLD FEDERAL RESERVE BANK BUILDING
400 SANSOME STREET
SAN FRANCISCO, CALIFORNIA 94111
(415) 392-1122
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Metra Biosystems, Inc., a California
corporation ("Metra Biosystems" or the "Company"). The address of the principal
executive offices of the Company is 265 North Whisman Road, Mountain View,
California 94043. The title of the class of equity securities to which this
Solicitation/Recommendation Statement (the "Statement") relates is the Company's
Common Stock, par value $0.001 per share, including the associated Preferred
Shares Purchase Rights (collectively, "Common Stock" or the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the tender offer by Quidel Corporation, a
corporation organized and existing under the laws of Delaware ("Parent" or
"Quidel"), and MBS Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Parent (the "Purchaser") to purchase all of the
Shares held by the Company's shareholders other than Parent, the Purchaser or
their affiliates (such shareholders, the "Public Shareholders" and such Shares,
the "Publicly Held Shares") at a price equal to $1.78 per Share, net to the
seller in cash ("Offer Price") (subject to applicable withholding of taxes),
without interest, upon the terms and subject to the conditions set forth in the
Purchaser's Offer to Purchase dated June 9, 1999 and in the related Letter of
Transmittal (which together with the Offer to Purchase, each as may be amended
and supplemented from time to time, constitute the "Offer"), copies of which are
filed respectively as Exhibits 1 and 2 hereto and are incorporated herein by
reference. The Offer is disclosed in a Tender Offer Statement on Schedule 14D-1
dated June 9, 1999 (the "Schedule 14D-1") filed with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules promulgated by the SEC thereunder.
The Offer is being made by the Purchaser pursuant to the Agreement and Plan
of Merger, dated as of June 4, 1999 (the "Merger Agreement"), by and among
Parent, Purchaser and the Company. The Merger Agreement provides that, among
other things, as promptly as practicable after the purchase of Shares pursuant
to the Offer and the satisfaction or waiver of the other conditions set forth in
the Merger Agreement and in accordance with the applicable provisions of the
California General Corporation Law (the "CGCL"), Purchaser will be merged with
and into the Company (the "Merger"), the separate corporate existence of
Purchaser will cease and the Company will continue as the surviving corporation
(the "Surviving Corporation") and will be a wholly-owned subsidiary of Parent.
At the effective time of the Merger (the "Effective Time"), each remaining
outstanding Share (other than Shares owned by Parent, the Purchaser or any
direct or indirect wholly-owned subsidiary of the Company or Parent immediately
prior to the Effective Time (the "Ineligible Shares") and Shares held by
shareholders who properly perfect their dissenters' rights under the CGCL (the
"Dissenting Shares")) will be converted automatically into the right to receive
the Offer Price, without interest. The Merger Agreement is more fully described
in Item 3.
According to the Offer to Purchase, the address of the principal executive
offices of Parent is 10165 McKellar Court, San Diego, California 92121, and the
address of the principal executive offices of the Purchaser is 10165 McKellar
Court, San Diego, California 92121.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Statement, is set forth in Item 1 above. All information contained in this
Statement or incorporated herein by reference concerning the Purchaser or
Parent, or actions or events with respect to either of them, was provided by the
Purchaser or Parent, respectively, and the Company takes no responsibility for
such information. Information contained in this Statement with respect to the
Company and its advisors has been provided by the Company.
(b) Except as described herein, in Annex A hereto, and in the exhibits
hereto, to the knowledge of the Company, as of the date hereof there are no
material contracts, agreements, arrangements or understandings, or any potential
or actual conflicts of interest between the Company or its affiliates and
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(1) the Company, its executive officers, directors or affiliates or (2) the
Purchaser, its executive officers, directors or affiliates.
INTERESTS OF CERTAIN PERSONS IN THE OFFER AND THE MERGER
In considering the recommendations of the Board of Directors of the Company
(the "Company Board"), the Public Shareholders should be aware that certain
members of the Company Board and certain of the Company's officers have
interests in the Merger and the Offer which are described herein and in Annex A
hereto and which may present them with certain conflicts of interest. Each of
the members of the Company Board were aware of these potential conflicts and
considered them along with the other factors described in Item 4(b)(2) below.
Dr. Mary Lake Polan, a director of the Company, is also a director of
Parent. Dr. Polan abstained from voting on all matters relating to the Offer and
the Merger.
Prior to joining the Company in September 1998, Jennifer Lloyd, the
Company's Vice President of Corporate Development, worked with the Company in
her capacity as Vice President of Healthcare Investment Banking at EGS
Securities Corp. in New York, the Company's financial advisor. Since joining the
Company, Ms. Lloyd has worked on a limited basis for EGS Securities on projects
that do not conflict with her responsibilities at the Company but has not been
employed by EGS Securities in connection with matters related to the Company and
does not have a change of control agreement with the Company.
The Company, at Parent's request, intends to enter into an employment
agreement with John F. Coombes, the Company's Vice President of Sales and
Marketing, to ensure his retention after the Merger. The agreement is expected
to provide for a salary of approximately $180,600 per year, a retention bonus,
severance benefits and acceleration of unvested in-the-money stock options,
which would not otherwise accelerate under the Company's existing employee
option plan.
Under the Company's 1995 Directors' Option Plan, all unvested options will
be accelerated upon the Merger.
In October 1998, the Company entered into a consulting agreement with
Gregory P. Lawless, Ph.D., a director of the Company, to evaluate merger and
acquisition opportunities. The Company granted Dr. Lawless an option to purchase
100,000 shares of the Company's Common Stock at an exercise price of $1.375 per
share. The option vests as to 8,333 shares per month. The Company has agreed to
accelerate the unvested portion of Dr. Lawless' option.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is filed
as an exhibit to the Schedule 14D-1 filed by Purchaser and Parent with the
Commission in connection with the Offer. Such summary is qualified in its
entirety by reference to the Merger Agreement.
THE OFFER. The Merger Agreement provides that the Purchaser will commence
the Offer, and that, upon the terms and subject to prior satisfaction or waiver
of the conditions of the Offer, as set forth below, the Purchaser will purchase
all Shares validly tendered pursuant to the Offer. The Merger Agreement provides
that, without the prior written consent of the Company, the Purchaser will not
(1) impose additional conditions to the Offer, (2) modify or amend the
conditions to the Offer or any other term of the Offer in a manner adverse to
the holders of Shares pursuant to the Offer, (3) reduce the number of Shares
subject to the Offer, (4) reduce the amount offered per Share, (5) except as
provided in the following sentence, extend the Offer, if all of the conditions
to the Offer are satisfied or waived, or (6) change the form of consideration
payable in the Offer. Notwithstanding the foregoing, the Purchaser may, without
the consent of the Company, (1) extend the Offer until August 4, 1999, if at the
then scheduled Expiration Date of the Offer, any of the conditions to the Offer
have not been satisfied or waived, or (2) increase the Offer Price and extend
the Offer for up to ten business days to the extent required by law.
Additionally, at the Company's request, the Purchaser is obligated to extend the
Expiration Date (1) in one or more periods of not more than five business days,
but not later than
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August 4, 1999, if (A) any of the conditions to the offer set forth below under
"Certain Conditions of the Offer" have not been satisfied for waived on the
Expiration Date, (B) such condition is reasonably capable of being satisfied by
the Company and the Company exercises reasonable efforts to cause such condition
to be satisfied, and (C) the Company is in compliance with its covenants in the
Merger Agreement; or (2) for five business days if the Minimum Condition has not
been satisfied at the first scheduled Expiration Date.
REVISED MINIMUM NUMBER. In the event the Minimum Condition is not satisfied
on any scheduled expiration date of the Offer and the Purchaser has not extended
the Offer at the Company's request as set forth above, the Purchaser may, in its
sole discretion, either (1) withdraw the Offer or allow it to expire, (2) extend
the Offer as set forth above or (3) amend the Offer to provide that, in the
event (A) the Minimum Condition is not satisfied at the next scheduled
expiration date of the Offer (without giving effect to the potential issuance of
any Shares issuable upon exercise of the Stock Option Agreement (as discussed
below)), and (B) the number of Shares tendered pursuant to the Offer and not
withdrawn as of such next scheduled Expiration Date is more than 50% of the then
outstanding Shares, the Purchaser shall waive the Minimum Condition and amend
the Offer to reduce the number of Shares subject to the Offer to a number of
Shares that, when added to the Shares then owned by the Purchaser, will equal
49.99% of the Shares then outstanding (the "Revised Minimum Number"). If a
greater number of Shares is tendered into the Offer and not withdrawn, the
Purchaser may elect to purchase, on a pro rata basis, the Revised Minimum Number
of Shares. Notwithstanding any other provisions in this Offer to Purchase, in
the event that the Purchaser purchases a number of Shares equal to the Revised
Minimum Number, then without the prior written consent of the Purchaser prior to
the termination of this Agreement, the Company shall take no action whatsoever
to increase the percentage of Shares owned by the Purchaser in excess of the
Revised Minimum Number.
RECOMMENDATION. The Company has represented to Parent in the Merger
Agreement that the Company Board, at a meeting duly called and held, has
unanimously (except for Dr. Polan who is also a director of Parent and,
accordingly, abstained from voting on all matters relating to the Offer and the
Merger) (1) determined that the Offer and the Merger are fair to and in the best
interests of the Company and its shareholders, (2) approved the Offer and
adopted the Merger Agreement in accordance with the CGCL and for purposes of
Section 1101 of the CGCL and similar provisions of any other similar state
statutes that might be deemed applicable to the transactions contemplated by the
Merger Agreement and (3) resolved to recommend acceptance of the Offer and
approval of the Merger Agreement by the Company's shareholders, PROVIDED,
HOWEVER, that such recommendation and approval may be withdrawn, modified or
amended to the extent that the Company Board determines in good faith and on a
reasonable basis, after consultation with its outside counsel, that such action
is required in the exercise of the Company Board's fiduciary duties under
applicable law. The Company has further represented that, prior to the execution
of the Merger Agreement, the Financial Advisor delivered to the Company Board
its written opinion, to the effect that, as of the date of such written opinion,
the consideration to be received by the holders of the Shares (other than Shares
held by Parent or its affiliates, in the treasury of the Company or by any
wholly-owned subsidiary of the Company) pursuant to the Offer and the Merger is
fair to such holders from a financial point of view.
DIRECTORS. The Merger Agreement provides that, subject to compliance with
applicable law, promptly upon the payment by the Purchaser for Shares pursuant
to the Offer, and from time to time thereafter, Parent is entitled to designate
such number of directors, rounded up to the next whole number, on the Company
Board as is equal to the product of the total number of directors on the Company
Board (determined after giving effect to the directors so elected pursuant to
this sentence) multiplied by the ratio of the aggregate number of Shares
beneficially owned by Parent, the Purchaser or their affiliates to the total
number of Shares then outstanding; PROVIDED, HOWEVER, that if the Purchaser has
acquired the Revised Minimum Number of Shares in the Offer, such number of
directors shall be rounded up to the greatest whole number plus one to give the
Purchaser at least a majority of the members of the Company Board. The Company
will, upon request of Parent, promptly take all actions necessary to cause
Parent's designees to be so elected, including, if necessary, seeking the
resignations of one or more existing directors;
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PROVIDED, HOWEVER, that prior to the time the Merger becomes effective (the
"Effective Time"), the Company Board will always have at least one member who is
a director on the Company Board at the time of execution of the Merger Agreement
and who is not an executive officer of the Company (the "Independent Director").
Following the election or appointment of Parent's designees pursuant to the
preceding paragraph and prior to the Effective Time, any amendment or
termination of the Merger Agreement by the Company, any extension by the Company
of the time for performance of any of the obligations or other acts of Parent or
the Purchaser or exercise or waiver of any of the Company's rights thereunder
will require the affirmative vote of the Independent Director.
THE MERGER. The Merger Agreement provides that, at the Effective Time, the
Purchaser will be merged with and into the Company. Following the Merger, the
separate corporate existence of the Purchaser will cease and the Company will
continue as the Surviving Corporation.
The Company has agreed pursuant to the Merger Agreement that, if required by
applicable law in order to consummate the Merger, it will (1) convene a special
meeting of its shareholders as soon as practicable following the acceptance for
payment of and payment for Shares by the Purchaser pursuant to the Offer for the
purpose of considering and taking action upon the Merger Agreement; (2) prepare
and file with the SEC a preliminary proxy statement relating to the Merger
Agreement, and use its reasonable best efforts (A) to obtain and furnish the
information required to be included by the SEC in the Proxy Statement and, after
consultation with Parent, to respond as soon as practicable to any comments made
by the SEC with respect to the preliminary proxy statement and to cause a
definitive proxy statement (the "Proxy Statement") to be mailed to its
shareholders and (B) to obtain the necessary approvals of the Merger and
adoption of the Merger Agreement by its shareholders; and (3) include in the
Proxy Statement the recommendation of the Company Board that shareholders of the
Company vote in favor of the approval and adoption of the Merger and the Merger
Agreement. Parent has agreed in the Merger Agreement that it will vote, or cause
to be voted, all of the Shares then owned by it, the Purchaser or any of its
other subsidiaries in favor of the approval of the Merger and the Merger
Agreement.
The Merger Agreement further provides that, notwithstanding the foregoing,
if the Purchaser acquires at least 90% of the outstanding Shares of the Company
pursuant to the Offer, the parties to the Merger Agreement will take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after the acceptance for payment of and payment for the Shares by
the Purchaser pursuant to the Offer without a meeting of the shareholders of the
Company, in accordance with Section 1110 of the CGCL.
CHARTER, BY-LAWS, DIRECTORS AND OFFICERS. The Articles of Incorporation of
the Purchaser, as in effect immediately prior to the Effective Time, will be the
Articles of Incorporation of the Surviving Corporation, until thereafter amended
in accordance with the provisions thereof and of the Merger Agreement and
applicable law. The By-Laws of the Purchaser in effect at the time of the
Effective Time will be the By-Laws of the Surviving Corporation until amended in
accordance with the terms thereof and applicable law. Subject to applicable law,
the directors of the Purchaser immediately prior to the Effective Time will be
the initial directors of the Surviving Corporation and will hold office until
their respective successors are duly elected and qualified, or their earlier
death, resignation or removal. At the Effective Time, Parent shall create a
vacancy on its Board of Directors by increasing its membership by one member and
shall fill the vacancy from among the existing members of the Company Board upon
mutual agreement of Parent and the Company. The officers of the Purchaser
immediately prior to the Effective Time will be the initial officers of the
Surviving Corporation.
CONVERSION OF SECURITIES. By virtue of the Merger and without any action on
the part of the holders thereof, at the Effective Time, each Share issued and
outstanding immediately prior to the Effective Time (other than (1) any Shares
held by Parent, the Purchaser, any wholly-owned subsidiary of Parent or the
Purchaser, in the treasury of the Company or by any wholly-owned subsidiary of
the Company, which Shares, by virtue of the Merger and without any action on the
part of the holder thereof, will be canceled
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and retired and will cease to exist with no payment being made with respect
thereto and (2) Dissenting Shares) will be canceled and retired and will be
converted into the right to receive the Merger Price, upon surrender of the
certificate formerly representing such Share. At the Effective Time, each share
of common stock of the Purchaser, par value $0.001 per share, issued and
outstanding immediately prior to the Effective Time will, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and become one validly issued, fully paid and non-assessable share of
common stock, par value $0.001 per share, of the Surviving Corporation.
STOCK OPTIONS. Upon the consummation of the Offer, the Purchaser will make
a cash payment (less applicable withholding taxes) to each holder of an option
("Company Stock Options") to acquire Shares outstanding immediately prior to the
Effective Time under the Company's 1990 Incentive Stock Option Plan, 1995 Stock
Option Plan, 1995 Employee Stock Option Plan and 1995 Directors' Option Plan
(collectively, the "Company Plans"), if then vested, in an amount equal to the
difference between the Offer Price less the per Share exercise price of such
option for all Shares subject to such option as expressly stated in the
applicable stock option agreement or other agreement (the "Option
Consideration"). At or before the Effective Time, the Company shall cause to be
effected any necessary amendments to the Company Plans to give effect to the
foregoing provisions.
REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to the Parent and the
Purchaser with respect to, among other matters, its organization and
qualification, capitalization, authority, required filings, public filings,
consents and approvals, no defaults or undisclosed liabilities, absence of
changes, litigation, compliance with applicable law, employee benefit plans and
labor matters, environmental laws and regulations, taxes, intellectual property,
assets, contracts, insurance, product warranties, suppliers, distributors and
customers, the Rights Agreement, certain business practices, vote required,
brokers, information supplied and opinion of the Financial Advisor. In addition,
the Company has represented that it had at April 30, 1999 cash and cash
equivalents, including short-term investments and long-term investments (other
than investments in equity securities) (collectively, "Cash Balances"), of $20
million, and as of the date that Purchaser accepts for payment and pays for
Shares in the Offer the Company will have a cash balance of at least $19
million, less $500,000 for every month after June 1999 and less the amount of
Company's reasonable out-of-pocket costs (the "Minimum Cash Balance"). Parent
and the Purchaser have made customary representations and warranties to the
Company with respect to, among other matters, its organization, authority,
financing, consents and approvals, information supplied and brokers.
COVENANTS. The Merger Agreement obligates the Company and its subsidiaries,
from the date of the Merger Agreement to the earlier to occur of the termination
of the Merger Agreement or the Effective Time, to conduct their operations only
in the ordinary course of business consistent with past practice and in such a
manner to cause the Company to have the Minimum Cash Balance. The Merger
Agreement also contains specific restrictive covenants as to certain
impermissible activities of the Company prior to such time when a majority of
the Company's Board is designated or elected by the Purchaser or its respective
affiliates, which provide that the Company will not (and will not permit any of
its subsidiaries to) take certain actions without the prior written consent of
Parent, including, among other things, amend its Charter or By-Laws, amend the
Rights Agreement, issue or sell its securities, change its capital structure,
set aside or pay dividends and other distributions, repurchase or redeem its
securities, enter into or assume certain additional indebtedness, increase
compensation or adopt new benefit plans, make material acquisitions or
dispositions, change its accounting principles or practices, settle or
compromise any tax liability, discharge or satisfy certain claims, liabilities
and obligations, and permit to occur certain other material events or
transactions.
NO SOLICITATION. The Merger Agreement requires the Company, its affiliates
and their respective officers, directors, employees, representatives and agents
to immediately cease any discussions or negotiations with any parties with
respect to any Third Party Acquisition (defined below). Neither the Company nor
any of its affiliates shall, nor shall the Company authorize or permit any of
its or their respective officers, directors, employees, representatives or
agents to, directly or indirectly, encourage, solicit,
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participate in or initiate discussions or negotiations with or provide any
non-public information to any person or group (other than Parent and the
Purchaser or any of their designees) concerning any Third Party Acquisition;
PROVIDED, HOWEVER, that nothing herein will prevent the Company Board from
taking and disclosing to the Company's shareholders a position contemplated by
Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to any
tender or exchange offer. The Company has agreed to promptly notify Parent in
the event it receives any proposal or inquiry concerning a Third Party
Acquisition, including the terms and conditions thereof and the identity of the
party submitting such proposal; and shall advise Parent from time to time of the
status and any material developments concerning the same.
Except as set forth herein, the Company Board shall not withdraw its
recommendation of the transactions contemplated by the Merger Agreement or
approve or recommend, or cause the Company to enter into any agreement with
respect to, any Third Party Acquisition. Notwithstanding the foregoing, if the
Company Board by a majority vote determines in its good faith judgment, after
consultation with and based upon the advice of its outside legal counsel, that
it is required to do so in order to comply with its fiduciary duties, the
Company Board may withdraw its recommendation of the transactions contemplated
hereby or approve or recommend a Superior Proposal (defined below), but in each
case only (1) after providing reasonable written notice to Parent (a "Notice of
Superior Proposal"), advising Parent that the Company Board has received a
Superior Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior Proposal; and (2) if
Parent does not, within three business days of Parent's receipt of the Notice of
Superior Proposal, make an offer that the Company Board by a majority vote
determines in its good faith judgment (based on the written advice of a
financial adviser of nationally recognized reputation) to be at least as
favorable to the Company's shareholders as such Superior Proposal; PROVIDED,
HOWEVER, that the Company shall not be entitled to enter into any agreement with
respect to a Superior Proposal unless and until the Merger Agreement is
terminated by its terms. Any disclosure that the Company Board may be compelled
to make with respect to the receipt of a proposal for a Third Party Acquisition
or otherwise in order to comply with its fiduciary duties or Rule 14d-9 or 14e-2
will not constitute a violation of the Merger Agreement PROVIDED that such
disclosure states that no action will be taken by the Company Board in violation
of the foregoing provisions.
A "Third Party Acquisition" means the occurrence of any of the following
events: (1) the acquisition of the Company by merger or otherwise by any person
(which includes a "person" as such term is defined in Section 13(d)(3) of the
Exchange Act) other than Parent, the Purchaser or any of their affiliates (a
"Third Party"); (2) the acquisition by a Third Party of any material portion of
the assets of the Company and its subsidiaries taken as a whole, other than the
sale of its products in the ordinary course of business consistent with past
practices; (3) the acquisition by a Third Party of fifteen percent (15%) or more
of the outstanding Shares; (4) the adoption by the Company of a plan of
liquidation or the declaration or payment of an extraordinary dividend; (5) the
repurchase by the Company or any of its subsidiaries of more than ten percent
(10%) of the outstanding Shares; or (6) the acquisition by the Company or any of
its subsidiaries by merger, purchase of stock or assets, joint venture or
otherwise of a direct or indirect ownership interest or investment in any
business whose annual revenues, net income or assets is equal or greater than
ten percent (10%) of the annual revenues, net income or assets of the Company. A
"Superior Proposal" means any bona fide proposal to acquire directly or
indirectly for consideration consisting of cash and/or securities more than a
majority of the Shares then outstanding or all or a significant portion of the
assets of the Company and otherwise on terms that the Company Board by a
majority vote determines in its good faith judgment (based on the written advice
of a financial advisor of nationally recognized reputation) to be more favorable
to the Company's shareholders than the Merger.
ACCESS TO INFORMATION. The Merger Agreement provides that, until the
Effective Time, the Company will give Parent, its representatives and persons
providing or committed to providing Parent with financing for the contemplated
transaction reasonable access to all employees, plants, offices, warehouses and
other facilities and properties and to all books and records of the Company and
its subsidiaries, will permit Parent to make such inspections as Parent
reasonably requests, and will cause the Company's officers and
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those of its subsidiaries to furnish Parent with such financial and operating
data and other information with respect to business and properties as Parent
reasonably requests.
REASONABLE EFFORTS. Subject to the terms and conditions provided in the
Merger Agreement, the Company and the Purchaser will use their respective
commercially reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper or advisable under any
applicable laws to consummate and make effective the transaction contemplated
hereby as promptly as practicable.
EMPLOYEE BENEFIT ARRANGEMENTS. Parent has agreed to provide the employees
of the Company and its subsidiaries with employee benefits reasonably
commensurate with the benefits currently provided to the Company's employees.
The Company's employees who remain with the Surviving Corporation or Parent will
receive credit for past service with the Company. Parent will compensate
employees of the Company and its subsidiaries at a rate not less than the rate
of compensation currently paid to such employees by the Company and its
subsidiaries. In addition, in connection with the Company's annual salary
reviews, the Company or Parent will increase the rate of compensation paid to
such employees in accordance with ordinary business practices, provided that the
aggregate amount of the increases shall not exceed five percent (5%) of total
base salaries or $196,200. Parent has agreed and will cause the Surviving
Corporation to agree that all obligations of the Company or any subsidiary under
any "change of control" or similar provisions relating to employees contained in
any existing contracts and all termination or severance agreements with certain
executives of the Company will be honored in accordance with their terms as of
the date of the Merger Agreement.
PUBLIC ANNOUNCEMENTS. The Merger Agreement provides that the Company, the
Purchaser and Parent will consult with each other before issuing any press
release or otherwise making any public statement with respect to transactions
contemplated by the Merger Agreement, and will not issue any such press release
or make any such public statement prior to such consultation, unless required by
applicable law or any listing agreement with a securities exchange or the Nasdaq
National Market System.
RESIGNATION OF OFFICERS AND DIRECTORS. Except as otherwise agreed in
writing by Parent, the Merger Agreement contemplates that each of the directors
and officers of the Company and its subsidiaries shall tender their resignations
effective on or before the Effective Time. Any resignations tendered by such
directors and officers will be deemed an "involuntary termination" for purposes
of any change of control or severance agreements.
NOTIFICATION OF CERTAIN EVENTS. Company has agreed to promptly notify
Parent of (1) the occurrence or non-occurrence of any fact or event which would
be reasonably likely to cause any representation or warranty contained in the
Merger Agreement to be untrue or inaccurate in any material respect at any time
prior to the Effective Time, (2) any notice or other communication from any
third party alleging that the consent of such third party is or may be required
in connection with the transactions contemplated by the Merger Agreement, (3)
any notice or other communication form any governmental or regulatory agency in
connection with the transactions contemplated by this Agreement, and (4) any
actions, suits, claims, investigations or proceedings commenced or, to the best
of its knowledge, threatened against, relating to or involving or otherwise
affecting such party which would have been required to have been disclosed
pursuant the Merger Agreement or which relate to the consummation of the
transactions contemplated by the Merger Agreement.
RIGHTS AGREEMENT. The Company agreed to take all action necessary to ensure
that neither the Merger Agreement nor the Merger will cause the Rights to become
exercisable, cause Parent or the Purchaser to become an "Acquiring Person" (as
defined in the Rights Agreement), or permit a "Triggering Event" or
"Distribution Date" (as each is defined in the Rights Agreement) to occur.
INDEMNIFICATION. The Merger Agreement provides that the Articles of
Incorporation of the Surviving Corporation shall contain the provisions with
respect to indemnification set forth in the Articles of Incorporation and
By-Laws of the Company, which provisions shall not be amended, repealed or
otherwise
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modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who between the date
of the Merger Agreement and the Effective Time were directors or officers of the
Company, unless such modification is required by law.
After the time the persons designated by Parent have been elected to, and
shall constitute a majority of, the Company Board pursuant to the terms of the
Merger Agreement (the "Appointment Date"), the Surviving Corporation shall, and
Parent shall cause the Surviving Corporation, to the fullest extent permitted
under applicable law or under the Surviving Corporation's Articles of
Incorporation or By-Laws, but subject to the limitations thereof, including the
limitations contained in Section 317 of the CGCL, to indemnify and hold
harmless, each director and officer of the Company or any of its subsidiaries
(collectively, the "Indemnified Parties"), against any costs or expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or omission by such
director or officer by virtue of their holding the office of director or officer
occurring at or before the Effective Time (including, without limitation, the
transactions contemplated by the Merger Agreement) for a period of six years
after the Effective Time. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (1) any counsel retained by the Indemnified Parties for any period after
the Effective Time shall be reasonably satisfactory to the Surviving Corporation
and Parent and (2) neither the Surviving Corporation nor Parent shall be liable
for any settlement effected without its written consent (which consent shall not
be unreasonably withheld).
For a period four years after the Effective Time, Parent has agreed to cause
to be maintained in effect the current policies of directors' and officers'
liability insurance maintained by the Company (provided that Parent may
substitute therefor policies with reputable and financially sound carriers of at
least the same coverage and amounts containing terms and conditions which are no
less advantageous) with respect to claims arising from or related to facts or
events that occurred at or before the Effective Time; PROVIDED, HOWEVER, that
Parent shall not be obligated to make annual premium payments for such insurance
to the extent such premiums exceed 150% of the annual premiums paid as of the
date of the Merger Agreement by the Company for such insurance (such 150%
amount, the "Maximum Premium"). If such insurance coverage cannot be obtained at
all, or can only be obtained at an annual premium in excess of the Maximum
Premium, Parent shall maintain the most advantageous policies of directors' and
officers' insurance obtainable for an annual premium equal to the Maximum
Premium, PROVIDED FURTHER, if such insurance coverage cannot be obtained at all,
Parent shall purchase all available extended reporting periods with respect to
pre-existing insurance in an amount that, together with all other insurance
purchased, does not exceed the Maximum Premium. Parent has agreed, add will
cause the Company not to take any action that would have the effect of limiting
the aggregate amount of insurance coverage required to be maintained for the
individuals referred herein.
SECURITY AGREEMENT. Simultaneously with the closing of the Offer, the
Company has agreed to execute a security agreement in form and substance
reasonably satisfactory to Parent to provide that the Minimum Cash Balance will
be available to Parent immediately following the acceptance of Shares by Parent
or the Purchaser for payment at the conclusion of the Offer.
EMPLOYMENT AGREEMENTS. The Company has agreed to use its reasonable best
efforts to cause a number of Company employees to execute employment agreements
reasonably satisfactory to Parent.
CONDITIONS TO CONSUMMATION OF THE MERGER. Pursuant to the Merger Agreement,
the respective obligations of Parent, the Purchaser and the Company to
consummate the Merger are subject to the satisfaction, at or before the
Effective Time, of each of the following conditions: (1) the shareholders of the
Company will have duly approved the transactions contemplated by the Merger
Agreement by the requisite vote, if required (2) Parent, the Purchaser or their
affiliates will have accepted for payment and paid for Shares pursuant to the
Offer in accordance with the terms of the Merger Agreement; and (3) no statute,
rule, regulation, executive order, decree, ruling or injunction will have been
enacted, entered,
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promulgated or enforced by any United States court or United States governmental
authority which prohibits, restrains, enjoins or restricts the consummation of
the Merger.
TERMINATION. The Merger Agreement provides that it may be terminated and
the Merger may be abandoned at any time prior to the Effective Time,
notwithstanding approval and adoption of the Merger Agreement by the
shareholders of the Company (with any termination by Parent also being an
effective termination by the Purchaser):
(1) by the mutual written consent of the Company, Parent and the Purchaser;
(2) by Parent and the Purchaser or the Company if (A) any court of competent
jurisdiction in the United States or other Governmental Entity shall have issued
a final order, decree or ruling or taken any other final action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling or
other action is or shall have become nonappealable, (B) the Merger has not been
consummated by November 15, 1999; or (C) the Offer terminates or expires in
accordance with its terms as a result of a
failure of any of the conditions set forth below under "Certain Conditions of
the Offer" without the Purchaser having purchased any Shares pursuant to the
Offer; provided that no party may terminate this Agreement pursuant to clauses
(B) or (C) if such party's failure to fulfill any of its obligations under the
Merger Agreement shall have been the reason that the Effective Time shall not
have occurred on or before said date;
(3) by the Company if (A) there shall have been a breach of any
representation or warranty on the part of Parent or the Purchaser set forth in
the Merger Agreement or if any representation or warranty of Parent or the
Purchaser shall have become untrue, and such breach shall not have been cured or
such representation or warranty shall not have been made true within thirty (30)
business days after notice by the Company thereof except for any inaccuracies
that, individually or in the aggregate, have not had, and would not have a
material adverse effect on Parent, provided that the Company has not breached
any of its obligations hereunder; (B) there shall have been a breach by Parent
or the Purchaser of any of their respective covenants or agreements hereunder
having a material adverse effect on Parent or materially adversely affecting (or
materially delaying) the consummation of the Merger, and Parent or the
Purchaser, as the case may be, has not cured such breach within thirty business
days after notice by the Company thereof, PROVIDED that the Company has not
breached any of its obligations hereunder; (C) the Purchaser has not timely
commenced this Offer; or (D) the Company Board has received a Superior Proposal
and has complied with the Merger Agreement; or
(4) by Parent and the Purchaser if (A) there shall have been a breach of any
representation or warranty on the part of the Company set forth in the Merger
Agreement or if any representation or warranty of the Company shall have become
untrue, and such breach shall not have been cured or such representation or
warranty shall not have been made true within thirty business days after notice
by Parent or the Purchaser thereof except for any inaccuracies that individually
or in the aggregate have not had, and would not have, a material adverse effect
on the Company, provided that Parent has not materially breached any of its
obligations hereunder; (B) there shall have been a breach by the Company of its
covenants or agreements hereunder having a material adverse effect on the
Company or materially adversely affecting (or materially delaying) the
consummation of the Merger, and the Company has not cured such breach within
thirty business days after notice by Parent or the Purchaser thereof provided
that Parent has not materially breached any of its obligations; (C) the Company
Board shall have recommended to the Company's shareholders a Superior Proposal;
(D) the Company Board shall have withdrawn or materially weakened its
recommendation of the Merger Agreement or the Merger; (E) if the Offer has
expired or has been terminated in accordance with the terms set forth below
under "Certain Conditions of the Offer" without any Shares having been purchased
pursuant to the Offer; (F) a tender offer or exchange offer for 15% or more of
the Shares is commenced, and the Company Board, within 10 business days after
such tender offer or exchange offer is commenced, either fails to recommend
against acceptance of such tender offer or exchange offer by its shareholders or
takes no position with respect to the acceptance of such tender offer or
exchange offer by its shareholders.
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FEES AND EXPENSES. In the event that the Merger Agreement is terminated
pursuant to the following paragraphs of "Termination" as described above:
- (3)(D), (4)(C) or (4)(D);
- (4)(A) or (4)(B) (unless the breach or inaccuracy causing termination
pursuant to either such paragraph was in all respects outside the
direction or control of the Company and within twelve (12) months
thereafter the Company enters into an agreement with respect to a Third
Party Acquisition or a Third Party Acquisition occurs involving any party
(or any affiliate thereof) (x) with whom the Company (or its agents) had
negotiations with a view to a Third Party Acquisition, (y) to whom the
Company (or its agents) furnished information with a view to a Third Party
Acquisition or (z) who had submitted a proposal or expressed an interest
in a Third Party Acquisition, in the case of each of clauses (x), (y) and
(z), after the date hereof and prior to such termination;
- (4)(D) and the Company Board has withdrawn or materially weakened its
recommendation following the receipt of an offer by a Third Party to
consummate a Third Party Acquisition involving the payment of
consideration to shareholders of the Company with a value in excess of
$1.78 per Share; then
the Company shall pay to Parent the amount of One Million Two Hundred Thousand
Dollars ($1,200,000) immediately upon the occurrence of the event described
herein. Except as specifically provided herein and except for a termination by
Parent or the Purchaser pursuant to paragraph (4)(B) above in an amount which,
taken together with any other amounts payable under Section 4 of the Merger
Agreement, will not exceed $1,200,000, the Company, Parent and the Purchaser
have agreed to bear their own expenses in connection with the Merger Agreement
and the transactions contemplated thereby.
AMENDMENT. Subject to applicable law, the Merger Agreement may be amended
by action taken by the Company, Parent and the Purchaser at any time before or
after approval of the Merger by the shareholders of the Company (if required by
applicable law) but, after any such approval, no amendment will be made which
requires the approval of such shareholders under applicable law without such
approval. The Merger Agreement may not be amended except by an instrument in
writing signed on behalf of the parties thereto.
EXTENSION; WAIVER. At any time prior to the Effective Time, any party to
the Merger Agreement may (1) extend the time for the performance of any of the
obligations or other acts of the other party, (2) waive any inaccuracies in the
representations and warranties of the other party contained therein or in any
document, certificate or writing delivered pursuant thereto, or (3) waive
compliance by the other party with any of the agreements or conditions contained
in the Merger Agreement. Any agreement on the part of any party thereto to any
such extension or waiver will be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of either party thereto to
assert any of its rights hereunder will not constitute a waiver of such rights.
CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provisions of
the Offer, and in addition to (and not in limitation of) the Purchaser's rights
to extend and amend the Offer (subject to the provisions of the Merger
Agreement), the Purchaser will not be required to accept for payment or, subject
to any applicable rules and regulations of the Commission, including Rule
14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay
for or return tendered Shares promptly after termination or withdrawal of the
Offer), pay for, and may delay the acceptance for payment of or, subject to the
restriction referred to above, the payment for, any tendered Shares, and may
terminate or amend the Offer, subject to the terms of the Merger Agreement, as
to any Shares not then paid for, if, at any time on or after June 4, 1999 and
before the time for payment for any such Shares, any of the following events
exist or shall occur and remain in effect:
(1) there has not been validly tendered and not withdrawn, prior to the
expiration of the Offer, such number of Shares which, together with Shares
already beneficially owned by Parent or any of its wholly-owned subsidiaries,
would constitute at least the Minimum Condition; provided, however, that the
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Minimum Condition must be waived by the Purchaser and the Revised Minimum Number
substituted therefor as contemplated, and to the extent required, by the Merger
Agreement.
(2) Parent, the Purchaser or the Company will be subject to any final order,
decree, or injunction of a court of competent jurisdiction within the United
States that (A) prevents or materially delays the consummation of the Offer or
the Merger, or (B) would impose any material limitation on the ability of Parent
effectively to exercise full rights of ownership of the Company or the assets or
business of the Company; or
(3) there shall have occurred (A) any general suspension of trading in, or
limitation on prices for, securities on the Nasdaq National Market System or New
York Stock Exchange, Inc. for a period in excess of twenty-four (24) hours
(excluding suspensions or limitations resulting solely from physical damage or
interference with such exchanges not related to market conditions), (B) a
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States (whether or not mandatory), (C) a commencement of a
war, armed hostilities or other international or national calamity, directly or
indirectly involving the United States, except for the current level of
hostilities in Kosovo, Bosnia, Serbia or Iraq, or (D) in the case of any of the
foregoing existing at the time of the commencement of the Offer, including the
current hostilities in Kosovo, Bosnia, Serbia or Iraq, a material acceleration
or worsening thereof; or
(4) any representation and warranty of the Company contained in the Merger
Agreement, without regard to any qualification or reference to immateriality or
Material Adverse Effect on Company (as defined in the Merger Agreement) is not
true and correct as of June 4, 1999 or will not be true and correct as of the
expiration of the Offer, except for any inaccuracies that, individually or in
the aggregate, have not had, and would not have, a Material Adverse Effect on
the Company; or
(5) there has been a material breach by the Company of any of its
agreements, covenants or obligations under this Agreement, and the breach is not
curable or, if curable, is not cured by the Company within twenty (20) calendar
days after receipt by the Company of written notice from Parent of such breach;
or
(6) the Merger Agreement has been terminated in accordance with its terms;
or
(7) (A) a tender offer or exchange offer for fifteen percent (15%) or more
of the outstanding Shares is commenced, and the Company Board, within ten (10)
business days after such tender offer or exchange offer is so commenced, either
fails to recommend against acceptance of such tender offer or exchange offer by
its shareholders or takes no position with respect to the acceptance of such
tender offer or exchange offer by its shareholders; or (B) any person or group
shall have entered into a definitive agreement or agreement in principle with
the Company with respect to a Third Party Acquisition; or
(8) (A) the Company Board has withdrawn, changed or modified (including by
amendment of the Schedule 14D-9) in a manner adverse to Parent or the Purchaser
its approval or recommendation of the Offer, the Merger Agreement or the Merger
or has recommended a proposal with respect to a Third Party Acquisition, or has
adopted any resolution to effect any of the foregoing, or (B) the Company Board
has recommended any proposal other than this Agreement; or
(9) the Company has not obtained all permits, authorizations, consents, and
approvals required on its part to perform its obligations under, and consummate
the transactions contemplated by, the Merger Agreement, in form and substance
reasonably satisfactory to Parent, or Parent and the Purchaser have not received
evidence reasonably satisfactory to them of the receipt of such permits,
authorizations, consents, and approvals, except for such permits,
authorizations, consents or approvals that, individually or in the aggregate,
have not had, and would not have, a Material Adverse Effect on the Company; or
(10) certain employees of the Company shall not have entered into employment
agreements reasonably satisfactory to Parent on substantially the terms
previously agreed upon by Parent and the Company;
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which in the reasonable judgment of Parent or the Purchaser, in any such case,
and regardless of the circumstances makes it inadvisable to proceed with the
Offer or with such acceptance for payment or payments.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser and may be waived by Parent or the Purchaser, in whole or in part at
any time and from time to time in the sole discretion of Parent or the
Purchaser. The failure by Parent or the Purchaser at any time to exercise any of
the foregoing rights will not be deemed a waiver of any such right and each such
right will be deemed an ongoing right which may be asserted at any time and from
time to time.
INDEMNIFICATION AGREEMENT
The Purchaser, Parent and the Company have entered into an Indemnification
Agreement, dated as of June 4, 1999 (the "Indemnification Agreement"), which
provides for the reimbursement of certain costs incurred by the Company in
converting and transferring the Cash Balances. In the event that the Purchaser
and Parent terminate the Merger Agreement and abandon the Offer for reasons
other than because of (1) the Company's breach of any representation or warranty
in the Merger Agreement, (2) the Company's breach of the Merger Agreement having
a material adverse effect on the Company, (3) the Company Board recommended to
its shareholders a Superior Proposal, (4) a tender offer or exchange offer for
15% or more of the Shares is commenced or (5) withdrawal or weakening of its
recommendation of the Offer, the Purchaser and Parent have agreed to indemnify
and reimburse the Company for bank charges, prepayment penalties and opportunity
costs incurred in transferring the Cash Balances.
STOCK OPTION AGREEMENT
In connection with the Merger Agreement, the Purchaser, Parent and the
Company entered into a Stock Option Agreement, dated as of June 4, 1999 (the
"Stock Option Agreement"), in which the Company granted the Purchaser an
irrevocable option to purchase (the "Option") a number of Shares, at a price of
$1.78 per Share, which, together with the Shares beneficially owned by the
Purchaser or Parent, would result in the Purchaser or Parent together
beneficially owning one hundred (100) Shares more than ninety percent (90%) of
the outstanding Shares following exercise of the Option. The Option expires
unless it is exercised before the earlier of (1) the Effective Time, (2)
termination of the Merger Agreement or termination or expiration of the Offer
without the purchase of Shares in the Offer for any reason, or (3) the date on
which the Purchaser waives the Minimum Condition and accepts for payment the
Revised Minimum Number of Shares.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendations with respect to the Offer.
Recommendation of the Company Board.
At a meeting held on May 29, 1999, the Company Board, by unanimous vote of
all directors (except Dr. Polan who is also a director of Parent and,
accordingly, abstained from voting on all matters relating to the Offer and the
Merger), (a) determined that each of the Offer, the Merger, the Stock Option
Agreement, the Indemnification Agreement and the Merger Agreement is fair to and
in the best interests of the Shareholders of the Company, (b) approved the Offer
and the Merger, (c) approved and adopted the Merger Agreement, the Stock Option
Agreement and the Indemnification Agreement, the execution of such agreements
and the transactions contemplated by such agreements and (d) recommended that
such shareholders accept the Offer and tender their Shares pursuant thereto.
THEREFORE, THE METRA BIOSYSTEMS BOARD RECOMMENDS THAT THE PUBLIC
SHAREHOLDERS TENDER ALL THEIR SHARES PURSUANT TO THE OFFER.
A copy of a letter to all shareholders of the Company communicating the
recommendations of the members of the Company Board is filed as Exhibit 5 hereto
and is incorporated by reference in its entirety.
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(b) Background; Reasons for the Recommendation of the Board; Opinion of EGS
Securities Corp. ("EGS Securities").
(1) BACKGROUND.
In September 1997, senior management of the Company recommended to the
Company Board that the Company evaluate its strategic alternatives by
considering mergers and acquisitions as a means to enhance shareholder value,
either through improving the Company's financial performance and growth
potential with acquisitions that would expand the Company's product line beyond
the osteoporosis sector, or by identifying attractive partners with whom the
Company could merge or be acquired.
In October 1997, the Company engaged EGS Securities, an investment banking
firm focused on the healthcare and medical technology sectors, as its financial
advisor to identify and approach potential candidates for mergers and
acquisitions and to assist in structuring and negotiating any transactions.
Beginning in November 1997, EGS Securities and the Company contacted over 65
potential partners and several investment banking firms with expertise in the
medical technology sector, to explore the partnering alternatives available to
the Company, including acquisitions, mergers and the sale of the Company. From
the engagement of EGS Securities until June 1998, EGS Securities and the Company
held meetings with over 15 companies, which had indicated an interest in
partnering with the Company and held preliminary negotiations with several
companies. The Company Board fully considered these potential transactions, but
none resulted in a transaction that met the goals and objectives of both
parties.
In November 1997, Mr. George Dunbar, President and Chief Executive Officer
of the Company, initiated discussions about combining the two companies with Mr.
Steven Frankel, then-President and Chief Executive Officer of Parent, which were
inconclusive. Mr. Frankel resigned as President and Chief Executive Officer of
Parent on March 2, 1998.
On March 11, 1998, Mr. Dunbar contacted Mr. Thomas Glaze, a board member of
Parent, to discuss a transaction between Parent and the Company and asked Mr.
Glaze to help facilitate a meeting with Mr. Andre de Bruin, then-Vice Chairman
of Parent. A meeting was scheduled for April 1998.
On April 17, 1998, Mr. Dunbar, Mr. James McLaren and Ms. Jennifer Lloyd of
EGS Securities, Mr. de Bruin, Mr. Steven Burke, then-Chief Financial Officer of
Parent and representatives of J.P. Morgan, Parent's former financial advisor,
met in Denver to discuss a potential transaction. The companies agreed to pursue
discussions. Following this meeting, EGS Securities and J.P. Morgan worked on an
integrated merger model and discussed certain terms for a transaction. Given
that Parent was in a period of transition (without a Chief Executive Officer)
and the Company was simultaneously negotiating another transaction, no agreement
was reached, and discussions ceased with a mutual understanding that talks could
resume if circumstances changed.
In June 1998, the Company Board made a firm offer to acquire a privately
held company in the medical diagnostics industry. EGS Securities and the Company
negotiated extensively with such company until July 1998, at which time that
company determined to accept an all-cash offer that was higher in value than the
Company's proposal and exceeded the Company's cash resources available for
acquisitions.
In July 1998, Mr. Dunbar made an employment offer to Ms. Lloyd, then a Vice
President in the investment banking group at EGS Securities, to join the Company
as Vice President of Corporate Development. Mr. Dunbar had determined that Ms.
Lloyd's direct employment at the Company for a limited time period would help
facilitate the Company's evaluation of strategic alternatives. Ms. Lloyd joined
the Company on September 1, 1998.
In September 1998, EGS Securities and the Company approached approximately
20 companies, including several companies that had not been contacted
previously, to explore further strategic discussions. At this time, the Company
initiated discussions with Spectral Diagnostics Inc., having met senior
management of Spectral at the American Association of Clinical Chemistry
conference in Chicago in
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August 1998 and having mutually explored a collaboration to acquire platform
technologies for quantitative point-of-care testing. Spectral Diagnostics
retained First Marathon Securities in Toronto as its financial advisor.
Spectral, the Company and their respective legal and financial advisors
negotiated the terms of the transaction, and on December 16, 1998, the Company
and Spectral announced an agreement to effect a merger of equals, which valued
the Company's shares at a premium to the then-current and recent historical
stock price but at a discount to the Company's cash value per share. It became
apparent that the transaction lacked sufficient support to secure shareholder
approval, and on January 26, 1998, the Company and Spectral terminated the
agreement by mutual consent and announced publicly that the Company Board would
evaluate broad strategic alternatives to maximize shareholder value, including
combinations with other companies.
On January 29, 1999, Ms. Lloyd contacted Mr. Charles Cashion, who had
recently joined Parent as Senior Vice President, Corporate Operations, and Chief
Financial Officer, to solicit Parent's interest in resuming discussions with the
Company. Mr. Cashion discussed the opportunity with Mr. de Bruin and called Ms.
Lloyd to confirm that Parent would be interested in discussing a transaction
with the Company. Mr. Dunbar called Mr. de Bruin to discuss the opportunity, and
Mr. de Bruin sent Mr. Dunbar a letter indicated Parent's interest in pursuing
discussions. Ms. Lloyd sent Parent an information memorandum on the Company and
arranged a meeting between the two companies for February 12, 1999.
On February 3, 1999, the Company Board authorized a formal process for
maximizing shareholder value through the sale of the Company. EGS Securities and
the Company contacted or reinitiated discussions with 36 companies and eight
investment banking firms, and distributed information memoranda to 20 companies
who indicated an interest in pursuing discussions. Six companies met with the
Company over the next few weeks, resulting in five proposals for transactions.
During the week of February 12th, Parent engaged Bay City Capital LLC as its
financial advisor. John D. Diekman, Ph.D. is a Board member of Parent and a
managing director of Bay City Capital LLC (accordingly Dr. Diekman abstained
from voting on all matters relating to the Offer and the Merger). On February
12, 1999, Mr. de Bruin, Mr. Cashion, Ms. Donna McGill, Vice President of
Strategic Business Management and Women's Health for Parent, Dr. Diekman and Mr.
Kirby Bartlett of Bay City Capital LLC, Mr. McLaren of EGS Securities and the
Company's senior management met to discuss a potential acquisition of the
Company by Parent. At the conclusion of the meeting, Parent informed the Company
that they were interested in pursuing discussions and would consider various
transaction structures in preparing a proposal over the next week. The parties
continued their discussions by telephone over the next several days regarding
strategic fit, synergies, valuation and structure for a transaction.
On February 25, 1999, Parent sent the Company a letter outlining a proposed
merger transaction and a valuation methodology, but not an absolute valuation,
with the majority of the consideration to be paid in cash and part of the
consideration to be paid in Parent stock. The Company, Parent and their
respective advisors negotiated the terms of the proposal over the next eight
days.
On March 4, 1999, the Company Board met to consider the revised proposal and
the four other proposals available to the Company. Three of the other proposals
were all-stock proposals from Nasdaq-listed companies with relatively low
liquidity. The other proposal was from a foreign company whose shares were
relatively illiquid and not listed in the United States, and included an option
for shareholders to be paid up to 32% of the consideration in cash. Although
this last transaction was attractive from an operations perspective,
specifically with regard to synergies and opportunities for research and
development collaboration, the Company Board determined that the Parent
transaction was the superior financial proposal and elected to pursue the Parent
transaction on an exclusive basis and directed EGS Securities and the Company's
management to negotiate certain terms of the agreement.
On March 5, 1999, Mr. Dunbar signed the revised proposal and delivered it to
Mr. de Bruin. On March 8, 1999, the Company announced publicly that it had
signed an agreement with an unnamed party to enter into an initial 30-day period
of exclusivity to negotiate a definitive agreement to sell the Company.
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During the initial 30-day period of exclusivity, representatives from Parent
and its advisors, including Bay City Capital, Ernst & Young, Gibson, Dunn &
Crutcher and Townsend & Townsend & Crew LLP, conducted due diligence at the
Company's headquarters in Mountain View, California and by telephone. During
such period, Parent, the Company and their respective legal and financial
advisors conducted further negotiations of the terms of the transaction.
Specifically, on March 10, 1999, Bay City Capital LLC and EGS Securities met in
Palo Alto, California to discuss the financial terms of the transaction. On
March 18, 1999, members of both working groups met in Mountain View, California
to further the due diligence process.
On March 22, 1999, the Company's management, EGS Securities, and the Company
Board members Ms. Mariann Byerwalter and Dr. Greg Lawless met with Parent's
management and Bay City Capital to conduct due diligence on Parent at Parent's
headquarters in San Diego, California.
From March 22, 1999 through April 7, 1999, the parties continued their
negotiations, and on April 7, 1999, Parent delivered to the Company a second
revised proposal for an all-cash transaction with two potential structures,
either (i) $1.65 per share at closing or (ii) $1.50 per share at closing plus an
additional payment in two years contingent upon several milestones and certain
events.
On April 8, 1999, the initial 30-day period of exclusivity had expired, and
the Company Board met to consider the second revised proposal, concluding that a
subcommittee of the Board, including Mr. Dunbar, Mr. Craig Taylor and Mr. John
Castello, would request a meeting with Mr. de Bruin and Dr. Diekman to negotiate
certain terms of the transaction. This meeting was held in Palo Alto, California
on April 13, 1999. On April 14, 1999, representatives from EGS Securities and
Bay City Capital LLC held a conference call to discuss further issues related to
the financial terms of the transaction. On April 15, 1999, Parent delivered a
third revised proposal to the Company. The third revised proposal consisted of
an all-cash transaction with two potential structures, either (a) $1.75 per
share at closing or (b) $1.72 per share plus up to $0.16 per share in escrow to
be paid after two years contingent upon certain events.
On April 18, 1999, the Company Board met to consider the Company's various
alternatives, and after lengthy discussion, agreed to accept Parent's third
revised proposal, indicating a strong preference that the transaction be
structured as a tender offer. The Company granted Parent an additional
exclusivity period until April 29, 1999, to allow Parent's Board to consider the
transaction for approval at its scheduled meeting on April 27, 1999.
On April 27, 1999, Parent's Board of Directors met to approve in principle
the proposed terms for an acquisition of the Company. At this meeting, Parent's
Board of Directors also established a special committee comprised of Messrs. de
Bruin, Glaze and Mr. Richard C.E. Morgan. The special committee was authorized
to review and approve the Merger Agreement. Dr. Mary Lake Polan, who is also a
director of the Company, abstained from voting in any of the matters relating to
the Offer and the Merger. On May 1, 1999, Parent's legal counsel delivered to
the Company a draft Merger Agreement. From May 1, 1999 through June 4, 1999,
Parent, the Company and their respective advisors negotiated further the terms
of the Merger Agreement.
On May 16, 1999, Parent increased its offer to $1.78 per share, structured
as an all-cash tender offer with no escrow provision.
On May 24, 1999, the Company Board held a special meeting in person and via
teleconference, in which all of the members were present. EGS Securities made a
presentation regarding certain financial analyses it had performed in connection
with its review of the Offer and Merger and indicated that it was prepared to
render an opinion that, subject to certain assumptions and qualifications, the
consideration to be received by the holders of the Company's Common Stock in the
Offer and Merger pursuant to the Merger Agreement was fair to such holders from
a financial point of view. Representatives of Venture Law Group and Orrick,
Herrington & Sutcliffe LLP also gave a presentation regarding the various legal
aspects of the transaction as well as a summary of the principal terms of the
Merger Agreement.
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On May 25, 1999, the special committee of Parent's Board of Directors,
together with Dr. Diekman and Parent's legal advisors, met telephonically to
discuss the transaction. Following discussion among the members of the special
committee, the special committee unanimously approved the transaction.
On May 29, 1999, the Company Board held a special meeting via
teleconference, in which all of the members were present. EGS Securities updated
its presentation regarding certain financial analyses it had performed in
connection with its review of the Offer and Merger, and rendered its oral
opinion, subsequently confirmed in writing, that subject to certain assumptions
and qualifications, the consideration to be received by the holders of the
Company's Common Stock in the Offer and Merger pursuant to the Merger Agreement
was fair to such holders from a financial point of view. Representatives of
Venture Law Group and Orrick, Herrington & Sutcliffe LLP also gave an update on
the various legal aspects of the transaction. At the conclusion of this meeting,
the Company Board unanimously (except for Dr. Polan who is also a director of
Parent and, accordingly, abstained from voting on all matters relating to the
Offer and the Merger), approved the Offer, the Merger, the Merger Agreement, the
Stock Option Agreement and the Indemnification Agreement, determined that the
Offer, the Merger, the Merger Agreement, the Stock Option Agreement and the
Indemnification Agreement are fair to and in the best interests of the
shareholders of the Company, and recommended that the shareholders accept the
Offer and tender their Shares pursuant thereto.
Between May 29, 1999 and June 4, 1999, there were various telephone
conversations among representatives of Parent and the Company and their
respective legal advisors, during which discussions of several remaining issues
relating to the terms of the Merger Agreement were negotiated and resolved.
On June 4, 1999, the Merger Agreement, the Stock Option Agreement and the
Indemnification Agreement were executed and a joint press release was issued by
the two parties prior to the opening of the U.S. stock markets on June 7, 1999.
On June 9, 1999, the Purchaser commenced the Offer.
(2) REASONS FOR THE RECOMMENDATION OF THE COMPANY BOARD.
In reaching its determination described above, the Company Board considered
a number of factors, including, without limitation, the following:
(i) The amount of consideration to be received by the Company's shareholders
in the Offer and the Merger pursuant to the Merger Agreement, as well as
the fact that shareholders would receive a cash payment with no
financing condition;
(ii) The Company's prospects if it were to remain independent, including the
risks inherent in remaining independent, and the prospects of the
Company going forward as an independent company;
(iii) The possible alternatives to the Offer and the Merger (including
liquidation of the Company, proposals made by other potential acquirors
and the possibility of continuing to operate the Company as an
independent entity), the range of possible benefits to the Company's
shareholders of such alternatives and the timing and the likelihood of
accomplishing the goal of any of such alternatives;
(iv) The current status of the medical diagnostics industry (specifically,
the current industry trend toward sector consolidation) and the
potential for the Company's products within a greater diagnostic
infrastructure, and additional product offerings under Parent's new
Women's Health initiative;
(v) The financial condition, historical results of operations and business
and strategic objectives of the Company, as well as the risks involved
in achieving those objectives;
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(vi) Other historical information concerning the Company's business,
prospects, financial performance and condition, operations, technology,
management and competitive position;
(vii) The fact that the cash consideration to be paid in the Offer and as the
consideration in the Merger ($1.78 at closing) represents a premium of
approximately 97.2% over the 30-day average closing sale price for the
Shares on the Nasdaq National Market System of $0.90 as of April 19,
1999 and a premium of approximately 83.7% over the $0.97 closing sale
price for the Shares on the Nasdaq National Market System 30 trading
days prior, to April 19, 1999; a premium of approximately 67.5% over
the $1 1/16 closing sale price for the Shares on the Nasdaq National
Market on May 28, 1999, the last trading day prior to the approval of
the Merger Agreement;
(viii) Current financial market conditions and historical market prices,
volatility and trading information with respect to the Common Stock of
the Company;
(ix) The opinion of EGS Securities Corp., dated May 29, 1999, that as of
such date, the proposed consideration to be received by holders of
Shares in the Offer and Merger pursuant to the Merger Agreement was
fair to such shareholders from a financial point of view. A copy of the
EGS Securities Corp. opinion is attached to this Schedule 14D-9 as
Annex B. Such opinion should be read in its entirety for a description
of the procedures followed, assumptions and qualifications made,
matters considered and limitations of the review undertaken by EGS
Securities. In connection with delivering its opinion, EGS Securities
made presentations to the Company Board at its meetings on May 24 and
29, 1999, as to various financial and other matters underlying such
opinion;
(x) The likelihood that the proposed acquisition would be consummated, in
light of the experience, reputation and financial capabilities of
Parent, in particular the Bank of America Commitment Letter, and that
the proposed acquisition would be consummated more quickly than a
stock-for-stock merger and, on the other hand, the risks to the Company
if the acquisition were not consummated or were not consummated for a
significant period of time, including a potential negative effect on (a)
the Company's sales and operating results, (b) progress of certain
development projects and (c) the Company's stock price; and
(xi) The terms of the Merger Agreement, including the parties'
representations, warranties and covenants, and the conditions to their
respective obligations; and the fact that pursuant to the Merger
Agreement, the Company is not prohibited from responding to any
unsolicited Superior Proposal (as defined in the Merger Agreement) to
acquire the Company in the manner provided in the Merger Agreement, and
the Company may terminate the Merger Agreement and accept such Superior
Proposal subject to the Company's compliance with the terms of the
Merger Agreement and the Company's obligation to pay the termination
fee in the amount and in the manner described in the Merger Agreement.
The Company Board did not assign relative weights to the above factors or
determine that any factor was of particular importance. Rather, the Company
Board viewed its position and recommendations as being based on the totality of
the information presented to and considered by it. In addition, it is possible
that different members of the Board assigned different weights to the various
factors described above.
The Company Board recognized that, while the consummation of the Offer gives
the Company's shareholders the opportunity to realize a premium over the price
at which the Shares were traded during the period prior to the public
announcement of the Offer, tendering in the Offer would eliminate the
opportunity for such shareholders to participate in the future growth and
profits of the Company. The Company Board believes that the loss of this
opportunity was fully reflected in the Offer price of $1.78 per Share. The
Company Board recognized that there can be no assurance as to the level of
growth or profits to be attained by Company, if it remained independent, or by
the Surviving Corporation in the future.
17
<PAGE>
It is expected that, if the Shares are not purchased by Parent in accordance
with the terms of the Offer or if the Merger is not consummated, the Company's
current management, under the general direction of the Company Board, will
continue to manage the Company as an ongoing business and may explore other
merger or acquisition opportunities.
THE FULL TEXT OF THE WRITTEN OPINION OF EGS SECURITES IS ATTACHED HERETO AS
ANNEX B. SHAREHOLDERS ARE URGED TO, AND SHOULD, READ SUCH OPINION CAREFULLY AND
IN ITS ENTIRETY. SUCH OPINION IS DIRECTED TO THE COMPANY BOARD IN CONNECTION
WITH THEIR CONSIDERATION OF THE MERGER AGREEMENT AND ADDRESSES ONLY THE FAIRNESS
(FROM A FINANCIAL POINT OF VIEW) OF THE CONSIDERATION TO BE RECEIVED BY HOLDERS
OF SHARES (OTHER THAN PARENT AND ITS AFFILIATES) IN THE OFFER AND THE MERGER
PURSUANT TO THE MERGER AGREEMENT. SUCH OPINION DOES NOT ADDRESS ANY OTHER ASPECT
OF THE OFFER OR THE MERGER AND DOES NOT CONSTITUTE AN OPINION OR A
RECOMMENDATION TO ANY SHAREHOLDER AS TO WHETHER TO TENDER SHARES IN THE OFFER OR
HOW TO VOTE WITH RESPECT TO THE MERGER. IN LIGHT OF THE FACTORS SET FORTH ABOVE,
THE BOARD RESOLVED UNANIMOUSLY TO APPROVE THE OFFER, THE MERGER, THE MERGER
AGREEMENT, THE STOCK OPTION AGREEMENT, AND THE INDEMNIFICATION AGREEMENT, AND
DETERMINED THAT THE TERMS OF THE OFFER, THE MERGER, THE MERGER AGREEMENT, AND
THE STOCK OPTION AGREEMENT, ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE
SHAREHOLDERS OF THE COMPANY AND UNANIMOUSLY RECOMMENDED (EXCEPT FOR DR. POLAN
WHO DID NOT VOTE) THAT SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER
THEIR SHARES TO THE PURCHASER.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
In connection with the Offer and other matters arising in connection
therewith, EGS Securities has been retained as the exclusive financial advisor
to the Company Board. EGS Securities has served as the Company's advisor in
connection with potential corporate partners and acquirors. Affiliates of EGS
Securities own 87,000 shares of the Company's Common Stock.
Pursuant to an engagement letter, dated October 10, 1997 (the "Engagement
Letter"), EGS Securities agreed to render financial advice and assistance to the
Company in connection with a possible merger, sale or other strategic
combination involving the Company (a "Transaction"), including advice and
assistance with respect to defining objectives, performing valuation analysis,
and structuring, planning and negotiating a Transaction.
Pursuant to the Engagement Letter, the Company has agreed to pay EGS
Securities the following fees: (i) a fee of approximately $30,000 upon signing
the Engagement Letter, $30,000 three months thereafter and $20,000 at the
beginning of each subsequent three month period, plus reimbursement of
out-of-pocket expenses; and (ii) upon consummation of a Transaction, a fee of 4%
of the first $5 million of consideration, 3% of the second $5 million of
consideration, 2% of the third $5 million of consideration, 1 1/2% of the fourth
$5 million of consideration and 1% of the next $10 million of consideration
involved in the completed Transaction, depending on the amount of the
consideration received in a Transaction.
In addition, at the Company's request, EGS Securities has rendered an
opinion letter to the Company with respect to the fairness of the consideration
to be received by the holders of the Company's Common Stock in the Offer and the
Merger. The Company has agreed to pay EGS Securities $100,000 for delivery of
the opinion letter.
EGS Securities is an investment banking firm and, as part of its investment
banking activities, is regularly engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private
18
<PAGE>
placements and valuations for corporate and other purposes. The Company selected
EGS Securities as its financial advisor on the basis of its experience and
expertise in transactions similar to the Offer and the Merger, its reputation in
the healthcare and medical technology and investment communities, and its
knowledge of and familiarity with the Company.
Prior to joining the Company in September 1998, Jennifer Lloyd, the
Company's Vice President of Corporate Development, worked with the Company in
her capacity as Vice President of Healthcare Investment Banking at EGS
Securities in New York. Since joining Metra, Ms. Lloyd has worked on a limited
basis for EGS Securities on projects that do not conflict with her
responsibilities at the Company. Since joining the Company, she has not been
employed by EGS Securities in connection with matters related to this
transaction and does not have a change of control agreement with the Company.
Neither the Company nor any person acting on its behalf has employed,
retained or agreed to compensate any other person to make solicitations or
recommendations to the Public Shareholders on behalf of the Company concerning
the Offer and the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) To the best knowledge of the Company, no transactions in Shares have
been effected during the past 60 days by the Company or any of its executive
officers, directors or affiliates. Certain officers of the Company have acquired
beneficial ownership of Shares under the Company's Employee Stock Purchase Plan,
which acquisitions are not material.
(b) The Company has been advised by its executive officers and directors who
own Publicly Held Shares, either directly or beneficially, that they intend to
tender such Shares to Purchaser pursuant to the Offer. The Company has not been
advised by its affiliates who own Publicly Held Shares, either directly or
beneficially, whether they intend to tender such Shares to Purchaser pursuant to
the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as described in Items 3 and 4 above, including as set forth in
the Offer, to the knowledge of the Company no negotiation is being undertaken or
is underway by the Company in response to the Offer which relates to or would
result in (1) any extraordinary transaction, such as a merger or reorganization,
involving the Company or any affiliate or subsidiary of the Company, (2) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company, (3) a tender offer for or other acquisition of
securities by or of the Company, or (4) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as described in Items 3 and 4 above, there are no transactions,
board resolutions, agreements in principle, or signed contracts in response to
the Offer which relate to or would result in one or more of the matters referred
to in clauses (1) through (4) of paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Other. In addition, reference is hereby made to the Offer to Purchase
(including without limitation Item 15 thereof) and the related Letter of
Transmittal, which are attached as Exhibits 1 and 2 hereto, respectively, and
are incorporated by reference herein in their entirety.
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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<S> <C>
Exhibit 1 Form of Offer to Purchase, dated June 9, 1999 (incorporated by reference to
Exhibit (a)(1) to Parent and the Purchaser's Tender Offer Statement on Schedule
14D-1 dated June 9, 1999 (the "Schedule 14D-1")).
Exhibit 2 Form of Letter of Transmittal (incorporated by reference to Exhibit (a)(2) to
the Schedule 14D-1).
Exhibit 3 Agreement and Plan of Merger, dated as of June 4, 1999, among Metra Biosystems,
Inc., MBS Acquisition Corporation and Quidel (incorporated by reference to
Exhibit (c)(1) to the Schedule 14D-1).
Exhibit 4 Stock Option Agreement, dated as of June 4, 1999, among Metra Biosystems, Inc.,
MBS Acquisition Corporation and Quidel (incorporated by reference to Exhibit
(c)(2) to the Schedule 14D-1).
Exhibit 5 Letter to Shareholders of Metra Biosystems, Inc. dated June 9, 1999.*
Exhibit 6 Indemnification Agreement between Quidel, MBS Acquisition Corporation and Metra
Biosystems, Inc. dated as of June 4, 1999 (incorporated by reference to Exhibit
(c)(3) to the Schedule 14D-1).
Exhibit 7 Press Release issued June 7, 1999 (incorporated by reference to Exhibit (a)(7)
to the Schedule 14D-1).
Exhibit 8 Form of Change of Control Agreement.(A)
Exhibit 9 Preferred Shares Rights Agreement, dated as of August 21, 1996, between Metra
Biosystems, Inc. and The First National Bank of Boston, including the
Certificate of Determination of Rights, Preferences and Privileges of Series A
Participating Preferred Stock, the form of Rights Certificate and the Summary
of Rights attached thereto as Exhibits A, B and C, respectively.(B)
Exhibit 10 Amendment No. 1 to Preferred Shares Rights Agreement, dated as of January 17,
1997, between Metra Biosystems, Inc. and The First National Bank of Boston.(C)
Exhibit 11 Amendment No. 2 to Preferred Shares Rights Agreement, dated as of November 3,
1998, between Metra Biosystems, Inc. and American Stock Transfer & Trust
Company.(D)
Exhibit 12 Amendment No. 3 to Preferred Shares Rights Agreement, dated as of June 4, 1999,
between Metra Biosystems, Inc. and American Stock Transfer & Trust Company.(E)
ANNEX A INFORMATION STATEMENT
ANNEX B OPINION OF EGS SECURITIES CORP.
</TABLE>
- ------------------------
* Included with Schedule 14D-9 mailed to shareholders.
(A) Incorporated by reference to an exhibit to the Company's Annual Report on
Form 10-K filed on September 27, 1997.
(B) Incorporated by reference to an exhibit to the Company's Registration
Statement on Form 8-A filed on August 22, 1996.
(C) Incorporated by reference to an exhibit to the Company's Registration
Statement on Form 8-A/A filed on January 27, 1997.
(D) Incorporated by reference to an exhibit to the Company's Registration
Statement on Form 8-A/A filed on November 16, 1998.
(E) Incorporated by reference to an exhibit to the Company's Registration
Statement on Form 8-A/A filed on June 7, 1999.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
Date: June 9, 1999
<TABLE>
<S> <C> <C>
METRA BIOSYSTEMS, INC.
By: /s/ GEORGE W. DUNBAR, JR.
-----------------------------------------
George W. Dunbar, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
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<PAGE>
ANNEX A
METRA BIOSYSTEMS, INC.
265 NORTH WHISMAN ROAD, MOUNTAIN VIEW, CALIFORNIA 94043
INFORMATION STATEMENT PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14f-1 THEREUNDER
GENERAL
This Information Statement (the "Statement") is being mailed on or about
June 9, 1999 as part of the Solicitation/Recommendation Statement on Schedule
14D-9 (the "Schedule 14D-9") of Metra Biosystems, Inc., a California corporation
(the "Company"), with respect to the tender offer by MBS Acquisition Corporation
(the "Purchaser"), a Delaware corporation, and a wholly-owned subsidiary of
Quidel, a corporation organized and existing under the laws of Delaware
("Parent"), for shares of the Company's Common Stock, par value $0.001 including
the associated Preferred Shares Purchase Rights ("Shares") per share.
Capitalized terms used and not otherwise defined herein shall have the meaning
set forth in the Schedule 14D-9. This Statement is furnished in connection with
the possible election of persons designated by Parent to a majority of the seats
on the Company's Board of Directors (the "Company Board"). The Agreement and
Plan of Merger by and among the Company, Parent and the Purchaser, dated as of
June 4, 1999 (as the same may be amended from time to time, the "Merger
Agreement"), provides that promptly upon the acceptance for payment by the
Purchaser or any other subsidiary of Parent of Shares purchased pursuant to the
Offer, and from time to time thereafter as Shares are acquired by Parent or any
of its subsidiaries, Parent will be entitled to designate such number of
directors ("Parent Designees"), rounded up to the next whole number, on the
Company Board as will give Parent representation on the Company Board equal to
that number of directors which equals the product of the total number of
directors on the Company Board (giving effect to the directors appointed or
elected pursuant to this sentence and including current directors serving as
officers of the Company) multiplied by the ratio of the aggregate number of
Shares beneficially owned by the Purchaser, Parent or any of their affiliates
(including Shares accepted for payment pursuant to the Offer, but excluding
Shares held by the Company or any of its affiliates, which would not include
Parent, the Purchaser or their affiliates) to the number of Shares outstanding.
However, if the Purchaser has acquired the Revised Minimum Number of Shares in
the Offer, such number of directors will be rounded up to the greatest whole
number plus one to give the Purchaser at least a majority of the members of the
Company Board. Furthermore, in the event that Purchaser's designees are
appointed or elected to the Company Board, until the Effective Time the Company
Board will have at least one director who is a director on the date of the
Merger Agreement and who is not an executive officer of the Company (the
"Independent Director"). At such times, the Company will also cause (i) each
committee of the Company Board, (ii) if requested by Parent, the board of
directors of each of the Company's subsidiaries and (iii) if requested by
Parent, each committee of such subsidiaries' boards of directors to include
persons designated by Parent constituting the same percentage of each such
committee or board of directors as Parent's Designees are of the Company Board.
The Company will, upon request by Parent, promptly increase the size of the
Company Board or exercise its best efforts to secure the resignations of such
number of directors, or both, as is necessary to enable Parent's designees to be
elected or appointed to the Company Board and will cause Parent's designees to
be so elected or appointed.
Following the election or appointment of Parent's designees and prior to the
Effective Time, the approval of a majority of the Independent Directors will be
required to authorize (i) any amendment that would be adverse to the holders of
Shares, (ii) any termination of the Merger Agreement by the Company, (iii) any
consent by the Company to any extension of the time for performance of any of
the obligations or other acts of Parent or the Purchaser, (iv) any waiver by the
Company of compliance with any of the covenants or conditions contained in the
Merger Agreement for the benefit of the Company or any other
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rights of the Company under the Merger Agreement, or (v) the exercise of any of
the Company's rights, remedies or benefits under the Merger Agreement.
This Statement is required by Section 14(f) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and Rule 14f-1 promulgated thereunder.
You are urged to read this Statement carefully. You are not, however, required
to take any action. The Offer commenced on June 9, 1999 and is scheduled to
expire at 5:00 pm, New York City time, on July 8, 1999, unless extended. The
information contained in this Information Statement concerning Parent and the
Purchaser has been furnished to the Company by Parent, and the Company assumes
no responsibility for the accuracy, completeness or fairness of any such
information. At the close of business on June 4, 1999, there were 12,696,935
Shares issued and outstanding, which is the only class of securities outstanding
having the right to vote for the election of the Company's directors, each of
which entitles its record holder to one vote.
DESIGNEES TO THE COMPANY'S BOARD OF DIRECTORS
Parent has informed the Company that it currently intends to choose the
Parent Designees it has the right to designate to the Company Board pursuant to
the Merger Agreement from the officers and employees of Parent and the Purchaser
listed below.
The Company's By-Laws currently provide for not less than five nor more than
nine directors and currently authorize eight directors.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AGE MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
Andre de Bruin............................ 51 President and Chief Executive Officer of Parent (1998 to
present); and President and Chief Executive Officer of
Somatogen, Inc. (1994 to 1998). Mr. de Bruin serves on the
Board of Directors of Diametrics Medical, Inc., a public
company that manufactures and markets proprietary critical care
blood and tissue analysis systems.
Richard C. E. Morgan...................... 53 Managing Partner of Amphion Capital Management LLC, the
successor to Wolfensohn Partners, L.P. (1986 to present). Mr.
Morgan is currently Chairman and director of AXCESS Inc., a
publicly traded, digital security systems company, and a
director of: Celgene Corporation, a publicly traded
biotechnology company; SEQUUS Pharmaceuticals, Inc., a publicly
traded biotechnology company; ChromaVision Medical Systems,
Inc., a publicly traded medical diagnostics company; and Indigo
N.V., a publicly traded digital printing systems company.
Thomas A. Glaze........................... 51 Chief Executive Officer of Metabolex, Inc. (1991 to present).
John D. Diekeman, Ph.D.................... 55 Chairman of Affymetrix Inc. (1993 to present); and Managing
Director of Bay City Capital LLC (1998 to present).
Faye Wattleton............................ 54 President of Center for Gender Equality; and President of The
Planned Parenthood Foundation of America. She presently serves
on the Boards of Directors of Estee Lauder Companies, Empire
Blue Cross and Blue Shield, Biotechnology General, and The
Henry Kaiser Family Foundation.
</TABLE>
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<PAGE>
Parent has advised the Company that each of the individuals listed above has
consented to act as a director, if so designated. Parent has also advised the
Company that, to the best knowledge of Parent or Purchaser, none of such
individuals (i) currently is a director of, or holds, any position with, the
Company, (ii) beneficially owns any equity securities, or rights to acquire any
equity securities, of the Company or (iii) has been involved in any transactions
with the Company or any of its directors, executive officers, affiliates or
associates which are required to be disclosed pursuant to the rules and
regulations of the Securities and Exchange Commission.
It is expected that the Parent Designees may assume office at any time
following the purchase by Parent or Purchaser, as applicable, of the specified
minimum number of shares of Common Stock pursuant to the Offer, which purchases
cannot be earlier than July 8, 1999.
CURRENT DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- --------------------------------------------- --- --------------------------------------------- ---------------
<S> <C> <C> <C>
George W. Dunbar, Jr......................... 51 President, Chief Executive Officer, Chief
Financial Officer and Director 1991
Claude D. Arnaud, M.D........................ 68 Director 1990
Mariann Byerwalter........................... 38 Director 1998
John L. Castello............................. 62 Director 1993
Gregory B. Lawless, Ph.D..................... 58 Director 1998
Mary Lake Polan, M.D., Ph.D.................. 54 Director 1992
Craig C. Taylor.............................. 48 Director 1991
Gerald J. Allen, Ph.D........................ 48 Vice President, Research and Development
John F. Coombes.............................. 54 Vice President, Sales & Marketing
Debby R. Dean................................ 42 Vice President, Human Resources and
Administration
S. Jennifer Lloyd............................ 27 Vice President, Corporate Development
</TABLE>
The officers of the Company are appointed by the Board of Directors and
serve at the discretion of the Board. There are no family relationships among
any of the directors or executive officers of the Company.
Mr. Dunbar joined the Company as President, Chief Executive Officer and
Director in July 1991. Prior to joining the Company, he was the Vice President
of Licensing and Business Development of The Ares-Serono Group ("Ares-Serono"),
a Swiss health care company that markets pharmaceutical, diagnostic and
veterinary products worldwide, from 1988 until 1991, where he established a
licensing and acquisition group for its health care divisions. From 1974 until
1987, he held various senior management positions with Amersham International
("Amersham"), a health care and life sciences company, where he most recently
served as Vice President for its Life Sciences business in North America. Mr.
Dunbar also served as Amersham's General Manager of Pacific Rim markets and
Eastern Regional operations and, prior to that, he managed the international
marketing of Amersham's medical and industrial radioisotopes. Mr. Dunbar also
serves as a director of Sonus Pharmaceuticals Inc., LJL Biosystems Inc., Valley
Medical Center Foundation, and Metra Biosystems (U.K.) Ltd., the Company's
wholly owned subsidiary. Mr. Dunbar holds a B.S. in electrical engineering and
an M.B.A. from Auburn University, and sits on the Auburn School of Business
M.B.A. Advisory Committee.
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<PAGE>
Dr. Arnaud is a co-founder of the Company, a member of its Scientific
Advisory Board, and joined the Company's Board of Directors in July 1990. Since
1981, Dr. Arnaud has been affiliated with the University of California at San
Francisco ("UCSF") and is currently Professor of Medicine and Physiology,
Director of Programs in Osteoporosis and Bone Biology, and Director of the
Center for Osteoporosis and Metabolic Bone Disease at UCSF. Dr. Arnaud has
served on several editorial advisory boards, including the Journal of Bone and
Mineral Research, Calcified Tissue International, Bone, and Osteoporosis
International. He is a founder and former president of the American Society of
Bone and Mineral Research and is a recipient of that society's William F. Newman
Award for excellence in research and teaching. Dr. Arnaud received his B.A. in
medicine from Columbia College, his M.D. from New York Medical College, and
completed postdoctoral work at the University of Wisconsin.
Ms. Byerwalter joined the Company's Board of Directors in February 1998. She
became Stanford's vice president for business affairs and chief financial
officer in 1996. She was co-founder and partner of America First Financial
Corporation. Ms. Byerwalter was the chief operating officer and chief financial
officer of America First Holdings and from 1993 to 1996, CFO of EurekaBank. Ms.
Byerwalter holds an M.B.A. degree from Harvard University and a bachelor's
degree from Stanford. She was a director of EurekaBank from 1988 until its sale
in 1998. She is a director of America First Companies of Omaha, Nebraska, and of
Stanford Health Services.
Mr. Castello joined the Company's Board of Directors in July 1993. He is the
Chairman, President and Chief Executive Officer of XOMA Corporation ("XOMA"), a
human therapeutics and biotechnology company. Prior to joining XOMA in 1992, Mr.
Castello was with Ares-Serono where he served as President and Chief Operating
Officer from 1988 to 1992. Mr. Castello is also a director of Cholestech
Corporation, a medical diagnostics company, and Alpha Therapeutics. Mr. Castello
holds a B.S. in mechanical and industrial engineering from the University of
Notre Dame.
Dr. Lawless joined the Company's Board of Directors in February 1998. He has
seventeen years' experience as a chief executive in the healthcare industry in
both pharmaceutical and diagnostic businesses in both large and small company
settings. His most recent assignment was President and CEO of Cygnus, a drug
delivery and diagnostics company in Redwood City, CA. Before joining Cygnus,
from 1989 to 1992, he was president and chief operating officer of Chiron
Corporation. Prior to joining Chiron, Dr. Lawless was affiliated with DuPont
Company in various management positions in its healthcare businesses. He holds a
B.S. degree in pharmacy from Fordham University, an M.S. degree in analytical
chemistry from St. John's University (New York), and a Ph.D. in physical
biochemistry from Temple University in Philadelphia.
Dr. Polan has served as a member of the Company's Board of Directors since
August 1992. She is the Chair of the Department of Gynecology and Obstetrics at
Stanford University School of Medicine. Previously, Dr. Polan was an Associate
Professor in the Department of Obstetrics and Gynecology at Yale University. She
has been a member of the Board of Health Sciences Policy of the Institute of
Medicine, a unit of the National Academy of Sciences, since 1992. Dr. Polan is
also a director of Quidel Corporation, a human diagnostics company, Gynecare,
Inc., a medical device company, and American Home Products, a pharmaceutical and
consumer products company. Dr. Polan received her B.A. in chemistry from
Connecticut College and a Ph.D. in biophysics, biochemistry and medicine from
Yale University.
Mr. Taylor joined the Company's Board of Directors in August 1991. He joined
Asset Management Company in 1977 and is a general partner of Asset Management
Associates and as well as associated private venture capital partnerships, one
of which is a shareholder of the Company. Mr. Taylor serves as a director of
Lynx Therapeutics, Inc., and Pharmacyclics, Inc., which are human therapeutics
companies. Mr. Taylor received a B.S. and M.S. in physics from Brown University
and an M.B.A. from Stanford University.
A-4
<PAGE>
Dr. Allen joined the Company as Vice President Research and Development in
June 1997. Dr. Allen has worked in the commercial immunoassay industry since
1975 with various companies including Amersham International, Serono
Diagnostics, and G.D. Searle. From 1991 to 1997, Dr. Allen was Vice President
Diagnostics at R & D Systems, Inc. in Minneapolis. Dr. Allen received his B.S.
and Ph.D. degrees from The University of Bristol.
Mr. Coombes joined the Company in November 1993 as Director, European Sales.
Mr. Coombes was appointed Vice President, Sales and Marketing in June 1997 after
serving as Vice President International since August 1996 and previously as
Director, European Operations and Managing Director of Metra Biosystems (U.K)
from November 1994 to August 1996. Previously, Mr. Coombes held positions in
European sales management at T Cell Diagnostics, a division of T Cell Sciences,
a biotechnology company, Digen Limited, a distributor for Gene Trak Systems, and
Gene Trak Systems, a human diagnostics, food industry and industrial
biotechnology company. Mr. Coombes received an Ordinary National Diploma in
chemistry from Bromsgrove College in Worcestershire, England and Higher National
Diplomas in chemistry and analytical chemistry from Lanchester Polytechnic in
Coventry, England.
Ms. Dean joined the Company as Senior Director of Human Resources and
Administration in September 1995, and was appointed Vice President Human
Resources and Administration in July 1997. From 1992 to 1995, Ms. Dean was Vice
President, Corporate Administration & Communications at DNX Corporation, a
biopharmaceutical company. Prior to DNX, Ms. Dean worked with Serono, as
Director, Human Resources. Ms. Dean received a B.S. in Management from Allentown
College, and an M.B.A. from Lehigh University.
Ms. Lloyd joined the Company as Vice President of Corporate Development in
September 1998. Prior to joining the Company, Ms. Lloyd worked with the Company
in her capacity as Vice President of Healthcare Investment Banking at EGS
Securities Corp. in New York. Since joining the Company, Ms. Lloyd has worked on
a limited basis for EGS Securities on projects that do not conflict with her
responsibilities at the Company but has not been employed by EGS Securities in
connection with matters related to the Company and does not have a change of
control agreement with the Company. Prior to joining EGS Securities, Ms. Lloyd
worked in the Investment Banking Division of Goldman, Sachs & Co., with a focus
on the healthcare industry. Ms. Lloyd received a B.A. from the University of
North Carolina at Chapel Hill.
CORPORATE GOVERNANCE
Meetings and Committees of the Board of Directors
During the period from July 1, 1997 through June 30, 1998 (the "last fiscal
year"), the Board met seven times and no director nominee attended fewer than
75% of the aggregate number of meetings of the Board and meetings of the
committees of the Board on which he or she serves. The Board has an Audit
Committee and a Compensation Committee. The Board does not have a nominating
committee or a committee performing the functions of a nominating committee.
Although there are no formal procedures for shareholders to nominate persons to
serve as directors, the Board will consider nominations from shareholders, which
should be addressed to George Dunbar at the Company's address set forth above.
The Audit Committee, which currently consists of directors Byerwalter,
Polan, and Taylor, held two meetings during the last fiscal year. The Audit
Committee recommends the engagement of the firm of certified public accountants
to audit the financial statements of the Company and monitors the effectiveness
of the audit effort, the Company's financial and accounting organization, and
its system of internal accounting controls.
The Compensation Committee which currently consists of directors Arnaud,
Castello, and Lawless, held five meetings during the last fiscal year. Its
functions are to establish and administer the Company's policies regarding
annual executive salaries, cash incentives, and long-term equity incentives. The
Compensation Committee administers the Company's 1995 Stock Option Plan, 1995
Directors' Stock Option Plan, 1995 Employee Stock Purchase Plan and 1990
Incentive Stock Plan.
A-5
<PAGE>
COMPENSATION OF DIRECTORS
Effective March 3, 1997, non-employee directors receive cash compensation
for meeting attendance as follows: $1,000 for each meeting of the Board of
Directors attended; $500 for attending committee meetings held on days upon
which the full Board of Directors does not meet; and $500 for telephonic
meetings more than one-half hour in duration. Additionally, directors are
reimbursed for out-of-pocket expenses incurred in connection with their
attendance at meetings of the Board. The Company's 1995 Directors' Stock Option
Plan (the "Directors' Plan") provides that each person who becomes a
non-employee director of the Company will be granted a non-statutory stock
option to purchase 10,000 shares of Common Stock on the date on which the
optionee first becomes a non-employee director of the Company. Thereafter, on
the date of each annual meeting of the Company's shareholders at which such
director is elected, each such non-employee director shall be granted an
additional option to purchase 5,000 shares of Common Stock if, on such date, he
or she shall have served on the Company's Board of Directors for at least six
months.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information that has been provided to the
Company with respect to beneficial ownership of shares of the Company's Common
Stock as of May 31, 1999 for (i) each person who is known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock, (ii) the
Company's Chief Executive Officer and the Company's other four most highly paid
executive officers who earned in excess of $100,000 during the fiscal year ended
June 30, 1998 (collectively, the "Named Executive Officers"), (iii) each
director of the Company and (iv) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
SHARES PERCENT OF SHARES
BENEFICIALLY BENEFICIALLY OWNED
NAME OWNED(1) (1)(2)
- --------------------------------------------------------------------------- ----------------- -------------------
<S> <C> <C>
Citigroup Inc. (3)......................................................... 1,659,272 13.07%
State of Wisconsin Investment Board (4).................................... 1,310,000 10.32
Mitchell & Henry, Inc. (5)................................................. 1,166,500 9.19
Weiss, Peck & Greer, L.L.C. (6)............................................ 926,290 7.30
George W. Dunbar, Jr. (7).................................................. 250,628 1.96
John F. Coombes (8)........................................................ 56,760 *
Debby R. Dean (9).......................................................... 34,787
Gerald J. Allen, Ph.D. (10)................................................ 39,061 *
Kurt E. Amundson (11)...................................................... 4,099 *
Ronald T. Steckel (12)..................................................... 21,639 *
Claude D. Arnaud, M.D. (13)................................................ 77,498 *
Mariann Byerwalter (14).................................................... 5,000 *
John L. Castello (15)...................................................... 30,833 *
Gregory B. Lawless, Ph.D (16).............................................. 71,666 *
Mary Lake Polan, M.D., Ph.D. (17).......................................... 46,664 *
Asset Management Associates 1989, LP (18).................................. 581,428 4.73
Craig C. Taylor (18)....................................................... 601,428 4.73
All directors and executive officers as a group (12 persons) (7) to (18)... 1,240,063 9.45%
</TABLE>
- ------------------------
* Less than 1%.
A-6
<PAGE>
(1) The persons named in this table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and except as indicated
in the other footnotes to this table. Unless otherwise indicated, the
address of each person listed is 265 N. Whisman Road, Mountain View, CA
94043.
(2) Calculations of percentage of beneficial ownership assume the exercise by
only the respective named shareholder of all options for the purchase of
Common Stock held by such shareholder which are exercisable within 60 days
of May 31, 1999.
(3) Based on a Schedule 13G filed January 22, 1999. Citigroup Inc. shares with
Salomon Smith Barney Inc., Salomon Brothers Holding Company Inc and Salomon
Smith Barney Holdings Inc. voting and investment power with respect to
certain shares of Common Stock shown as beneficially owned by Citigroup
Inc. The address of Citigroup Inc. is 153 East 53(rd) Street, Legal Dept.
20(th) Floor, New York, NY 10043.
(4) Based on a Schedule 13G filed January 8, 1999. The address of State of
Wisconsin Investment Board is P.O. Box 7842, Madison, WI 53707.
(5) Based on Schedule 13Ds filed January 6, 1999 and December 7, 1998. Includes
264,800 shares owned by Thomas S. Mitchell, 331,000 owned by Thomas
Mitchell & Co. LP, and 108,600 shares owned by Thomas Mitchell Management
Co., Inc. The Company believes these persons are affiliated and has
aggregated such shares as beneficially owned by Mitchell & Henry, Inc. The
address of Mitchell & Henry, Inc. is P.O. Box 31, Lake Placid, NY 12946.
(6) Based on a Schedule 13G filed February 16, 1999. The address of Weiss, Peck
& Greer, L.L.C. is One New York Plaza, New York, NY 10004.
(7) Includes 8,600 shares held by his children and 115,722 shares issuable upon
exercise of options exercisable within 60 days of May 31, 1999.
(8) Includes 50,335 shares issuable upon exercise of options exercisable within
60 days of May 31, 1999.
(9) Includes 23,331 shares issuable upon exercise of options exercisable within
60 days of May 31, 1999.
(10) Includes 39,061 shares issuable upon exercise of options exercisable
within 60 days of May 31, 1999.
(11) Mr. Amundson terminated employment with the Company on May 31, 1998.
(12) Mr. Steckel terminated employment with the Company on June 30, 1998.
(13) Includes 35,832 shares issuable upon exercise of options exercisable
within 60 days of May 31, 1999.
(14) Includes 5,000 shares issuable upon exercise of options exercisable within
60 days of May 31, 1999.
(15) Includes 30,833 shares issuable upon exercise of options exercisable
within 60 days of May 31, 1999.
(16) Includes 71,666 shares issuable upon exercise of options exercisable
within 60 days of May 31, 1999.
(17) Includes 1,665 shares held by her children and 34,999 shares issuable upon
exercise of options exercisable within 60 days of May 31, 1999.
(18) Includes 20,000 shares issuable upon exercise of options exercisable
within 60 days of May 31, 1999 and 581,428 shares held by Asset Management
Associates 1989, LP Because Mr. Taylor is a general partner of AMC
Partners 89, LP, the general partner of Asset Management Associates 1989,
LP, he may be deemed to be a beneficial owner of such shares. Mr. Taylor
disclaims beneficial ownership of such shares except to the extent of his
interest in such shares arising from his interest in AMC Partners 89, LP.
A-7
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors currently consists of
directors Arnaud, Castello, and Lawless. No member of the Compensation Committee
or executive officer of the Company has a relationship that would constitute an
interlocking relationship with executive officers or directors of another
entity.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table shows the compensation received in the fiscal year ended
June 30, 1998 by the Company's Chief Executive Officer and the Named Executive
Officers, and the compensation received by certain of such individuals for the
Company's prior three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------------
<S> <C> <C> <C> <C> <C>
AWARDS
-------------- PAYOUTS
ANNUAL COMPENSATION SECURITIES ----------------
FISCAL --------------------- UNDERLYING ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS/SARS* COMPENSATION(2)
- ------------------------------------------------- ----------- ---------- --------- -------------- ----------------
George W. Dunbar, Jr............................. 1998 $ 236,250 -- 70,000 $ 819
President and Chief Executive 1997 $ 225,000 -- 145,000 $ 735
Officer 1996 $ 200,081 $ 40,000 170,000 $ 1,894
John F. Coombes.................................. 1998 $ 160,220 -- -- $ 15,243
Vice President, Sales and 1997 $ 145,868 -- 89,000 $ 12,828
Marketing 1996 $ 112,212 -- 9,000 $ 14,829
Debby R. Dean.................................... 1998 $ 134,521 -- 12,000 $ 675
Vice President, Human 1997 $ 136,250 -- 32,000 $ 7,432
Resources and Administration 1996 $ 109,375 -- 44,000 $ 18,504
Gerald J. Allen.................................. 1998 $ 155,000 -- -- $ 77,887
Vice President, Immunoassays 1997 $ 12,917 $ 32,917 75,000 $ 41
Ronald T. Steckel (3)............................ 1998 $ 208,097 -- 40,000 $ 819
Senior Vice President 1997 $ 195,000 -- 87,500 $ 735
1996 $ 165,081 $ 10,000 62,500 $ 15,121
Kurt E. Amundson (4)............................. 1998 $ 176,534 -- 30,000 $ 819
Vice President and Chief 1997 $ 171,200 -- 100,000 $ 720
Financial Officer 1996 $ 71,913 $ 20,000 150,000 $ 245
</TABLE>
- ------------------------
* Includes options canceled as a result of repricing as follows: George W.
Dunbar, Jr.: 75,000 options canceled in 1996, 95,000 options canceled in
1997; John F. Coombes: 9,000 options canceled in 1997; Debby R. Dean: 22,000
options canceled in 1996, 22,000 options canceled in 1997; Ronald T.
Steckel: 25,000 options canceled in 1996, 37,500 options canceled in 1997;
Kurt E. Amundson: 75,000 options canceled in 1997.
(1) These bonuses were paid based upon the individual's performance in the prior
fiscal year or as a signing bonus paid upon the commencement of employment.
(2) Amounts reported consist of: (i) forgiveness of amounts due under loans from
the Company to assist in the purchase of homes (Mr. Steckel and Dr. Allen),
(ii) relocation expenses paid for by the Company (Dr. Allen and Ms. Dean),
(iii) premiums paid on life and accidental death and dismemberment insurance
policies for the officer's benefit, and (iv) car allowance (Mr. Coombes
only).
(3) Mr. Steckel terminated employment with the Company in June 1998.
(4) Mr. Amundson terminated employment with the Company in May 1998.
A-8
<PAGE>
Mr. Dunbar has entered into an agreement with the Company dated May 24, 1991
which provides that in the event his employment with the Company is terminated
by the Company without cause, he will be entitled to receive his monthly base
salary and benefits for each month he is unable to find suitable employment
while seeking such employment in good faith, but in no event will such payments
continue for less than three months nor more than twelve months. In December
1998, the Company amended Mr. Dunbar's agreement to provide twelve months
severance and benefits if involuntarily terminated.
Mr. Coombes has entered into an agreement with the Company dated August 2,
1994 which provides that in the event that his employment with the Company is
terminated by him or the Company a notice period of six months, plus one week
for each completed year of service to a maximum of 12 additional weeks notice,
is required. In December 1998, the Company amended Mr. Coombes' agreement to
provide twelve months severance and benefits if involuntarily terminated.
Dr. Allen has entered into an agreement with the Company dated April 15,
1997 which provides that in the event that his employment with the Company is
terminated by the Company without cause, he will be entitled to receive his
monthly base salary and benefits for each month he is unable to find suitable
employment while seeking such employment in good faith, but in no event will
such payments continue for more than six months. In December 1998, the Company
amended Dr. Allen's agreement to provide twelve months severance and benefits if
involuntarily terminated.
Ms. Dean has entered into an agreement with the Company dated July 15, 1997
which provides that in the event that her employment with the Company is
terminated by the Company without cause, she will be entitled to receive her
monthly base salary and benefits for each month she is unable to find suitable
employment while seeking such employment in good faith, but in no event will
such payments continue for more than six months. In December 1998, the Company
amended Ms. Dean's agreement to provide twelve months severance and benefits if
involuntarily terminated.
Messrs. Steckel and Amundson entered into agreements with the Company dated
February 1, 1992 and January 2, 1996, respectively, that in the event that each
of their employment with the Company was terminated by the Company without
cause, they would each be entitled to receive their monthly base salary and
benefits for each month they were unable to find suitable employment while
seeking such employment in good faith, but in no event would such payments have
continued for more than six months. Mr. Steckel terminated his employment with
the Company on June 30, 1998. Mr. Amundson terminated his employment with the
Company on May 31, 1998.
During 1997, the Company entered into Change of Control Agreements with each
of Messrs. Dunbar, Coombes, Steckel, Amundson, Dr. Allen, and Ms. Dean, and (the
"Change of Control Agreements"). The Change of Control Agreements provide that,
in the event of (1) a merger or consolidation that results in more than 50% of
the voting stock of the Company or its successor changing ownership (whether or
not approved by the Board) and in a change in the composition of the Board of
Directors as a result of which fewer than a majority of the incumbent directors
remain directors after the event; (2) the sale of all or substantially all of
the Company's assets; or (3) approval of a plan of complete liquidation of the
Company (a "Change of Control"), all restricted stock and stock options
outstanding on the date of the Change of Control (the "Shares") will immediately
vest to the extent of 50% of the Shares that have not otherwise vested as of the
date of the Change of Control and be freely transferable or exercisable at the
completion of the transaction, whether or not the officer's employment is
terminated by the Company or a successor corporation. If an officer is
involuntarily terminated by the Company following a Change of Control and prior
to the second anniversary of the Change of Control, such officer will receive
(1) salary continuation and continuation of health and life insurance benefits
for a period of 12 months, (2) pro rata payment of such officer's target bonus
for the year, and (3) immediate and complete acceleration of vesting of the
Shares.
A-9
<PAGE>
In January 1999, the Company amended the Change of Control Agreements with
Messrs. Dunbar and Allen to provide also (1) full payment of such officer's
target bonus for the year or forgiveness of the outstanding balance of any real
estate loan made by the Company to such officer, whichever is greater, and (2)
forgiveness of the principal and accrued interest on any loans outstanding that
were executed for the purchase of shares of the Company's Common Stock.
STOCK OPTION GRANTS IN FISCAL YEAR 1998
The following table provides certain information with respect to stock
options granted to the Named Executive Officers in the last fiscal year. In
addition, as required by Securities and Exchange Commission rules, the table
sets forth the hypothetical gains that would exist for the options based on
assumed rates of annual compound stock price appreciation during the option
term.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
INDIVIDUAL GRANTS(1) AT ASSUMED ANNUAL
-------------------------------------------------------- RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS EXERCISE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH)(2) DATE 5%($) 10%($)
- ----------------------------------------------- ------------- --------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
George W. Dunbar, Jr........................... 70,000 22.64 4.75 08/2007 209,107 529,919
John F. Coombes................................ -- -- -- -- -- --
Debby R. Dean.................................. 12,000 3.88 4.75 08/2007 35,847 90,843
Gerald J. Allen................................ -- -- -- -- -- --
Ronald T. Steckel.............................. 40,000 12.94 4.75 08/2007 119,490 302,811
Kurt E. Amundsen............................... 30,000 9.70 4.75 08/2007 89,617 227,108
</TABLE>
- ------------------------
(1) Options vest over four years as follows: Mr. Dunbar: 0% in year 1, 14.3% in
year 2, 14.3% in year 3, 71.4% in year 4; Mr. Steckel: 0% in year 1, 12.5%
in year 2, 12.5% in year 3, 75% in year 4; Mr. Amundson and Ms. Dean: 100%
in year 4.
(2) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately prior
to the expiration of their terms, assuming the specified compounded rates of
appreciation of the market price per share from the date of grant to the end
of the option term. Actual gains, if any, on stock option exercise are
dependent upon a number of factors, including the future performance of the
Common Stock and the timing of option exercises, as well as the optionee's
continued employment through the vesting period. There can be no assurance
that the amounts reflected in this table will be achieved.
A-10
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to stock
options exercised by the Named Executive Officers during the last fiscal year.
In addition, the table sets forth the number of shares covered by stock options
as of June 30, 1998, and the value of "in-the-money" stock options, which
represents the positive spread between the exercise price of a stock option and
the market price of the shares subject to such option on June 30, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END(#) AT FY-END($)(1)
SHARES --------------------- --------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------------------- ------------- ----------- --------------------- --------------------
<S> <C> <C> <C> <C>
George W. Dunbar, Jr............................. -- -- 66,456/148,544 --/--
John F. Coombes.................................. -- -- 33,838/68,105 13,257/--
Debby R. Dean.................................... -- -- 14,666/29,334 --/--
Gerald J. Allen.................................. -- -- 18,750/56,250 --/--
Ronald T. Steckel (2)............................ -- -- 40,013/0 --/--
Kurt E. Amundson (3)............................. -- -- 43,747/0 --/--
</TABLE>
- ------------------------
(1) Based on the $2.00 per share closing price of the Company's Common Stock on
The Nasdaq National Market on June 30, 1998, less the exercise prices.
(2) Mr. Steckel's options ceased vesting upon his termination of employment on
June 30, 1998; the vested options were exercisable until July 30, 1998.
(3) Mr. Amundson's options ceased vesting upon his termination of employment on
May 30, 1998; the vested options were exercisable until July 1, 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 30, 1994, the Company issued and sold an aggregate of 33,333
shares of Common Stock to George W. Dunbar with a purchase price of $1.20 per
share pursuant to a Stock Purchase Agreement under the Company's 1995 Stock
Option Plan. In connection with this purchase, on December 30, 1994, Mr. Dunbar
executed a promissory note in favor of the Company in the amount of $40,000.
This note accrues interest at a rate of 4.28% per annum and was originally due
on the earlier of December 30, 1998 or the date of termination of the Mr.
Dunbar's employment relationship with the Company. In October 1998, the Company
amended the promissory note to be due on or before December 30, 2000. The
estimated balance as of June 30, 1999 is approximately $55,100. The Company
loaned to Mr. Dunbar $290,000 in May 1998 pursuant to a 5.5% Secured Promissory
Note as a short-term personal loan. This loan is due and payable on demand any
time after May 5, 1999 or upon termination of Mr. Dunbar's employment with the
Company for any reason. The loan is forgiven over three years in lieu over three
years in lieu of cash bonuses under the Executive Bonus Plan. The estimated
balance as of June 30, 1999 is approximately $205,500. Under the Change of
Control Agreement, as amended, all Company loans will be forgiven in the event
of a change in control followed by an involuntary termination within two years.
The Company loaned to Gerald J. Allen $90,000 in July 1997 pursuant to a
6.45% Secured Promissory Note as a short-term personal loan. This loan is due
and payable on demand any time after August 1, 2001. The principal on the loan
is reduced monthly over four years. The outstanding balance is due forty-eight
months following termination of Dr. Allen's employment with the Company. The
estimated balance as of June 30, 1999 is approximately $49,800. Under the Change
of Control Agreement, as amended, all Company loans will be forgiven in the
event of a change in control followed by an involuntary termination within two
years.
A-11
<PAGE>
The Company loaned to John F. Coombes $75,000 in August 1996 pursuant to a
6.15% Secured Promissory Note as a short-term personal loan. This loan was paid
in full in September 1998.
The Company has entered into indemnification agreements with its officers
and directors containing provisions which may require the Company, among other
things, to indemnify its officers and directors against certain liabilities that
may arise by reason of their status or service as officers or directors (other
than liabilities arising from willful misconduct of a culpable nature) and to
advance their expenses incurred as a result of any proceeding against them as to
which they could be indemnified.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons who own more than 10% of the Company's Common
Stock (collectively, "Reporting Persons") to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and changes in
ownership of the Company's Common Stock. Reporting Persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) reports they
file. To the Company's knowledge, based solely on its review of the copies of
such reports received or written representations from certain Reporting Persons
that no other reports were required, the Company believes that during its fiscal
year ended June 30, 1998, all Reporting Persons complied with all applicable
filing requirements.
A-12
<PAGE>
ANNEX B
[LETTERHEAD]
May 29, 1999
Board of Directors
Metra Biosystems, Inc.
265 North Whisman Road
Mountain View, CA 94043
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding shares of common stock of Metra
Biosystems, Inc. (the "Company") of the consideration to be received by them
pursuant to the terms and subject to the conditions set forth in the May 28,
1999 draft of the Agreement and Plan of Merger (the "Merger Agreement") among
the Company, Quidel Corporation ("Quidel") and MBS Acquisition Corporation
("Purchaser"), a wholly-owned subsidiary of Quidel. The Merger Agreement
provides, among other things, that (i) Purchaser will commence a cash tender
offer (the "Tender Offer") to purchase each outstanding share of common stock of
the Company for U.S. $1.78 per share net to the seller in cash (the "Merger
Consideration"), and (ii) following the Tender Offer, Purchaser will merge with
and into the Company (the "Merger") and each outstanding share of common stock
of the Company not previously tendered will be converted into the right to
receive the Merger Consideration, all as set forth in the Merger Agreement.
EGS Securities Corp., as a part of its investment banking business, is
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, private placements and valuations for corporate and
other purposes. We are familiar with the Company, having been retained as its
financial advisor since October 1997 to identify and approach potential
candidates for mergers and acquisitions and having advised the Company in
connection with certain of the negotiations leading to the Merger Agreement.
Affiliates of EGS Securities Corp. own 87,000 shares of common stock of the
Company.
For the purpose of rendering this opinion, we have undertaken certain
reviews, analyses and inquiries we have deemed relevant and have, among other
things:
1. reviewed a draft of the Merger Agreement dated May 28, 1999 and certain
related documents;
2. reviewed publicly available information relating to the Company,
including: the Annual Reports to Stockholders and Annual Reports on Form
10-K of the Company for the fiscal years ended June 30, 1997 and June 30,
1998; and certain interim reports to stockholders and Quarterly Reports
on Form 10-Q of the Company for each of the three quarters comprising the
nine-month period ended March 31, 1999;
B-1
<PAGE>
3. discussed with senior management of the Company its historical and
current operations, financial condition and future prospects and reviewed
certain internal financial information, business plans and forecasts
prepared by management of the Company;
4. visited the headquarters of the Company and Quidel;
5. participated in discussions and negotiations among representatives of
the Company and Quidel and their respective legal and financial advisors;
6. reviewed certain financial and market data for the Company and compared
such information with similar information for certain other publicly
traded companies;
7. reviewed certain mergers and acquisitions of businesses which we deemed
comparable;
8. solicited interest from other parties in acquiring the Company or its
assets; and
9. performed such other analyses and investigations and considered such
other factors as we deemed appropriate.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information provided to us, and we have
not assumed any responsibility for the independent verification of such
information. We have further relied upon the assurance of management of the
Company that they are unaware of any facts that would make such information
incomplete or misleading. We have not performed any independent evaluation or
appraisal of the assets of the Company, nor have we been furnished with any such
appraisals. With respect to financial projections, we have been advised by
management of the Company that, and have assumed that, they have been reasonably
prepared on bases reflecting the best currently available estimates and
judgements of management of the future financial performance of the Company. We
have assumed that the Tender Offer and the Merger will be consummated in
accordance with the terms of the Merger Agreement. Our opinion is necessarily
based on the information available to us and economic, market and other
conditions existing on the date of our opinion. We express no view as to, and
our opinion does not address, the relative merits of the Tender Offer and the
Merger as compared to any alternative business strategies that might exist for
the Company.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services, a
significant portion of which is contingent upon the consummation of the Tender
Offer and the Merger. This letter and the opinion contained herein are solely
for the benefit of the Board of Directors of the Company in its consideration of
the proposed Tender Offer and Merger. This letter may not be used for any other
purpose, except that it may be included in its entirety by the Company in any
filing made by the Company with the Securities and Exchange Commission in
respect of this transaction. Any summary of, excerpt from, or reference to this
letter or to EGS Securities Corp. in such filing or elsewhere shall not be made
or used without our prior written consent. We express no recommendation or
opinion as to whether the shareholders of the Company should tender their shares
in the Tender Offer or how the shareholders should vote on any matters relating
to the Merger Agreement or the transactions contemplated thereby.
Based on the foregoing, it is our opinion that, as of the date hereof, the
consideration to be received by the shareholders of Metra Biosystems, Inc.
pursuant to the Merger Agreement is fair to such shareholders from a financial
point of view.
Very truly yours,
/s/ James I. McLaren
EGS Securities Corp.
B-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT NAME
- ------------- ---------------------------------------------------------------------------------------------------
<S> <C>
Exhibit 1 Form of Offer to Purchase, dated June 9, 1999 (incorporated by reference to Exhibit (a)(1) to
Parent and the Purchaser's Tender Offer Statement on Schedule 14D-1 dated June 9, 1999 (the
"Schedule 14D-1")).
Exhibit 2 Form of Letter of Transmittal (incorporated by reference to Exhibit (a)(2) to the Schedule 14D-1).
Exhibit 3 Agreement and Plan of Merger, dated as of June 4, 1999, among Metra Biosystems, Inc., MBS
Acquisition Corporation and Quidel (incorporated by reference to Exhibit (c)(1) to the Schedule
14D-1).
Exhibit 4 Stock Option Agreement, dated as of June 4, 1999, among Metra Biosystems, Inc., MBS Acquisition
Corporation and Quidel (incorporated by reference to Exhibit (c)(2) to the Schedule 14D-1).
Exhibit 5 Letter to Shareholders of Metra Biosystems, Inc. dated June 9, 1999.*
Exhibit 6 Indemnification Agreement between Quidel, MBS Acquisition Corporation and Metra Biosystems, Inc.
dated as of June 4, 1999 (incorporated by reference to Exhibit (c)(3) to the Schedule 14D-1).
Exhibit 7 Press Release issued June 7, 1999 (incorporated by reference to Exhibit (a)(7) to the Schedule
14D-1).
Exhibit 8 Form of Change of Control Agreement.(A)
Exhibit 9 Preferred Shares Rights Agreement, dated as of August 21, 1996, between Metra Biosystems, Inc. and
The First National Bank of Boston, including the Certificate of Determination of Rights,
Preferences and Privileges of Series A Participating Preferred Stock, the form of Rights
Certificate and the Summary of Rights attached thereto as Exhibits A, B and C, respectively.(B)
Exhibit 10 Amendment No. 1 to Preferred Shares Rights Agreement, dated as of January 17, 1997, between Metra
Biosystems, Inc. and The First National Bank of Boston.(C)
Exhibit 11 Amendment No. 2 to Preferred Shares Rights Agreement, dated as of November 3, 1998, between Metra
Biosystems, Inc. and American Stock Transfer & Trust Company.(D)
Exhibit 12 Amendment No. 3 to Preferred Shares Rights Agreement, dated as of June 4, 1999, between Metra
Biosystems, Inc. and American Stock Transfer & Trust Company.(E)
ANNEX A INFORMATION STATEMENT
ANNEX B OPINION OF EGS SECURITIES CORP.
</TABLE>
- ------------------------
* Included with Schedule 14D-9 mailed to shareholders.
(A) Incorporated by reference to an exhibit to the Company's Annual Report on
Form 10-K filed on September 27, 1997.
(B) Incorporated by reference to an exhibit to the Company's Registration
Statement on Form 8-A filed on August 22, 1996.
(C) Incorporated by reference to an exhibit to the Company's Registration
Statement on Form 8-A/A filed on January 27, 1997.
(D) Incorporated by reference to an exhibit to the Company's Registration
Statement on Form 8-A/A filed on November 16, 1998.
(E) Incorporated by reference to an exhibit to the Company's Registration
Statement on Form 8-A/A filed on June 7, 1999.
<PAGE>
[LOGO]
June 9, 1999
To Our Shareholders:
I am pleased to inform you that on June 4, 1999, Metra Biosystems entered
into an Agreement and Plan of Merger with Quidel Corporation and MBS Acquisition
Corporation, a wholly-owned subsidiary of Quidel. Under the Agreement, Quidel
has commenced a cash tender offer to purchase all of the outstanding shares of
Metra's Common Stock for $1.78 per share (including the associated Preferred
Shares Purchase Rights), without interest. The offer will be followed by a
Merger in which any remaining shares of Metra's Common Stock will be converted
into the right to receive $1.78 per share in cash, without interest.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED (EXCEPT FOR DR. POLAN WHO
IS ALSO A DIRECTOR OF QUIDEL AND, ACCORDINGLY, DID NOT VOTE) THE OFFER, THE
MERGER, THE STOCK OPTION AGREEMENT, THE INDEMNIFICATION AGREEMENT AND THE MERGER
AGREEMENT AS DESCRIBED IN THE SCHEDULE 14D-9 ATTACHED HERETO AND DETERMINED THAT
THE OFFER, THE MERGER, THE STOCK OPTION AGREEMENT AND THE MERGER AGREEMENT ARE
FAIR TO AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY AND
RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER
THEIR SHARES TO PURCHASER PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave consideration
to a number of factors, which are described in the attached Schedule 14D-9 that
has been filed today with the Securities and Exchange Commission. These factors
include, among other things, the opinion of EGS Securities Corp., the Company's
financial advisor, that the consideration to be received by the shareholders of
the Company in the Offer and Merger pursuant to the Agreement is fair from a
financial point of view to the shareholders of the Company (other than Quidel
and its affiliates).
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated June 9, 1999, of Quidel, together with
related materials to be used for tendering your shares. These documents set
forth the terms and conditions of the Offer and the Merger and provide
instructions as to how to tender your shares. I urge you to read the enclosed
materials carefully.
Sincerely,
/s/ George W. Dunbar, Jr.
George W. Dunbar, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
