<PAGE>
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-11303
SYNBIOTICS CORPORATION
(Exact name of small business issuer as specified in its charter)
CALIFORNIA 95-3737816
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11011 VIA FRONTERA
SAN DIEGO, CALIFORNIA 92127
(Address of principal executive offices) (Zip Code)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (619) 451-3771
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
As of July 31, 1995, 5,803,376 shares of Common Stock were outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
================================================================================
<PAGE>
SYNBIOTICS CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. Condensed Statement of Operations -
Three and six months ended June 30, 1995 and 1994 2
Condensed Balance Sheet -
June 30, 1995 and December 31, 1994 3
Condensed Statement of Cash Flows -
Six months ended June 30, 1995 and 1994 4
Notes to Condensed Financial Statements 5
Management's Discussion and Analysis or Plan of Operation 6
PART II. Other Information 7
</TABLE>
1
<PAGE>
PART I. FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
SYNBIOTICS CORPORATION
CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------------- ---------------------------------------
1995 1994 1995 1994
------------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 3,811,000 $ 1,860,000 $ 8,637,000 $ 7,346,000
License fees and other 97,000 40,000 148,000 105,000
Interest 9,000 34,000 17,000 49,000
------------------- ----------------- ------------------ ------------------
3,917,000 1,934,000 8,802,000 7,500,000
------------------- ----------------- ------------------ ------------------
Cost and expenses:
Cost of sales 2,304,000 936,000 4,487,000 3,620,000
Research and development 217,000 270,000 418,000 519,000
Selling and marketing 982,000 1,349,000 2,360,000 2,779,000
General and administrative 361,000 661,000 712,000 1,445,000
------------------- ----------------- ------------------ ------------------
3,864,000 3,216,000 7,977,000 8,363,000
------------------- ----------------- ------------------ ------------------
Income (loss) before gain on disposition of
investment in affiliated company 53,000 (1,282,000) 825,000 (863,000)
Gain on disposition of investment in affiliate 931,000 931,000
------------------- ----------------- ------------------ ------------------
Income (loss) before income taxes 984,000 (1,282,000) 1,756,000 (863,000)
Provision for income taxes 4,000 2,000 22,000 2,000
------------------- ----------------- ------------------ ------------------
Net income (loss) $ 980,000 $ (1,284,000) $ 1,734,000 $ (865,000)
=================== ================= ================== ==================
Net income (loss) per share $ .17 $ (.22) $ .30 $ (.15)
=================== ================= ================== ==================
Weighted average shares outstanding 5,806,000 5,803,000 5,805,000 5,803,000
=================== ================= ================== ==================
</TABLE>
Net income (loss) per share was computed based upon the weighted average
number of shares outstanding, including common stock equivalents.
See accompanying notes to condensed financial statements.
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
--------------------
SYNBIOTICS CORPORATION
CONDENSED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
------------ ------------
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 1,291,000 $ 447,000
Securities available for sale 502,000 502,000
Accounts receivable 1,829,000 1,444,000
Inventories 2,652,000 2,763,000
Other current assets 884,000 963,000
------------ ------------
Total current assets 7,158,000 6,119,000
Property and equipment, net 1,088,000 1,329,000
Securities available for sale 1,765,000 942,000
Other assets 1,774,000 1,921,000
------------ ------------
$ 11,785,000 $ 10,311,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,518,000 $ 1,662,000
Other current liabilities 697,000 695,000
------------ ------------
Total current liabilities 2,215,000 2,357,000
------------ ------------
Shareholders' equity:
Common stock, no par value, 24,800,000 shares authorized,
5,803,000 shares issued and outstanding at
June 30, 1995 and December 31, 1994 29,308,000 29,318,000
Unrealized holding losses from securities available for sale (1,803,000) (1,695,000)
Accumulated deficit (17,935,000) (19,669,000)
------------ ------------
Total shareholders' equity 9,570,000 7,954,000
------------ ------------
$ 11,785,000 $ 10,311,000
============ ============
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
--------------------
SYNBIOTICS CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $1,734,000 $ (865,000)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization 507,000 390,000
Gain on disposition of investment in affiliate (931,000)
Changes in assets and liabilities:
Accounts receivable (385,000) 524,000
Receivable from affiliates (30,000)
Inventories 111,000 (179,000)
Other assets 35,000 (38,000)
Accounts payable and accrued expenses (144,000) 108,000
Other liabilities 2,000 (18,000)
---------- ----------
Net cash provided by (used for) operating activities 929,000 (108,000)
---------- ----------
Cash flows from investing activities:
Acquisition of property and equipment (75,000) (196,000)
Loans to affiliates (450,000)
---------- ----------
Net cash used for investing activities (75,000) (646,000)
---------- ----------
Cash flows from financing activities:
Common stock issuance costs (10,000)
---------- ----------
Net cash used for financing activities (10,000)
---------- ----------
Net increase (decrease) in cash and equivalents 844,000 (754,000)
Cash and equivalents - beginning of year 447,000 3,928,000
---------- ----------
Cash and equivalents - end of period $1,291,000 $3,174,000
========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
--------------------
SYNBIOTICS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - INTERIM FINANCIAL STATEMENTS:
The accompanying balance sheet as of June 30, 1995 and the statements of
operations and of cash flows for the six month periods ended June 30, 1995 and
1994 have been prepared by Synbiotics Corporation (the Company) and have not
been audited. These financial statements, in the opinion of management, include
all adjustments (consisting only of normal recurring accruals) necessary for a
fair presentation of the financial position, results of operations and cash
flows for all periods presented. The financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB filed for the nine month period ended
December 31, 1994. Interim operating results are not necessarily indicative of
operating results for the full year.
NOTE 2 - SECURITIES AVAILABLE FOR SALE:
Included in current assets are securities available for sale which consist of
U.S. Government Treasury bills.
On June 30, 1995, the Company received 573,000 shares of Texas Biotechnology
Corporation ("TBC") common stock resulting from the satisfaction of a certain
contingency on May 31, 1995 related to the acquisition of ImmunoPharmaceutics,
Inc. ("IPI") by TBC in July 1994. Accordingly, the Company recognized a gain
for financial reporting purposes in the amount of $931,000, based on the closing
price of TBC common stock on May 31, 1995 of $1.625 per share as reported on the
American Stock Exchange.
The Company may receive an additional 409,000 shares of TBC common stock (the
"Contingent Shares") pending the outcome of certain remaining contingencies. No
amounts have been recorded related to the Contingent Shares, and no amounts will
be recorded until such time as the contingencies are satisfied.
NOTE 3 - INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---------- ------------
<S> <C> <C>
Raw materials $ 598,000 $ 576,000
Work in process 764,000 756,000
Finished goods 1,290,000 1,431,000
---------- ----------
$2,652,000 $2,763,000
========== ==========
</TABLE>
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
RESULTS OF OPERATIONS
Total revenue for the second quarter of 1995 increased by $1,983,000 or 103%
over the quarter ended June 30, 1994, and increased for the six months ended
June 30, 1995 by $1,302,000 or 17% over the six months ended June 30, 1994. The
increases are primarily due to an increase in product sales of $1,951,000 or
105% during the second quarter of 1995, and an increase in product sales of
$1,291,000 or 18% during the six months ended June 30, 1995, respectively.
The increase in product sales during the second quarter of 1995 comprises an
increase in diagnostic sales of $793,000 or 56% and a $1,171,000 or 373%
increase in the sales of vaccines. The increased diagnostic sales are primarily
due to sales of ICT GOLD/TM/ HW, the Company's new canine heartworm diagnostic,
which was introduced in March 1995. Sales of this new product more than offset
declines in the Company's other canine heartworm diagnostic products, which were
caused by customer shifts to ICT GOLD/TM/ HW and by external product
competition. Vaccine sales increased due to increased international and domestic
shipments of bulk feline leukemia vaccine, promotional programs implemented
during the second quarter of 1995 and, primarily, comparison against relatively
slow vaccine sales in the quarter ended June 30, 1994. Vaccine sales in the
quarter ended March 31, 1994 were unusually large as a result of initial "load-
in" distributor purchases as part of the Company's new vaccine product line
launch; as a result, distributor demand was low in the following quarter. The
six months ended June 30, 1995 saw an increase in diagnostic sales of $1,310,000
or 30% and a $51, 000 or 2% increase in vaccine sales, both explained by the
respective factors discussed above.
The cost of sales as a percentage of product revenue increased to 60% during the
second quarter of 1995 as compared to 50% for the quarter ended June 30, 1994.
The increase is due to increased unapplied manufacturing overhead resulting from
a larger percentage of product sales during the second quarter of 1995 being
generated from products which are manufactured for the Company by third parties.
The cost of sales percentage was worsened by domestic shipments of bulk feline
leukemia vaccine to Rhone Merieux, Inc. (located in Athens, Georgia) during the
second quarter of 1995. The Company has contracted to sell bulk vaccine to
Rhone Merieux, Inc. at cost because the Company receives a royalty on Rhone
Merieux, Inc.'s resulting product sales in the United States. By contrast, the
Company's international sales of bulk feline leukemia vaccine to Rhone-Merieux
of France are at a profit, not at cost. Cost of sales as a percentage of
product revenue would have been 55% and 43% during the quarters ended June 30,
1995 and 1994, respectively, if the zero margin bulk sales were not taken into
consideration. The 1995 cost of sales percentage was also influenced by reduced
average selling prices due to increased competition and promotional programs.
The cost of sales as a percentage of product revenue increased to 52% for the
six months ended June 30, 1995 as compared to 49% for the six months ended June
30, 1994. The increase is primarily due to factors similar to those discussed
in the quarterly comparison.
Research and development expenses during the second quarter of 1995 decreased by
$53,000 or 20% from the quarter ended June 30, 1994, and decreased during the
six months ended June 30, 1995 by $101,000 or 19% from the six months ended June
30, 1994. The decreases are primarily due to a decrease in contracted research
and development resulting from the completion of the development of the
Company's ICT GOLD/TM/ HW canine heartworm diagnostic test which was introduced
in March 1995.
Selling and marketing expenses during the second quarter of 1995 decreased by
$367,000 or 27% from the quarter ended June 30, 1994, and decreased during the
six months ended June 30, 1995 by $419,000 or 15% from the six months ended June
30, 1994. The decreases are due primarily to the non-recurrence of significant
1994 advertising and special sales promotion expenses related to the launch of
the Company's new vaccine product line.
6
<PAGE>
General and administrative expenses during the second quarter of 1995 decreased
by $300,000 or 45% from the quarter ended June 30, 1994, and decreased during
the six months ended June 30, 1995 by $733,000 or 51% from the six months ended
June 30, 1994. The decreases are due to a decrease in legal expenses as a
result of the settlement of major litigation in December 1994.
On June 30, 1995, the Company received 573,000 shares of Texas Biotechnology
Corporation ("TBC") common stock resulting from the satisfaction of a certain
contingency on May 31, 1995 related to the acquisition of ImmunoPharmaceutics,
Inc. ("IPI") by TBC in July 1994. The Company had been a major shareholder of
IPI, and had previously recognized a $2,036,000 gain on the transaction for
financial reporting purposes. In the second quarter of 1995, the Company
recognized an additional gain for financial reporting purposes in the amount of
$931,000. The Company may receive an additional 409,000 shares of TBC common
stock pending the outcome of certain remaining contingencies. The Company will
recognize additional income when, and if, these contingencies are satisfied.
FINANCIAL CONDITION
Management believes that the Company's present capital resources, which included
working capital of $4,943,000 at June 30, 1995, are sufficient to meet its
current working capital needs.
Although TBC is a publicly traded company, the TBC common stock received by the
Company is subject to certain securities-law and contractual restrictions
against resale. TBC has filed a Registration Statement on Form S-3, which has
not yet been declared effective by the Securities and Exchange Commission,
related to these shares. The Company's present intent is to hold its 1,228,000
TBC shares for investment.
PART II. OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS:
------------------
No material developments.
ITEM 2. CHANGES IN SECURITIES:
----------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
--------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
----------------------------------------------------
None.
7
<PAGE>
ITEM 5. OTHER INFORMATION:
------------------
Theodor H. Heinrichs resigned as a director of the Company, subsequent to the
July 12, 1995 annual meeting of shareholders, for health reasons.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
---------------------------------
(a) Exhibits
--------
3.2 Bylaws, as amended
11.1 Computation of Earnings (Loss) Per Share.
10.50/*+/ 1995 Stock Option/Stock Issuance Plan. Incorporated
herein by reference to Exhibit 99.1 to the Registrant's
Registration Statement on Form S-8, Registration No. 33-
61103, dated July 17, 1995..
10.51/*+/ Notice of Grant/Stock Option Agreement form, as used under
the 1995 Stock Option/Stock Issuance Plan. Incorporated
herein by reference to Exhibit 99.2 to the Registrant's
Registration Statement on Form S-8, Registration No. 33-
61103, dated July 17, 1995.
27 Financial Data Schedule (for electronic filing purposes
only).
- ----------
/*/ Incorporated by reference.
/+/ Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
-------------------
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SYNBIOTICS CORPORATION
Date: August 11, 1995 /s/ Michael K. Green
-----------------------------------------
Michael K. Green
Vice President of Finance and
Chief Financial Officer
(signing both as a duly authorized
officer and as principal financial
officer)
8
<PAGE>
Exhibit 3.2
-----------
AMENDED AND RESTATED BYLAWS
of
SYNBIOTICS CORPORATION
(a California corporation)
ARTICLE I
DIRECTORS; MANAGEMENT
---------------------
Section 1. Powers; Standard of Care
------------------------
(a) Subject to the provisions of the General Corporation Law of
California, effective January 1, 1977 (to which the various
Section numbers quoted herein relate) and subject to any
limitation in the Articles of Incorporation and the Bylaws
relating to action required to be approved by the Shareholders
(Sec. 153) or by the outstanding shares (Sec. 152), the
business and affairs of this corporation shall be managed by
and all corporate powers shall be exercised by or under
direction of the Board of Directors.
(b) Each Director shall exercise such powers and otherwise perform
such duties in good faith, in the manner such director
believes to be in the best interests of the corporation, and
with such care, including reasonable inquiry, using ordinary
prudence, as a person in a like position would use under
similar circumstances (Sec. 309).
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.
Section 3. Election and Tenure of Office
-----------------------------
The directors shall be elected by ballot at the annual meeting of
the Shareholders, to serve for one year or until their successors
are elected and have qualified. Their term of office shall begin
immediately after election.
Section 4. Vacancies
---------
Vacancies in the Board of Directors may be filled by a majority of
the remaining Directors, though less than a quorum, or by a sole
remaining Director, and each Director so elected shall hold office
until his successor is elected at an annual meeting of Shareholders
or at a special meeting called
1
<PAGE>
for that purpose. The Shareholders may at any time elect a Director
to fill any vacancy not filled by the Directors, and may elect the
additional Directors at the meeting at which an amendment of the
Bylaws is voted authorizing an increase in the number of Directors.
A vacancy or vacancies shall be deemed to exist in case of the
death, resignation or removal of any Director, or if the
Shareholders shall increase the authorized number of Directors but
shall fail at the meeting at which such increase is authorized, or
at an adjournment thereof, to elect the additional Director so
provided for, or in case the Shareholders fail at any time to elect
the full number of authorized Directors.
If the Board of Directors accepts the resignation of a Director
tendered to take effect at a future time, the Board, or the
Shareholders, shall have power to elect a successor to take office
when the resignation shall become effective.
No reduction of the number of Directors shall have the effect of
removing any Director prior to the expiration of his term of
office.
Section 5. Removal of Directors
--------------------
The entire Board of Directors or any individual Director may be
removed from office as provided by Secs. 302, 303 and 304 of the
Corporations Code of the State of California. In such case, the
remaining Board members may elect a successor Director to fill such
vacancy for the remaining unexpired term of the Director so
removed.
Section 6. Notice, Place and Manner of Meetings
------------------------------------
Meetings of the Board of Directors may be called by the Chairman of
the Board, or the President, or any Vice President, or the
Secretary, or any two (2) Directors and shall be held at the
principal executive office of the corporation in the State of
California, unless some other place is designated in the notice of
the meeting. No notice need be given of organization meetings or
regular meetings held at the corporate offices at the time and date
set forth herein. Notice shall be given of other meetings as herein
provided. Members of the Board may participate in a meeting through
use of a conference telephone or similar communications equipment
so long as all members participating in such a meeting can hear one
another. Accurate minutes of any meeting of the Board, or any
committee thereof, shall be maintained as required by Sec. 1500 of
the Code by the Secretary or other Officer designated for that
purpose.
Section 7. Organization Meetings - Regular Meetings
----------------------------------------
The organization meetings of the newly elected Board of Directors
shall be held immediately following the adjournment of the annual
meetings of the Shareholders.
Other Regular Meetings
----------------------
Regular meetings of the Board of Directors shall be held at the
corporate offices, or such other place as may be designated by the
Board of Directors, as follows:
Time of Regular Meeting: 10:00 a.m.
Date of regular Meeting: First Thursday of April
2
<PAGE>
If said day shall fall upon a holiday, such meetings shall be held
on the next succeeding business day thereafter.
Section 8. Special Meetings - Notices
--------------------------
Special meetings of the Board may be called at any time by the
President or, if he is absent or unable or refuses to act, by any
Vice President or the Secretary or by any two Directors, or by one
Director if only one is provided.
At least forty-eight (48) hours notice of the time and place of
special meetings shall be delivered personally to the Directors or
personally communicated to them by a corporate Officer by telephone
or telegraph. If the notice is sent to a Director by letter, it
shall be addressed to him at his address as it is shown upon the
records of the corporation, (or if it is not so shown on such
records or is not readily ascertainable, at the place in which the
meetings of the Directors are regularly held). In case such notice
is mailed, it shall be deposited in the United States mail, postage
prepaid, in the place in which the principal executive office of
the corporation is located at least four (4) days prior to the time
of the holding of the meeting. Such mailing, telegraphing,
telephoning or delivery as above provided shall be due, legal and
personal notice to such Director.
Section 9. Waivers
-------
When (i) all of the Directors are present at any organizational,
regular or special meeting, however called or noticed, and sign a
written consent thereto on the records of such meeting, or, (ii) if
a majority of the Directors are present and if those not present
sign a waiver of notice of such meeting or a consent to holding the
meeting or an approval of the minutes thereof, whether prior to or
after the holding of such meeting, which said waiver, consent or
approval shall be filed with the corporate records or made a part
of the minutes of the meeting or (iii) if a Director attends a
meeting without notice but without protesting, prior thereto or at
its commencement, the lack of notice to him, then the transactions
thereof are as valid as if had at a meeting regularly called and
noticed.
Section 10. Sole Director Provided by Articles of Incorporation
---------------------------------------------------
In the event only one Director is required by the Bylaws or
Articles of Incorporation, then any reference herein to notices,
waivers, consents, meetings or other actions by a majority or
quorum of the Directors shall be deemed to refer to such notice,
waiver, etc., by such sole Director, who shall have all the rights
and duties and shall be entitled to exercise all of the powers and
shall assume all the responsibilities otherwise herein described as
given to a Board of Directors.
Section 11. Directors Acting by Unanimous Written Consent
---------------------------------------------
Any action required or permitted to be taken by the Board of
Directors may be taken without a meeting and with the same force
and effect as if taken by a unanimous vote of Directors, if
authorized by a writing signed individually or collectively by all
members of the Board. Such consent shall be filed with the regular
minutes of the Board.
Section 12. Quorum
------
A majority of the number of Directors as fixed by the Articles of
Incorporation or Bylaws shall be necessary to constitute a quorum
for the transaction of business, and the action of a majority of
the Directors present at any meeting at which there is a quorum,
when duly assembled, is valid
3
<PAGE>
as a corporate act; provided that a minority of the Directors, in
the absence of a quorum, may adjourn from time to time, but may not
transact any business. A meeting at which a quorum is initially
present may continue to transact business, notwithstanding the
withdrawal of Directors, if any action taken is approved by a
majority of the required quorum for such meeting.
Section 13. Notice of Adjournment
---------------------
Notice of the time and place of holding an adjourned meeting need
not be given to absent Directors if the time and place be fixed at
the meeting adjourned and held within twenty-four (24) hours, but
if adjourned more than twenty-four (24) hours, notice shall be
given to all Directors not present at the time of the adjournment.
Section 14. Compensation of Directors
-------------------------
Directors, as such, shall not receive any stated salary for their
services, but by resolution of the Board a fixed sum and expense of
attendance, if any, may be allowed for attendance at each regular
and special meeting of the Board; provided that nothing herein
contained shall be construed to preclude any Director from serving
the company in any other capacity and receiving compensation
therefor.
Section 15. Committees
----------
Committees of the Board may be appointed by resolution passed by a
majority of the whole Board. Committees shall be composed of two or
more members of the Board, and shall have such powers of the Board
as may be expressly delegated to it by resolution of the Board of
Directors, except those powers expressly made non-delegable by Sec.
311.
Section 16. Advisory Directors
------------------
The Board of Directors from time to time may elect one or more
persons to be Advisory Directors who shall not by such appointment
be members of the Board of Directors. Advisory Directors shall be
available from time to time to perform special assignments
specified by the President, to attend meetings of the Board of
Directors upon invitation and to furnish consultation to the Board.
The period during which the title shall be held may be prescribed
by the Board of Directors. If no period is prescribed, the title
shall be held at the pleasure of the Board.
Section 17. Resignations
------------
Any Director may resign effective upon giving written notice to the
Chairman of the Board, the President, the Secretary or the Board of
Directors of the corporation, unless the notice specifies a later
time for the effectiveness of such resignation. If the resignation
is effective at a future time, a successor may be elected to take
office when the resignation becomes effective.
ARTICLE II
OFFICERS
--------
Section 1. Officers
--------
The Officers of the corporation shall be a Chairman of the Board or
a President or both, a Secretary and a Chief Financial Officer. The
corporation may also have, at the discretion of the
4
<PAGE>
Board of Directors, one or more Vice Presidents, one or more
Assistant Secretaries and such other Officers as may be appointed
in accordance with the provisions of Section 3 of this Article. One
person may hold two or more offices.
Section 2. Election
--------
The Officers of the corporation, except such Officers as may be
appointed in accordance with the provisions of Section 3 or Section
5 of this Article shall be chosen annually by the Board of
Directors, and each shall hold his office until he shall resign or
shall be removed or otherwise disqualified to serve, or his
successor shall be elected and qualified.
Section 3. Subordinate Officers, Etc.
--------------------------
The Board of Directors may appoint such other Officers as the
business of the corporation may require, each of whom shall hold
office for such period, have such authority and perform such duties
as are provided in the Bylaws or as the Board of Directors may from
time to time determine.
Section 4. Removal and Resignation
-----------------------
Any Officer may be removed, either with or without cause, by a
majority of the Directors at the time in office, at any regular or
special meeting of the Board, or, except in case of an Officer
chosen by the Board of Directors, by any Officer upon whom such
power of removal may be conferred by the Board of Directors.
Any Officer may resign at any time by giving written notice to the
Board of Directors, or to the President, or to the Secretary of the
corporation. Any such resignation shall take effect at the date of
the receipt of such notice or at any later time specified therein;
and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5. Vacancies
---------
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner
prescribed in the Bylaws for regular appointments to such office.
Section 6. Chairman of the Board
---------------------
The Chairman of the Board, if there shall be such an Officer,
shall, if present, preside at all meetings of the Board of
Directors, and exercise and perform such other powers and duties as
may be from time to time assigned to him by the Board of Directors
or prescribed by the Bylaws.
Section 7. President
---------
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the Chairman of the Board, if there be such
an Officer, the President shall be the Chief Executive Officer of
the corporation and shall, subject to the control of the Board of
Directors, have general supervision, direction and control of the
business and Officers of the corporation. He shall preside at all
meetings of the Shareholders and in the absence of the Chairman of
the Board, or if there be none, at all meetings of the Board of
Directors. He shall be ex officio a member of all the standing
committees, including the Executive Committee, if any, and shall
have the general powers
5
<PAGE>
and duties of management usually vested in the office of President
of a corporation, and shall have such other powers and duties as
may be prescribed by the Board of Directors or the Bylaws.
Section 8. Vice President
--------------
In the absence or disability of the President, the Vice Presidents,
in order of their rank as fixed by the Board of Directors, or if
not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when
so acting shall have all the powers of, and be subject to, all the
restrictions upon, the President. The Vice Presidents shall have
such other powers and perform such other duties as from time to
time may be prescribed for them respectively by the Board of
Directors or the Bylaws.
Section 9. Secretary
---------
The secretary shall keep, or cause to be kept, a book of minutes at
the principal office or such other place as the Board of Directors
may order, of all meetings of Directors and Shareholders, with the
time and place of holding, whether regular or special, and if
special, how authorized, the notice thereof given, the names of
those present at Directors' meetings, the number of shares present
or represented at Shareholders' meetings and the proceedings
thereof.
The Secretary shall keep, or cause to be kept, at the principal
office or at the office of the corporation's transfer agent, a
share register, or duplicate share register, showing the names of
the Shareholders and their addresses; the number and classes of
shares held by each; the number and date of certificates issued for
the same; and the number and date of cancellation of every
certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the Shareholders and of the Board of Directors required
by the Bylaws or by law to be given, and he shall keep the seal of
the corporation in safe custody, and shall have such other powers
and perform such other duties as may be prescribed by the Board of
Directors or by the Bylaws.
Section 10. Chief Financial Officer
-----------------------
This Officer shall keep and maintain, or cause to be kept and
maintained in accordance with generally accepted accounting
principles, adequate and correct accounts of the properties and
business transactions of the corporation, including accounts of its
assets, liabilities, receipts, disbursements, gains, losses,
capital, earnings (or surplus) and shares. The books of account
shall at all reasonable times be open to inspection by any
Director.
This Officer shall deposit all moneys and other valuables in the
name and to the credit of the corporation with such depositaries as
may be designated by the Board of Directors. He shall disburse the
funds of the corporation as may be ordered by the Board of
Directors, shall render to the President and Directors, whenever
they request it, an account of all of his transactions and of the
financial condition of the corporation, and shall have such other
powers and perform such other duties as may be prescribed by the
Board of Directors or the Bylaws.
6
<PAGE>
ARTICLE III
SHAREHOLDERS' MEETINGS
----------------------
Section 1. Place of Meetings
-----------------
Meetings of the Shareholders shall be held at the principal
executive office of the corporation, in the State of California,
unless some other appropriate and convenient location be designated
for that purpose from time to time by the Board of Directors.
Section 2. Annual Meetings
---------------
The annual meeting of the Shareholders of the corporation for the
election of directors and for the transaction of such other
business as may properly come before the meeting shall be held on
such date and at such time and place as may be determined each year
by the Board of Directors.
Section 3. Special Meetings
----------------
Special meetings of the Shareholders may be called at any time by
the Board of Directors, the Chairman of the Board, the President, a
Vice President, the Secretary, or by one or more Shareholders
holding not less than one-tenth (l/10) of the voting power of the
corporation. Except as next provided, notice shall be given as for
the annual meeting.
Upon receipt of a written request addressed to the Chairman,
President, Vice President, or Secretary, mailed or delivered
personally to such Officer by any person (other than the Board)
entitled to call a special meeting of Shareholders, such Officer
shall cause notice to be given, to the Shareholders entitled to
vote, that a meeting will be held at a time requested by the person
or persons calling the meeting, not less than twenty-five nor more
than sixty days after the receipt of such request. If such notice
is not given within twenty days after receipt of such request, the
persons calling the meeting may give notice thereof in the manner
provided by these Bylaws or apply to the Superior Court as provided
in Sec. 305(c).
Section 4. Notice of Meetings - Reports
----------------------------
Notice of meetings, annual or special, shall be given in writing
not less than ten nor more than sixty days before the date of the
meeting, to Shareholders entitled to vote thereat by the Secretary
or the Assistant Secretary, or if there be no such Officer, or in
the case of his neglect or refusal, by any Director or Shareholder.
Such notices or any reports shall be given personally or by mail or
other means or written communication as provided in Sec. 601 of the
Code and shall be sent to the Shareholder's address appearing on
the books of the corporation, or supplied by him to the corporation
for the purpose of notice, and in the absence thereof, as provided
in Sec. 601 of the Code.
Notice of any meeting of Shareholders shall specify the place, the
day and the hour of meeting, and (l) in case of a special meeting,
the general nature of the business to be transacted and no other
business may be transacted, or (2) in the case of an annual
meeting, those matters which the Board at date of mailing, intends
to present for action by the Shareholders. At any meetings where
Directors are to be elected, notice shall include the names of the
nominees, if any, intended at date of Notice to be presented by
management for election.
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If a Shareholder supplies no address, notice shall be deemed to
have been given to him if mailed to the place where the principal
executive office of the company, in California, is situated, or
published at least once in some newspaper of general circulation in
the County of said principal office.
Notice shall be deemed given at the time it is delivered personally
or deposited in the mail or sent by other means of written
communication. The Officer giving such notice or report shall
prepare and file an affidavit or declaration thereof.
When a meeting is adjourned for forty-five days or more, notice of
the adjourned meeting shall be given as in case of an original
meeting. Save, as aforesaid, it shall not be necessary to give any
notice of adjournment or of the business to be transacted at an
adjourned meeting other than by announcement at the meeting at
which such adjournment is taken.
Section 5. Validation of Shareholders' Meetings
------------------------------------
The transactions of any meeting of Shareholders, however called and
noticed, shall be valid as though had at a meeting duly held after
regular call and notice, if a quorum be present either in person or
by proxy, and if, either before or after the meeting, each of the
Shareholders entitled to vote, not present in person or by proxy,
sign a written waiver of notice, or a consent to the holding of
such meeting or an approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate
records or made a part of the minutes of the meeting. Attendance
shall constitute a waiver of notice, unless objection shall be made
as provided in Sec. 601(e).
Section 6. Shareholders Acting Without A Meeting - Directors
-------------------------------------------------
Any action which may be taken at a meeting of the Shareholders may
be taken without a meeting or notice of meeting if authorized by a
writing signed by all of the Shareholders entitled to vote at a
meeting for such purpose and filed with the Secretary of the
corporation, provided further that while ordinarily Directors can
only be elected by unanimous written consent under Sec. 603(d), as
to vacancy created by death, resignation or other causes, if the
Directors fail to fill a vacancy, then a Director to fill that
vacancy may be elected by the written consent of persons holding a
majority of shares entitled to vote for the election of Directors.
Section 7. Other Actions Without A Meeting
-------------------------------
Unless otherwise provided in the GCL or the Articles, any action
which may be taken at any annual or special meeting of Shareholders
may be taken without a meeting and without prior notice if a
consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding shares having not less than
the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote
thereon were present and voted.
Unless the consents of all Shareholders entitled to vote have been
solicited in writing,
(1) Notice of any Shareholder approval pursuant to Secs. 310, 317,
1201 or 2007 without a meeting by less than unanimous written
consent shall be given at least 10 days before the consummation
of the action authorized by such approval, and
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<PAGE>
(2) Prompt notice shall be given of the taking of any other
corporate action approved by Shareholders without a meeting by
less than unanimous written consent, to each of those
Shareholders entitled to vote who have not consented in
writing.
Any Shareholder giving a written consent, or the Shareholder's
proxyholders, or a transferee of the shares of a personal
representative of the Shareholder or their respective proxyholders,
may revoke the consent by a writing received by the corporation
prior to the time that written consents of the number of shares
required to authorize the proposed action have been filed with the
Secretary of the corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the Secretary.
Section 8. Quorum
------
The holders of a majority of the shares entitled to vote thereat,
present in person, or represented by proxy, shall constitute a
quorum at all meetings of the Shareholders for the transaction of
business except as otherwise provided by law, by the Articles of
Incorporation, or by these Bylaws. If, however, such majority shall
not be present or represented at any meeting of the Shareholders,
the Shareholders entitled to vote thereat, present in person, or by
proxy, shall have the power to adjourn the meeting from time to
time, until the requisite amount of voting shares shall be present.
At such adjourned meeting at which the requisite amount of voting
shares shall be represented, any business may be transacted which
might have been transacted at a meeting as originally notified.
If a quorum be initially present, the Shareholders may continue to
transact business until adjournment, notwithstanding the withdrawal
of enough Shareholders to leave less than a quorum, if any action
taken is approved by a majority of the Shareholders required to
initially constitute a quorum.
Section 9. Voting Rights; Cumulative Voting
--------------------------------
Only persons in whose names shares entitled to vote stand on the
stock records of the corporation on the day of any meeting of
Shareholders, unless some other day be fixed by the Board of
Directors for the determination of Shareholders of record, and then
on such other day, shall be entitled to vote at such meeting.
Provided the candidate's name has been placed in nomination prior
to the voting and one or more Shareholders has given notice at the
meeting prior to the voting of the Shareholder's intent to cumulate
the Shareholder's votes, every Shareholder entitled to vote at any
election for Directors of any corporation for profit may cumulate
his votes and give one candidate a number of votes equal to the
number of Directors to be elected multiplied by the number of votes
to which his shares are entitled, or distribute his votes on the
same principle among as many candidates as he thinks fit.
The candidates receiving the highest number of votes up to the
number of Directors to be elected are elected.
The Board of Directors may fix a time in the future not exceeding
sixty days preceding the date of any meeting of Shareholders or the
date fixed for the payment of any dividend or distribution, or for
the allotment of rights, or when any change or conversion or
exchange of shares shall go into effect, as a record date for the
determination of the Shareholders entitled to notice of and to vote
at any such meeting, or entitled to receive any such dividend or
distribution, or any allotment of rights, or to exercise the rights
in respect to any such change, conversion or exchange of shares.
9
<PAGE>
In such case only Shareholders of record on the date so fixed shall
be entitled to notice of and to vote at such meeting, or to receive
such dividends, distribution or allotment of rights, or to exercise
such rights, as the case may be, notwithstanding any transfer of
any share on the books of the company after any record date fixed
as aforesaid. The Board of Directors may close the books of the
company against transfers of shares during the whole or any part of
such period.
Section 10. Proxies
-------
Every Shareholder entitled to vote, or to execute consents, may do
so, either in person or by written proxy, executed in accordance
with the provisions of Secs. 604 and 705 of the Code and filed with
the Secretary of the corporation.
Section 11. Organization
------------
The President(or, should the President so elect in his discretion,
the Chairman of the Board), or in the absence of the Chairman of
the Board, the President, any Vice President, shall call the
meeting of the Shareholders to order, and shall act as chairman of
the meeting. In the absence of the President and all of the Vice
Presidents, Shareholders shall appoint a chairman for such meeting.
The Secretary of the company shall act as Secretary of all meetings
of the Shareholders, but in the absence of the Secretary at any
meeting of the Shareholders, the presiding Officer may appoint any
person to act as Secretary of the meeting.
Section 12. Inspectors of Election
----------------------
In advance of any meeting of Shareholders the Board of Directors
may, if they so elect, appoint inspectors of election to act at
such meeting or any adjournments thereof. If inspectors of election
be not so appointed, the chairman of any such meeting may, and on
the request of any Shareholder or his proxy shall, make such
appointment at the meeting in which case the number of inspectors
shall be either one or three as determined by a majority of the
Shareholders represented at the meeting.
ARTICLE IV
CERTIFICATES AND TRANSFER OF SHARES
-----------------------------------
Section 1. Certificates for Shares
-----------------------
A certificate or certificates for shares of the capital stock of
the corporation shall be issued to each shareholder when any of
these shares are fully paid, and the board of directors may
authorize the issuance of certificates or shares as partly paid
provided that these certificates shall state the amount of the
consideration to be paid for them and the amount paid. All
certificates shall be signed in the name of the corporation by the
chairman of the board or the president or vice president and by the
chief financial officer or an assistant treasurer or the secretary
or any assistant secretary, certifying the number of shares and the
class or series of shares owned by the shareholder. Any or all of
the signatures on the certificate may be facsimile. In case any
officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed on a certificate shall have
ceased to be that officer, transfer agent, or registrar before that
certificate is issued, it may be issued by the corporation with the
same effect as if that person were an officer, transfer agent or
registrar at the date of issue.
10
<PAGE>
Section 2. Transfer on the Books
---------------------
Upon surrender to the Secretary or transfer agent of the
corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, cancel the
old certificate and record the transaction upon its books.
Section 3. Lost or Destroyed Certificates
------------------------------
Any person claiming a certificate of stock to be lost or destroyed
shall make an affidavit or affirmation of that fact and shall if
the Directors so require give the corporation a bond of indemnity,
in form and with one or more sureties satisfactory to the Board, in
at least double the value of the stock represented by said
certificate, whereupon a new certificate may be issued in the same
tenor and for the same number of shares as the one alleged to be
lost or destroyed.
Section 4. Transfer Agents and Registrars
------------------------------
The Board of Directors may appoint one or more transfer agents or
transfer clerks, and one or more registrars, which shall be an
incorporated bank or trust company, either domestic or foreign, who
shall be appointed at such times and places as the requirements of
the corporation may necessitate and the Board of Directors may
designate.
Section 5. Closing Stock Transfer Books - Record Date
------------------------------------------
In order that the corporation may determine the Shareholders
entitled to notice of any meeting or to vote or entitled to receive
payment of any dividend or other distribution or allotment of any
rights or entitled to exercise any rights in respect of any other
lawful action, the Board may fix, in advance, a record date, which
shall not be more than sixty nor less than ten days prior to the
date of such meeting nor more than sixty days prior to any other
action.
If no record date is fixed:
(1) The record date for determining Shareholders entitled to notice
of or to vote at a meeting of Shareholders shall be at the
close of business on the business day next preceding the day on
which notice is given or, if notice is waived, at the close of
business on the business day next preceding the day on which
the meeting is held.
(2) The record date for determining Shareholders entitled to give
consent to corporate action in writing without a meeting, when
no prior action by the Board is necessary, shall be the day on
which the first written consent is given.
(3) The record date for determining Shareholders for any other
purpose shall be at the close of business on the day on which
the Board adopts the resolution relating thereto, or the 60th
day prior to the date of such other action, whichever is later.
Section 6. Legend Condition
----------------
In the event any shares of this corporation are issued pursuant to
a permit or exemption therefrom requiring the imposition of a
legend condition the person or persons issuing or transferring said
shares shall make sure said legend appears on the certificate and
on the stub relating thereto in the
11
<PAGE>
stock record book and shall not be required to transfer any shares
free of such legend unless an amendment to such permit or a new
permit be first issued so authorizing such a deletion.
ARTICLE V
CORPORATE RECORDS AND REPORTS; INSPECTION
-----------------------------------------
Section 1. Records
-------
The corporation shall maintain, in accordance with generally
accepted accounting principles, adequate and correct accounts,
books and records of its business and properties. All of such
books, records and accounts shall be kept at its principal
executive office in the State of California, as fixed by the Board
of Directors from time to time.
Section 2. Inspection of Books and Records
-------------------------------
All books and records provided for in Sec. 1500 shall be open to
inspection of the Directors and Shareholders from time to time and
in the manner provided in said Sec. 1600 - 1602.
Section 3. Certification and Inspection of Bylaws
--------------------------------------
The original or a copy of these Bylaws, as amended or otherwise
altered to date, certified by the Secretary, shall be kept at the
corporation's principal executive office and shall be open to
inspection by the Shareholders of the company, at all reasonable
times during office hours, as provided in Sec. 213 of the
Corporations Code.
Section 4. Checks, Drafts, Etc.
--------------------
All checks, drafts or other orders for payment of money, notes or
other evidences of indebtedness, issued in the name of or payable
to the corporation, shall be signed or endorsed by such person or
persons and in such manner as shall be determined from time to time
by resolution of the Board of Directors.
Section 5. Contracts, Etc. - How Executed
------------------------------
The Board of Directors, except as in the Bylaws otherwise provided,
may authorize any Officer or Officers, agent or agents, to enter
into any contract or execute any instrument in the name of and on
behalf of the corporation. Such authority may be general or
confined to specific instances. Unless so authorized by the Board
of Directors, no Officer, agent or employee shall have any power or
authority to bind the corporation by any contract or agreement, or
to pledge its credit, or to render it liable for any purpose or to
any amount, except as provided in Sec. 313 of the Corporations
Code.
12
<PAGE>
ARTICLE VI
ANNUAL REPORTS
--------------
Section 1. Due Date, Contents
------------------
The Board of Directors shall cause an annual report or statement to
be sent to the Shareholders of this corporation not later than 120
days after the close of the fiscal or calendar year in accordance
with the provisions of Secs. 1500 - 1501. Such report shall be sent
to Shareholders at least fifteen days prior to the annual meeting
of Shareholders. Such report shall contain a balance sheet as of
the end of the fiscal year, an income statement and a statement of
changes in financial position for such fiscal year, accompanied by
any report thereon of an independent accountant, or if there is no
such report, a certificate of the Chief Financial Officer or
President that such statements were prepared without audit of the
books and records of the corporation.
Section 2. Waiver
------
The foregoing requirement of an annual report may be waived by the
Board so long as this corporation shall have less than 100
Shareholders.
ARTICLE VII
AMENDMENTS TO BYLAWS
--------------------
Section 1. By Shareholders
---------------
New Bylaws may be adopted or these Bylaws may be repealed or
amended at their annual meeting, or at any other meeting of the
Shareholders called for that purpose, by a vote of Shareholders
entitled to exercise a majority of the voting power of the
corporation, or by written assent of such Shareholders.
Section 2. Powers of Directors
-------------------
Subject to the right of the Shareholders to adopt, amend or repeal
Bylaws, as provided in Section 1 of this Article VII, and the
limitations of Sec. 204(a)(5) and Sec. 212, the Board of Directors
may adopt, amend or repeal any of these Bylaws.
Section 3. Record of Amendments
--------------------
Whenever an amendment or new Bylaw is adopted, it shall be copied
in the book of Bylaws with the original Bylaws, in the appropriate
place. If any Bylaw is repealed, the fact of repeal with the date
of the meeting at which the repeal was enacted or written assent
was filed shall be stated in said book.
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<PAGE>
ARTICLE VIII
MISCELLANEOUS
-------------
Section 1. References to Code Sections
---------------------------
"Sec." references herein refer to the equivalent Sections of the
General Corporation Law effective January 1, 1977, as amended.
Section 2. Representation of Shares in Other Corporations
----------------------------------------------
Except as provided in Sec. 703, shares of other corporations
standing in the name of this corporation may be voted or
represented and all incidents thereto may be exercised on behalf of
the corporation by the Chairman of the Board, the President or any
Vice President and the Secretary or an Assistant Secretary.
Section 3. Subsidiary Corporations
-----------------------
Shares of this corporation owned by a subsidiary shall not be
entitled to vote on any matter. A subsidiary for these purposes is
defined in Sec. 189 (a) and (b).
Section 4. Indemnification of Agents of the Corporation; Purchase of Liability
-------------------------------------------------------------------
Insurance
---------
(a) For the purposes of this Section 4, "agent" means any person
who (i) is or was a director, officer, employee or other agent
of the Corporation, (ii) is or was serving at the request of
the Corporation as a director, officer, employee or agent of
another foreign or domestic corporation, partnership, joint
venture, trust or other enterprise, or (iii) was a director,
officer, employee or agent of a foreign or domestic corporation
which was a predecessor corporation of the Corporation or of
another enterprise at the request of such predecessor
corporation; "proceeding" means any threatened, pending or
completed action or proceeding, neither civil, criminal,
administrative or investigative; and "expenses" included,
without limitation, attorney's fees and any expenses of
establishing a right to indemnification under paragraph (d) or
(e)(3) of this Section 4.
(b) The Corporation shall have the power to indemnify any person
who was or is a party, or is threatened to be made a party, to
any proceeding (other than an action by or in the right of the
Corporation to procure a judgment in its favor) by reason of
the fact that such person is or was an agent of the Corporation
against expenses, judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with
such proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in the best
interests of the Corporation and, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of
such person was unlawful. The termination of any proceeding by
judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in the best
interests of the Corporation or that the person had reasonable
cause to believe that the person's conduct was unlawful.
(c) The Corporation shall have the power to indemnify any person
who was or is a party, or is threatened to be made a party, to
any threatened, pending or completed action by or in the right
of the Corporation to procure a judgment in its favor by reason
of the fact that
14
<PAGE>
such person is or was an agent of the Corporation against
expenses actually and reasonably incurred by such person in
connection with the defense or settlement of such action if
such person acted in good faith, in a manner such person
believed to be in the best interests of the Corporation and its
shareholders. No indemnification shall be made under this
paragraph (c):
(1) in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the
Corporation in the performance of such person's duty to the
Corporation and its shareholders, unless and only to the
extent the court in which such proceeding is or was pending
shall determine upon application that, in view of all the
circumstances of the case, such person is fairly and
reasonably entitled to indemnity for expenses and then only
to the extent that the court shall determine; or
(2) of amounts paid in settling or otherwise disposing of a
pending action without court approval; or
(3) of expenses incurred in defending a pending action which is
settled or otherwise disposed of without court approval.
(d) To the extent that an agent of the Corporation has been
successful on the merits in defense of any proceeding referred
to in paragraphs (b) or (c) above, or in defense of any claim,
issue or matter therein, said agent shall be indemnified
against expenses actually and reasonably incurred by said agent
in connection therewith.
(e) Except as provided in paragraph (d) above, any indemnification
under this section shall be made by the Corporation only if
authorized in the specific case upon a determination that
indemnification of the agent is proper in the circumstances
because the agent has met the applicable standard of conduct
set forth in paragraph (b) or (c) above, by:
(1) a majority vote of a quorum consisting of directors who are
not parties to such proceeding;
(2) if such a quorum of directors is not obtainable, by
independent legal counsel in a written opinion;
(3) approval by the affirmative vote of a majority of the
shares of this Corporation represented and voting at a duly
held meeting at which a quorum is present (which shares
voting affirmatively also constitute at least a majority of
the required quorum) or by the written consent of holders
of a majority of the outstanding shares which would be
entitled to vote at such meeting. For such purpose, the
shares owned by the person to be indemnified shall not be
considered outstanding or entitled to vote thereon; or
(4) the court in which such proceeding is or was pending, upon
application made by the Corporation, the agent or the
attorney or other person rendering services in connection
with the defense, whether or not such application by said
agent, attorney or other person is opposed by the
Corporation.
(f) Expenses incurred in defending any Proceeding may be advanced
by the Corporation prior to the final disposition of such
proceeding upon receipt of an undertaking by or on behalf
15
<PAGE>
of the agent to repay such amount if it shall be determined
ultimately that the agent is not entitled to be indemnified as
authorized in this section.
(g) The indemnification provided by this section shall not be
deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any bylaw, agreement,
vote of shareholders or disinterested directors or otherwise,
both as to action in an official capacity and as to action in
another capacity while holding such office, to the extent such
additional rights to indemnification are authorized in the
Articles of Incorporation of the Corporation. The rights to
indemnity hereunder shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators
of the person. Nothing contained in this section shall affect
any right to indemnification to which persons other than such
directors and officers may be entitled by contract or
otherwise.
(h) No indemnification or advance shall be made under this section,
except as provided in paragraphs (d) or (e)(3) above, in any
circumstance where it appears:
(1) that it would be inconsistent with a provision of the
Articles of Incorporation of the Corporation, Bylaws, a
resolution of the shareholders or an agreement in effect at
the time of the accrual of the alleged cause of action
asserted in the proceeding in which the expenses were
incurred or other amounts were paid which prohibits or
otherwise limits indemnification; or
(2) that it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
(i) Upon and in the event of a determination by the Board of
Directors of the Corporation to purchase such insurance, the
Corporation shall purchase and maintain insurance on behalf of
any agent of the Corporation against any liability asserted
against or incurred by the agent in such capacity or arising
out of the agent's status as such whether or not the
Corporation would have the power to indemnify the agent against
such liability under the provisions of this section. The fact
that the Corporation owns all or a portion of the shares of the
company issuing a policy of insurance shall not render this
subdivision inapplicable if either of the following conditions
are satisfied:
(1) if authorized in the Articles of Incorporation of the
Corporation, any policy issued is limited to the extent
provided by subdivision (d) of Section 204 of the
California Corporations Code; or
(2) (a) the company issuing the insurance policy is organized,
licensed and operated in a manner that complies with
the insurance laws and regulations applicable to its
jurisdiction of organization;
(b) the company issuing the policy provides procedures for
processing claims that do not permit that company to be
subject to the direct control of the corporation that
purchased that policy; and
(c) the policy issued provides for some manner of risk
sharing between the issuer and purchaser of the policy,
on one hand, and some unaffiliated person or persons,
on the other, such as by providing for more than one
unaffiliated owner of the company issuing the policy or
by providing
16
<PAGE>
that a portion of the coverage furnished will be
obtained from some unaffiliated insurer or reinsurer.
(j) If this section or any portion thereof shall be invalidated on
any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless have the power to indemnify each
director, officer, employee or other agent against expenses
(including attorneys' fees), judgments, fines and amounts paid
in settlement with respect to any action, suit, proceeding or
investigation, whether civil, criminal or administrative, and
whether internal or external, including a grand jury proceeding
and an action or suit brought by or in the right of the
Corporation, to the full extent permitted by any applicable
portion of this section that shall not have been invalidated or
by any other applicable law.
(k) Upon, and in the event of, a determination of the Board of
Directors of the Corporation to do so, the Corporation is
authorized to enter into indemnification agreements consistent
with the provisions of this section with some or all of its
directors, officers, employees and other agents.
(1) The Corporation shall not retroactively repeal or amend this
section or any provision hereof, or any other provision of
these Bylaws relating to indemnification, in a way which
adversely affects any right or protection under this section of
an Indemnitee existing at the time of such repeal or amendment.
17
<PAGE>
EXHIBIT 11.1
------------
SYNBIOTICS CORPORATION
COMPUTATION OF EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------- -------------------------------
1995 1994 1995 1994
------------ --------------- -------------- -------------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS (LOSS) PER SHARE:
Net income (loss) per statement of operations $ 980,000 $ (1,284,000) $ 1,734,000 $ (865,000)
============ =============== ============== =============
Weighted average number of shares outstanding 5,806,000 5,803,000 5,805,000 5,803,000
============ =============== ============== =============
Primary earnings (loss) per share $ .17 $ (.22) $ .30 $ (.15)
============ =============== ============== =============
FULLY DILUTED EARNINGS (LOSS) PER SHARE:/(1)/
Net income (loss) per statement of operations $ 980,000 $ (1,284,000) $ 1,734,000 $ (865,000)
============ =============== ============== =============
Reconciliation of weighted average number of
shares per primary computation above, to
amount used for fully diluted computation:
Weighted average number of shares outstanding,
per primary computation 5,806,000 5,803,000 5,805,000 5,803,000
Add-effect of outstanding options (as determined
by the application of the treasury method) 5,000 50,000 4,000 50,000
------------ --------------- -------------- -------------
Weighted average number of shares, as adjusted 5,811,000 5,853,000 5,809,000 5,853,000
============ =============== ============== =============
Fully diluted earnings (loss) per share $ .17 $ (.22) $ .30 $ (.15)
============ =============== ============== =============
</TABLE>
/(1)/ This computation is submitted, for the three and six month periods ended
June 30, 1994, in accordance with Regulation S-B Item 601(b)(11) although
it is contrary to paragraph 40 of APB Opinion No. 15 because it produces
an anti-dilutive result.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
BALANCE SHEET AS OF JUNE 30, 1995 AND THE RELATED CONDENSED STATEMENTS OF
OPERATIONS AND OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1995 INCLUDED
ELSEWHERE IN THE FORM 10-QSB.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,291
<SECURITIES> 502
<RECEIVABLES> 1,752
<ALLOWANCES> 77
<INVENTORY> 2,652
<CURRENT-ASSETS> 7,158
<PP&E> 4,398
<DEPRECIATION> 3,310
<TOTAL-ASSETS> 11,785
<CURRENT-LIABILITIES> 2,215
<BONDS> 0
<COMMON> 29,308
0
0
<OTHER-SE> (19,738)
<TOTAL-LIABILITY-AND-EQUITY> 11,785
<SALES> 8,637
<TOTAL-REVENUES> 8,802
<CGS> 4,487
<TOTAL-COSTS> 7,977
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,756
<INCOME-TAX> 22
<INCOME-CONTINUING> 1,734
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,734
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
