UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
SCHEDULE 14D-9
Solicitation/Recommendation
Statement under Section 14(d)(4)
of the Securities Exchange Act
of 1934
COLEY PHARMACEUTICAL GROUP,
INC.
(Name of Subject
Company)
COLEY PHARMACEUTICAL GROUP,
INC.
(Names of Persons Filing
Statement)
COMMON STOCK, PAR VALUE $0.01
PER SHARE
(Title of Class of
Securities)
19388P 10 6
(CUSIP Number of Class of
Securities)
Robert L. Bratzler, Ph.D.
President and Chief Executive Officer
(Principal Executive Officer)
93 Worcester Street, Suite 101
Wellesley, MA 02481
(781) 431-9000
(Name, address, and telephone number of person authorized to
receive
notices and communications on behalf of the persons filing
statement)
WITH COPIES TO:
William T. Whelan, Esq.
Megan N. Gates, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, MA 02111
(617) 542-6000
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Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
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TABLE OF CONTENTS
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Item 1.
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Subject
Company Information.
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The name of the subject company to which this
solicitation/recommendation statement on
Schedule 14D-9
(this
“Schedule 14D-9”)
relates is Coley Pharmaceutical Group, Inc. (the
“Company” or “Coley”), a Delaware
corporation. The principal executive offices of Coley are
located at 93 Worcester Street, Suite 101, Wellesley,
MA 02481. The telephone number of the principal executive
offices of Coley is
(781) 431-9000.
The title of the class of equity securities to which this
Schedule 14D-9
relates is Coley’s Common Stock, par value $0.01 per share
(“Coley Common Stock”). As of November 23, 2007,
there were 26,741,697 shares of Coley Common Stock issued
and outstanding.
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Item 2.
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Identity
and Background of Filing Person.
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The name, business address and business telephone number of the
Company, which is the person filing this
Schedule 14D-9
and the subject company, are set forth in Item 1(a) above.
This
Schedule 14D-9
relates to the tender offer by Corvette Acquisition Corp.
(“Merger Sub”), a Delaware corporation (the
“Offeror”), an indirect wholly-owned subsidiary of
Pfizer Inc., a Delaware corporation (“Pfizer”), to
purchase all of the outstanding shares of Coley Common Stock
(including the associated preferred stock purchase rights, the
“Shares”) at a purchase price of $8.00 per Share, net
to the selling stockholders in cash, without interest thereon
and less any required withholding taxes (the “Offer
Price”) upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated November 30, 2007
(the “Offer to Purchase”), and in the related Letter
of Transmittal (which, together with the Offer to Purchase,
constitutes the “Offer”). The Offer is described in a
Tender Offer Statement on Schedule TO (as amended or
supplemented from time to time, the
“Schedule TO”), filed by Pfizer and Offeror with
the Securities and Exchange Commission (the “SEC”) on
November 30, 2007. The Offer to Purchase and related Letter
of Transmittal have been filed as Exhibits (a)(2) and (a)(3)
hereto, respectively.
The Offer is being made pursuant to the Agreement and Plan of
Merger, dated as of November 15, 2007, by and among Pfizer,
Offeror and the Company (the “Merger Agreement”). The
Merger Agreement provides that, among other things, subject to
the satisfaction or waiver of certain conditions, following
completion of the Offer, and in accordance with the Delaware
General Corporation Law (the “DGCL”), Offeror will be
merged with and into the Company (the “Merger”).
Following the consummation of the Merger, the Company will
continue as the surviving corporation (the “Surviving
Corporation”) and will be an indirect wholly-owned
subsidiary of Pfizer. At the effective time of the Merger (the
“Effective Time”), each outstanding Share (other than
(1) any Shares owned by Pfizer, Offeror or the Company or
any direct or indirect wholly-owned subsidiary of Pfizer,
Offeror or the Company, including all Shares held by the Company
as treasury stock, or (2) Shares that are held by any
stockholder who is entitled to demand and properly demands
appraisal pursuant to, and who complies in all respects with the
provisions of Section 262 of the DGCL) will be converted
into the right to receive the Offer Price from the Offeror (or
any such higher price per Share as may be paid in the Offer)
(the “Merger Consideration”). The Merger Agreement is
summarized in Section 11 of the Offer to Purchase and has
been filed herewith as Exhibit (e)(1) and is incorporated herein
by reference.
Pfizer has formed Offeror in connection with the Merger
Agreement, the Offer and the Merger. The Schedule TO states
that the principal executive offices of each of Pfizer and
Offeror are located at 235 East
42
nd
Street,
New York, NY 10017.
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Item 3.
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Past
Contacts, Transactions, Negotiations and
Agreements.
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Conflicts
of Interest
Except as set forth in this
Schedule 14D-9,
including in the Information Statement of the Company attached
to this
Schedule 14D-9
as Annex I hereto, which is incorporated by reference
herein (the “Information Statement”) and in the
Company’s Proxy Statement on Schedule 14A filed with
the SEC on April 25, 2007, as incorporated herein by
reference, as of the date of this
Schedule 14D-9,
there are no material agreements, arrangements or understandings
and no actual or potential conflicts of interest between the
Company or its affiliates and (i) its executive officers,
directors or affiliates, or (ii) Pfizer, Offeror or their
respective executive officers, directors or affiliates. The
Information Statement included in Annex I is being
furnished to the Company’s stockholders
2
pursuant to Section 14(f) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), and
Rule 14f-1
promulgated under the Exchange Act, in connection with
Pfizer’s right pursuant to the Merger Agreement to
designate persons to the board of directors of the Company (the
“Company Board” or the “Company’s Board of
Directors”) after the first time at which the Offeror
accepts for payment Shares pursuant to the Offer (the
“Acceptance Time”) satisfying the Minimum Condition
(as defined in Article 1.1(b) of the Merger Agreement).
The following is a discussion of all material agreements,
arrangements, understandings and any actual or potential
conflicts of interest between the Company and its affiliates
that relate to the Offer. Additional material agreements,
arrangements, understandings and actual or potential conflicts
of interest between the Company and its affiliates that are
unrelated to the Offer are discussed in the Information
Statement.
Interests
of Certain Persons
Certain members of management and the board of directors of the
Company (the “Company Board” or the
“Company’s Board of Directors”) may be deemed to
have certain interests in the transactions contemplated by the
Merger Agreement that are different from or in addition to the
interests of the Company’s stockholders generally. The
Company Board was aware of these interests and considered that
such interests may be different from or in addition to the
interests of the Company’s stockholders generally, among
other matters, in approving the Merger Agreement and the
transactions contemplated thereby. As described below,
consummation of the Offer will constitute a change in control of
the Company under employment agreements between the Company and
each of its executive officers and other key employees.
Employment
and Change in Control Agreements
Robert L. Bratzler, Ph.D., Arthur M. Krieg, M.D.,
Ferdinand Massari, M.D., and Charles H. Abdalian, Jr.,
each of whom is an executive officer of the Company (an
“Executive Officer”), previously entered into
executive employment or change in control agreements with the
Company (the “Executive Agreements”). The Executive
Agreements each contain change of control agreements which
provide for benefits to be paid in the event of a change in
control of the Company.
The Company has entered into an amended and restated employment
agreement with Dr. Bratzler. The amended and restated
employment agreement with Dr. Bratzler dated July 8,
2005 originally provided for his employment as the
Company’s President and Chief Executive Officer until
May 31, 2006, and automatically renews for successive
one-year terms thereafter, unless terminated by either party.
The agreement provides for an annual base salary of $345,000,
subject to subsequent adjustment at the discretion of the board
of directors, plus yearly performance-based bonuses to be
granted in an amount in the board of directors’ discretion.
The agreement allows all options to continue to vest during the
severance period for a year after termination and provides for
health care benefit coverage to family members covered under the
Company’s benefit plan for one year after death or
permanent disability. The agreement also provides that in the
event Dr. Bratzler is terminated without cause or
terminates his employment for good reason within 24 months
after a change of control, the Company must pay him severance
benefits, including: (1) an amount equal to one-twelfth of
his then current annual base salary multiplied by 24, payable in
a lump sum within 30 days of termination; (2) an
amount equal to one-twelfth of his target annual incentive bonus
multiplied by 24, payable in a lump sum within 30 days of
termination; and (3) continued health care benefits for
Dr. Bratzler and his dependents until the second
anniversary of his termination date. The Company’s
agreement with Dr. Bratzler with respect to a change of
control allows all options to be accelerated and to become fully
vested and exercisable on the date immediately preceding a
termination within 24 months after a change of control.
Upon a change of control, Dr. Bratzler may make payments
subject to certain excise taxes imposed by Section 4999 of
the Internal Revenue Code. The Company’s change of control
agreement with Dr. Bratzler allows him to be reimbursed for
all such excise taxes as well as any additional income and
excise taxes that become payable by him as a result of the
reimbursements. If Dr. Bratzler is not at least
age 53, but has at least two years of service and the sum
of his age and the service equals 55 as of the date of the
change in control, then Dr. Bratzler would be eligible for
retiree medical benefits.
The Company has also entered into Executive Agreements with
Dr. Krieg (amended on April 1, 2005), with
Mr. Abdalian on April 1, 2005, and with
Dr. Massari on April 27, 2006. These agreements share
the following
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provisions. In the event of the termination of the Executive
Officer’s employment for good reason, or in the event the
Executive Officer is terminated without cause, within two years
after a change of control, the Company must pay the Executive
Officer, within no later than thirty days of termination, an
amount equal to one-twelfth of the Executive Officer’s
annual base salary for two years, plus an amount equal to
one-twelfth of the Executive Officer’s maximum annual
incentive bonus, if any, that would be payable to the Executive
Officer for two years if the termination had not occurred. In
addition, for two years following the Executive Officer’s
termination, the Executive Officer is entitled to participate in
the Company’s medical, dental and life insurance plans. In
the event the Executive Officer is terminated without cause or
the Executive Officer terminates his or her employment for good
reason within twenty-four months after a change of control, the
Company will accelerate the vesting of any stock options or any
shares subject to any right of repurchase by the Company or
restrictions on transfer, held by such executive and will pay
one years’ salary, bonus, and medical and dental benefits.
In the event the Executive Officer is terminated involuntarily
without cause more than 24 months after a change in
control, any shares subject to any right of repurchase by the
Company or restrictions on transfer, held by such Executive
Officer will continue to vest during the severance period for
one year and the Executive Officer will receive one year’s
salary, bonus, and medical and dental benefits. Each of these
agreements permits the Company to enforce its confidentiality
and non-competition agreement with such Executive Officer only
if the Company makes a severance payment pursuant to the terms
of the agreement. Upon a change in control of the Company, the
Executive Officer may make payments subject to certain excise
taxes imposed by Section 4999 of the Internal Revenue Code.
The Company’s change of control agreement allows the
Executive Officer to be reimbursed for all such excise taxes as
well as any additional income and excise taxes that become
payable by him as a result of the reimbursements. If the
Executive Officer is (1) at least 53 years of age or
(2) not at least 53, but has at least two years of service
and the sum of his age and the service equals 55 as of the date
of the change in control, the Executive Officer will be eligible
for retiree medical benefits.
For more detailed descriptions of these Executive Agreements,
see the Section entitled “
Potential Payments upon
Termination or
Change-In-Control
”
of the Company’s Proxy Statement on Schedule 14A,
filed with the SEC on April 25, 2007 which is incorporated
herein by reference. The foregoing descriptions of the Executive
Agreements are qualified in their entirety by reference to the
respective copies of the agreements filed as Exhibits (e)(2),
(e)(3), (e)(4), and (e)(5) hereto, which are incorporated herein
by reference.
Acceleration
of Stock Options
Pursuant to the Merger Agreement and the Company’s 1997
Employee, Director and Consultant Stock Option Plan (the
“1997 Plan”) and the 2005 Stock Plan (the “2005
Plan”), the Company Board voted to cause all outstanding
stock options of the Company (“Company Stock
Options”), whether vested or unvested, that are outstanding
immediately prior to the Effective Time to become fully vested
and (1) each such Company Stock Option with an exercise
price per share that is less than the applicable Merger
Consideration to be cancelled, as of the Effective Time, in
exchange for the right to receive an amount in cash (without
interest and less any applicable taxes required to be withheld
in accordance with the Merger Agreement with respect to such
payment) determined by multiplying (x) the excess, if any,
of the Merger Consideration over the applicable exercise price
per share of such Company Stock Option by (y) the number of
Shares subject to such Company Stock Option and (2) each
such Company Stock Option with an exercise price per share that
is equal to or greater than the applicable Merger Consideration
to be terminated, as of the Effective Time, without any
consideration therefor.
The foregoing summary and the information contained in the Offer
to Purchase regarding Company Stock Options are qualified in
their entirety by reference to the Merger Agreement, a copy of
which has been filed as Exhibit (e)(1) hereto and is
incorporated in this
Schedule 14D-9
by reference. Further details regarding certain beneficial
owners of Shares are described under the heading “Executive
Compensation” in the Information Statement.
4
The table below sets forth the amounts payable upon consummation
of the Merger to the Executive Officers pursuant to the cash-out
of Company Stock Options and Shares and the payment of bonuses.
The table below also sets forth the amounts payable to each
Executive Officer if he is terminated without cause or resigns
for good reason within the requisite time period following a
change of control (with “cause” and “good
reason” defined in each respective Executive Agreement).
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To be Received
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Pursuant to a
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Cash-Out of Company
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Termination of Employment Without
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Stock Options(1)
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Cause for Good Reason as Defined in the
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Previously
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Executive Agreements
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Vested
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Accelerated
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Cash-out of
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Cash
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Other
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Executive Officers
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Options
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Options
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Shares
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Total
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Severance
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Benefits
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Robert L. Bratzler, Ph.D.
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$
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3,336,190
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$
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602,639
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$
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3,674,808
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(2)
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$
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7,613,636
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$
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1,059,800
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$
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600,716
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Arthur M. Krieg, M.D.
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$
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1,627,060
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$
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436,216
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$
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4,490,576
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(3)
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$
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6,553,852
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$
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812,512
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$
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471,762
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Ferdinand Massari, M.D.
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$
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0
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$
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316,550
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$
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0
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$
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316,550
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$
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873,600
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$
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499,690
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Charles H. Abdalian, Jr.
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$
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699,207
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$
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312,051
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$
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0
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$
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1,011,258
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$
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802,547
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$
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430,120
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(1)
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Pursuant to the Merger Agreement, all Company Stock Options
outstanding will, at the time the Merger is consummated, become
fully vested, and each in-the-money Company Stock Option will be
cancelled and exchanged for the right to receive an amount of
cash determined by multiplying (x) the excess, if any, of
the Merger Consideration ($8.00 for the purposes of these
calculations) over the applicable exercise price per share of
such Company Stock Option by (y) the number of Shares
subject to such Company Stock Option. Amounts shown reflect
Company Stock Options vested as of November 23, 2007.
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(2)
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Represents 459,351 shares at a price of $8.00 per share.
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(3)
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Represents 561,322 shares at a price of $8.00 per share.
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The table below sets forth the amounts payable upon consummation
of the Merger to the Company’s non-employee directors
pursuant to the cash-out of such Directors’ Company Stock
Options and Shares.
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Cash-Out of Company Stock Options(1)
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Previously
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Accelerated
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Cash-out of
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Non-Employee Directors
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Vested Options
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Options
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Shares(2)
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Total
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Kenneth M. Bate
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$
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96,592
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$
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52,971
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$
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0
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$
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149,563
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Anthony B. Evnin
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$
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0
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$
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0
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$
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23,582,368
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$
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23,582,368
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Robert J. Hugin
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$
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87,248
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$
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62,314
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$
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0
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$
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149,563
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Manfred E. Karobath
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$
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47,525
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$
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9,343
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$
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0
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$
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56,869
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Patrick Langlois
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$
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87,248
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$
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62,314
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$
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0
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$
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149,563
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James E. Thomas
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$
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0
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$
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0
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$
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20,545,112
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$
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20,545,112
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(1)
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Pursuant to the Merger Agreement, all in-the-money Company Stock
Options will be cancelled and exchanged for the right to receive
an amount of cash determined by multiplying (x) the excess,
if any, of the Merger Consideration ($8.00 for the purposes of
these calculations) over the applicable exercise price per share
of such Company Stock Option by (y) the number of Shares
subject to such Company Stock Option. Amounts shown reflect
Company Stock Options vested as of November 23, 2007.
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(2)
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Represents 2,947,796 Shares and 2,568,139 Shares owned
by entities affiliated with Anthony B. Evnin and James E.
Thomas, respectively, at a price of $8.00 per share.
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Indemnification
of Executive Officers and Directors
Section 145 of the DGCL provides that a corporation may
indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the
corporation, by reason of the
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fact that the person is or was a director, officer, employee or
agent of the corporation or is or was serving at the
corporation’s request as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust
or other enterprise, against expenses, including attorneys’
fees, judgments, fines and amounts paid in settlement actually
and reasonably incurred by the person in connection with the
action, suit or proceeding if the person acted in good faith and
in a manner the person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe the person’s conduct was unlawful. The
power to indemnify applies to actions brought by or in the right
of the corporation as well, but only to the extent of expenses,
including attorneys’ fees but excluding judgments, fines
and amounts paid in settlement, actually and reasonably incurred
by the person in connection with the defense or settlement of
the action or suit if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to
the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that a
court of competent jurisdiction shall determine that such
indemnity is proper.
Article IX of the Company’s amended and restated
Certificate of Incorporation provides that to the fullest extent
permitted by the DGCL, a director of the Company shall not be
personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director.
Article IX states that the Company shall indemnify, and pay
or reimburse reasonable expenses in advance of final disposition
of a proceeding, to the fullest extent permitted by law, any
person made or threatened to be made a party to an action or
proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he, his testator or
intestate is or was a director, officer or employee of the
Company or any predecessor of the Company or serves or served at
any other enterprise as a director, officer or employee at the
request of the Company or any predecessor to the Company. The
indemnification is not exclusive of other indemnification rights
arising under any of the Company’s By-laws, agreements,
vote of directors or stockholders or otherwise and shall inure
to the benefit of the heirs and legal representatives of such
person. Any person seeking indemnification under Article IX
is deemed to have met the standard of conduct required for such
indemnification unless the contrary is established. The Article
states that neither any amendment nor repeal of Article IX,
nor the adoption of any provision of the Company’s
Certificate of Incorporation inconsistent with Article IX,
eliminates or reduces the effect of Article IX, in respect
of any matter occurring, or any action or proceeding accruing or
arising or that, but for Article IX, would accrue or arise,
prior to such amendment, repeal or adoption of an inconsistent
provision.
Section 145(g) of the Delaware General Corporation Law
provides that a corporation shall have the power to purchase and
maintain insurance on behalf of its officers, directors,
employees and agents, against any liability asserted against and
incurred by such persons in any such capacity. The Company has
obtained insurance covering its directors and officers against
losses and insuring it against certain obligations to indemnify
its directors and officers.
Pursuant to the Merger Agreement, for six years after the
Effective Time, Pfizer will, to the fullest extent permitted by
law, indemnify, defend and hold harmless each director, officer,
present and former employee and agents of the Company and its
Subsidiaries (the “Indemnified Parties”) against all
losses, expenses, claims, damages, liabilities or amounts
arising out of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the transactions
contemplated by the Merger Agreement). Until the six-year
anniversary date of the Effective Time, Pfizer and the Surviving
Corporation have agreed that all rights to indemnification or
exculpation existing in favor of the Indemnified Parties as
provided in the respective charters or by-laws, by contract, or
otherwise in effect prior to the Merger, will survive the Merger
and continue in full force and effect. Further, Pfizer will
ensure that the Surviving Corporation keep in effect those
indemnification and exculpation provisions, to the fullest
extent permitted under applicable law and will not amend, repeal
or otherwise modify their provisions for the six-year period
after the Effective Time (except as required by applicable law
or except to make changes permitted by applicable law that would
enlarge the exculpation or rights of indemnification thereunder).
The Merger Agreement also specifies that for a period of six
years after the Effective Time, Pfizer shall cause the Surviving
Corporation and the Surviving Corporation with Pfizer’s
authorization shall cause to be maintained in effect the current
policies of directors’ and officers’ (D&O)
liability insurance maintained by the Company (or policies of at
least the same coverage and amounts containing terms and
conditions which are no less advantageous)
6
with respect to claims arising from facts or events which
occurred before the Effective Time; provided that neither Pfizer
nor Surviving Corporation shall be required to expend more than
an amount per year equal to 200% of the annual premiums paid by
the Company for such insurance and if the amount of the annual
premiums necessary to maintain or procure such insurance
coverage exceeds such amount, Pfizer and Surviving Corporation
shall procure and maintain for such six-year period as much
coverage as reasonably practicable for such amount. Pfizer shall
have the right to cause coverage to be extended under the
Company’s D&O liability insurance by obtaining a
six-year “tail” policy on terms and conditions no less
advantageous than the Company’s existing D&O liability
insurance. Further, Pfizer has agreed to be jointly and
severally liable with the Surviving Corporation for its
indemnification obligations to the Indemnified Parties.
The foregoing summary of the indemnification of Executive
Officers and directors and of the directors’ and
officers’ liability insurance does not purport to be
complete and is qualified in its entirety by reference to the
Merger Agreement, which has been filed as Exhibit (e)(1) hereto
and is incorporated herein by reference.
Merger
Agreement.
The summary of the Merger Agreement contained in Section 11
of the Offer to Purchase filed as Exhibit (d)(1) to the
Schedule TO and the description of the conditions of the
Offer contained in Section 15 of the Offer to Purchase are
incorporated herein by reference. Such summary and description
are qualified in their entirety by reference to the Merger
Agreement, which is filed as Exhibit (e)(1) hereto and is
incorporated herein by reference to provide information
regarding its terms.
The Merger Agreement governs the contractual rights among the
Company, Pfizer and Offeror in relation to the Offer and the
Merger. The Merger Agreement has been filed as an exhibit to
this
Schedule 14D-9
to provide you with information regarding the terms of the
Merger Agreement and is not intended to modify or supplement any
factual disclosures about the Company or Pfizer in the
Company’s or Pfizer’s public reports filed with the
SEC. In particular, the Merger Agreement and this summary of
terms are not intended to be, and should not be relied upon as,
disclosures regarding any facts or circumstances relating to the
Company or Pfizer. The representations and warranties have been
negotiated with the principal purpose of establishing the
circumstances in which Offeror may have the right not to
consummate the Offer, or a party may have the right to terminate
the Merger Agreement, if the representations and warranties of
the other party prove to be untrue due to a change in
circumstance or otherwise, and allocate risk between the
parties, rather than establish matters as facts. The
representations and warranties may also be subject to a
contractual standard of materiality different from those
generally applicable to stockholders.
Tender
Agreement
Pfizer and Venrock Associates, Thomas, McNerney &
Partners, L.P., Robert Bratzler and Arthur Kreig (the
“Tender Stockholders”) have entered into a Tender
Agreement (the “Tender Agreement”) dated
November 15, 2007, pursuant to which the Tender
Stockholders have agreed to accept the Offer and to tender all
Shares beneficially owned by them. The Shares held by the Tender
Stockholders represent approximately 27% of Coley’s
outstanding shares. The Tender Stockholders have agreed that
they (i) will not withdraw the Shares tendered pursuant to
the Offer unless the Tender Agreement is withdrawn,
(ii) will either appear themselves or cause their Shares to
be counted towards the quorum of any Coley stockholder meeting
with respect to any action relating to the Merger Agreement,
(iii) have granted Pfizer an irrevocable proxy to vote
their Shares, (iv) will vote or cause to be voted, if need
be, all Shares beneficially owned by them, in approval of the
Merger Agreement, and (v) will vote against any action or
agreement that would reasonably be expected to result in a
breach of any representation, warranty, covenant or agreement by
Coley contained in the Merger Agreement or of the stockholders
contained in the Tender Agreement or which could adversely
affect the timely consummation of the Offer or the Merger or
which would constitute an alternate acquisition proposal. This
description does not purport to be complete and is qualified in
its entirety by reference to the Tender Agreement, a copy of
which is filed as an exhibit to the Schedule TO and is
incorporated by reference. The Tender Agreement makes the
Minimum Condition substantially more likely to be satisfied.
7
Confidentiality
Agreement
On October 10, 2007, the Company and Pfizer entered into a
confidentiality agreement (the “Confidentiality
Agreement”). Under the terms of the Confidentiality
Agreement, the Company and Pfizer agreed to furnish the other
party on a confidential basis certain information concerning
their respective businesses in connection with the evaluation of
a possible transaction between Pfizer and the Company.
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Item 4.
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The
Solicitation or Recommendation.
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At a meeting of the Company’s Board of Directors held on
November 15, 2007, the Company Board unanimously:
(1) determined that the terms of the Merger Agreement and
the transactions contemplated thereby, including the Offer, the
Merger and the Tender Agreement, are fair to, and in the best
interests of, the Company and its stockholders,
(2) approved the Merger Agreement and the transactions
contemplated by the Merger Agreement, including the Offer and
the Merger, and (3) declared the advisability of the Merger
Agreement and resolved to recommend that the Company’s
stockholders tender their Shares in the Offer and adopt the
Merger Agreement.
The Company Board recommends that the Company’s
stockholders accept the Offer, tender their Shares under the
Offer to Purchase and, if necessary, adopt the Merger
Agreement.
A copy of the letter to the Company’s stockholders
communicating the Company Board’s recommendation is filed
as Exhibit (a)(1)(A) to this
Schedule 14D-9
and is incorporated herein by reference.
Background
of the Offer
The Company’s management has periodically explored and
assessed, and discussed with the Company’s Board of
Directors, strategic alternatives for the Company. These
alternatives included strategies to grow and expand the
Company’s business and operations through collaboration
arrangements and licensing agreements, and opportunities to
merge or combine the Company’s operations with other
companies in the pharmaceutical and biotechnology sectors.
In March 2005, Coley entered into a series of agreements with
Pfizer under which it granted Pfizer development and worldwide
marketing rights to CPG 7909, now referred to as PF-3512676 by
Pfizer, for the treatment, control and prevention of multiple
cancers, including the treatment of advanced non-small cell lung
cancer, or NSCLC. Under the license agreement, Coley received a
$50,000,000 upfront license fee in 2005 and became entitled to
receive up to $455,000,000 in milestone payments, a significant
majority of which relates to potential development and
regulatory approval milestones, as well as royalties on any
future product sales. Pursuant to a separate screening
agreement, Pfizer agreed to provide Coley with funding for the
discovery and development of next-generation TLR9 agonists for
cancer, which, if successful, would be licensed to Pfizer and
could result in milestone payments and royalties to Coley.
In March 2005, Coley also entered into a stock purchase
agreement with Pfizer pursuant to which Pfizer purchased
$10,000,000 of Coley’s common stock in a private placement
concurrent with Coley’s initial public offering.
In December 2006, following Pfizer’s announcement of the
acquisition of the vaccine company PowderMed, Coley approached
Pfizer by telephone to inquire whether Pfizer was interested in
discussing an expanded license for Coley’s vaccine adjuvant
VaxImmune.
On February 21, 2007, Pfizer entered into a confidentiality
agreement with Coley in order to review confidential information
relating to the use of adjuvants with compounds for the
treatment of certain diseases outside of the field of oncology.
On February 23, 2007, representatives for Pfizer and Coley
discussed the uses of CpG adjuvants in vaccines for the
treatment of diseases outside the field of oncology, in a
telephonic meeting.
On May 10, 2007, a technical meeting between Coley and
representatives of Pfizer took place at Coley’s offices in
Wellesley, Massachusetts to determine the level of Pfizer’s
interest in seeking a license to VaxImmune and other potentially
novel adjuvants.
8
On June 4, 2007, Pfizer approached Coley about expanding
Pfizer’s rights to VaxImmune outside of oncology to other
therapeutic areas.
On June 7, 2007, Coley and Pfizer discussed telephonically
the potential terms and framework for a VaxImmune license.
On June 15, 2007, Coley provided a term sheet to Pfizer
regarding a possible licensing agreement to obtain rights to
VaxImmune outside of oncology. Representatives of the companies
engaged in a number of follow up discussions regarding the terms
of a potential license agreement.
On June 20, 2007, Pfizer discontinued two Phase III
trials in advanced lung cancer with PF-3512676 in combination
with cytotoxic chemotherapy. Pfizer’s decision to
discontinue the Phase III clinical trials was based on a
scheduled interim analysis of these clinical trials by an
independent Data Safety Monitoring Committee. This decision was
announced by Coley in a press release issued on June 20,
2007. Pfizer continues to investigate PF-3512676 as a potential
treatment for lung and other cancers with two ongoing clinical
trials. These two trials include a Phase II clinical trial
evaluating PF-3512676 in combination with
Tarceva
®
as a potential treatment for refractory NSCLC, as well as a
Phase I clinical trial evaluating PF-3512676 combined with
Pfizer’s anti-CTLA-4 targeted monoclonal antibody in
patients with advanced malignant melanoma.
On July 16, 2007, Coley’s Chief Executive Officer and
Pfizer’s Senior Vice President for Worldwide Business
Development discussed telephonically that Coley was evaluating
its strategic alternatives and might consider pursuing a more
significant transaction than a VaxImmune license and asked if
Pfizer might be interested. Pfizer’s Senior Vice President
for Worldwide Business Development indicated that he would
respond in September 2007.
During July 2007, Coley and Pfizer continued to discuss the
terms of the VaxImmune collaboration.
On July 31, 2007, the Company Board held a regularly
scheduled telephonic meeting at the Company’s offices
during which several topics were discussed, including the
Company’s strategic options, future value-driving events,
the status of the Company’s development programs and how to
move the Company forward and maximize shareholder value. The
Company Board also reviewed the challenges posed by the
Company’s early-stage product pipeline, including
development and regulatory risks and the need for substantial
additional capital. At this meeting, the Company Board also
discussed establishing a special committee of the Board to
assist the management team in activities related to evaluating
the potential strategic opportunity with Pfizer and a potential
acquisition of the Company or a substantial amount of its assets
by other third parties (the “Third Party Strategic
Opportunities” and the “Third Parties,”
respectively).
On August 13, 2007, a meeting between Coley and
representatives of Pfizer took place at Coley’s offices in
Düsseldorf, Germany to discuss the capabilities of
Coley’s German operations regarding the discovery of
additional TLR9 agonists and TLR7 and 8 agonists in the context
of improved vaccine performance.
On August 30, 2007, Coley’s Chief Executive Officer
and Pfizer’s Senior Vice President for Worldwide Business
Development discussed telephonically a potential meeting between
Coley and Pfizer to discuss possible collaboration and deal
structure arrangements.
On September 7, 2007 the Company Board at a regularly
scheduled meeting discussed the company’s strategic
options, development strategy, fund-raising alternatives, and
merger and acquisition alternatives, including the possibility
of maximizing shareholder value through a sale of the Company to
a pharmaceutical or biotechnology company
In mid-September, Coley management contacted J.P. Morgan
Securities Inc. (“JPMorgan”) to discuss engaging
JPMorgan to advise Coley with respect to a variety of potential
transactions, including a merger.
On September 21, 2007, senior executives of both Coley and
Pfizer met in New York City to discuss partnership objectives
and possible collaboration and deal structure arrangements.
On September 28, 2007, the Company Board met telephonically
to discuss the Pfizer collaboration and the possibility of
Pfizer acquiring Coley or its vaccine adjuvant assets, the fact
that Coley had been approached by other third parties about
potential license and or acquisition transactions, and other
matters. The Company Board authorized Coley’s Chief
Executive Officer to engage in specific strategic transaction
discussions with Pfizer and
9
Third Parties. The Company Board created and approved a
committee of the Company Board (the “Strategic Transaction
Committee”), to which Company Board members Kenneth Bate,
Anthony Evnin and James Thomas were appointed as members, to
evaluate the Pfizer opportunity and the Third Party Strategic
Opportunities, with the assistance of the Company’s
management, JPMorgan, and the Company’s outside legal
counsel, Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C. (“Mintz Levin”). The Company Board
discussed the strategy for continuing discussions with Pfizer,
including the role of the Strategic Transaction Committee. The
Company Board reviewed with Mintz Levin the Company Board’s
fiduciary duties in the context of particular strategic
transactions, including a sale of the Company, and
representatives of Mintz Levin reviewed legal considerations
applicable in this context.
On October 1, 2007, Coley’s Chief Executive Officer
informed Pfizer that the Coley Board of Directors would consider
a broader strategic transaction with Pfizer, including a sale of
the company to Pfizer.
On October 4, 2007, representatives of Pfizer spoke to
Coley’s Chief Financial Officer to coordinate additional
due diligence by Pfizer, and Pfizer provided a detailed
corporate due diligence request to Coley.
From October 4 through November 7, 2007, representatives of
Pfizer were in frequent contact with Coley regarding due
diligence and other matters regarding the potential transaction.
On October 5, 2007, representatives of Pfizer’s
financial advisor, Lazard Frères & Co. LLC
(“Lazard”) spoke by telephone to Coley’s Chief
Financial Officer in order to obtain a better understanding of
the timing of a potential transaction. On this call, Lazard
indicated that Pfizer was in a position to complete a
transaction quickly.
Also on October 5, 2007, the Company Board held a special
telephonic meeting, with Coley management, JPMorgan and Mintz
Levin also in attendance, to discuss potential strategic
transactions. With input from JPMorgan, the Company Board
discussed the valuation of Coley. JPMorgan was excused and the
Company Board discussed retaining JPMorgan as its financial
advisor for the strategic transaction. The Company Board
discussed JPMorgan’s proposed engagement letter, and
approved the engagement letter and the retention of JPMorgan.
Coley’s Chief Executive Officer gave the Company Board an
update of discussions and interactions with Pfizer.
On October 8, 2007, Coley retained JPMorgan as its
financial advisor in connection with a variety of potential
transactions.
On October 9, 2007, representatives of Pfizer visited
Coley’s offices in Ontario, Canada to review key assets at
the facility.
On October 10, 2007, Pfizer and Coley entered into a new
confidentiality agreement between the two companies in order to
provide Pfizer with access to additional confidential
information about Coley. Under the terms of the agreement,
Pfizer agreed for a specified period of time, subject to certain
exceptions, not to acquire shares of the Company’s capital
stock, not to take certain actions with respect to control of
the Company without the consent of the Company, and not to
solicit employees of the Company without the consent of the
Company.
On October 12, 2007, Coley informed Pfizer and Lazard that
Coley had retained JPMorgan as its advisor in connection with a
potential sale of the company. Lazard called to speak with
JPMorgan and discuss the process for Pfizer to initiate due
diligence. On the same day, representatives of Pfizer and Coley
spoke and confirmed a due diligence visit by Pfizer to
Coley’s Wellesley, Massachusetts offices and a management
presentation session by Coley, all scheduled for
October 15, 2007.
From October 12 through November 12, 2007, JPMorgan and
Lazard communicated with each other regarding the financial and
other aspects of the potential strategic transaction between
Coley and Pfizer.
On October 15, 2007, the representatives of Pfizer, Lazard
and Covington visited Coley headquarters in Wellesley,
Massachusetts for a corporate overview and program review
provided by Coley’s management team including its Chief
Executive Officer and Chief Financial Officer. Representatives
of JPMorgan and Mintz Levin were also in attendance.
Also on October 15, 2007, Coley made an electronic data
room available to Pfizer’s management and its
representatives and over the next several weeks, Pfizer
conducted its initial due diligence review.
10
On October 17, 2007, Pfizer’s research and development
team visited Coley headquarters in Wellesley, Massachusetts to
perform an in person review of scientific data and hold
discussions with Coley Research and Development management.
On October 23, 2007, the Strategic Transaction Committee
held a special meeting telephonically, with Coley management,
JPMorgan and Mintz Levin also in attendance, to discuss the
strategic alternatives with Pfizer. Mintz Levin presented an
overview of, and addressed questions and comments from the
Strategic Transaction Committee about, the proposed merger
agreement to be provided to Pfizer and Third Parties.
Coley’s Chief Executive Officer and Chief Financial Officer
gave the Strategic Transaction Committee an update of
discussions and interactions with Pfizer.
Also on October 23, 2007, Coley provided Pfizer with a
draft merger agreement prepared by Mintz Levin for review.
JPMorgan and Mintz Levin, on behalf of Coley, requested that
Pfizer submit a marked version of the agreement with its initial
bid to acquire the company.
On October 25, 2007, Lazard received a call from
Coley’s Chief Financial Officer who encouraged Lazard and
Pfizer to put forth a bid focused on the value of the Coley
platform and portfolio rather than its current market valuation.
On October 26, 2007, JPMorgan, on behalf of Coley, advised
Lazard that multiple other parties had expressed interest in
acquiring Coley and that a letter outlining timing of the
process would be forthcoming.
On October 29, 2007, JPMorgan provided Pfizer and Third
Parties interested in acquiring the Company or the
Company’s vaccine assets with a process letter from
JPMorgan, on behalf of Coley, outlining the procedures for bids
to acquire Coley that would be due on November 7, 2007.
On October 31, 2007, Lazard called JPMorgan to discuss the
process and to request guidance as to what price the Board of
Directors of Coley would likely find sufficient in order to
accept Pfizer’s offer. JPMorgan did not give such guidance.
On November 2, 2007, the Strategic Transaction Committee
met and discussed, among other things, whether to provide
guidance to Pfizer and decided not to provide such guidance at
that time.
On November 6, 2007, a Third Party indicated to Coley that
its diligence had been completed and a complete proposal to
acquire the company including a
mark-up
of
the merger agreement and an attractive offer price would be
submitted by the end of the day on Friday, November 9, 2007.
On Wednesday, November 7, 2007, Pfizer submitted a bid to
acquire Coley for $6.25 per share by way of a cash tender offer.
The bid was subject to completion of outstanding due diligence
and negotiation of a mutually acceptable merger agreement. The
bid submission included Pfizer’s comments to the merger
agreement and list of outstanding due diligence items.
On Thursday, November 8, 2007, Coley management held a
telephonic meeting with Mintz Levin and JPMorgan to discuss
Pfizer’s bid as well as other expressions of interests to
buy the Company or the Company’s vaccine assets,
Pfizer’s proposed changes to the merger agreement, and
further diligence materials requested by Pfizer.
Also on Thursday, November 8, 2007, the Strategic
Transaction Committee held a telephonic meeting with Coley
management, Mintz Levin and JPMorgan to discuss Pfizer’s
offer, Pfizer’s proposed changes to the merger agreement,
and further diligence materials requested by Pfizer. JPMorgan
also provided the Strategic Transaction Committee with an update
of its communications with Lazard. Mintz Levin provided the
Strategic Transaction Committee with an analysis of the changes
to the merger agreement proposed by Pfizer. The Strategic
Transaction Committee discussed with JPMorgan the process of
communicating with Pfizer and Third Parties with the aim of
receiving multiple favorable offers in the same time frame.
Mintz Levin again discussed and further reviewed with the
Strategic Transaction Committee the fiduciary duties of the
Company Board in a sale transaction.
Also on Thursday, November 8, 2007, representatives from
JPMorgan, on behalf of Coley, contacted Lazard and indicated
that Coley had received and reviewed responses and feedback to
the bid solicitation process from all
11
interested parties and that Coley considered Pfizer’s offer
not sufficient. Lazard reiterated its request for guidance on
what price would be sufficient.
On Friday, November 9, 2007, the Strategic Transaction
Committee held a telephonic meeting with Coley management, Mintz
Levin and JPMorgan to discuss JPMorgan’s communications
with Pfizer and Third Parties interested in acquiring the
Company or the Company’s vaccine assets. JPMorgan updated
the Strategic Transaction Committee with respect to discussions
with Pfizer and Third Parties, including JPMorgan’s
specific feedback to Pfizer regarding its proposed price per
share. The Strategic Transaction Committee instructed JPMorgan
to give guidance to Lazard that the Company Board would likely
accept an offer of $8.00 per share.
Also on Friday, November 9, 2007, JPMorgan provided
detailed feedback to Pfizer relating to its bid. JPMorgan stated
that the value of the Pfizer offer was insufficient for the
Board to approve. At the direction of the Strategic Transaction
Committee, JPMorgan suggested that if Pfizer were able to make
an offer of $8.00 per share for the company, it believed the
Coley Board would support a transaction at that price. JPMorgan
also stated that the Coley Board would be meeting on Monday,
November 12, 2007, and would like to hear from Pfizer
before that time.
On Saturday, November 10, 2007, a Third Party, which had
previously indicated that it would submit a complete proposal
package on Friday, November 9, 2007, called the Company to
indicate that requisite executive committee approval was not
obtained to submit the proposal that it had indicated would be
submitted to the Company and that the Third Party was
withdrawing from the process.
On the morning of Monday, November 12, 2007, the Company
Board held a special telephonic meeting to further discuss the
transaction in which Coley management, Mintz Levin and JPMorgan
participated. Representatives of JPMorgan provided an update on
the potential buyers contacted. The Company Board discussed with
JPMorgan further feedback it would give to Pfizer. Coley’s
Chief Financial Officer updated the Company Board about ongoing
due diligence being conducted by Pfizer. The Company Board
discussed the valuation of the Company. During the meeting,
JPMorgan received a call from Lazard conveying Pfizer’s
increase of its bid price to $8.00 per share, provided that
certain changes be made to the merger agreement. The Company
Board discussed the new bid, based on the assumption that it
would be made in writing, including analysis of the enterprise
value represented by the new bid and other alternatives, such as
the sale of its vaccine assets. The Company Board determined
that the new bid was the best way to maximize value for
shareholders and authorized the Strategic Transaction Committee
to complete the transaction expeditiously, subject to final
authorization by the Company Board. The Company Board requested
that JPMorgan complete its analysis of the fairness of the per
share bid price to shareholders and discussed the preparation of
its fairness opinion pursuant to the merger agreement.
Also on the morning of Monday, November 12, 2007, the
Strategic Transaction Committee held a special telephonic
meeting, in which Mintz Levin and JPMorgan participated, to
further discuss the transaction, based on the assumption that
the new bid would be made imminently in writing. The members of
the Strategic Transaction Committee discussed, among other
things, the terms of the merger agreement, certain financial
aspects of the transaction, including the Company’s
historical stock price and the premium represented by
Pfizer’s proposal, and the process for finalizing, signing,
and announcing the execution of the merger agreement.
Also on the morning of Monday, November 12, 2007, Pfizer
submitted a revised offer to JPMorgan reflecting a bid price of
$8.00 per share, which offer, by its terms, would remain open
until Tuesday, November 13.
In the afternoon of November 12, 2007, JPMorgan called
Lazard to say that the Coley Board would move forward with
Pfizer’s revised offer if Pfizer completed its remaining
due diligence review expeditiously.
Also on November 12, 2007, representatives from Pfizer
spoke with Coley’s Chief Financial Officer in order to
coordinate the remaining due diligence. Coley agreed to make
additional diligence materials available and to provide a
revised draft of the merger agreement the following day that
would respond to Pfizer’s comments to the merger agreement
submitted on November 7, 2007.
Throughout the day on each of November 12, 13, 14 and 15,
2007, representatives of Pfizer, Coley, Covington, Mintz Levin,
Lazard and JPMorgan negotiated the terms of the merger
agreement, disclosure schedules, and a tender agreement,
pursuant to which certain shareholders would agree to tender
their shares in the tender offer.
12
On November 13, 2007, JPMorgan called Lazard to confirm
that Pfizer’s offer would not expire that day, as had been
indicated in Pfizer’s letter dated November 12, which
Lazard did confirm. Lazard also indicated that Pfizer’s due
diligence review was nearly completed.
A special meeting of the Company Board was held telephonically
during the morning of Thursday, November 15, 2007 to
discuss the proposed terms of the transaction. Coley’s
management, Mintz Levin and JPMorgan participated in the
meeting. In advance of this telephonic meeting, a revised draft
of the Merger Agreement and related materials were circulated to
the Company Board. The Company Board also engaged in a review
with Mintz Levin of the key provisions of the Merger Agreement,
including the
break-up
fee, triggers for the
break-up
fee
and the Company’s ability to consider a superior
acquisition proposal. JPMorgan rendered to the Company Board an
oral opinion, which was confirmed by delivery of a written
opinion dated November 15, 2007, to the effect that, as of
that date and based on and subject to various assumptions,
matters considered and limitations described in its opinion, the
$8.00 per share cash consideration to be received in the Offer
and the Merger, taken together, by holders of the Shares (other
than Pfizer and its affiliates) was fair, from a financial point
of view, to such holders. The Company Board reviewed again with
Mintz Levin the Company Board’s fiduciary duties in a sale
transaction. On the basis of the Company’s activities to
date and, after extensive discussion, the Company Board
determined that the price then being proposed by Pfizer for each
Share was the best per share price then obtainable and that a
transaction with Pfizer would result in the maximum value to
Coley’s shareholders.
After further discussion among the participants on the call to
address questions from the Company Board, the Company Board, by
a unanimous vote, approved the proposed Merger Agreement, the
Offer and Merger. The Merger Agreement and other
transaction-related documents were signed on November 15,
2007 and their execution was announced on November 16, 2007
in a joint press release.
On November 15, 2007, representatives of Pfizer, Corvette
Acquisition Corp., an indirect wholly-owned subsidiary of
Pfizer, and Coley executed the merger agreement and Pfizer and
certain shareholders of Coley executed the tender agreement.
On November 16, 2007, Pfizer and Coley issued a joint press
release announcing their entry into the merger agreement.
Reasons
for the Recommendation of the Company Board.
In evaluating the Merger and the Merger Agreement, the Company
Board consulted with the Company’s management, legal
counsel and financial advisor and, in reaching its
recommendation described in this Item 4 regarding the
Offer, the Merger and the Merger Agreement, the Company Board
considered a number of factors, including the following:
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The Company’s Relationship with
Pfizer.
The Company Board considered the
relationship between Pfizer and the Company, which had been
established in March 2005 in connection with the license
agreement entered into between the parties. Since that time, the
parties had worked closely together on the clinical development
of PF-3512676 for the treatment, control and prevention of
multiple cancers, and had established a strong and committed
relationship based on that work.
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The Company’s Operating and Financial Condition;
Prospects of the Company
. The Company Board
considered its knowledge and familiarity with the Company’s
business, financial condition and results of operations, as well
as the Company’s financial plan and prospects if it were to
remain an independent company and the Company’s short-term
and long-term capital needs. The Company Board discussed the
Company’s current financial plan, including the risks
associated with achieving and executing upon the Company’s
business plan. The Company Board considered, among other
factors, that the holders of Shares would continue to be subject
to the risks and uncertainties of the Company’s financial
and clinical development plans and prospects unless the Shares
were acquired for cash. These risks and uncertainties included
risks relating to the Company’s reliance upon a limited
number of clinical and preclinical stage product candidates,
potential difficulties or delays in its pre-clinical and
clinical trials, including those with respect to PF-3512676, and
its effectiveness at managing and raising sufficient financial
resources
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(including financing its research and development activities),
as well as the other risks and uncertainties discussed in the
Company’s filings with the SEC.
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Strategic Alternatives.
The Company Board
considered trends in the biotechnology industry and the
strategic alternatives available to the Company, including
remaining an independent public company, acquisitions of or
mergers with other companies in the industry, as well as the
risks and uncertainties associated with such alternatives. The
Company Board noted in particular the activities undertaken by
JPMorgan in connection with the solicitation of offers to
purchase the Company or a portion of its business.
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Transaction Financial Terms; Premium to Market
Price.
The Company Board considered the
relationship of the Offer Price to the market prices of the
Shares. In light of the Company’s activities to date
(including, without limitation, overtures made to selected third
parties in advance of the execution of the Merger Agreement),
the Company Board determined that the Offer Price and Merger
Consideration to be paid in the Offer and the Merger represented
the best per share price currently obtainable for the
Company’s shareholders. In making that determination, the
Company considered that the Offer Price and Merger
Consideration, respectively, represent a premium of
approximately 167% over $3.00, the closing price of the Shares
on the Nasdaq Global Market on November 15, 2007, the last
trading day prior to the execution of the Merger Agreement. This
premium compared very favorably to the premiums paid in other
recent acquisitions of life sciences companies.
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Ability to Respond to Unsolicited Takeover Proposals and
Terminate the Merger Agreement to Accept a Superior
Proposal
. The Company Board considered the
provisions in the Merger Agreement that provide for the ability
of the Company, subject to the terms and conditions of the
Merger Agreement, to provide information to and engage in
negotiations with third parties that make an unsolicited
proposal, and, subject to payment of a termination fee and the
other conditions set forth in the Merger Agreement, to enter
into a transaction with a party that makes a superior proposal.
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Termination Fee Provisions.
The Company Board
considered the termination fee provisions of the Merger
Agreement and determined that they likely would not be a
deterrent to competing offers that might be superior to the
Offer Price and the Merger Consideration. The Company Board
considered that the termination fee of $9.5 million was
equal to approximately 4.1% of the Company’s total value of
the transaction, which the Company Board believed to be a
reasonable fee to be paid to Pfizer should a superior offer be
accepted by the Company and not a fee that would deter superior
efforts.
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•
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Conditions to the Consummation of the Offer and the Merger;
Likelihood of Closing
. The Company Board
considered the reasonable likelihood of the consummation of the
transactions contemplated by the Merger Agreement in light of
the nature of the conditions in the Merger Agreement to the
obligation of Offeror to accept for payment and pay for the
Shares tendered pursuant to the Offer, including that the
consummation of the Offer and the Merger was not contingent on
Pfizer’s ability to secure financing.
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•
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Cash Consideration; Certainty of Value.
The
Company Board considered the form of consideration to be paid to
holders of Shares in the Offer and the Merger and the certainty
of the value of such cash consideration compared to stock or
other consideration.
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•
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Timing of Completion.
The Company Board
considered the anticipated timing of consummation of the
transactions contemplated by the Merger Agreement and the
structure of the transaction as a cash tender offer for all of
the Shares, which should allow stockholders to receive the
transaction consideration in a relatively short timeframe,
followed by the Merger in which stockholders would receive the
same consideration as received by stockholders who tender their
Shares in the Offer. The Company Board considered that the
potential for closing in a relatively short timeframe could also
reduce the amount of time in which the Company’s business
would be subject to the potential uncertainty of closing and
related disruption.
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•
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Opinion of the Company’s Financial
Advisor.
The Company Board considered the opinion
of JPMorgan, dated November 15, 2007, to the Company Board
as to the fairness, from a financial point of view and as of the
date of the opinion, of the $8.00 per Share cash consideration
to be received in the Offer and the Merger, taken together, by
holders of Shares (other than Pfizer and its affiliates). The
full text of JP Morgan’s written opinion, dated
November 15, 2007, is attached hereto as Annex II.
Holders of Shares are encouraged to read
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this opinion carefully in its entirety for a description of the
assumptions made, procedures followed, matters considered and
limitations on the review undertaken.
JPMorgan’s opinion
was provided to the Company Board in connection with and for the
purpose of its evaluation of the Offer and the Merger.
JPMorgan’s opinion was limited to the fairness, from a
financial point of view, of the $8.00 per Share cash
consideration to be received by the holders of Shares in the
proposed Offer and Merger (other than Pfizer and its
affiliates), and JPMorgan expressed no opinion as to the
fairness of the Offer and the Merger to, or any consideration to
be received in connection therewith by, the holders of any other
class of securities, creditors, or other constituencies of the
Company or as to the underlying decision by the Company to
engage in the Offer and the Merger. JPMorgan’s opinion does
not constitute a recommendation to any stockholder as to whether
any stockholder should tender Shares pursuant to the Offer or as
to how any such stockholder should vote on any matter.
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•
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Appraisal Rights.
The Company Board considered
the availability of appraisal rights with respect to the Merger
for the Company’s stockholders who properly exercise their
rights under Delaware law, which would give such stockholders
the ability to seek and be paid a judicially determined
appraisal of the “fair value” of their Shares upon the
completion of the Merger.
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•
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Tender Agreement.
The Company Board considered
the fact that certain stockholders owning approximately 27% of
Coley Common Stock had entered into a Tender Agreement with
Pfizer to vote in favor of the Merger.
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The Tender Agreement makes the Minimum Condition substantially
more likely to be satisfied.
The Company Board also considered a number of uncertainties and
risks in their deliberations concerning the transactions
contemplated by the Merger Agreement, including the Offer and
Merger, including the following:
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Restrictions; Termination Fee.
The Company
Board considered the restrictions that the Merger Agreement
imposes on actively soliciting competing bids, and the
requirement under the Merger Agreement that the Company would be
obligated to pay a termination fee of $9.5 million under
certain circumstances, and the potential effect of such
termination fee in deterring other potential acquirers from
proposing alternative transactions.
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•
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Failure to Close.
The Company Board considered
that the conditions to Pfizer’s and Offeror’s
obligation to accept for payment and pay for the Shares tendered
pursuant to the Offer and to consummate the Merger were subject
to conditions, and the possibility that such conditions may not
be satisfied, including as a result of events outside of the
Company’s control. The Company Board also considered the
fact that, if the Offer and Merger are not completed, the
market’s perception of the Company’s continuing
business could potentially result in a loss of business
partners, collaboration partners and employees and that the
trading price of the Shares could be adversely affected. The
Company Board considered that, in that event, it would be
unlikely that another party would be interested in acquiring the
Company. The Company Board also considered the fact that, if the
Offer and Merger are not consummated, the Company’s
directors, officers and other employees will have expended
extensive time and effort and will have experienced significant
distractions from their work during the pendency of the
transaction, and the Company will have incurred significant
transaction costs, attempting to consummate the transaction.
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•
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Public Announcement of the Offer and
Merger.
The Company Board considered the effect
of a public announcement of the execution of the Merger
Agreement and the Offer and Merger contemplated thereby,
including effects on the Company’s operations, stock price
and employees and the Company’s ability to attract and
retain key management and personnel. The Company Board also
considered the effect of these matters on Pfizer and the risks
that any adverse reaction to the transactions contemplated by
the Merger Agreement could adversely affect Pfizer’s
willingness to consummate the transactions contemplated by the
Merger Agreement.
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•
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Pre-Closing Covenants.
The Company Board
considered that, under the terms of the Merger Agreement, the
Company agreed that it will carry on its business in the
ordinary course of business consistent with past practice and,
subject to specified exceptions, that the Company will not take
a number of actions related to the conduct of its business
without the prior written consent of Pfizer. The Company Board
further
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considered that these terms of the Merger Agreement may limit
the ability of the Company to pursue business opportunities that
it would otherwise pursue.
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•
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Cash Consideration.
The Company Board
considered the fact that, subsequent to completion of the
Merger, the Company will no longer exist as an independent
public company and that the nature of the transaction as a cash
transaction would prevent the Company stockholders from being
able to participate in any value creation that the Company could
generate going forward, as well as any future appreciation in
value of the combined company, unless they separately acquired
Pfizer common stock.
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•
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Tax Treatment.
The Company Board considered
the fact that gains from this transaction would be taxable to
the Company stockholders for U.S. federal income tax
purposes.
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•
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Potential Conflicts of Interest.
The Company
Board was aware of the potential conflicts of interest between
the Company, on the one hand, and certain of the Company’s
Executive Officers and directors, on the other hand, as a result
of the transactions contemplated by the Offer and the Merger as
described in Item 3 above.
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The Company Board believed that, overall, the potential benefits
of the Offer and the Merger to the Company stockholders outweigh
the risks of the Offer and the Merger and provide the maximum
value to shareholders.
The foregoing discussion of information and factors considered
by the Company Board is not intended to be exhaustive. In light
of the variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Company Board did
not find it practicable to, and did not, quantify or otherwise
assign relative weights to the specific factors considered in
reaching its determinations and recommendations. Moreover, each
member of the Company Board applied his own personal business
judgment to the process and may have given different weight to
different factors.
Intent to Tender:
To the best of the
Company’s knowledge, after reasonable inquiry, each
Executive Officer, director, affiliate and subsidiary of the
Company who owns Shares presently intends to tender in the Offer
all Shares that he or she owns of record or beneficially, other
than any Shares that if tendered would cause him, her or them to
incur liability under the short-swing profits recovery
provisions of the Exchange Act. As noted above, under
“
Interests of Certain Persons
”, pursuant to the
Tender Agreement, certain Coley stockholders have committed to
accept the Offer and to tender all Shares of Coley Common Stock
owned directly or indirectly by them, which represents
approximately 27% of the Company’s outstanding shares. The
foregoing does not include any Shares over which, or with
respect to which, any such Executive Officer, director or
affiliate acts in a fiduciary or representative capacity or is
subject to the instructions of a third party with respect to
such tender.
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Item 5.
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Person/Assets,
Retained, Employed, Compensated or Used.
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Pursuant to an engagement letter dated October 8, 2007, the
Company retained JPMorgan to act as its exclusive financial
advisor in connection with a possible sale transaction,
including the Offer and the Merger. Under the terms of
JPMorgan’s engagement, the Company has agreed to pay
JPMorgan an aggregate fee of approximately $2.8 million for
its financial advisory services in connection with the Offer and
the Merger, a portion of which was payable in connection with
the delivery of JPMorgan’s opinion to the Company Board and
a portion of which is payable contingent upon the consummation
of the Offer. In addition, the Company has agreed to reimburse
JPMorgan for its reasonable expenses, including fees,
disbursements and other charges of legal counsel, and to
indemnify JPMorgan and related parties against liabilities,
including liabilities under federal securities laws, relating
to, or arising out of, its engagement.
Neither the Company nor any person acting on its behalf has
employed, retained or compensated any person to make
solicitations or recommendations to the Company’s
stockholders on its behalf concerning the Offer or the Merger,
except that such solicitations or recommendations may be made by
directors, officers or employees of the Company, for which
services no additional compensation will be paid.
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Item 6.
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Interest
in Securities of the Subject Company.
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There have been no transactions in the Coley Common Stock on the
part of the Company or any executive officer or director or
subsidiary or affiliate of Coley during the past 60 days.
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Item 7.
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Purposes
of the Transaction and Plans or Proposals.
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Except as indicated in Items 2, 3 and 4 of this
Schedule 14D-9,
(a) the Company is not undertaking or engaged in any
negotiations in response to the Offer that relate to, or would
result in: (i) a tender offer for or other acquisition of
the Company’s securities by the Company, any of its
subsidiaries, or any other person; (ii) any extraordinary
transaction such as a merger, reorganization or liquidation,
involving the Company or any of its subsidiaries; (iii) any
purchase, sale or transfer of a material amount of assets of the
Company or any of its subsidiaries; or (iv) any material
change in the present dividend rates or policy, or indebtedness
or capitalization of the Company and (b) there are no
transactions, resolutions of the Company Board or agreements in
principle or signed contracts in response to the Offer that
relate to, or would result in, one or more of the events
referred to in clause (a) of this Item 7.
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Item 8.
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Additional
Information.
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Appraisal
Rights
No appraisal rights are available in connection with the Offer.
However, if the Offer is successful and the Merger is
consummated, stockholders of the Company who have not properly
tendered in the Offer and have neither voted in favor of the
Merger nor consented thereto in writing, and who otherwise
comply with the applicable procedures under DGCL
Section 262, will be entitled to receive appraisal rights
for the “fair value” of their Shares as determined by
the Delaware Court of Chancery. Stockholders should be aware
that an investment banking opinion as to the fairness, from a
financial point of view, of the consideration payable in a
merger is not an opinion as to fair value under DGCL
Section 262. Any stockholder contemplating the exercise of
such appraisal rights should review carefully the provisions of
DGCL Section 262, particularly the procedural steps
required to perfect such rights.
The obligations of the Company to notify stockholders of their
appraisal rights will depend on how the Merger is effected. If a
meeting of the Company’s stockholders is held to approve
the Merger, the Company will be required to send a notice to
each stockholder of record not less than 20 days prior to
the Merger that appraisal rights are available, together with a
copy of Section 262. Within 10 days after the closing
of the Merger, the Surviving Corporation will be required to
send a notice that the Merger has become effective to each
stockholder who delivered to the Company a demand for appraisal
prior to the vote and who did not vote in favor of the Merger.
Alternatively, if the Merger is consummated through a short-form
procedure, the Surviving Corporation will be required to send a
notice within 10 days after the date the Merger has become
effective to each stockholder of record on the effective date of
the Merger. The notice will inform stockholders of the effective
date of the Merger and of the availability of, and procedure for
demanding, appraisal rights, and will include a copy of
Section 262.
FAILURE TO FOLLOW THE STEPS REQUIRED BY
DGCL SECTION 262 FOR PERFECTING APPRAISAL RIGHTS MAY RESULT
IN THE LOSS OF SUCH RIGHTS.
The foregoing summary of
appraisal rights under DGCL is not complete and is qualified in
its entirety by reference to DGCL Section 262, a copy of
which is attached hereto as Annex IV, and the Offer.
APPRAISAL RIGHTS CANNOT BE EXERCISED AT THIS
TIME. THE INFORMATION SET FORTH ABOVE IS FOR
INFORMATIONAL PURPOSES ONLY WITH RESPECT TO ALTERNATIVES
AVAILABLE TO STOCKHOLDERS IF THE MERGER IS COMPLETED.
STOCKHOLDERS WHO WILL BE ENTITLED TO APPRAISAL RIGHTS IN
CONNECTION WITH THE MERGER WILL RECEIVE ADDITIONAL INFORMATION
CONCERNING APPRAISAL RIGHTS AND THE PROCEDURES TO BE FOLLOWED IN
CONNECTION THEREWITH BEFORE SUCH STOCKHOLDERS HAVE TO TAKE ANY
ACTION RELATING THERETO.
STOCKHOLDERS WHO SELL SHARES IN THE OFFER WILL NOT BE
ENTITLED TO EXERCISE APPRAISAL RIGHTS WITH RESPECT THERETO BUT,
RATHER, WILL RECEIVE THE OFFER PRICE.
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(b)
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Anti-Takeover
Statute.
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As a Delaware corporation, the Company is subject to
Section 203 of the DGCL (“Section 203”). In
general, Section 203 would prevent an “interested
stockholder” (generally defined as a person beneficially
owning 15% or more of a corporation’s voting stock) from
engaging in a “business combination” (as defined in
Section 203) with a Delaware corporation for three
years following the date such person became an interested
stockholder unless: (i) before such person became an
interested stockholder, the board of directors of the
corporation approved the transaction in which the interested
stockholder became an interested stockholder or approved the
business combination, (ii) upon consummation of the
transaction which resulted in the interested stockholder
becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding for
purposes of determining the number of shares of outstanding
stock held by directors who are also officers and by employee
stock plans that do not allow plan participants to determine
confidentially whether to tender shares), or
(iii) following the transaction in which such person became
an interested stockholder, the business combination is
(x) approved by the board of directors of the corporation
and (y) authorized at a meeting of stockholders by the
affirmative vote of the holders of at least
66
2
/
3
%
of the outstanding voting stock of the corporation not owned by
the interested stockholder. In accordance with the provisions of
Section 203, the Company’s Board of Directors has
approved the Merger Agreement, as described in Item 4 above
and, therefore, the restrictions of Section 203 are
inapplicable to the Merger and the transactions contemplated
under the Merger Agreement.
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(c)
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Regulatory
Approvals.
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Under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the “HSR
Act”) and the rules that have been promulgated thereunder
by the Federal Trade Commission (the “FTC”), certain
acquisition transactions may not be consummated unless certain
information has been furnished to the Antitrust Division of the
Department of Justice (the “Antitrust Division”) and
the FTC and certain waiting period requirements have been
satisfied. The initial waiting period for a cash tender offer is
15 days, but this period may be shortened if the reviewing
agency grants “early termination” of the waiting
period, or it may be lengthened if the reviewing agency
determines that an investigation is required and asks the filing
person voluntarily to withdraw and refile to allow a second
15-day
waiting period, or issues a formal request for additional
information and documentary material. Coley expects to file
Premerger Notification and Report Forms with the FTC and the
Antitrust Division in connection with the purchase of Shares in
the Offer and the Merger on November 30, 2007. Accordingly,
the required waiting period with respect to the Offer and the
Merger will expire at 11:59 p.m., New York City time, on or
about December 15, 2007, unless earlier terminated by the
FTC or the Antitrust Division or unless the FTC or the Antitrust
Division issues a request for additional information and
documentary material prior to that time. The purchase of Shares
pursuant to the Offer may be subject to such requirements. The
Antitrust Division and the FTC scrutinize the legality under the
antitrust laws of transactions such as the acquisition of Shares
by Offeror pursuant to the Offer. At any time before or after
the consummation of any such transactions, the Antitrust
Division or the FTC could take such action under the antitrust
laws of the United States as it deems necessary or desirable in
the public interest, including seeking to enjoin the purchase of
Shares pursuant to the Offer or seeking divestiture of the
Shares so acquired or divestiture of substantial assets of
Pfizer or the Company. Private parties (including individual
States of the United States) may also bring legal actions under
the antitrust laws of the United States. The Company does not
believe that the consummation of the Offer will result in a
violation of any applicable antitrust laws. However, there can
be no assurance that a challenge to the Offer on antitrust
grounds will not be made, or if such a challenge is made, what
the result would be.
The Company is not aware of any other filings, approvals or
other actions by or with any governmental authority or
administrative or regulatory agency other than the forgoing
filings under the HSR Act that would be required for
Pfizer’s or Offeror’s acquisition or ownership of the
Shares.
German Merger Control Law:
Under German merger
control law, the purchase of Shares in the Offer must not be
completed until the expiration of a one-month waiting period
following the Federal Cartel Office (“FCO”)’s
receipt of a complete filing by Pfizer as the ultimate parent
company of Offeror without any decision of the FCO to enter into
an in-depth investigation (Hauptprüfverfahren) has been
passed or a clearance has been obtained. Pfizer filed a merger
control notification on November 28, 2007 with the FCO.
Accordingly the required waiting period
18
with respect to the Offer and the Merger will expire at 12:00 pm
CET, on December 28, 2007, unless clearance has been obtained
earlier or the FCO has entered into an in-depth investigation
prior to that time. If the latter is the case, the waiting
period with respect of the Offer and the Merger would be
extended until the expiration of four months following the
FCO’s receipt of the complete notification, unless
clearance has been obtained. After the expiration of the
four-month waiting period, the waiting period could be extended
only with the Consent of Coley and Pfizer.
As long as no clearance has been obtained, it is illegal and
subject to administrative fines, to consummate the Offer and the
Merger. Agreements concluded under German law would be deemed to
be invalid. Within its investigation, the FCO determines whether
the Merger would result in the formation or strengthening of a
market dominant position of the parties in a relevant market.
Should the FCO come to the conclusion that this is the case, it
may prohibit the Merger or impose remedies which regularly
consist of divestitures of certain businesses or parts of those.
If the latter is the case, the Merger may be consummated upon
the issuance of the clearance decision (in case of
non-conditional remedies which have to be fulfilled later on
within a certain time frame) or upon the complete fulfillment of
all respective conditions (in case of conditional remedies).
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(d)
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Vote
Required to Approve the Merger.
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The Company Board has approved the Offer, the Merger and the
Merger Agreement in accordance with the DGCL. Under
Section 253 of the DGCL, if Offeror acquires, pursuant to
the Offer or otherwise, a number of Shares representing at least
90% of the outstanding Shares, Offeror will be able to effect
the Merger after consummation of the Offer without a vote by the
Company’s stockholders. If Offeror acquires, pursuant to
the Offer or otherwise, a number of Shares representing less
than 90% of the outstanding Shares, the affirmative vote of the
holders of a number of Shares representing a majority of the
outstanding Shares will be required under the DGCL to effect the
Merger. In the event the minimum tender condition required to be
met under the Merger Agreement has been satisfied, after the
purchase of the Shares by Offeror pursuant to the Offer, Offeror
will own a number of Shares representing a majority of the
outstanding Shares and be able to effect the Merger without the
affirmative vote of any other stockholder of the Company. The
Company has granted an option to Offeror to purchase Shares if,
after the exercise of the option, Offeror would hold enough
shares to effect a short form merger pursuant to
Section 253. See the description of the option in paragraph
(e) below.
Subject to the terms of the Merger Agreement, the Company has
granted the Offeror an assignable and irrevocable option to
purchase from the Company, at a per share price equal to the
Offer Price, that number of newly-issued Shares that is equal to
one Share more than the number of Shares needed to give the
Offeror ownership of more than 90% of the number of Shares of
the Company then outstanding on a fully diluted basis (where
“on a fully diluted basis” means the number of Shares
outstanding, together with the shares of the Company’s
common stock that the Company may be required to issue pursuant
to warrants, Company Stock Options or other obligations under
employee stock or similar benefit plans or otherwise, whether or
not vested or then exercisable). This
“top-up”
option is exercisable only if, among other things, the issuance
of Shares pursuant to the exercise of such
“top-up”
option would not require approval of the Company’s
stockholders under applicable law and the Minimum Condition (as
defined in the Merger Agreement) is satisfied. The Offeror may
pay the exercise price for the
“top-up”
option, at its election, either in cash or by delivering to the
Company a promissory note having a principal amount equal to the
exercise price (or by a combination of these methods). The
foregoing summary is qualified in its entirety by reference to
the Merger Agreement, which is filed as Exhibit (e)(1) hereto
and is incorporated herein by reference.
19
The following Exhibits are filed with this
Schedule 14D-9:
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Exhibit No.
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Description
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(a)(1)(A)
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Letter to Stockholders of the Company, dated November 30,
2007, from Robert L. Bratzler, Ph.D., President and Chief
Executive Officer of the Company (included as Annex III to
this Schedule 14D-9).
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(a)(2)
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Offer to Purchase, dated November 30, 2007 (incorporated by
reference to Exhibit (a)(1)(A) to the Schedule TO of Pfizer
and Offeror, filed with the Securities and Exchange Commission
on November 30, 2007).
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(a)(3)
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Form of Letter of Transmittal (incorporated by reference to
Exhibit (a)(1)(B) to the Schedule TO of Pfizer and Offeror
filed with the Securities and Exchange Commission on
November 30, 2007).
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(a)(4)
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Opinion of J.P. Morgan Securities Inc., to the Board of
Directors of the Company dated November 15, 2007 (included as
Annex II to this Schedule 14D-9).
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(a)(5)
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Joint Press Release issued by the Company and Pfizer, dated
November 16, 2007 (incorporated by reference to the Schedule
14D-9C filed by the Company on November 16, 2007).
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(a)(6)
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Summary Advertisement as published in the Wall Street Journal
(incorporated by reference to Exhibit (a)(5)(B) to the
Schedule TO of Offeror and Pfizer filed with the Securities and
Exchange Commission on November 30, 2007).
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(a)(7)
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Transcript of a conference call dated November 16, 2007
(incorporated by reference to Exhibit 99.1 to the Company’s
Current Report on Form 8-K filed with the Securities and
Exchange Commission on November 16, 2007).
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(a)(8)
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Letter distributed to employees on November 16, 2007
(incorporated by reference to Exhibit 99.2 to the Company’s
Current Report on Form 8-K filed with the Securities and
Exchange Commission on November 16, 2007).
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(e)(1)
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Agreement and Plan of Merger, dated November 15, 2007, by
Offeror and the Company (incorporated by reference to Exhibit
2.1 to the Company’s Current Report on Form 8-K filed with
the Securities and Exchange Commission on November 16, 2007).
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(e)(2)
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Employment Agreement, dated as of May 6, 1998, as amended, by
and between the Company and Robert L. Bratzler, Ph.D.,
(incorporated by reference to Exhibits 10.6 and 10.7 to the
Company’s Registration Statement on Form S-1 [Reg. No.
333-124176]).
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(e)(3)
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Form of Change of Control Agreement by and between the Company
and its Executive Officers (incorporated by reference to Exhibit
10.14 to the Company’s Registration Statement on Form S-1
[Reg. No. 333-124176]).
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Annex I — Information Statement Pursuant to
Section 14(f) of the Securities Exchange Act of 1934 and
Rule 14f-1
promulgated thereunder.
Annex II — Opinion of J.P. Morgan Securities
Inc., to the Board of Directors of the Company, dated
November 15, 2007.
Annex III — Letter to Stockholders of the
Company, dated November 30, 2007, from Robert L.
Bratzler, Ph.D., President and Chief Executive Officer of
the Company.
20
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is
true, complete and correct.
COLEY PHARMACEUTICAL GROUP, INC.
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By:
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/s/
Robert
L. Bratzler, Ph.D.
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Robert L. Bratzler, Ph.D.
President and Chief Executive Officer
Dated: November 30, 2007
21
Annex I
COLEY
PHARMACEUTICAL GROUP, INC.
93 Worcester Street
Wellesley, Massachusetts 02481 USA
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934 AND
RULE 14F-1
THEREUNDER
GENERAL
This information statement (the “Information
Statement”) is being mailed on or after November 30,
2007 as part of the Solicitation/Recommendation Statement on
Schedule 14D-9
(the
“Schedule 14D-9”)
of Coley Pharmaceutical Group, Inc., a Delaware corporation
(“Coley”), relating to the tender offer being made by
Corvette Acquisition Corp., a Delaware corporation. Capitalized
terms used and not otherwise defined herein shall have the
meaning set forth in the
Schedule 14D-9.
Unless the context indicates otherwise, in this Information
Statement, we use the terms “us,” “we” and
“our” to refer to Coley.
You are receiving this Information Statement in connection with
the possible election of persons designated by Pfizer Inc.
(“Pfizer”) to a majority of seats on the Board of
Directors of Coley (the “Board of Directors” or the
“Board”). There will be no vote or other action by
stockholders of Coley in connection with this Information
Statement. Voting proxies regarding shares of Coley Common Stock
(as defined below) are not being solicited from any stockholder
in connection with this Information Statement. You are urged to
read this Information Statement carefully. You are not, however,
required to take any action in connection with this Information
Statement.
On November 15, 2007, Coley, Pfizer, and Corvette
Acquisition Corp. (“Merger Sub”), a Delaware
Corporation and wholly owned subsidiary of Pfizer, entered into
an Agreement and Plan of Merger (the “Merger
Agreement”), pursuant to which Pfizer and Merger Sub, have
commenced a cash tender offer for each issued and outstanding
share of Coley’s common stock, par value $.01 per share
(“Coley Common Stock” or the “Shares”), in
exchange for $8.00 in cash, net to the seller thereof in cash,
without interest, less any required withholding taxes.
Pfizer’s tender offer is subject to the terms and
conditions set forth in the Offer to Purchase, dated
November 30, 2007 (the “Offer”). The Offer and
withdrawal rights are currently scheduled to expire at midnight,
Eastern Time, on December 28, 2007, unless Pfizer extends
it in accordance with the terms of the Offer. Copies of the
Offer to Purchase and the accompanying Letter of Transmittal
have been mailed to the Coley stockholders and are filed as
exhibits to the Tender Offer Statement on Schedule TO filed
by Pfizer with the Securities and Exchange Commission (the
“SEC”) on November 30, 2007. Following the
completion of the Offer and subject to the satisfaction or
waiver of certain conditions set forth in the Merger Agreement,
Coley will merge with and into Merger Sub and the surviving
company will continue as an indirect wholly owned subsidiary of
Pfizer (the “Merger”).
The Merger Agreement requires Coley to cause Pfizer’s
designees to be elected to Coley’s Board of Directors under
certain circumstances described below.
This Information Statement is being mailed to you in accordance
with Section 14(f) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), and
Rule 14f-1
promulgated thereunder. The information set forth herein
supplements certain information set forth in the
Schedule 14D-9.
All information contained in this Information Statement
concerning Pfizer, Merger Sub and the Pfizer Designees (as
defined below) has been furnished to Coley by Pfizer and Coley
assumes no responsibility for the accuracy of any such
information.
PFIZER
DESIGNEES
Subject to the terms of the Merger Agreement, effective upon the
date Pfizer accepts for payment or exchange all tendered shares
of Coley Common Stock in the Offer, Pfizer shall be entitled to
designate the number of directors, rounded up to the next whole
number, on Coley’s Board of Directors that equals the
product of the total
I-1
number of directors on the Coley Board of Directors (giving
effect to the election of any additional directors pursuant to
Pfizer’s designation rights as described in this paragraph)
and the percentage that the number of shares of Coley Common
Stock beneficially owned by Pfizer or Merger Sub (including
shares of Coley Common Stock accepted for payment or exchange)
bears to the total number of shares of Coley Common Stock
outstanding. Coley shall take all action necessary to cause
Pfizer’s designees to be elected or appointed to the Coley
Board of Directors, including increasing the number of
directors, and seeking and accepting resignations of incumbent
directors. At such time, Coley will also use its best efforts to
cause individuals designated by Pfizer to constitute the number
of members, rounded up to the next whole number, on each
committee of the Coley Board of Directors and each board of
directors of each Coley subsidiary identified by Pfizer (and
each committee thereof) that represents the same percentage as
such individuals represent on the Coley Board of Directors, in
each case only to the extent permitted by applicable law.
Notwithstanding the foregoing, Pfizer and Coley shall use their
respective best efforts (including by reducing the number of
directors that Pfizer may designate, but in no event to less
than a majority of the directors on the Coley Board of
Directors) to ensure that at least two of the members of the
Coley Board of Directors shall, at all times prior to the
effective time of the Merger, be directors of Coley who were
directors of Coley on November 15, 2007, or the continuing
directors. If there are fewer than two continuing directors in
office for any reason, the Coley Board of Directors shall cause
a person designated by the remaining continuing director to fill
such vacancy who shall be deemed to be a continuing director for
all purposes of the Merger Agreement. If no continuing directors
then remain in office, the other directors of Coley then in
office shall designate two persons to fill such vacancies who
will not be officers or employees or affiliates of Coley, Pfizer
or Merger Sub or any of their respective subsidiaries and such
persons shall be deemed to be continuing directors for all
purposes of the Merger Agreement.
Following the election or appointment of Pfizer’s designees
and until the effective time of the Merger, the approval of a
majority of the continuing directors shall be required to
authorize any termination of the Merger Agreement by Coley, any
amendment of the Merger Agreement requiring action by the Coley
board of directors, any extension of time for performance of any
obligation or action hereunder by Pfizer or Merger Sub, any
waiver of compliance with any of the agreements or conditions
contained in the Merger Agreement for the benefit of Coley, any
amendment of the certificate of incorporation or bylaws of
Coley, and any other action of Coley which adversely affects the
holders of shares of Coley Common Stock (other than Pfizer or
Merger Sub).
Pfizer has informed Coley that its designees (the “Pfizer
Designees”) will be selected by Pfizer from among the
individuals listed below:
David R. Reid
Margaret M. Foran
Phil Kerstein
Martin Mackay
Pfizer has informed Coley that each Pfizer Designee has
consented to serve as a director of Coley if appointed or
elected. None of the Pfizer Designees currently is a director
of, or holds any positions with, Coley. Pfizer has advised Coley
that, to the best of their knowledge, none of the Pfizer
Designees or any of their affiliates beneficially owns any
equity securities or rights to acquire any such securities of
Coley nor has any such person been involved in any transaction
with Coley or any of its directors, executive officers or
affiliates that is required to be disclosed pursuant to the
rules and regulations of the Securities and Exchange Commission
(the “SEC”) other than with respect to transactions
between Pfizer, Merger Sub and Coley that have been described in
the Schedule TO filed by Pfizer, and Merger Sub with the
SEC on November 30, 2007 or the
Schedule 14D-9.
In addition, Pfizer has informed Coley that none of the
individuals listed above has, during the past five years,
(i) been convicted in a criminal proceeding or
(ii) been a party to any judicial or administrative
proceeding that resulted in a judgment, decree or final order
enjoining the person from future violations of, or prohibiting
activities subject to, U.S. federal or state securities
laws, or a finding of any violation of U.S. federal or
state securities laws.
I-2
COMMON
STOCK
As of November 23, 2007, there were 26,741,697 shares
of Coley Common Stock issued and outstanding, with Coley Common
Stock being the only class of voting securities of Coley
outstanding that would be entitled to vote for Coley directors
at a stockholders meeting if one were to be held, with each
share of Coley Common Stock being entitled to one vote.
CURRENT
MANAGEMENT OF COLEY
The Board
of Directors
Our charter provides that our business is to be managed by or
under the direction of our Board of Directors. Our Board of
Directors is divided into three classes for purposes of
election. One class is elected at each annual meeting of
stockholders to serve for a three-year term. Our Board of
Directors currently consists of seven members, classified into
three classes as follows: (1) James E. Thomas, Anthony B.
Evnin, Ph.D. and Patrick Langlois, Ph.D. constitute a
class with a term ending at the 2010 annual meeting;
(2) Kenneth M. Bate, Robert J. Hugin and Manfred E.
Karobath, M.D. constitute a class with a term ending at the
2008 annual meeting; and (3) Robert L. Bratzler, Ph.D.
constitutes a class with a term ending at the 2009 annual
meeting. There is one board seat that is currently vacant. It is
the intention of the Board to fill that vacancy when a qualified
candidate is recommended by the Board’s Nominating and
Governance Committee.
Set forth below are the names of the current directors of Coley,
their ages, their offices in Coley, if any, their principal
occupations or employment for the past five years, the length of
their tenure as directors and the names of other public
companies in which such persons hold directorships.
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Name
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Age
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Position
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Robert L. Bratzler, Ph.D.
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61
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President and Chief Executive Officer; Director
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Kenneth M. Bate(2)(3)
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57
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Director
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Anthony B. Evnin, Ph.D.(2)(3)
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66
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Director
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Robert J. Hugin(3)
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53
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Director
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Manfred E. Karobath, M.D.(1)
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66
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Director
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Patrick Langlois, Ph.D.(1)(3)
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61
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Director
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James E. Thomas(1)(2)
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47
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Director
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(1)
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Member of our Compensation Committee.
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(2)
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Member of our Nominating and Governance Committee.
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(3)
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Member of our Audit Committee.
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Robert L. Bratzler, Ph.D.
Dr. Bratzler has
been our President, Chief Executive Officer and a director since
June 1998. A co-founder of Sepracor Inc., a research-based
pharmaceutical company, in 1984, Dr. Bratzler also
co-founded and helped build and finance several Sepracor group
companies, including ChiRex, a pharmaceutical outsourcing
company, where Dr. Bratzler served as President and Chief
Executive Officer from 1996 to 1997. A former faculty member in
the department of chemical engineering at Princeton University,
Dr. Bratzler received his B.S. degree from the University
of Michigan and his Ph.D. in chemical engineering from the
Massachusetts Institute of Technology.
Kenneth M. Bate.
Mr. Bate has served as a
director since April 2005. Since January 2007, Mr. Bate has
been President, Chief Executive Officer and director of
NitroMed, Inc., a biopharmaceutical company. From March 2006 to
January 2007, Mr. Bate was Chief Operating Officer and
Chief Financial Officer of NitroMed. From January 2005 until
March 2006, Mr. Bate was a consultant with JSB Partners,
LP, a banking and advisory firm for biopharmaceuticals and life
sciences companies, which he founded in July 1999. From 2002 to
January 2005, Mr. Bate held the posts of Executive Vice
President, Head of Commercial Operations and Chief Financial
Officer at Millennium Pharmaceuticals, Inc. where he managed
commercial operations with responsibility for the company’s
I-3
two marketed products and was responsible for all financial
activities including government affairs, corporate
communications and investor relations. From 1998 to 2002, he
held positions at JSB Partners and
MPM Capital, firms that provided banking and advisory services
to biopharmaceutical companies. Mr. Bate’s experience
in biotechnology also includes six years in the positions of
Vice President and Chief Financial Officer of Biogen, Inc.
Mr. Bate received his B.A. degree from Williams College and
his MBA from The Wharton School of the University of
Pennsylvania.
Anthony B. Evnin, Ph.D.
Dr. Evnin has
served as a director since August 2003. Dr. Evnin has been
a Managing General Partner of Venrock Associates, a venture
capital firm, since 1980. Dr. Evnin presently serves on the
boards of directors of Memory Pharmaceuticals Corp., Icagen,
Inc., Infinity Pharmaceuticals, Inc., Pharmos Corporation,
Renovis, Inc., Sunesis Pharmaceuticals, Inc. and several private
companies. He led Venrock’s investment in Athena
Neurosciences, Centocor, Genetics Institute, IDEC
Pharmaceuticals, IDEXX Laboratories and Sepracor. Dr. Evnin
received his A.B. degree from Princeton University and received
his Ph.D. in chemistry from the Massachusetts Institute of
Technology.
Robert J. Hugin.
Mr. Hugin serves as President
and Chief Operating Officer of Celgene Corporation, a
biopharmaceutical company focused on the discovery, development
and commercialization of innovative therapies for unmet medical
needs in cancer and immune-inflammatory disease. He joined
Celgene in June 1999 and has been a director of Celgene since
December 2001. Mr. Hugin also serves as a director of The
Medicines Company and of Family Promise, a national non-profit
network assisting homeless families. Prior to joining Celgene,
Mr. Hugin was a Managing Director with
J.P. Morgan & Co. Inc. Mr. Hugin received an
A.B. degree from Princeton University in 1976 and an MBA from
the University of Virginia in 1985 and served as a United States
Marine Corps infantry officer during the intervening period.
Manfred E. Karobath, M.D.
Dr. Karobath has
served as a director since December 1999. Dr. Karobath
served as President of research and development and Executive
Vice President of Rhône-Poulenc Rorer (now sanofi-aventis),
a pharmaceutical company, from 1992 to 1999. Prior to that,
Dr. Karobath served as Senior Vice President and Head of
Research and Development, Switzerland for Sandoz Pharmaceuticals
(now Novartis) in Basel, Switzerland. Dr. Karobath
currently serves as a director on the boards of Qiagen N.V.,
Cardion AG, and a number of privately held companies. He became
a professor of biological psychiatry in 1979 at the University
of Vienna Medical School, from which he holds his M.D. degree.
Patrick Langlois, Ph.D.
Dr. Langlois has
been a Partner with PJL Conseils, a consulting firm, since
February 2005. He served as Executive Vice President and Chief
Financial Officer of Aventis S.A. from December 1999 to February
2005 and as Vice Chairman of Aventis’ Management Board from
2002 to 2004. At Aventis, Dr. Langlois was responsible for
finance and corporate development functions as well as three
global businesses: chemicals, protein therapeutics, and animal
health. Prior to joining Aventis, Dr. Langlois was employed
by the Rhône-Poulenc Group from 1975 to 1999, most recently
as Chief Financial Officer and Member of the Executive
Committee. Dr. Langlois currently serves as a director on
the board of Shire Pharmaceutical Group plc. Dr. Langlois
received a
License
degree from the University of Rennes
in 1967 and a Ph.D. degree from the University of Rennes in 1968
and was awarded a Diploma in Higher Banking Studies in 1974.
James E. Thomas.
Mr. Thomas has served as a director
since September 2003. He has been a partner of Thomas,
McNerney & Partners, L.L.C., a venture capital firm
based in Stamford, Connecticut since 2001. Prior to co-founding
Thomas, McNerney & Partners, Mr. Thomas was
employed by E.M. Warburg, Pincus & Co., L.L.C.’s
health care technology private equity practice from 1989 to
2000, most recently as a managing director. Mr. Thomas is
currently a board member of a number of privately held
companies. Mr. Thomas received his B.A. degree from The
Wharton School of the University of Pennsylvania and also holds
an advanced degree in economics from the London School of
Economics.
Our Board has determined that with the exception of
Dr. Bratzler, all of the members of the Board qualify as
independent under the definition promulgated by the Nasdaq Stock
Market.
I-4
Committees
of the Board of Directors and Meetings
Meeting Attendance.
During the fiscal year
ended December 31, 2006 there were eight meetings of our
Board of Directors, and the various committees of the Board met
a total of 16 times. No director attended fewer than 75% of the
total number of meetings of the Board and of committees of the
Board on which he served during fiscal 2006. The Board has
adopted a policy requiring that each member of the Board make
every effort to attend the annual meetings of our stockholders.
All directors attended our annual meeting of stockholders held
in 2007, except for James Thomas, Kenneth Bate and Patrick
Langlois.
Audit Committee.
Our Audit Committee met seven
times during fiscal 2006. This committee currently has four
members, Mr. Hugin, Mr. Bate, Dr. Evnin and
Dr. Langlois. Our Audit Committee has the authority to
retain and terminate the services of our independent
accountants, reviews annual financial statements, considers
matters relating to accounting policy and internal controls and
reviews the scope of annual audits. We believe that each member
of the Audit Committee satisfies the requirements for membership
established by the Nasdaq Global Market and the Securities and
Exchange Commission. The Board has determined that
Mr. Hugin is an “audit committee financial
expert,” as the Securities and Exchange Commission has
defined that term in Item 401 of
Regulation S-K.
A copy of the Audit Committee’s written charter is publicly
available on our website at
www.coleypharma.com
.
Compensation Committee.
Our Compensation
Committee met five times during fiscal 2006. This committee
currently has three members, Dr. Karobath,
Dr. Langlois and Mr. Thomas. The Compensation
Committee makes recommendations to the Board of Directors
regarding the compensation philosophy and compensation
guidelines for our executives, the role and performance of our
executive officers, appropriate compensation levels for our
Chief Executive Officer, which are determined without the Chief
Executive Officer present, and other executives based on a
comparative review of compensation practices of similarly
situated businesses.
The Compensation Committee is charged with establishing a
compensation policy for our executives and directors that is
designed to attract and retain the best possible executive
talent, to motivate them to achieve corporate objectives, and
reward them for superior performance. The Compensation Committee
also makes recommendations to the Board regarding the design and
implementation of our compensation plans and the establishment
of criteria and the approval of performance results relative to
our incentive plans. The Compensation Committee meets at least
twice per year and more often as necessary to review and make
decisions with regard to executive compensation matters. As part
of its review of executive compensation matters, the
Compensation Committee may delegate any of the powers given to
it to a subcommittee of the Committee.
All members of the Compensation Committee qualify as independent
under the definition promulgated by Nasdaq. A copy of the
Compensation Committee’s written charter is publicly
available on our website at
www.coleypharma.com
.
Nominating and Governance Committee.
Our
Nominating and Governance Committee met four times during fiscal
2006 and has three members, Mr. Bate, Dr. Evnin and
Mr. Thomas. This committee’s role is to make
recommendations to the full Board as to the size and composition
of the Board and its committees, and to evaluate and make
recommendations as to potential candidates. We believe that each
member of the Nominating and Governance Committee satisfies the
requirements for membership established by the Nasdaq Global
Market.
The Nominating and Governance Committee may consider candidates
recommended by stockholders as well as from other sources such
as other directors or officers, third party search firms or
other appropriate sources. For all potential candidates, the
Nominating and Governance Committee may consider all factors it
deems relevant, such as a candidate’s personal integrity
and sound judgment, business and professional skills and
experience, independence, knowledge of the industry in which we
operate, possible conflicts of interest, diversity, the extent
to which the candidate would fill a present need on the Board,
and concern for the long-term interests of the stockholders. In
general, persons recommended by stockholders will be considered
on the same basis as candidates from other sources. If a
stockholder wishes to nominate a candidate to be considered for
election as a director using the procedures set forth in the
Company’s Bylaws, it must follow the procedures described
in “Stockholder Proposals and Nominations For
Director.” If a stockholder wishes simply to propose a
candidate for consideration as a nominee by the Nominating and
Governance Committee, it should follow the procedures set forth
in Appendix B, “Procedures for Shareholders Submitting
Nominating Recommendations,” to our Nominating and
Governance Committee Charter, which is available on our website
at
www.coleypharma.com.
I-5
Compensation Committee Interlocks and Insider
Participation.
No member of our Compensation
Committee has at any time been an employee of ours. None of our
executive officers serves as a member of the Board of Directors
or compensation committee of any entity that has one or more
executive officers serving as a member of our Board of Directors
or Compensation Committee.
Shareholder
Communications to the Board
Generally, shareholders who have questions or concerns should
contact our Investor Relations department at +1
(781) 431-9019.
However, any shareholders who wish to address questions
regarding our business directly with the Board of Directors, or
any individual director, should direct his or her questions in
writing to the Board of Directors at Coley Pharmaceutical Group,
Inc., 93 Worcester Street, Wellesley, Massachusetts 02481 USA.
Communications will be distributed to the Board, or to any
individual director or directors as appropriate, depending on
the facts and circumstances outlined in the communications.
Items that are unrelated to the duties and responsibilities of
the Board may be excluded, such as:
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junk mail and mass mailings,
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resumes and other forms of job inquiries,
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surveys, and
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solicitations or advertisements.
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In addition, any material that is unduly hostile, threatening,
or illegal in nature may be excluded, provided that any
communication that is filtered out will be made available to any
outside director upon request.
Executive
Officers
The following table sets forth certain information regarding our
executive officers who are not also directors. All executive
officers other than Dr. Bratzler are at-will employees.
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Name
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Age
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Title
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Arthur M. Krieg, M.D.
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50
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Executive Vice President, Research and Development and Chief
Scientific Officer
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Charles H. Abdalian, Jr.
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57
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Senior Vice President, Finance and Chief Financial Officer
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Ferdinand E. Massari, M.D.
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48
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Senior Vice President, Drug Development and Chief Medical
Officer
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Arthur M. Krieg, M.D.
Dr. Krieg is our
scientific co-founder and has been our Executive Vice President,
Research and Development since February 2007, prior to which he
had served as Senior Vice President, Research and Development
since April 2001 and Chief Scientific Officer since May 1997.
Dr. Krieg served as Staff Fellow at the National Institute
of Arthritis, Musculoskeletal and Skin Diseases at the National
Institute of Health after his internship and residency in
internal medicine at the University of Minnesota. Dr. Krieg
has been a Professor of Medicine in the University of
Iowa’s Department of Internal Medicine since April 1999. He
is currently on an indefinite leave of absence from his position
at the University of Iowa. Dr. Krieg received his B.S. in
biology from Haverford College and his M.D. from Washington
University in St. Louis, Missouri.
Charles H. Abdalian, Jr.
Mr. Abdalian has been
our Senior Vice President, Finance and Chief Financial Officer
since March 2004. Mr. Abdalian worked as an independent
industry consultant for Bolton Management Consulting from
December 2002 to March 2004. Mr. Abdalian served as
President and Chief Executive Officer of Pelias Technologies,
Inc., an early stage private biotechnology company specializing
in drug-delivery technologies, from October 2001 to December
2002, and as Chief Operating and Financial Officer from August
2001 to October 2001. He served as Chief Financial Officer at
Emisphere Technologies, a publicly traded biotechnology company
focused on advanced drug-delivery technologies from March 1999
to July 2001. Previously, Mr. Abdalian served in various
senior financial positions with publicly traded companies and
was employed by Coopers & Lybrand (a predecessor firm
of PricewaterhouseCoopers) for 17 years, seven as a
Partner. Mr. Abdalian received his B.S. degree from Norwich
University and his MBA degree from The Wharton School of the
University of Pennsylvania.
Ferdinand E. Massari, M.D.
Dr. Massari has been
our Senior Vice President, Drug Development and Chief Medical
Officer since April 2006. Dr. Massari joined Coley with
more than 15 years of experience in the
I-6
pharmaceutical industry, including clinical drug development,
new product registration, medical affairs and marketing.
Immediately prior to joining Coley, he served as Medical
Consultant, Clinical Partners. From
2003-2005,
Dr. Massari was Vice President,
Anti-infective/Respiratory/Urology Group, Worldwide Medical
Affairs for Pfizer. Prior to Pfizer’s acquisition of
Pharmacia, he served as Pharmacia Corporation’s Vice
President, Infectious Diseases, Women’s Health, Urology and
General Medicine, Global Clinical Research from
1999-2003.
Prior to Pharmacia, Dr. Massari held positions with
Merck & Company from
1997-1998
both in marketing and clinical research. Trained as a Fellow in
Allergy/Immunology in the Laboratory of Immunoregulation at the
National Institute of Allergy and Infectious Diseases,
Dr. Massari received his M.D. at Jefferson Medical School
and served as an adjunct faculty member of the University of
Pennsylvania Medical School.
Executive
Compensation
Summary
Compensation Table
The following table shows the total compensation paid or accrued
during the fiscal year ended December 31, 2006 to
(1) our Chief Executive Officer, (2) our Chief
Financial Officer, and (3) our two next most highly
compensated executive officers who earned more than $100,000
during the fiscal year ended December 31, 2006.
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Change in
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Pension
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Value and
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Nonqualified
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Non-Equity
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Deferred
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Stock
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Option
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Incentive Plan
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Compensation
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All Other
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Year
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Salary
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Bonus
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Awards
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Awards
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Compensation
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Earnings
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Compensation
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Total
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Name and Principal Position(a)
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(b)
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($)(c)
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($)(d)
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($)(e)
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($)(1)(f)
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($)(g)
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($)(h)
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($)(i)
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($) (j)
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|
|
|
|
Robert L. Bratzler, Ph.D
President and Chief Executive Officer
|
|
|
2006
|
|
|
|
365,700
|
|
|
|
73,140
|
|
|
|
—
|
|
|
|
1,537,143
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,500
|
(2)
|
|
|
1,983,483
|
|
|
Arthur M. Krieg, M.D.
Executive Vice President, Research and Development, Chief
Scientific Officer
|
|
|
2006
|
|
|
|
280,370
|
|
|
|
42,055
|
|
|
|
—
|
|
|
|
531,614
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,292
|
(3)
|
|
|
861,331
|
|
|
Charles H. Abdalian, Jr.
Senior Vice President, Finance and Chief Financial Officer
|
|
|
2006
|
|
|
|
275,600
|
|
|
|
41,340
|
|
|
|
—
|
|
|
|
267,691
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,500
|
(4)
|
|
|
592,131
|
|
|
Ferdinand Massari, M.D.
Senior Vice President, Drug Development and Chief Medical
Officer(5)
|
|
|
2006
|
|
|
|
202,308
|
|
|
|
55,000
|
(6)
|
|
|
—
|
|
|
|
88,181
|
|
|
|
—
|
|
|
|
—
|
|
|
|
49,377
|
(7)
|
|
|
394,866
|
|
|
|
|
|
|
(1)
|
|
The amounts in column (f) reflect the dollar amount
recognized as compensation cost for financial statement
reporting purposes for the fiscal year ended December 31,
2006, in accordance with FAS 123R, of stock options granted
under our equity plans, disregarding the forfeiture estimates,
and may include amounts from stock options granted in and prior
to 2006. There can be no assurance that the FAS 123R
amounts will ever be realized. The assumptions we used to
calculate these amounts are included in footnote 8 to our
audited financial statements for the fiscal year ended
December 31, 2006 included in our Annual Report on
Form 10-K
filed with the SEC on March 9, 2007.
|
|
|
|
(2)
|
|
Includes $7,500 for 401(k) matching contributions.
|
|
|
|
(3)
|
|
Includes $7,292 for 401(k) matching contributions.
|
|
|
|
(4)
|
|
Includes $7,500 for 401(k) matching contributions.
|
|
|
|
(5)
|
|
Dr. Massari commenced employment on April 27, 2006.
|
|
|
|
(6)
|
|
Includes a one-time $25,000 signing bonus and a $30,000
performance bonus in fiscal year 2006.
|
|
|
|
(7)
|
|
Includes $6,834 for 401(k) matching contributions and $29,700
reimbursement of relocation expenses and $12,843 reimbursed for
tax gross ups in connection with the relocation expenses.
|
I-7
Annex II
November 15, 2007
The Board of Directors
Coley Pharmaceutical Group, Inc.
93 Worcester Street
Suite 101
Wellesley, MA 02481
Members of the Board of Directors:
You have requested our opinion as to the fairness, from a
financial point of view, to the holders of common stock, par
value $.01 per share (the “Shares”), of Coley
Pharmaceutical Group, Inc. (the “Company”) of the
Consideration (defined below) to be received by such holders in
the proposed Transaction (defined below). Pursuant to the
Agreement and Plan of Merger (the “Agreement”), among
the Company, Pfizer Inc. (“Acquiror”), and a
wholly-owned subsidiary of Acquiror (“Acquisition
Sub”), (i) Acquisition Sub will commence a tender
offer (the “Tender Offer”) for all of the outstanding
Shares for a purchase price of $8.00 per Share in cash (the
“Consideration”), and (ii) Acquisition Sub will
be merged with the Company in a merger (the “Merger”),
in which each Share not acquired in the Tender Offer (other than
Shares held by the Company as treasury stock or otherwise or
held by Acquiror, Acquisition Sub or by any direct or indirect
wholly-owned subsidiary of the Company or Acquiror, or Shares as
to which dissenter’s rights have been perfected) will be
converted into the right to receive the Consideration. The
Tender Offer and the Merger, taken together, are referred to as
the “Transaction”.
In arriving at our opinion, we have (i) reviewed a draft
dated November 15, 2007 of the Agreement;
(ii) reviewed certain publicly available business and
financial information concerning the Company and the industries
in which it operates; (iii) compared the proposed financial
terms of the Transaction with the publicly available financial
terms of certain transactions involving companies we deemed
relevant and the consideration received for such companies;
(iv) compared the financial and operating performance of
the Company with publicly available information concerning
certain other companies we deemed relevant and reviewed the
current and historical market prices of the Shares and certain
publicly traded securities of such other companies;
(v) reviewed certain internal financial analyses and
forecasts prepared by the management of the Company relating to
its business; and (vi) performed such other financial
studies and analyses and considered such other information as we
deemed appropriate for the purposes of this opinion.
In addition, we have held discussions with certain members of
the management of the Company with respect to certain aspects of
the Transaction, and the past and current business operations of
the Company, the financial condition and future prospects and
operations of the Company, and certain other matters we believed
necessary or appropriate to our inquiry.
In giving our opinion, we have relied upon and assumed, without
assuming responsibility or liability for independent
verification, the accuracy and completeness of all information
that was publicly available or was furnished to or discussed
with us by the Company or otherwise reviewed by or for us. We
have not conducted or been provided with any valuation or
appraisal of any assets or liabilities, nor have we evaluated
the solvency of the Company or Acquiror under any state or
federal laws relating to bankruptcy, insolvency or similar
matters. In relying on financial analyses and forecasts provided
to us, we have assumed that they have been reasonably prepared
based on assumptions reflecting the best currently available
estimates and judgments by management as to the expected future
results of operations and financial condition of the Company to
which such analyses or forecasts relate. We express no view as
to such analyses or forecasts or the assumptions on which they
were based. We have also assumed that the Transaction and the
other transactions contemplated by the Agreement will be
consummated as described in the Agreement, and that the
definitive Agreement will not differ in any material respects
from the draft thereof furnished to us. We have also assumed
that the representations and warranties made by the Company
II-1
and Acquiror in the Agreement and the related agreements are and
will be true and correct in all ways material to our analysis.
We are not legal, regulatory or tax experts and have relied on
the assessments made by advisors to the Company with respect to
such issues. We have further assumed that all material
governmental, regulatory or other consents and approvals
necessary for the consummation of the Transaction will be
obtained without any adverse effect on the Company.
Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available
to us as of, the date hereof. It should be understood that
subsequent developments may affect this opinion and that we do
not have any obligation to update, revise, or reaffirm this
opinion. Our opinion is limited to the fairness, from a
financial point of view, of the Consideration to be received by
the holders of the Shares in the proposed Transaction (other
than Acquiror and its affiliates) and we express no opinion as
to the fairness of the Transaction to, or any consideration
received in connection therewith by, the holders of any other
class of securities, creditors or other constituencies of the
Company or as to the underlying decision by the Company to
engage in the Transaction.
We have acted as financial advisor to the Company with respect
to the proposed Transaction and will receive a fee from the
Company for our services, a portion of which is payable in
connection with the delivery of this opinion and a portion of
which will become payable only if the proposed Transaction is
consummated. In addition, the Company has agreed to indemnify us
for certain liabilities arising out of our engagement. We and
our affiliates have performed in the past, and may continue to
perform, certain services for the Company, Acquiror and their
respective affiliates, all for customary compensation.
Specifically, we recently advised the Company in respect of its
adoption of its shareholders’ rights plan and acted as a
co-lead managing underwriter of the Company’s initial
public offering of Shares in August 2005, and we or certain of
our affiliates acted as bookrunner of Acquiror’s
€900mm Eurobond offering in May 2007 and its revolving
credit facility in February 2007. In the ordinary course of our
businesses, we and our affiliates may actively trade the debt
and equity securities of the Company or Acquiror for our own
account or for the accounts of customers and, accordingly, we
may at any time hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion
as of the date hereof that the Consideration to be received by
the holders of the Shares in the proposed Transaction is fair,
from a financial point of view, to such holders (other than
Acquiror and its affiliates).
This letter is provided to the Board of Directors of the Company
in connection with and for the purposes of its evaluation of the
Transaction. This opinion does not constitute a recommendation
to any shareholder of the Company as to whether any shareholder
of the Company should tender any Shares pursuant to the Offer or
as to how any such shareholder should vote on any matter. This
opinion may not be disclosed, referred to, or communicated (in
whole or in part) to any third party for any purpose whatsoever
except with our prior written approval; provided, however, that
this opinion may be reproduced in full in the
Solicitation/Recommendation Statement on
Schedule 14D-9
to be filed by the Company with the Securities and Exchange
Commission with respect to the Offer or in any proxy statement
mailed to shareholders of the Company.
Very truly yours,
J.P. MORGAN SECURITIES INC.
II-2
Annex III
November 30, 2007
Coley Pharmaceutical Group, Inc
93 Worcester Street
Suite 101
Wellesley, MA 02481
Dear Stockholder,
We are pleased to inform you that on November 15, 2007,
Coley Pharmaceutical Group, Inc.. (the “Company”)
entered into an Agreement and Plan of Merger (the “Merger
Agreement”), with Pfizer Inc. (“Pfizer”) and
Corvette Acquisition Corp., an indirect wholly owned subsidiary
of Pfizer (“Offeror”). Under the terms of the Merger
Agreement and subject to the conditions set forth in
Offeror’s Offer to Purchase and related materials enclosed
with this letter, Offeror is commencing today a cash tender
offer to purchase all of the outstanding shares of the common
stock of the Company (the “Shares”) at a purchase
price of $8.00 per share, net to the seller in cash without
interest, and subject to any required withholding taxes. Unless
subsequently extended, the tender offer is currently scheduled
to expire at 12:00 midnight, New York City Time, on
December 28, 2007.
The tender offer is conditioned upon, among other things, there
being a majority of the Shares, on a fully-diluted basis,
validly tendered and not properly withdrawn prior to the
expiration of the tender offer. If successful, the tender offer
will be followed by the merger of Offeror into the Company, with
the Company being the surviving corporation and an indirect
wholly owned subsidiary of Pfizer. In the merger, Shares not
purchased in the tender offer will be converted into the right
to receive the same $8.00 per Share cash payment, without
interest, paid in the tender offer.
The board of directors of the Company has unanimously
(1) determined that the terms of the Merger Agreement and
the transactions contemplated thereby, including the tender
offer and the merger, are fair to, and in the best interest of,
the Company and its stockholders, (2) approved the Merger
Agreement, and the transactions contemplated by the Merger
Agreement, including the tender offer and the merger, and
(3) declared the advisability of the Merger Agreement and
resolved to recommend that the Company’s stockholders
tender their Shares in the tender offer and adopt the Merger
Agreement.
ACCORDINGLY, THE BOARD OF DIRECTORS OF THE COMPANY
RECOMMENDS THAT YOU ACCEPT THE TENDER OFFER, TENDER YOUR SHARES
TO OFFEROR PURSUANT TO THE TENDER OFFER AND, IF NECESSARY, ADOPT
THE MERGER AGREEMENT.
In arriving at its recommendations, the Company’s board of
directors gave careful consideration to a number of factors that
are described in the enclosed
Schedule 14D-9.
Offeror’s Offer to Purchase and related materials,
including a letter of transmittal for use in tendering your
Shares set forth the terms and conditions of Offeror’s
tender offer and provide instructions as to how to tender your
shares. We urge you to read each of the enclosed materials
carefully.
Best regards,
Robert L. Bratzler, Ph.D.
President and Chief Executive Officer
Coley Pharmaceutical Group, Inc
III-1
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