<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SYNBIOTICS CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)1(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
SYNBIOTICS CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held July 12, 1995
The Annual Meeting of Shareholders of Synbiotics Corporation will be held at the
Radisson Suite Hotel (Rancho Bernardo), 11520 West Bernardo Court, San Diego,
California 92127, on July 12, 1995, at 10:30 a.m. for the following purposes:
1. To elect six directors;
2. To consider a proposal to approve the 1995 Stock Option/Stock Issuance
Plan;
3. To consider a proposal to amend Article I, Section 2 of the Bylaws;
4. To ratify the selection of Price Waterhouse LLP as Independent Accountants;
and to transact such other business as may properly come before the meeting and
any postponement or adjournment thereof.
The Board of Directors has fixed May 15, 1995, as the record date for
determining the shareholders entitled to notice of and to vote at the Annual
Meeting and any postponement or adjournment thereof.
WE WOULD BE GRATEFUL IF YOU WOULD PROMPTLY SIGN AND RETURN THE ENCLOSED PROXY
CARD.
Michael K. Green
Secretary
May 25, 1995
<PAGE>
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Synbiotics Corporation, a California corporation (the
"Company"), 11011 Via Frontera, San Diego, California 92127, of proxies in the
accompanying form to be used at the Annual Meeting of Shareholders to be held at
the Radisson Suite Hotel (Rancho Bernardo), 11520 West Bernardo Court, San
Diego, California, 92127, at 10:30 a.m. on July 12, 1995, and any postponement
or adjournment thereof.
A proxy may be revoked at any time before it is exercised. Any shareholder
giving a proxy may revoke it prior to its use at the Annual Meeting (1) by
delivering a written notice expressly revoking the proxy to the Company's
Secretary at the Company's offices, (2) by signing and delivering to the Company
at its offices, or to the place of the Annual Meeting, a later dated proxy or
(3) by attending the Annual Meeting and casting his or her votes personally. A
proxy is not revoked by the death or incapacity of the maker unless, before the
vote is counted, written notice of such death or incapacity is received by the
Company.
On the matters coming before the meeting as to which a choice has been
specified by the shareholder on the proxy, the shares will be voted accordingly.
If no choice is so specified, the shares will be voted FOR the election of the
six nominees for director listed in this Proxy Statement, FOR the approval of
proposals 2, 3 and 4 described in the Notice of Meeting and this Proxy
Statement, and in the discretion of the proxyholders as to any other business
which may properly come before the meeting.
May 15, 1995, has been fixed as the record date for determining the shareholders
entitled to notice of and to vote at the Annual Meeting. As of the close of
business on such date, the Company had 5,803,376 shares of Common Stock
outstanding and entitled to vote. Outstanding shares of Common Stock are
entitled to one vote each on all matters. Under California law, shareholders
are permitted to cumulate votes for the election of directors whose names have
been placed in nomination. Therefore, in voting for directors, each outstanding
share of Common Stock would be entitled to six votes which may be cast for one
candidate or distributed in any manner among the nominees for director.
However, the right to cumulate votes in favor of one or more candidates may not
be exercised until the candidate or candidates have been nominated and any
shareholder has given notice at the Annual Meeting of the intention to cumulate
votes.
The proxyholders (if authority to vote for one or more nominees is not withheld)
will have full discretion and authority to vote cumulatively and to allocate
votes among any or all of the Board of Directors nominees as they may determine
or, if authority to vote for a specified candidate or candidates has been
withheld, among those candidates for whom authority to vote has not been
withheld.
The expense of printing and mailing proxy material will be borne by the Company.
The approximate date these proxy solicitation materials will be first sent to
shareholders is May 25, 1995.
ELECTION OF DIRECTORS
(ITEM 1 ON THE PROXY CARD)
Six directors are to be elected at the Annual Meeting to serve until the next
Annual Meeting and until their respective successors are elected or appointed.
Unless authority to vote for one or more nominees is withheld, it is intended
that the proxyholders will vote for the election of the nominees named below.
In the event any of them shall become unable or unwilling to accept nomination
or election, the shares represented by the enclosed proxy will be voted for the
election of such other person as the Board of Directors may recommend in his
place. Each of the nominees named is currently a member of the Board of
Directors of the Company.
1
<PAGE>
The following information is furnished regarding the nominees of the Company.
<TABLE>
<CAPTION>
Name; Positions; Business Experience During the Director
Past Five Years; Directorships in Reporting Companies Since Age
- ------------------------------------------------------------------------------------- -------- ---
<S> <C> <C>
Patrick Owen Burns................................................................... 1988 57
Vice President of R&D Funding Corp, an affiliate of Prudential Securities Inc.,
and Senior Vice President of Prudential Securities Inc.; Director of Ecogen,
Inc., Creative BioMolecules, Inc. and Texas Biotechnology Corporation.
James C. DeCesare.................................................................... 1993 64
President and Chief Operating Officer of Boehringer Ingelheim Animal Health
from 1986 to 1992 when he retired; currently a consultant to the animal health
and pharmaceutical industries.
Theodor H. Heinrichs................................................................. 1984 68
Formerly, Chairman of the Board of Directors of the Company (September
1985 to August 1994); General Partner, H&Q Life Science Ventures, a San
Francisco based investment banking and venture capital firm since 1985;
Director of Telios Pharmaceuticals, Inc., Corvas International, Inc. and Abaxis,
Inc.
M. Blake Ingle, Ph.D................................................................. 1994 53
President and Chief Executive Officer of Canji, Inc. since March 1993; Acting
President of Telios Pharmaceuticals, Inc. since December 1994; President and
Chief Executive Officer of IMCERA Group, Inc. (now known as The
Mallinckrodt Group) from 1991 to 1993; President and Chief Operating
Officer of IMCERA Group, Inc. (now known as The Mallinckrodt Group)
from 1990 to 1991; Director of Telios Pharmaceuticals, Inc. and Corvas
International, Inc.
Donald E. Phillips................................................................... 1987 62
Chairman of the Board of Directors of the Company since August 1994; Vice
Chairman of the Board of Directors of the Company from 1993 to August
1994; a consultant to IMCERA Group, Inc. (now known as The Mallinckrodt
Group) from 1988 until November 1, 1990, when he retired; Director of
Potash Corporation of Saskatchewan (Canada).
Robert L. Widerkehr.................................................................. 1992 57
President and Chief Executive Officer of the Company since August 1992;
Chief Operating Officer of the Company from 1991 to 1992; Vice President
for the U.S. and Canada of SmithKline Beecham Animal Health from 1989 to
1991.
</TABLE>
The Board of Directors of the Company held a total of thirteen meetings during
the nine month fiscal year ended December 31, 1994. Except for Mr. Heinrichs,
each director attended more than seventy-five percent (75%) of the meetings of
the Board of Directors (and the Board committees of which he was a member) held
during the time he was a member of the Board.
2
<PAGE>
The Company currently has Compensation and Audit Committees of the Board of
Directors. The Company does not have a Nominating Committee of the Board of
Directors. The current membership of each committee is as follows:
Compensation Committee Audit Committee
James C. DeCesare Patrick Owen Burns, Chairman
Theodor H. Heinrichs, Chairman Donald E. Phillips
Donald E. Phillips
The function of the Compensation Committee is to review the Company's
compensation policies. The Audit Committee oversees the Company's accounting
and financial reporting policies, reviews with the independent accountants the
accounting principles and practices followed, reviews the annual audit and
financial results and makes recommendations to the Board regarding any of the
preceding. The Audit Committee met twice and the Compensation Committee met
once during the nine month fiscal year ended December 31, 1994.
Mr. Ingle became an executive officer of Telios Pharmaceuticals, Inc. in
December 1994, shortly after that company's primary product failed a clinical
trial. In January 1995, Telios filed a voluntary bankruptcy petition. The
Company believes these facts do not impugn Mr. Ingle's ability or integrity in
any way.
Executive Officers and Significant Employees
NAME, AGE, AND BUSINESS EXPERIENCE
POSITION AND DURATION DURING THE PAST FIVE YEARS
- ------------------------------------- ----------------------------------
Executive Officers
President and Chief Executive Officer - Robert L. Widerkehr (57)
since August 1992 Formerly, Vice President for the U.S.
and Canadian operations of SmithKline
Beecham Animal Health 1989 - 1991
Vice President - Finance, Chief Michael K. Green (39)
Financial Officer Formerly, Senior Manager with Price
and Secretary - since May 1991 Waterhouse LLP 1980 - 1991
Significant Employees
Corporate Controller and Chief Keith A. Butler (33)
Accounting Officer - Formerly, Manager with Price
since March 1991 Waterhouse LLP 1984 -1991
Director of Operations - Clifford Frank (45)
since September 1992 Formerly, Manager of Manufacturing
for the Company 1991 - 1992;
President of Akorn Pharmaceuticals
and President of Walnut
Pharmaceuticals, a division of Akorn
Pharmaceuticals, 1990 - 1991; Manager
of Manufacturing with Schering-Plough
Corporation 1984 - 1990
3
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's Common
Stock as of March 31, 1995, of each of the Company's directors, director
nominees, 5% shareholders and the Named Executive Officer, and of the directors
and executive officers of the Company as a group. Each person has sole
investment and voting power over the shares shown. Percentages are calculated
in accordance with the method set forth in the Securities and Exchange
Commission's rules.
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL OWNERSHIP
-------------------------------
NUMBER OF PERCENT
NAME OF INDIVIDUAL OR IDENTITY OF GROUP SHARES OF CLASS
- ------------------------------------------ --------- --------
<S> <C> <C>
Patrick Owen Burns/(1)//(3)/............... 565,802 9.2%
c/o R&D Funding Corp
1 Seaport Plaza
16th Floor
New York, NY 10292
James C. DeCesare/(3)/.................... 17,250 *
5260 S. Landings Drive, #200
Ft. Myers, FL 33919
Theodor H. Heinrichs/(2)//(3)/.............. 541,790 8.8%
c/o H&Q Life Science Ventures
One Bush Street
San Francisco, CA 94104
M. Blake Ingle, Ph.D./(3)/................ 3,125 *
c/o Canji, Inc.
3030 Science Park Road
Suite 302
San Diego, CA 92121
Donald E. Phillips/(3)/................... 31,749 *
372 Fannin Landing Circle
Brandon, MS 39042
Robert L. Widerkehr/(3)/.................. 191,625 3.2%
c/o Synbiotics Corporation
11011 Via Frontera
San Diego, CA 92127
Daniel F. Cain............................ 350,000 5.7%
c/o Paravax
2301 Research Boulevard
Suite 110
Fort Collins, CO 80526
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
AMOUNT OF BENEFICIAL OWNERSHIP
-------------------------------
NUMBER OF PERCENT
NAME OF INDIVIDUAL OR IDENTITY OF GROUP SHARES OF CLASS
- ------------------------------------------ --------- --------
<S> <C> <C>
Gruber & McBaine Capital Management/(4)/... 595,300 9.7%
c/o John P. Broadhurst, Esq.
Shartsis, Friese & Ginsburg
One Maritime Plaza
18th Floor
San Francisco, CA 94111
H&Q Life Science Ventures.................. 489,041 8.0%
One Bush Street
San Francisco, CA 94104
The Mallinckrodt Group.................... 458,806 7.5%
7733 Forsyth Boulevard
St. Louis, MO 63105
Edward T. Maggio, Ph.D./(5)/............... 461,999 7.5%
c/o ImmunoPharmaceutics, Inc.
11011 Via Frontera
San Diego, CA 92127
PruTech Research and Development
Partnership II............................. 460,303 7.5%
3945 Freedom Circle
Suite 800
Santa Clara, CA 95054
All executive officers and directors
as a group/(3)/ (7 persons).............. 1,369,966 22.3%
</TABLE>
- ---------------
/*/ Less than one percent.
/(1)/ Includes 460,303 shares of Common Stock held by PruTech Research and
Development Partnership II and 70,000 shares of Common Stock held by
PruTech Project Development Partnership, both of which are public
research and development partnerships sponsored by R&D Funding Corp. Mr.
Burns is a Vice President of R&D Funding Corp, and disclaims any
beneficial ownership of these shares.
/(2)/ Includes 489,041 shares of Common Stock held by H&Q Life Science
Ventures, a California limited partnership. Mr. Heinrichs is a general
partner of H&Q Life Science Ventures.
/(3)/ Includes options to purchase shares of Common Stock, which are
exercisable on or before June 30, 1995, as follows: Mr. Burns - 35,499
shares; Mr. DeCesare - 12,250 shares; Mr. Green - 13,750 shares; Mr.
Heinrichs - 51,749 shares; Dr. Ingle - 3,125 shares; Mr. Phillips -
31,749 shares; Mr. Widerkehr -194,500 shares.
/(4)/ Owned by a group of six persons who granted their respective powers of
attorney to Gruber & McBaine Capital Management ("GMCM"), a California
corporation, to handle any and all necessary filings in connection with
these securities. The direct ownership of these shares is as follows:
GMCM - 38,500 shares; Jon D. Gruber ("Gruber") - 68,000 shares; J.
Patterson McBaine ("McBaine") - 55,400 shares; Lagunitas Partners
("Lagunitas") - 235,800; GMJ Investments, LP ("GMJ") - 6,500 shares;
Proactive
5
<PAGE>
Partners, a California Limited Partnership ("Proactive") - 191,100
shares. Gruber and McBaine are the sole directors and sole executive
officers of GMCM. GMCM, Gruber and McBaine are the general partners of
Lagunitas and GMJ. Gruber and McBaine are general partners in the entity
which is the general partner of Proactive. Gruber and McBaine disclaim
beneficial ownership of the shares held by GMCM, Lagunitas, GMJ and
Proactive except to the extent of their respective pecuniary interests.
GMCM disclaims beneficial ownership of the shares held by Gruber,
McBaine, Lagunitas and GMJ except to the extent of its pecuniary
interest.
/(5)/ Includes options to purchase 6,999 shares of Common Stock, which are
exercisable on or before June 30, 1995, held by Dr. Maggio.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table provides certain summary information concerning the
compensation earned by the Company's President and Chief Executive Officer (the
"Named Executive Officer") for services rendered in all capacities to the
Company for the nine month fiscal year ended December 31, 1994 and the fiscal
years ended March 31, 1994 and 1993:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION> Long-Term
Annual Compensation Compensation
-------------------------------------------------- Awards
Other ------------
Name and Annual Securities All Other
Principal Fiscal Compen- Underlying Compensa-
Position Year Salary ($)/(1)/ Bonus ($) sation ($) Options (#) tion ($)/(2)/
- ------------ ------ --------------- --------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Robert L.Widerkehr 1994/(5)/ $131,250 - $8,750/(4)/ 22,000 $2,625
President and Chief 1994 $135,000 $19,280/(6)/ $8,750/(4)/ 78,000 $2,700
Executive Officer/(3)/ 1993 $131,250 - $8,750/(4)/ - $2,205
</TABLE>
- --------------
/(1)/ Includes amounts deferred under the 401(k) Compensation Deferral Savings
Plan pursuant to Section 401(k) of the Internal Revenue Code of 1986, as
amended.
/(2)/ Consists of matching contributions made by the Company to Mr. Widerkehr's
401(k) account.
/(3)/ Mr. Widerkehr was named President and Chief Executive Officer in August
1992 and previously served as the Company's Senior Vice President.
/(4)/ Forgiveness of a loan made to Mr. Widerkehr to defray relocation expenses
at the rate of $8,750 per year. As of December 31, 1994, the balance due
was $2,188.
/(5)/ Information is for the nine month fiscal year ended December 31, 1994.
/(6)/ Bonus was earned for the fiscal year ended March 31, 1994 and was not
disclosed in the proxy statement for the August 25, 1994 annual meeting
as the amount of the bonus was not calculable as of the date the proxy
statement was prepared.
The following table contains information concerning the grant of stock options
to the Named Executive Officer:
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
- ----------------------------------------------------------------------------------------------------
Number of % of Total Options
Securities Granted to
Underlying Options Employees in Exercise
Name Granted (#)/(1)/ Fiscal Year Price ($/Sh)/(2)/ Expiration Date
- ------ ------------------ ------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Robert L. Widerkehr 22,000 12.36% $3.88 04/19/04
</TABLE>
- --------------
/(1)/ The options become exercisable ratably over a four-year period following
the date of grant. The grant date for the options listed in the above
table is April 19, 1994. The option has a maximum term of 10 years,
subject to earlier termination in the event of optionee's cessation of
service with the Company.
/(2)/ The exercise price may be paid in cash, in shares of Common Stock valued
at the fair market value on the date of exercise or through a cashless
exercise procedure under which the optionee provides irrevocable
instructions to a brokerage firm to sell the purchased shares and to
remit to the Company, out of the sale proceeds, an amount equal to the
exercise price plus all applicable withholding taxes. The Compensation
Committee may also assist an optionee in the exercise of an option by (i)
authorizing a loan from the Company in a principal amount not exceeding
the aggregate exercise price plus any tax liability incurred in
connection with the exercise or (ii) permitting the optionee to pay the
option price in installments over a period of years upon terms
established by the Compensation Committee. The Plan Administrator also
has the authority to reprice outstanding options through the cancellation
of those options and the grant of replacement options with an exercise
price equal to the fair market value of the option shares on the regrant
date.
The following table provides information, with respect to the Named Executive
Officer, concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year. No shares were
acquired on exercise of options by the Named Executive Officer during the fiscal
year ended December 31, 1994.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised in-the-Money
Unexercised Options at December 31, 1994 (#) Options at December 31, 1994/(1)/
-------------------------------------------- ---------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Robert L. Widerkehr 163,250 86,750 $ - $ -
</TABLE>
- --------------
/(1)/ Value is defined as market price of the Company's Common Stock at fiscal
year end less exercise price. The closing sale price of the Company's
Common Stock at December 31, 1994 was $1.94.
For their services as directors, each of the outside directors of the Company
received fees of $1,000, plus $500 for travel, for each Board of Directors
meeting attended, except for Mr. Burns. Fees payable to Mr Burns are paid
instead to R&D Funding Corp. Outside directors do not receive any fees for
committee meetings attended as committee members. Employee directors do not
receive any fees for attendance at meetings of the Board of Directors or
committee meetings. In addition, Mr. Heinrichs and Mr. Phillips were paid fees
of $10,415 and $8,332, respectively, in the nine month fiscal year ended
December 31, 1994 pursuant to consulting agreements with the Company. On August
25, 1994, Mr. Burns was granted an option to purchase 10,000 shares of Common
Stock at
7
<PAGE>
$2.63 per share. One half of the option, which expires on August 25, 2004,
vested immediately while the remaining one half vests ratably over a one-year
period following the grant date. On December 15, 1994, Dr. Ingle was granted an
option to purchase 5,000 shares of Common Stock at $2.38 per share. The option
vests ratably over the nine-month period following the grant date and expires on
December 15, 2004.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 31, 1993, the Company terminated a research and development agreement
with PruTech Research and Development Partners II (PruTech). Pursuant to the
termination agreement, PruTech made a final payment of $569,423, assigned all
its rights under the research and development agreements to the Company and has
no further funding obligations. The Company has issued 530,303 shares of Common
Stock to PruTech and has no further royalty or research obligations.
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF ALL SIX NOMINEES, SET FORTH IN
ITEM 1 ON THE PROXY CARD. The six persons receiving the highest number of votes
will be elected as directors. Abstentions and broker non-votes will have no
influence in the election of directors.
APPROVAL OF 1995 STOCK OPTION/STOCK ISSUANCE PLAN
(ITEM 2 ON THE PROXY CARD)
On April 27, 1995, the Board of Directors adopted the Company's 1995 Stock
Option/Stock Issuance Plan (the "1995 Plan"), subject to subsequent approval by
the shareholders. The 1995 Plan is intended to unify the Company's stock option
program; upon shareholder approval of the 1995 Plan all outstanding options
under the Company's 1983, 1984, 1986, 1987, 1988, 1991 and 1994 Stock Option
Plans (the "Prior Plans") will be incorporated into the 1995 Plan and the Prior
Plans will be terminated as to any future grants. (The 1983 and 1984 Stock
Option Plans have already expired by their own terms.) The 1,300,000 shares of
Company common stock authorized for issuance under the 1995 Plan are 282,055
more than the sum of the 711,862 shares currently the subject of options
outstanding under the Prior Plans and 306,083 shares currently reserved and
available for issuance under, but not currently the subject of any grants under,
the Prior Plans.
The 1995 Plan also differs from the Prior Plans in that it (a) allows the grant
of both incentive stock options and non-qualified stock options, (b) provides
for automatic stock option grants to Directors, (c) allows direct stock
issuances, and (d) provides for acceleration of vesting upon a hostile takeover
of the Company. The 1995 Plan also differs from one or more of the Prior Plans
in several other ways, many of which involve providing flexibility to the
Company in areas where the Prior Plans did not allow flexibility.
PLAN STRUCTURE
The 1995 Plan is divided into three separate parts:
. The "Discretionary Grant Program," under which employees and consultants
(other than nonemployee Board members) may, at the discretion of the Plan
Administrator, be granted options to purchase shares of the Synbiotics
Common Stock at an exercise price not less than 85% of the fair market
value of each such share on the grant date. The granted options may be
either incentive stock options which are designed to meet the requirements
of Section 422 of the Internal Revenue Code or nonstatutory options not
intended to satisfy such requirements.
. The "Stock Issuance Program," under which eligible individuals will be
allowed to effect immediate purchases of Synbiotics Common Stock at the
fair market value of each such share, or at discounts of up
8
<PAGE>
to 15% from the fair market value of any such share, including shares which
may be issued in consideration for past or future services without any cash
payment required of the participant.
. The "Automatic Grant Program," under which an option grant will be made to
each individual upon first joining the Board of Directors as a nonemployee
member and subsequent annual automatic option grants will be made to each
individual who is re-elected as a nonemployee director of Synbiotics.
As of March 31, 1995, approximately 59 officers and employees were eligible to
participate in the Discretionary Grant Program and the Stock Issuance Program.
There are currently five nonemployee directors standing for re-election who will
be eligible to receive automatic grants under the Automatic Grant Program.
PLAN ADMINISTRATION
Option grants under the Discretionary Grant Program and stock issuances under
the Stock Issuance Program are to be made by a committee of two or more
nonemployee Board members (the "Plan Administrator") appointed by the Board.
Members of the committee will be ineligible to participate in the 1995 Plan or
in any stock option, stock issuance or other stock plan of Synbiotics, except to
the extent such individuals become entitled to a special option grant under the
Automatic Grant Program. The selected committee members will serve for such
period of time as the Board may determine and will be subject to removal by the
Board at any time.
The Committee will have the sole and exclusive authority, subject to the
provisions of the 1995 Plan, to determine the eligible individuals who are to
receive options under the Discretionary Grant Program or the Stock Issuance
Program, the number of shares to be covered by each granted option or issuance,
the date or dates on which the option is to become exercisable and the maximum
term for which the option is to remain outstanding. The Committee will also
have the authority to determine whether the granted option is to be an incentive
stock option ("Incentive Option") under the Federal tax laws and to establish
rules and regulations for proper plan administration. Options grants under the
Automatic Grant Program will be made in strict compliance with the express
provisions of that program, and the Committee will not have any discretionary
authority with respect to those option grants.
EFFECT ON PRIOR PLANS
If adopted, the 1995 Plan will replace and serve as the successor to the Prior
Plans. Following the effective date of the Plan, no further option grants will
be made under the Prior Plans and all options outstanding under the Prior Plans
as of such date will be incorporated into the 1995 Plan and treated as
outstanding options under the 1995 Plan. However, each outstanding option so
incorporated shall continue to be governed solely by the terms of the documents
evidencing such option. No provision of the 1995 Plan will adversely affect or
diminish the rights or obligations of the optionees of the incorporated options.
Subject to the rights of the optionee under the incorporated option documents,
the Plan Administrator's discretion under the 1995 Plan may be exercised with
respect to incorporated options to the same extent as it is exercisable with
respect to options originally granted under the 1995 Plan.
ISSUABLE SHARES
Shares of the Synbiotics Common Stock will be available for issuance under the
1995 Plan. The maximum number of shares of Common Stock reserved for issuance
over the 10 year term of the 1995 Plan, measured from the Effective Date of the
1995 Plan, will not exceed 1,300,000 shares. Such authorized share reserve is
comprised of (i) the number of shares that remained available for issuance under
the Prior Plans, including the shares subject to the outstanding options
incorporated into the 1995 Plan and any other shares that would have been
available for future option grant or share issuance under the predecessor plans
as last approved by the stockholders, and (iii) an additional 282,055 shares.
The share reserve available for issuance under the 1995 Plan will be subject to
periodic adjustment for changes in Synbiotics's Common Stock occasioned by stock
splits, stock dividends, recapitalizations, conversions or other changes
affecting the outstanding Common Stock as a class without Synbiotics's receipt
of consideration. To the extent any of the incorporated options are
subsequently exercised, the number of shares issued
9
<PAGE>
under those options will reduce, on a share-for-share basis, the number of
shares available for issuance under the 1995 Plan.
Should an option expire or terminate for any reason prior to exercise in full
(including options canceled in accordance with the cancellation-regrant
provisions described below), the shares subject to the portion of the option not
so exercised will be available for subsequent option grants or share issuances
under the 1995 Plan. All shares issued under the 1995 Plan, whether or not such
shares are subsequently reacquired by Synbiotics pursuant to its repurchase
rights under the 1995 Plan, will reduce on a share-for-share basis the number of
shares of Synbiotics Common Stock available for subsequent grants.
No more than 800,000 shares may be granted to any one optionee over the lifetime
of the 1995 Plan.
TERMS OF DISCRETIONARY GRANT PROGRAM
Option Price and Term. The option price per share for incentive stock options
will not be less than 100% of the fair market value of each share of Synbiotics
Common Stock issuable under the option on the grant date of such option. The
option price per share for nonstatutory stock options may not be less than 85%
of the fair market value per share of each share of Synbiotics Common Stock
issuable under the option on the grant date of such option. No option will have
a term in excess of 10 years measured from the grant date.
Valuation. For purposes of establishing the option exercise price for
Synbiotics Common Stock, the "Fair Market Value" per share of the stock on any
relevant date will be the closing selling price per share on such date, as
quoted on the NASDAQ National Market. If there is no reported selling price for
such date, then the closing selling price for the last previous date for which
such quotation exists will be determinative of Fair Market Value.
Vesting of Options. The vesting schedule for each granted option will be
determined by the Plan Administrator and will be set forth in the instrument
evidencing such grant. The granted option may be (i) immediately exercisable
for vested shares, (ii) immediately exercisable for unvested shares subject to
Synbiotics's repurchase rights or (iii) exercisable in installments for vested
shares over the optionee's period of service.
Payment. Upon exercise of the option, the option price for the purchased shares
will become immediately payable in cash or in shares of common stock valued at
fair market value on the date of exercise. The option may also be exercised
through a cashless exercise procedure pursuant to which the optionee provides
irrevocable written instructions to a designated brokerage firm to effect the
immediate sale of the purchased shares and remit to Synbiotics, out of the sale
proceeds, an amount equal to the aggregate option price payable for the
purchased shares plus all applicable withholding taxes.
Financial Assistance. The Plan Administrator may assist any optionee (including
an officer) in the exercise of one or more outstanding options under the 1995
Plan by (i) authorizing a loan from Synbiotics or (ii) permitting the optionee
to pay the option price in installments over a period of years. The terms and
conditions of any such loan or installment payment will be established by the
Plan Administrator in its sole discretion, but in no event will the maximum
credit extended to the optionee exceed the aggregate option price for the
purchased shares plus any Federal or State tax liability incurred in connection
with the option exercise.
Termination of Service. Should the optionee cease to remain in Synbiotics's
service while holding one or more options under the 1995 Plan, then those
options will not remain exercisable beyond the limited post-service period
designated by the Plan Administrator at the time of the option grant (subject to
certain minimum post-service periods). Under no circumstances, however, may any
option be exercised after the specified expiration date of the option term.
Each such option will, during the period it remains exercisable, be exercisable
for the number of shares for which the option was exercisable on the date of the
optionee's cessation of service.
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<PAGE>
Should the optionee die while holding one or more outstanding options, then the
personal representative of the optionee's estate or the person or persons to
whom each such option is transferred pursuant to the optionee's will or in
accordance with the laws of inheritance will have the right to exercise such
option for any or all of the shares for which the option is exercisable on the
date of the optionee's cessation of service, less any option shares subsequently
purchased by the optionee prior to death. Such right will lapse, and the option
will terminate, upon the earlier of (i) the end of the limited post-service
period designated by the Plan Administrator at the time of the option grant or
(ii) the specified expiration date of the option term.
The Plan Administrator will have complete discretion to extend the period
following the optionee's termination of service during which his or her
outstanding options may be exercised and/or to accelerate the exercisability of
such options in whole or in part. Such discretion may be exercised at any time
while the options remain outstanding, whether before or after the optionee's
actual cessation of service.
Corporate Transaction. Except to the extent otherwise provided in the option
documents, each option share will become fully vested in the event of certain
Corporate Transactions unless the option is assumed or is replaced with a cash
incentive program which preserves the material benefits of the options. Upon
consummation of the Corporate Transaction, all options which are not assumed
will be canceled and cease to exist. The options or cash incentive programs
which replace any options which do not accelerate will provide for full vesting
in the event of involuntary termination of employment within 18 months following
the Corporate Transaction.
For purposes of the above, a Corporate Transaction includes (i) a merger or
consolidation in which the Synbiotics is not the surviving entity (except for a
transaction the principal purpose of which is to change the State of
incorporation), (ii) the sale, transfer or other disposition of all or
substantially all of the assets of Synbiotics, or (iii) any reverse merger in
which Synbiotics is the surviving entity but in which securities possessing more
than fifty percent (50%) of the total combined voting power of Synbiotics are
transferred to holders different from those who held Synbiotics' securities
immediately prior to such merger.
Stockholder Rights and Option Assignability. No optionee is to have any
stockholder rights with respect to the option shares until such optionee has
exercised the option, paid the option price for the purchased shares and been
issued a stock certificate for such shares. Options are not assignable or
transferable other than by will or by the laws of inheritance following the
optionee's death, and the option may, during the optionee's lifetime, be
exercised only by the optionee.
Cancellation/Regrant. The Plan Administrator will have the authority to effect,
on one or more separate occasions, the cancellation of outstanding options under
the Discretionary Grant Program which have exercise prices in excess of the then
current market price of the common stock and to issue replacement options with
an exercise price based on the lower market price of the common stock at the
time of grant.
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<PAGE>
TERMS OF STOCK ISSUANCE PROGRAM
Issue Price. The purchase price per share will not be less than 85% of the fair
market value of any share of Synbiotics Common Stock being issued on the date
the Plan Administrator authorizes the issuance.
Vesting of Shares. The vesting schedule for each share issued will be
determined by the Plan Administrator and set forth in the issuance agreement.
The shares may be fully and immediately vested upon issuance or may vest in one
or more installments, subject to Synbiotics's repurchase right, over the
participant's period of service.
Stockholder Rights. The recipient of the share issuance will have full
stockholder rights, including voting and dividend rights, with respect to the
issued shares, whether or not the shares are vested. However, the recipient may
not sell, transfer or assign any unvested shares issued under the 1995 Plan,
except for certain limited family transfers.
Repurchase Rights. Should the recipient of unvested shares cease to remain in
Synbiotics's service before vesting in such shares, then those unvested shares
are to be immediately surrendered to Synbiotics for cancellation, and the
recipient will have no further stockholder rights with respect to those shares.
To the extent the surrendered shares were previously issued to the recipient for
consideration paid in cash or promissory note, Synbiotics will refund the cash
consideration paid for the surrendered shares and cancel the principal balance
of the note to the extent attributable to such surrendered shares.
Payment. Upon issuance of the shares, the issue price for the purchased shares
will become immediately payable in cash, in shares of Synbiotics Common Stock
valued at fair market value on the date of issuance, or by promissory note
payable to Synbiotics's order. The promissory note may, at the discretion of
the Plan Administrator, be subject to cancellation over the participant's period
of service. Shares may also be issued for past or future services, without any
cash or other payment required of the participant.
Corporate Transaction. Except to the extent otherwise provided in the stock
issuance documents, all repurchase rights will terminate and each share will
become fully vested in the event of a Corporate Transaction (as defined above)
unless the repurchase rights are assigned to the successor corporation.
Following consummation of the Corporate Transaction, all repurchase rights which
are assigned to the successor will terminate and cease to exist in the event of
involuntary termination of employment within 18 months following the Corporate
Transaction.
TERMS OF AUTOMATIC GRANT PROGRAM
Each individual who first becomes a nonemployee Board member, whether through
election by the stockholders or appointment by the Synbiotics Board, and who was
not otherwise in the prior employ of Synbiotics will automatically be granted,
at the time of such initial election or appointment, a non-statutory stock
option to purchase 7,000 shares of Synbiotics Common Stock. Further, at each
annual Stockholders Meeting, each individual who is at that time reelected as a
nonemployee Board member will automatically be granted a nonstatutory stock
option under the new Automatic Grant Program to purchase an additional 7,000
shares of Synbiotics Common Stock. There is no limit on the number of such
7,000-share option grants the nonemployee Synbiotics Board member may receive
over his or her period of Board service.
Each such option grant will be subject to the following terms and conditions:
(i) The option price per share will be equal to 100% of the Fair Market Value
per share of Common Stock on the grant date.
(ii) Each option is to have a term of 10 years measured from the grant date.
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<PAGE>
(iii) Each automatic grant will be immediately exercisable in full, provided
that any shares issued upon the exercise of an automatic option grant
shall be subject to repurchase at the option exercise price if the Board
member ceases to be in service prior to the vesting of such shares.
(iv) The shares shall vest in four equal quarterly installments over the
optionee's period of service following the automatic option grant.
(v) The options will remain exercisable during the remainder of their term
following the optionee's cessation of Synbiotics Board membership for any
reason, provided that the option shall be exercisable following the
termination of service only with respect to the shares which were vested
as of such termination of service date. Should the optionee die while any
option is still exercisable, then such option may be exercised by the
personal representative of the optionee's estate or the person to whom the
grant is transferred by the optionee's will or the laws of inheritance.
(vi) The remaining terms and conditions of the option will in general conform
to the terms described above for option grants made under the
Discretionary Grant Program and will be incorporated into the option
agreement evidencing the automatic grant.
(vii) The terms and provisions of the Automatic Grant Program and the
outstanding options thereunder may not be amended or modified at intervals
more frequently than once every six months, except as otherwise required
to comply with applicable Federal tax laws and regulations.
Each option share will become fully vested in the event of a Corporate
Transaction (as defined above). Upon consummation of the Corporate Transaction,
all options will be canceled and cease to exist.
CHANGES IN CAPITALIZATION
In the event any change is made to the Synbiotics Common Stock issuable under
the 1995 Plan by reason of any recapitalization, stock dividend, stock split,
combination of shares, exchange of shares, or other change in corporate
structure effected without Synbiotics's receipt of consideration, appropriate
adjustments will be made to (i) the maximum number and/or class of securities
issuable under the 1995 Plan, (ii) the number and/or class of securities and
price per share in effect under each outstanding option (including all
discretionary and automatic option grants under the 1995 Plan and all option
grants incorporated from the Prior Plans), and (iii) the number and/or class of
securities per nonemployee member of the Synbiotics Board for which option
grants will subsequently be made under the Automatic Grant Program.
Each outstanding option which is assumed or is otherwise to continue in effect
after a Corporate Transaction will be appropriately adjusted to apply and
pertain to the number and class of securities which would have been issuable, in
connection with such Corporate Transaction, to an actual holder of the same
number of shares of Synbiotics Common Stock as are subject to such option
immediately prior to such Corporate Transaction. Appropriate adjustments will
also be made to the option price payable per share and to number and class of
securities available for issuance under the 1995 Plan.
Option grants under the 1995 Plan will not affect the right of Synbiotics to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
SPECIAL TAX WITHHOLDING ELECTION
The Plan Administrator may provide one or more participants in the 1995 Plan
with the election to have Synbiotics withhold, from the shares of Synbiotics
Common Stock otherwise issuable upon the exercise of non-qualified options or
the vesting of unvested shares, a portion of those shares in satisfaction of the
tax liability incurred in connection
13
<PAGE>
with their acquisition or vesting. Any election so made will be subject to the
approval of the Plan Administrator, and no shares will be accepted in
satisfaction of such tax liability except to the extent the Plan Administrator
approves the election. Alternatively, one or more participants may be granted
the right, subject to Plan Administrator approval, to deliver existing shares of
Synbiotics Common Stock in satisfaction of such tax liability. The withheld or
delivered shares will be valued at their then current fair market value.
AMENDMENT AND TERMINATION
The Board of Directors may amend or modify the 1995 Plan in any or all respects
whatsoever, subject, however, to the limitation on plan amendments to the
Automatic Grant Program. However, no such amendment may adversely affect the
rights of existing optionees without their consent and unless otherwise
necessary to comply with applicable tax laws and regulations. In addition, the
Board may not (i) materially increase the maximum number of shares issuable
under the 1995 Plan or the number of shares for which automatic grants may be
made to nonemployee Board members, except in the event of certain changes to
Synbiotics's capital structure as indicated above, (ii) materially modify the
eligibility requirements for option grants or (iii) otherwise materially
increase the benefits accruing to participants under the 1995 Plan without the
approval of Synbiotics's stockholders.
The Board may terminate the 1995 Plan at any time, and the 1995 Plan will in all
events terminate on the tenth anniversary of the Effective Date. Each stock
option outstanding at the time of such termination will remain in force in
accordance with the provisions of the instruments evidencing such grant.
FEDERAL TAX CONSEQUENCES
Options granted under the 1995 Plan may be either incentive stock options which
satisfy the requirements of Section 422 of the Internal Revenue Code or non-
qualified options which are not intended to meet such requirements. The Federal
income tax treatment for the two types of options differs as described below:
Incentive Options. No taxable income is recognized by the optionee at the time
of the option grant, and no taxable income is generally recognized at the time
the option is exercised. The optionee will, however, recognize income for
alternative minimum tax purposes in the year the option is exercised and regular
taxable income in the year in which the purchased shares are sold or otherwise
made the subject of disposition.
For Federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. The optionee will make a qualifying
disposition of the purchased shares if the sale or other disposition of such
shares is made after the optionee has held the shares for more than two years
after the grant date of the option and more than one year after the exercise
date. If the optionee fails to satisfy either of these two holding periods
prior to the sale or other disposition of the purchased shares, then a
disqualifying disposition will result.
Upon a qualifying disposition of the shares, the optionee will recognize long-
term capital gain in an amount equal to the excess of (i) the amount realized
upon the sale or other disposition of the purchased shares over (ii) the
exercise price paid for such shares. If there is a disqualifying disposition of
the shares, then the excess of (i) the fair market value of those shares on the
date the option was exercised over (ii) the exercise price paid for the shares
will be taxable as ordinary income. Any additional gain recognized upon the
disposition will be a capital gain.
If the optionee makes a disqualifying disposition of the purchased shares, then
Synbiotics will be entitled to an income tax deduction, for the taxable year in
which such disposition occurs, equal to the excess of (i) the fair market value
of such shares on the date the option was exercised over (ii) the exercise price
paid for the shares. In no other instance will Synbiotics be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
Non-qualified Options. No taxable income is recognized by an optionee upon the
grant of a non-qualified option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
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<PAGE>
excess of the fair market value of the purchased shares on the date of exercise
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
Special provisions of the Internal Revenue Code apply to the acquisition of
Synbiotics Common Stock under a non-qualified option, if the purchased shares
are subject to repurchase by Synbiotics. These special provisions may be
summarized as follows:
A. If the shares acquired upon exercise of the non-qualified option are
subject to repurchase by Synbiotics at the original exercise price in the
event of the optionee's termination of service prior to vesting in such
shares, the optionee will not recognize any taxable income at the time of
exercise but will have to report as ordinary income, as and when
Synbiotics's repurchase right lapses, an amount equal to the excess of (i)
the fair market value of the shares on the date Synbiotics's repurchase
right lapses with respect to such shares over (ii) the exercise price paid
for the shares.
B. The optionee may, however, elect under Section 83(b) of the Internal
Revenue Code to include as ordinary income in the year of exercise of the
non-qualified option an amount equal to the excess of (i) the fair market
value of the purchased shares on the date of exercise (determined as if the
shares were not subject to Synbiotics's repurchase right) over (ii) the
exercise price paid for such shares. If the Section 83(b) election is
made, the optionee will not recognize any additional income as and when the
Synbiotics's repurchase right lapses.
Synbiotics will be entitled to a business expense deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised non-
qualified option. The deduction will in general be allowed for the taxable year
of Synbiotics in which such ordinary income is recognized by the optionee.
Direct Stock Issuances. The tax consequences of individuals who receive direct
stock issuances under the 1995 Plan will be substantially the same as the
treatment described above for the exercise of non-qualified stock options.
ACCOUNTING TREATMENT
Option grants with exercise prices less than the fair market value of the option
shares on the grant date and direct stock issuances at purchase prices less than
the fair market value of the issued shares will result in a compensation expense
to Synbiotics's earnings equal to the difference between such exercise or
purchase prices and the fair market value of the shares on the option grant date
or (for direct stock issuances) the fair market value on the issue date. Such
expense will be accrued by Synbiotics over the period the optionee or share
recipient vests in the option shares or directly-issued shares. Option grants
and direct stock issuances at 100% of fair market value will not result in any
charge to Synbiotics's earnings. Whether or not granted at a discount, the
number of outstanding options may be a factor in determining Synbiotics's
earnings per share.
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<PAGE>
OUTSTANDING OPTION GRANTS UNDER THE PLAN
The table below shows, as to Synbiotics's President and Chief Executive Officer,
(the "Named Executive Officers") and as to the various indicated groups, the
following information with respect to stock options granted during fiscal 1995
and fiscal 1994 and during all other plan years which were outstanding as of
December 31, 1994, as well as options which Synbiotics has determined to grant
under the Plan to the extent currently known or determinable: (i) the number of
shares of Synbiotics Common Stock subject to options granted and (ii) the
weighted average exercise price per share for such options.
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended
December 31, 1994 March 31, 1994 All Other Plan Years
------------------------ ------------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options (#) Price Options (#) Price Options (#) Price
----------- --------- ----------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Robert L.Widerkehr
President, Chief
Executive Officer,
Director and
Nominee for
Director 22,000 $3.88 78,000 $3.25 150,000 $3.88
All current directors
who are not executive
officers (5 persons) 15,000 $2.54 5,000 $5.19 150,500 $3.72
All current executive
officers as a group
(2 persons) 37,000 $3.88 78,000 $3.25 160,000 $3.83
All employees who
are not executive
officers 130,000 $3.88 8,000 $4.98 177,851 $3.70
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE 1995 STOCK OPTION/STOCK
ISSUANCE PLAN (ITEM 2 ON THE PROXY CARD). Approval will require the affirmative
vote of a majority of those shares which are present or represented at the
Meeting. Abstentions will have the same effect as votes against approval of the
1995 Plan. Broker non-votes will, assuming the shares are represented at the
Meeting for any purpose, have the same effect as votes against approval of the
1995 Plan; but if the shares are entirely not represented at the Meeting the
broker non-vote will have no effect on the proposal to approve the 1995 Plan.
AMENDMENT OF BYLAWS
(ITEM 3 ON THE PROXY CARD)
Article I, Section 2 of the Company's Bylaws as currently written provides that
the number of seats on the Board of Directors shall range from a minimum of 2 to
a maximum of 9, with the exact number within that range being fixed from time to
time by resolution of the Board of Directors. Although the Board of Directors
has from time to
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<PAGE>
time used its power to change, within the stated range, the number of seats on
the Board of Directors, the Bylaw provision itself has not been amended since
1982. Most recently, on June 23, 1994, the Board of Directors has fixed the
number of seats at 6.
The Company's current outside lawyers have advised it that Article I, Section 2
appears to violate California Corporations Code Section 212, which requires that
in such a range the maximum number of seats cannot be more than one fewer than
double the stated minimum number of seats. Applied literally, this statute
would make the maximum number of seats 3 (1 fewer than 2 times 2).
The Company's current outside lawyers recommend that Article I, Section 2 be
amended to read in full as follows:
Section 2. Number of Directors.
-------------------
The authorized number of directors of the corporation shall be a minimum of
five (5), and a maximum of nine (9), until changed by a duly adopted
amendment to the articles of incorporation or by an amendment to this bylaw
adopted by the vote or written consent of shareholders of a majority of the
outstanding shares entitled to vote; provided, however, that a bylaw
reducing the maximum number of directors to a number less than five cannot
be adopted if the votes cast against its adoption at a meeting of
shareholders or the shares not consenting in the case of action by written
consent are equal to more than sixteen and two-thirds (16-2/3) percent of
the outstanding shares entitled to vote. The number of directors within
the minimum to maximum range may be designated by the Board of Directors by
resolution from time to time.
This would effect no substantive change in the Company's intended corporate
governance; it is merely "legal clean-up." If the proposed amendment is
approved, the number of seats on the Board of Directors will continue to be 6
unless and until changed by a Board of Directors resolution to another number
within the range.
California law provides that amendments of bylaws establishing or changing a
range for the number of seats on the Board of Directors can be adopted only by
the shareholders, and cannot be adopted by Board of Directors action.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE AMENDMENT OF ARTICLE I,
SECTION 2 OF THE BYLAWS (ITEM 3 ON THE PROXY CARD). Approval will require the
affirmative vote of a majority of the Company's outstanding shares. Abstentions
and broker non-votes will have the same effect as votes against approval of the
amendment.
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
(ITEM 4 ON THE PROXY CARD)
The Board of Directors has selected the firm of Price Waterhouse LLP as its
independent accountants for the fiscal year ending December 31, 1995. If the
shareholders do not ratify the selection of Price Waterhouse LLP, the Board of
Directors will reconsider its selection of independent accountants. The Board
retains the power to select another firm as independent accountants to replace a
firm whose selection was ratified by the shareholders, if the Board determines
that such a change would be in the Company's best interests.
Representatives of Price Waterhouse LLP are expected to be present at the
Company's Annual Meeting with the opportunity to make a statement if they desire
to do so and they are expected to be available to respond to appropriate
questions.
THE BOARD OF DIRECTORS RECOMMENDS RATIFICATION OF THE SELECTION OF PRICE
WATERHOUSE LLP (ITEM 4 ON THE PROXY CARD).
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<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership of the Company's equity securities with the Securities and Exchange
Commission. Officers, directors and greater than 10% shareholders are required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms furnished to the Company,
or written representations that no Forms 5 were required, the Company believes
that during the nine month fiscal year ended December 31, 1994, all Section
16(a) filing requirements applicable to its officers, directors and greater than
10% beneficial owners were complied with.
SHAREHOLDER PROPOSALS
To be included in the Company's proxy materials for the Annual Meeting of
Shareholders to be held in 1996, a shareholder proposal must be received at the
offices of the Company, 11011 Via Frontera, San Diego, CA 92127, not later than
March 15, 1996.
OTHER MATTERS
The Board of Directors, at this time, knows of no other business which will be
presented to the meeting. If any other business is properly brought before the
meeting, it is intended that the proxies in the enclosed form will be voted in
respect thereof in accordance with the judgment of the persons voting the
proxies.
The Company's Annual Report, including the Company's audited financial
statements for the nine month fiscal year ended December 31, 1994, is being
mailed herewith to all Shareholders of record. THE COMPANY WILL PROVIDE WITHOUT
CHARGE TO ANY PERSON WHO WAS A BENEFICIAL OWNER OF COMMON STOCK ON MAY 15, 1995,
UPON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-KSB FOR THE NINE MONTH FISCAL YEAR ENDED DECEMBER 31, 1994
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. SUCH REQUESTS SHOULD BE
DIRECTED TO MICHAEL K. GREEN, VICE PRESIDENT - FINANCE OF THE COMPANY, AT 11011
VIA FRONTERA, SAN DIEGO, CA 92127.
Whether you intend to be present at this meeting or not, you are urged to return
your proxy promptly.
By order of the Board of Directors
Michael K. Green
Secretary
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APPENDIX A
----------
NOTE: THIS ITEM IS BEING FILED WITH THE COMMISSION PURSUANT TO INSTRUCTION 3 TO
ITEM 10(b) OF SCHEDULE 14A. THE ITEM IS NOT PART OF THE PROXY STATEMENT AND
WILL NOT BE DISTRIBUTED TO THE COMPANY'S SHAREHOLDERS IN CONJUNCTION WITH THE
SOLICITATION OF PROXIES.
SYNBIOTICS CORPORATION
1995 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSE OF THE PLAN
This 1995 Stock Option/Stock Issuance Plan (the "Plan") is intended to promote
the interests of Synbiotics Corporation, a California corporation, by providing
eligible persons with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation.
Capitalized terms not otherwise defined shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate equity programs:
(i) the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be
granted options to purchase shares of common stock of the
Corporation,
(ii) the Stock Issuance Program under which eligible persons may, at
the discretion of the Plan Administrator, be issued shares of
common stock of the Corporation directly, either through the
immediate purchase of such shares or as a bonus for services
rendered the Corporation (or any Parent or Subsidiary), and
(iii) the Automatic Option Grant Program under which non-employee
directors shall automatically receive option grants at periodic
intervals to purchase shares of common stock of the Corporation.
B. The provisions of Articles One and Five shall apply to all equity
programs under the Plan and shall accordingly govern the interests of
all persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. This Plan shall be administered by the Board or by a committee
("Committee") consisting of two (2) or more Board members who assume
full responsibility for the administration of the Plan (the "Plan
Administrator"). Members of any Committee shall serve for such period
of time as the Board may determine and shall be subject to removal by
the Board at any time.
B. The Plan Administrator shall have full power and authority (subject to
the express provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for the proper
1
<PAGE>
administration of the Plan and to make such determinations under, and
issue such interpretations of, the Plan and any outstanding option
grants or stock issuances as it may deem necessary or advisable.
Decisions of the Plan Administrator shall be final and binding on all
parties who have an interest in the Plan or any outstanding option or
stock issuance.
C. Notwithstanding the above, the administration of the Automatic Option
Grant Program under Article Three shall be self executing in
accordance with the terms and conditions thereof and the Plan
Administrator shall not exercise any discretionary functions in
respect to matters governed by Article Three.
D. The Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full authority to determine, (i)
with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time
or times when such option grants are to be made, the number of shares
to be covered by each such grant, the status of the granted option as
either an Incentive Option or a Non-Statutory Option, the time or
times at which each option is to become exercisable, the vesting
schedule (if any) applicable to the option shares and the maximum term
for which the option is to remain outstanding and (ii) with respect to
stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such
issuances are to be made, the number of shares to be issued to each
Participant, the vesting schedule (if any) applicable to the issued
shares and the consideration to be paid by the Participant for such
shares.
E. The Plan Administrator shall have the absolute discretion either to
grant options in accordance with the Discretionary Option Grant
Program or to effect stock issuances in accordance with the Stock
Issuance Program.
IV. OPTION GRANTS AND STOCK ISSUANCES
A. Subject to Section V.B below, the persons eligible to receive stock
issuances under the Stock Issuance Program ("Participant") and/or
option grants pursuant to the Discretionary Option Grant Program
("Optionee") are as follows:
(i) officers and other employees of the Corporation (or its parent or
subsidiary corporations) who render services which contribute to
the management, growth and financial success of the Corporation
(or its parent or subsidiary corporations);
(ii) those consultants or other independent contractors who provide
valuable services to the Corporation (or its parent or subsidiary
corporations);
provided that, notwithstanding any other provision of this Plan, no
option grants under the Discretionary Option Grant Program or stock
issuances under the Stock Issuance Program shall be made to any
director hereunder unless, at the time of such option or issuance, the
Plan Administrator is a Committee composed entirely of non-employee
Board members none of whom have received an option grant or stock
issuance under this Plan or any other stock plan of the Corporation
(or any parent or subsidiary corporation) other than under the
Automatic Option Grant Program during the one year prior to service on
the Committee or during such service.
B. The individuals eligible to receive option grants under the Automatic
Option Grant Program shall be those individuals who serve as non-
employee Board members during the term of the Plan.
V. STOCK SUBJECT TO THE PLAN
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A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired common stock of the Corporation ("Common
Stock"), including shares repurchased by the Corporation on the open
market. The maximum number of shares of Common Stock which may be
issued over the term of the Plan shall not exceed 1,300,000 shares.
Such authorized share reserve is comprised of (i) the number of shares
available for issuance under the Predecessor Plan as last approved by
the Corporation's stockholders prior to such date, including the
shares subject to the outstanding options incorporated into the Plan
and any other shares which would have been available for future option
grants under the Predecessor Plan, plus (ii) an additional increase of
282,055 shares authorized by the Board under the Plan, subject to
stockholder approval.
B. No one person participating in the Plan may receive options
and direct stock issuances for more than 800,000 shares of Common
Stock in the aggregate over the term of the Plan.
C. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the
options (including any options incorporated from the Predecessor
Plan) expire or terminate for any reason prior to exercise in full or
(ii) the options are canceled in accordance with the cancellation-
regrant provisions of Article Two. All shares issued under the Plan
(including shares issued upon exercise of options incorporated from
the Predecessor Plan), whether or not those shares are subsequently
repurchased by the Corporation pursuant to its repurchase rights under
the Plan, shall reduce on a share-for-share basis the number of shares
of Common Stock available for subsequent issuance under the Plan. In
addition, should the exercise price of an option under the Plan
(including any option incorporated from the Predecessor Plan) be paid
with shares of Common Stock or should shares of Common Stock otherwise
issuable under the Plan be withheld by the Corporation in satisfaction
of the withholding taxes incurred in connection with the exercise of
an option or the vesting of a stock issuance under the Plan, then the
number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is
exercised or which vest under the stock issuance, and not by the net
number of shares of Common Stock issued to the holder of such option
or stock issuance.
D. Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration,
appropriate adjustments shall be made to (i) the maximum number and/or
class of securities issuable under the Plan, (ii) the maximum number
and/or class of securities for which the share reserve is to increase
automatically each year, (iii) the number and/or class of securities
for which any one person may be granted options and direct stock
issuances over the term of the Plan, (iv) the number and/or class of
securities for which automatic option grants are to be subsequently
made under the Automatic Option Grant Program and (v) the number
and/or class of securities and the exercise price per share in effect
under each outstanding option (including any option incorporated from
the Predecessor Plan) in order to prevent the dilution or enlargement
of benefits thereunder. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
----------------------------------
I. OPTION TERMS
3
<PAGE>
Each option shall be evidenced by one or more documents in the form approved by
the Plan Administrator; provided, however, that each such document shall comply
--------
with the terms specified below. Each document evidencing an Incentive Option
shall, in addition, be subject to the provisions of the Plan applicable to such
options.
A. Exercise Price.
--------------
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent
(85%) of the Fair Market Value per share of Common Stock on the
option grant date.
2. The exercise price shall become immediately due upon exercise of
the option and shall, subject to the provisions of Section I of
Article Five and the documents evidencing the option, be payable
in one or more of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market
Value on the exercise date, or
(iii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable
written instructions to (a) a Corporation-designated
brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds
to cover the aggregate exercise price payable for the
purchased shares plus all applicable Federal, state and
local income and employment taxes required to be withheld by
the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete
the sale transaction.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares
must be made on the exercise date.
B. Exercise and Term of Options. Each option shall be exercisable at
----------------------------
such time or times, during such period and for such number of shares
as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term
in excess of ten (10) years measured from the option grant date.
C. Effect of Termination of Service.
--------------------------------
1. The following provisions shall govern the exercise of any options
held by the Optionee at the time of cessation of Service or
death:
(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable
for such period of time thereafter as shall be determined by
the Plan Administrator and set forth in the documents
evidencing the option, but no such option shall be
exercisable after the expiration of the option term.
(ii) Any option exercisable in whole or in part by the Optionee
at the time of death may be subsequently exercised by the
personal representative of the Optionee's
4
<PAGE>
estate or by the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution.
(iii) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than
the number of vested shares for which the option is
exercisable on the date of the Optionee's cessation of
Service. Upon the expiration of the applicable exercise
period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be outstanding
for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the
Optionee's cessation of Service, terminate and cease to be
outstanding to the extent it is not exercisable for vested
shares on the date of such cessation of Service.
(iv) In the event of a Corporate Transaction,the provisions of
Section III of this Article Two shall govern the period for
which the outstanding options are to remain exercisable
following the Optionee's cessation of Service and shall
supersede any provisions to the contrary in this section.
2. The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service
from the period otherwise in effect for that option to such
greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the
option term, and/or
(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such
option is exercisable at the time of the Optionee's
cessation of Service but also with respect to one or more
additional installments in which the Optionee would have
vested under the option had the Optionee continued in
Service.
D. Stockholder Rights. The holder of an option shall have no stockholder
------------------
rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the discretion
-----------------
to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase, at the
exercise price paid per share, any or all of those unvested shares.
The terms upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate
vesting schedule for the purchased shares) shall be established by the
Plan Administrator and set forth in the document evidencing such
repurchase right.
F. Limited Transferability of Options. During the lifetime of the
----------------------------------
Optionee, the option shall be exercisable only by the Optionee and
shall not be assignable or transferable other than by will or by the
laws of descent and distribution following the Optionee's death.
However, a Non-Statutory Option may be assigned in accordance with the
terms of a Qualified Domestic Relations Order within the meaning of
Internal Revenue Code Section 414(p). The assigned option may only be
exercised by the person or persons who acquire a proprietary interest
in the option pursuant to such Qualified Domestic Relations Order.
The terms applicable to the assigned option (or portion
5
<PAGE>
thereof) shall be the same as those in effect for the option
immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem
appropriate
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions
of Articles One, Two and Five shall be applicable to Incentive Options.
Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall not be subject to the terms of this Section II.
---
A. Eligibility. Incentive Options may only be granted to Employees.
-----------
B. Exercise Price. The exercise price per share shall not be less than
--------------
one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the option grant date.
C. Dollar Limitation. The aggregate Fair Market Value of the shares of
-----------------
Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan
(or any other option plan of the Corporation or any Parent or
Subsidiary) may for the first time become exercisable as Incentive
Options during any one (1) calendar year shall not exceed the sum of
One Hundred Thousand Dollars ($100,000). To the extent the Employee
holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied
on the basis of the order in which such options are granted.
D. 10% Stockholder. If any Employee to whom an Incentive Option is
---------------
granted is a 10% stockholder (within the meaning of Internal Revenue
Code Section 424(d)), then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock on the option grant date, and the option term
shall not exceed five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION
A. In the event of any Corporate Transaction, each outstanding option
shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction,
become fully exercisable for all of the shares of Common Stock at the
time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. However, an
outstanding option shall NOT so accelerate if and to the extent: (i)
such option is, in connection with the Corporate Transaction, either
to be assumed by the successor corporation (or parent thereof) or to
be replaced with a comparable option to purchase shares of the capital
stock of the successor corporation (or parent thereof), (ii) such
option is to be replaced with a cash incentive program of the
successor corporation which preserves the spread existing on the
unvested option shares at the time of the Corporate Transaction and
provides for subsequent payout in accordance with the same vesting
schedule applicable to such option or (iii) the acceleration of such
option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant. The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and
conclusive.
B. All outstanding repurchase rights shall also terminate automatically,
and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent: (i) those repurchase rights are to
be assigned to the
6
<PAGE>
successor corporation (or parent thereof) in connection with such
Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the
repurchase right is issued.
C. Immediately following the consummation of the Corporate Transaction,
all outstanding options shall terminate and cease to be outstanding,
except to the extent assumed by the successor corporation (or parent
thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities
which would have been issuable to the Optionee in consummation of such
Corporate Transaction had the option been exercised immediately prior
to such Corporate Transaction. Appropriate adjustments shall also be
made to (i) the number and class of securities available for issuance
under the Plan on both an aggregate and per Optionee basis following
the consummation of such Corporate Transaction and (ii) the exercise
price payable per share under each outstanding option, provided the
--------
aggregate exercise price payable for such securities shall remain the
same.
E. Any options which are assumed or replaced in the Corporate Transaction
and do not otherwise accelerate at that time, shall automatically
accelerate (and any of the Corporation's outstanding repurchase rights
which do not otherwise terminate at the time of the Corporate
Transaction shall automatically terminate and the shares of Common
Stock subject to those terminated rights shall immediately vest in
full) in the event the Optionee's Service should subsequently
terminate by reason of an Involuntary Termination within eighteen (18)
months following the effective date of such Corporate Transaction.
Any options so accelerated shall remain exercisable for fully-vested
shares until the earlier of (i) the expiration of the option term or
-------
(ii) the expiration of the one (1)-year period measured from the
effective date of the Involuntary Termination.
F. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction or Change in Control shall remain exercisable as
an Incentive Option only to the extent the applicable One Hundred
Thousand Dollar limitation is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall
be exercisable as a Non-Statutory Option under the Federal tax laws.
G. The grant of options under the Discretionary Option Grant Program
shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time and
from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary
Option Grant Program (including outstanding options incorporated from the
Predecessor Plan) and to grant in substitution new options covering the
same or different number of shares of Common Stock but with an exercise
price per share based on the Fair Market Value per share of Common Stock on
the new option grant date.
7
<PAGE>
ARTICLE THREE
STOCK ISSUANCE PROGRAM
----------------------
I. STOCK ISSUANCE TERMS
8
<PAGE>
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.
A. Purchase Price
--------------
1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than eighty-five percent
(85%) of the Fair Market Value per share of Common Stock on the
stock issuance date.
2. Subject to the provisions of Section I of Article Five, shares of
Common Stock may be issued under the Stock Issuance Program for
one or both of the following items of consideration which the
Plan Administrator may deem appropriate in each individual
instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any Parent or
Subsidiary).
B. Vesting Provisions
------------------
1. Shares of Common Stock issued under the Stock Issuance Program
may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more
installments over the Participant's period of Service or upon
attainment of specified performance objectives. The elements of
the vesting schedule applicable to any unvested shares of Common
Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the Participant or the
performance objectives to be attained,
(ii) the number of installments in which the shares are to vest,
(iii) the interval or intervals (if any) which are to lapse
between installments, and
(iv) the effect which death, Permanent Disability or other event
designated by the Plan Administrator is to have upon the
vesting schedule,
shall be determined by the Plan Administrator and incorporated
into the stock issuance agreement.
2. Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect
to the Participant's unvested shares of Common Stock by reason of
any stock dividend, stock split, recapitalization, combination of
shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same
vesting requirements applicable to the Participant's unvested
shares of Common Stock and (ii) such escrow arrangements as the
Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with respect
to any shares of Common Stock issued to the Participant under the
Stock Issuance Program, whether or not the Participant's interest
in those shares is vested. Accordingly, the Participant shall
have the right to vote such shares and to receive any regular
cash dividends paid on such shares.
9
<PAGE>
4. Should the Participant cease to remain in Service while holding
one or more unvested shares of Common Stock issued under the
Stock Issuance Program or should the performance objectives not
be attained with respect to one or more such unvested shares of
Common Stock, then those shares shall be immediately surrendered
to the Corporation for cancellation, and the Participant shall
have no further stockholder rights with respect to those shares.
To the extent the surrendered shares were previously issued to
the Participant for consideration paid in cash or cash equivalent
(including the Participant's purchase-money indebtedness), the
Corporation shall repay to the Participant the cash consideration
paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the
Participant attributable to such surrendered shares.
5. The Plan Administrator may in its discretion waive the surrender
and cancellation of one or more unvested shares of Common Stock
(or other assets attributable thereto) which would otherwise
occur upon the non-completion of the vesting schedule applicable
to such shares. Such waiver shall result in the immediate
vesting of the Participant's interest in the shares of Common
Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's
cessation of Service or the attainment or non-attainment of the
applicable performance objectives.
II. CORPORATE TRANSACTION
A. All of the outstanding repurchase rights under the Stock Issuance
Program shall terminate automatically, and all the shares of Common
Stock subject to those terminated rights shall immediately vest in
full, in the event of any Corporate Transaction, except to the extent
(i) those repurchase rights are assigned to the successor corporation
(or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations
imposed in the stock issuance agreement.
B. Any repurchase rights that are assigned in the Corporate Transaction
shall automatically terminate, and all the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in
the event the Optionee's Service should subsequently terminate by
reason of an Involuntary Termination within eighteen (18) months
following the effective date of such Corporate Transaction.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends
on the certificates evidencing those unvested shares.
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
------------------------------
I. OPTION TERMS
A. GRANT DATES. Option grants shall be made on the dates specified
-----------
below:
1. Each non-employee director who is who is first elected or
appointed as a non-employee Board member after the effective date
of the Plan shall automatically be granted, on such
10
<PAGE>
initial election or appointment, a Non-Statutory Option to
purchase 7,000 shares of Common Stock.
2. On the date of each Annual Stockholders Meeting, beginning with
the 1995 Annual Meeting, each individual who is to continue to
serve as a non-employee director after such meeting, shall
automatically be granted, whether or not such individual is
standing for re-election as a Board member at that Annual
Meeting, a Non-Statutory Option to purchase an additional 7,000
shares of Common Stock, provided such individual has served as a
non-employee Board member for at least six (6) months prior to
the date of such Annual Meeting. There shall be no limit on the
number of such 7,000-share option grants any one non-employee
director may receive over his or her period of Board service.
B. EXERCISE PRICE.
--------------
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock
on the option grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant
Program. Except to the extent the sale and remittance procedure
specified thereunder is utilized, payment of the exercise price
for the purchased shares must be made on the exercise date.
C. OPTION TERM. Each option shall have a term of ten (10) years measured
-----------
from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be immediately
-------------------------------
exercisable for any or all of the option shares. However, any shares
purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's
cessation of Board service prior to vesting in those shares. Each
grant shall vest, and the Corporation's repurchase right shall lapse,
in a series of four (4) equal and successive quarterly installments
over the Optionee's period of continued service as a Board member,
with the first such installment to vest upon the Optionee's completion
of three (3) months of Board service measured from the option grant
date.
E. EFFECT OF TERMINATION OF BOARD SERVICE. The following provisions
--------------------------------------
shall govern the exercise of any options held by the Optionee at the
time the Optionee ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's death, the personal
representative of the Optionee's estate or the person or persons
to whom the option is transferred pursuant to the Optionee's will
or in accordance with the laws of descent and distribution) shall
have the balance of the option term in which to exercise each
such option.
(ii) Following cessation of service on the Board for other than death
or disability, the option may not be exercised in the aggregate
for more than the number of vested shares of Common Stock for
which the option was exercisable at the time of the Optionee's
cessation of Board service.
(iii) Should the Optionee cease to serve as a Board member by reason
of death or Permanent Disability, then all shares at the time
subject to the option shall immediately vest so that such option
may be exercised for all or any portion of such shares as fully-
vested shares of Common Stock.
11
<PAGE>
(iv) Upon expiration of the option term, the option shall terminate
and cease to be outstanding for any vested shares for which the
option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Board service,
terminate and cease to be outstanding to the extent it is not
exercisable for vested shares on the date of such cessation of
Board service.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common Stock
at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for all of the shares of Common
Stock at the time subject to such option and may be exercised for all
or any portion of such shares as fully-vested shares of Common Stock.
Immediately following the consummation of the Corporate Transaction,
each automatic option grant shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation
(or parent thereof).
B. In connection with any Change in Control, the shares of Common Stock
at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Change in
Control, become fully exercisable for all of the shares of Common
Stock at the time subject to such option and may be exercised for all
or any portion of such shares as fully-vested shares of Common Stock.
Each such option shall remain exercisable for such fully-vested option
shares until the expiration or sooner termination of the option term
or the surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a
thirty (30)-day period in which to surrender to the Corporation each
automatic option held by him or her for a period of at least six (6)
months. The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of
(i) the Take-Over Price of the shares of Common Stock at the time
subject to the surrendered option (whether or not the Optionee is
otherwise at the time vested in those shares) over (ii) the aggregate
exercise price payable for such shares. Such cash distribution shall
be paid within five (5) days following the surrender of the option to
the Corporation. No approval or consent of the Board shall be
required in connection with such option surrender and cash
distribution.
D. The grant of options under the Automatic Option Grant Program shall in
no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to
merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
III. AMENDMENT OF THE AUTOMATIC OPTION GRANT PROGRAM
The provisions of this Automatic Option Grant Program, together with the
option grants outstanding thereunder, may not be amended at intervals more
frequently than once every six (6) months, other than to the extent
necessary to comply with applicable Federal income tax laws and
regulations.
IV. REMAINING TERMS
---------------
The remaining terms of each option granted under the Automatic Option Grant
Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
12
<PAGE>
ARTICLE FIVE
MISCELLANEOUS
-------------
I. ACCELERATION
A. The Plan Administrator shall have the discretion, exercisable either
at the time an option is granted under the Discretionary Stock Option
Program, at the time that stock is issued under the Stock Issuance
Program or at any time while the option or stock remains outstanding,
to provide for the acceleration of one or more outstanding options and
the termination of repurchase rights on one or more outstanding shares
upon the occurrence of such events as the Plan Administrator may
determine, including upon a Corporate Transaction regardless or
whether or not such options are to be assumed or replaced or the
repurchase rights are to be assigned in the Corporate Transaction.
B. The Plan Administrator shall not have the discretion to provide for
the acceleration of any options granted under the Automatic Option
Grant Program.
II. FINANCING
A. The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program
or the purchase price for shares issued under the Stock Issuance
Program by delivering a promissory note payable in one or more
installments. The terms of any such promissory note (including the
interest rate and the terms of repayment) shall be established by the
Plan Administrator in its sole discretion. Promissory notes may be
authorized with or without security or collateral. In all events, the
maximum credit available to the Optionee or Participant may not exceed
the sum of (i) the aggregate option exercise price or purchase price
payable for the purchased shares plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share
purchase.
B. The Plan Administrator may, in its discretion, determine that one or
more such promissory notes shall be subject to forgiveness by the
Corporation in whole or in part upon such terms as the Plan
Administrator may deem appropriate.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of options or upon the issuance or vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable
Federal, state and local income and employment tax withholding
requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock
under the Plan (other than the options granted or the shares issued
under the Automatic Option Grant Program) with the right to use shares
of Common Stock in satisfaction of all or part of the federal, state
and local income or employment taxes incurred by such holders in
connection with the exercise of their options or the vesting of their
shares. Such right may be provided to any such holder in either or
both of the following formats:
(i) Stock Withholding: The election to have the Corporation
-----------------
withhold, from the shares of Common Stock otherwise issuable upon
the exercise of such Non-Statutory Option or the vesting of such
shares, a portion of those shares with an aggregate Fair Market
Value
13
<PAGE>
equal to the percentage of such taxes (not to exceed one hundred
percent (100%)) designated by the holder.
(ii) Stock Delivery: The election to deliver to the Corporation, at
--------------
the time the Non-Statutory Option is exercised or the shares
vest, one or more shares of Common Stock previously acquired by
such holder (other than in connection with the option exercise or
share vesting triggering the taxes) with an aggregate Fair Market
Value equal to the percentage of such taxes (not to exceed one
hundred percent (100%)) designated by the holder.
IV. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective on the date the Plan is adopted by the
Board, and options may be granted under the Discretionary Option Grant
Program from and after the effective date. However, no options
granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Plan is approved by the Corporation's
stockholders. If such stockholder approval is not obtained within
twelve (12) months after such effective date, then all options
previously granted under this Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares
shall be issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor Plan, and no
further option grants shall be made under the Predecessor Plan after
the effective date of the Plan. All options outstanding under the
Predecessor Plan as of such date shall, immediately upon approval of
the Plan by the Corporations's stockholders, be incorporated into the
Plan and treated as outstanding options under the Plan. However, each
outstanding option so incorporated shall continue to be governed
solely by the terms of the documents evidencing such option. No
provision of the Plan shall be deemed to adversely affect or otherwise
diminish the rights or obligations of the holders of such incorporated
options with respect to their acquisition of shares of Common Stock
which may exist under the terms of the Predecessor Plan under which
such incorporated option was issued. Subject to the rights of the
optionee under the incorporated option documents and Predecessor Plan,
the discretion delegated to the Plan Administrator hereunder may be
exercised with respect to incorporated options to the same extent as
it is exercisable with respect to options originally granted under
this Plan.
C. The option/vesting acceleration provisions of Article Two relating to
Corporate Transactions and Changes in Control may, in the Plan
Administrator's discretion, be extended to one or more options
incorporated from the Predecessor Plan which do not otherwise provide
for such acceleration.
D. The Plan shall terminate upon the earliest of (i) April 27, 2005, (ii)
--------
the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of the options or the
issuance of shares (whether vested or unvested) under the Plan or
(iii) the termination of all outstanding options in connection with a
Corporate Transaction. Upon such Plan termination, all options and
unvested stock issuances outstanding on such date shall thereafter
continue to have force and effect in accordance with the provisions of
the documents evidencing such options or issuances.
V. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, (i) no such
amendment or modification shall adversely affect the rights and
obligations with respect to options or unvested stock issuances at the
time outstanding under the Plan unless the Optionee or the Participant
consents to such amendment or modification, and (ii) any amendment
made to the Automatic Option Grant Program
14
<PAGE>
(or any options outstanding thereunder) shall be in compliance with
the limitations of that program. In addition, the Board shall not,
without the approval of the Corporation's stockholders, (i) materially
increase the maximum number of shares issuable under the Plan, the
number of shares for which options may be granted under the Automatic
Option Grant Program or the maximum number of shares for which any one
person may be granted options and direct stock issuances in the
aggregate over the term of the Plan, except for permissible
adjustments in the event of certain changes in the Corporation's
capitalization, (ii) materially modify the eligibility requirements
for Plan participation or (iii) materially increase the benefits
accruing to Plan participants.
B. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant Program and shares of Common Stock may be
issued under the Stock Issuance Program that are in each instance in
excess of the number of shares then available for issuance under the
Plan, provided any excess shares actually issued under those programs
are held in escrow until there is obtained stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock
available for issuance under the Plan. If such stockholder approval
is not obtained within twelve (12) months after the date the first
such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease
to be outstanding and (ii) the Corporation shall promptly refund to
the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow,
together with interest (at the applicable Short Term Federal Rate) for
the period the shares were held in escrow, and such shares shall
thereupon be automatically canceled and cease to be outstanding.
VI. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.
VII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option under the
Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any option or (ii) under the Stock Issuance Program shall
be subject to the Corporation's procurement of all approvals and
permits required by regulatory authorities having jurisdiction over
the Plan, the options granted under it and the shares of Common Stock
issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or delivered
under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws,
including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and
all applicable listing requirements of any stock exchange (or the
Nasdaq National Market, if applicable) on which Common Stock is then
listed for trading.
VIII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant any
right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the
Corporation (or any Parent or Subsidiary employing or retaining such
person) or of the Optionee or the Participant, which rights are hereby
expressly reserved by each, to terminate such person's Service at any time
for any reason, with or without cause.
15
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
-----
B. CHANGE IN CONTROL shall mean a change in ownership or control of the
-----------------
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any person or related
group of persons (other than the Corporation or a person that directly
or indirectly controls, is controlled by, or is under common control
with, the Corporation), of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders
which the Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over a period of thirty-six
(36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B)
have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (A) who were still in office at the time the Board approved
such election or nomination.
C. CORPORATE TRANSACTION shall mean either of the following stockholder-
---------------------
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to
change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all or substantially all of
the assets of the Company in liquidation or dissolution of the
Company, or
(iii) any reverse merger in which the Company is the surviving entity but
in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities
are transferred to holders different from those who held such
securities immediately prior to such merger.
D. CORPORATION shall mean Synbiotics Corporation, a California corporation.
-----------
E. EMPLOYEE shall mean an individual who is in the employ of the Corporation
--------
(or any Parent or Subsidiary), subject to the control and direction of the
employer entity as to both the work to be performed and the manner and
method of performance.
F. FAIR MARKET VALUE per share of Common Stock on any relevant date shall be
-----------------
determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question, as
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<PAGE>
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If
there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock Exchange, then
the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined
by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date
for which such quotation exists.
(iii) For purposes of option grants made on the date the Underwriting
Agreement is executed and the initial public offering price of the
Common Stock is established, the Fair Market Value shall be deemed to
be equal to the established initial offering price per share. For
purposes of option grants made prior to such date, the Fair Market
Value shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate.
G. HOSTILE TAKE-OVER shall mean a change in ownership of the Corporation
-----------------
effected through acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the Securities Exchange Act of 1934) of securities
possessing more than fifty percent (50%) of the total combined voting power
of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders which the
Board does not recommend such stockholders to accept.
H. INCENTIVE OPTION shall mean an option which satisfies the requirements of
----------------
Internal Revenue Code Section 422.
I. INVOLUNTARY TERMINATION shall mean the termination of the Service of any
-----------------------
individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a change in his
or her position with the Corporation which materially reduces his or
her level of responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and any non-
discretionary and objective-standard incentive payment or bonus award)
by more than fifteen percent (15%) or (C) a relocation of such
individual's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is effected
by the Corporation without the individual's consent.
J. MISCONDUCT shall mean the commission of any act of fraud, embezzlement or
----------
dishonesty by the Optionee or Participant, any unauthorized use or
disclosure by such person of confidential information or trade secrets of
the Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by such person adversely affecting the business or affairs of
the Corporation (or any Parent or Subsidiary) in a material manner. The
foregoing definition shall not be deemed to be inclusive of all the acts or
omissions which the Corporation (or any Parent or Subsidiary) may consider
as grounds for the dismissal or discharge of any Optionee, Participant or
other person in the Service of the Corporation (or any Parent or
Subsidiary).
K. NON-STATUTORY OPTION shall mean an option which is not an Incentive Option.
--------------------
A-2
<PAGE>
L. PARENT shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
M. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability of
--------------------------------------------
the Optionee or the Participant to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of
twelve (12) months or more.
N. PREDECESSOR PLANS shall mean the Corporation's existing 1986 Stock Option
-----------------
Plan, 1987 Stock Option Plan, 1988 Stock Option Plan, 1991 Stock Option
Plan, and 1994 Stock Option Plan.
O. SERVICE shall mean the provision of services to the Corporation (or any
-------
Parent or Subsidiary) by a person in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant.
P. SUBSIDIARY shall mean any corporation (other than the Corporation) in an
----------
unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain
owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
Q. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market Value per
--------------- -------
share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest
reported price per share of Common Stock paid by the tender offeror in
effecting such Hostile Take-Over. However, if the surrendered option is an
Incentive Option, the Take-Over Price shall not exceed the clause (i) price
per share.
A-3
<PAGE>
COMMON STOCK PROXY SYNBIOTICS CORPORATION COMMON STOCK PROXY
11011 VIA FRONTERA, SAN DIEGO, CALIFORNIA 92127
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert L. Widerkehr and Michael K. Green,
jointly and severally, as proxyholders, each with full power to appoint his
substitute, and hereby authorizes them to vote as designated below, all the
shares of Common Stock of Synbiotics Corporation held of record by the
undersigned on May 15, 1995, at the Annual Meeting of Shareholders to be held on
July 12, 1995, or any postponement or adjournment thereof, and to vote in their
discretion on such other business as may come before the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 4.
1. ELECTION OF DIRECTORS.
[_] FOR all nominees listed below (except as marked to the contrary below)
[_] WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
CHECK THE BOX "FOR" AND STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
BELOW.)
Nominees: Patrick Owen Burns, James C. DeCesare, Theodor H. Heinrichs, M.
Blake Ingle, Donald E. Phillips, Robert L. Widerkehr
2. APPROVAL OF THE 1995 STOCK OPTION/STOCK ISSUANCE PLAN.
[_] FOR [_] AGAINST [_] ABSTAIN
3. APPROVAL OF THE AMENDMENT OF ARTICLE I, SECTION 2 OF THE BYLAWS.
[_] FOR [_] AGAINST [_] ABSTAIN
4. RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE AS INDEPENDENT ACCOUNTANTS
FOR FISCAL YEAR 1995.
[_] FOR [_] AGAINST [_] ABSTAIN
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER AND WILL BE VOTED BY THE PROXYHOLDERS AT THEIR
DISCRETION AS TO ANY OTHER MATTERS PROPERLY TRANSACTED AT THE ANNUAL MEETING.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
Dated: _____________________, 1995
__________________________________
(Shareholder's Signature)
__________________________________
(Shareholder's Signature)
Please sign exactly as your name
appears on this Proxy. If signing
for trusts, estates or
corporations, title or capacity
should be stated. If shares are
held jointly, each holder should
sign.
PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING. [_]
