<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 March 31, 1996
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 April 30, 1996, 5,974,880 shares of Common Stock were outstanding.
Transitional Small Business Disclosure Format: Yes [_] No [X]
================================================================================
<PAGE>
SYNBIOTICS CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
Part I. Condensed Statement of Operations -
Three months ended March 31, 1996 and 1995 3
Condensed Balance Sheet -
March 31, 1996 and December 31, 1995 4
Condensed Statement of Cash Flows -
Three months ended March 31, 1996 and 1995 5
Notes to Condensed Financial Statements 6
Management's Discussion and Analysis or Plan of Operation 7
Part II. Other Information 8
</TABLE>
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
--------------------
SYNBIOTICS CORPORATION
CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Revenues:
Product sales $5,750,000 $4,826,000
License fees and other 171,000 50,000
Interest 11,000 9,000
---------- ----------
5,932,000 4,885,000
Cost and expenses:
Cost of sales 2,779,000 2,183,000
Research and development 216,000 201,000
Selling and marketing 1,229,000 1,378,000
General and administrative 385,000 351,000
---------- ----------
4,609,000 4,113,000
---------- ----------
Income before gain on sale of securities
available for sale 1,323,000 772,000
Gain on sale of securities available for sale 385,000
---------- ----------
Income before income taxes 1,708,000 772,000
Provision for income taxes 57,000 18,000
---------- ----------
Net income $1,651,000 $ 754,000
========== ==========
Net income per share $ .28 $ .13
========== ==========
Weighted average shares outstanding 5,911,000 5,803,000
========== ==========
</TABLE>
Net income per share was computed based upon the weighted average
number of shares outstanding, including common stock equivalents.
See accompanying notes to condensed financial statements.
3
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
--------------------
SYNBIOTICS CORPORATION
CONDENSED BALANCE SHEET
________________________________________________________________________________
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ -------------
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 1,620,000 $ 1,017,000
Securities available for sale 715,000
Accounts receivable 3,572,000 1,430,000
Inventories 4,082,000 3,439,000
Other current assets 557,000 578,000
------------ -------------
Total current assets 10,546,000 6,464,000
Property and equipment, net 765,000 879,000
Securities available for sale 2,840,000 2,533,000
Other assets 1,885,000 1,582,000
------------ -------------
$16,036,000 $ 11,458,000
============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,063,000 $ 1,613,000
Other current liabilities 686,000 697,000
------------ -------------
Total current liabilities 2,749,000 2,310,000
------------ -------------
Shareholders' equity:
Common stock, no par value, 24,800,000 shares authorized,
5,970,000 and 5,816,000 shares issued and outstanding at
March 31, 1996 and December 31, 1995 29,748,000 29,351,000
Unrealized holding gains (losses) from securities available for sale 1,056,000 (1,035,000)
Accumulated deficit (17,517,000) (19,168,000)
------------ -------------
Total shareholders' equity 13,287,000 9,148,000
------------ -------------
$ 16,036,000 $ 11,458,000
============ =============
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
--------------------
SYNBIOTICS CORPORATION
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
________________________________________________________________________________
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,651,000 $ 754,000
Adjustments to reconcile net income to net cash
used for operating activities:
Depreciation and amortization 231,000 251,000
Gain on sale of securities available for sale (385,000)
Changes in assets and liabilities:
Accounts receivable (2,142,000) (579,000)
Inventories (643,000) (107,000)
Other assets 16,000 65,000
Accounts payable and accrued expenses 450,000 379,000
Other liabilities (11,000) 6,000
----------- ----------
Net cash (used for) provided by operating activities (833,000) 769,000
----------- ----------
Cash flows from investing activities:
Acquisition of property and equipment (16,000) (60,000)
Investment in securities available for sale (715,000) (5,000)
Proceeds from sale of securities available for sale 2,167,000
----------- ----------
Net cash provided by (used for) investing activities 1,436,000 (65,000)
----------- ----------
Net increase in cash and equivalents 603,000 704,000
Cash and equivalents - beginning of year 1,017,000 447,000
----------- ----------
Cash and equivalents - end of period $ 1,620,000 $1,151,000
=========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
5
<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 March 31, 1996 and the statements of
operations and of cash flows for the three month periods ended March 31, 1996
and 1995 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 year ended December 31,
1995. 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
primarily of short-term commercial paper.
NOTE 3 - INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- ------------
<S> <C> <C>
Raw materials $1,044,000 $ 665,000
Work in process 642,000 633,000
Finished goods 2,396,000 2,141,000
---------- ------------
$4,082,000 $3,439,000
========== ============
</TABLE>
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
RESULTS OF OPERATIONS
Total revenue for the first quarter of 1996 increased by $1,047,000 or 21% over
the first quarter of 1995. Product sales during the first quarter of 1996
increased $924,000 or 19%. The increase is due to an increase of $644,000 or
49% in vaccine sales and a $280,000 or 8% increase in diagnostic sales. Vaccine
sales increased primarily due to $640,000 of international shipments of bulk
feline leukemia vaccine to Rhone-Merieux, which bottles and markets the
Company's feline leukemia vaccine under its own brand name in certain parts of
Europe, for which there were no comparable sales during the first quarter of
1995. The increased diagnostic sales are primarily due to sales of the
Company's ICT GOLD(TM) HW product, which was introduced in March 1995, and sales
of D-TEC/(R)/ CB (canine brucellosis) which had been on back order for
approximately one year as a result of third-party manufacturer production
problems.
License fees and other revenue during the first quarter of 1996 increased
$121,000 or 242% over the first quarter of 1995 due to increased royalties
earned on certain of the Company's products which are licensed to Rhone Merieux,
Inc. (located in Athens, Georgia) and license fees received in conjunction with
an exclusive distribution agreement with Daiichi Pharmaceutical Co., Ltd. for
the distribution of the Company's vaccine and diagnostic products in Japan. The
Daiichi arrangement is not expected to generate significant revenues until at
least 1998.
The cost of sales as a percentage of product revenue increased to 48% during the
first quarter of 1996 as compared to 45% for the first quarter of 1995. The
increase is due primarily to increased unapplied manufacturing overhead,
resulting from a larger percentage of product sales during 1996 being generated
from products which are manufactured for the Company by third parties. The
Company's manufacturing costs are predominantly fixed costs. Among the
Company's major products, DiroCHEK/(R)/ canine heartworm diagnostic products are
manufactured at Company facilities, whereas ICT GOLD(TM) HW and all vaccines are
manufactured by third parties. In addition to affecting gross margins, this
shift in product mix renders the Company relatively more dependent on the third-
party manufacturers.
Selling and marketing expenses during the first quarter of 1996 decreased by
$149,000 or 11% from the first quarter of 1995. The decrease is due primarily to
a reduction in advertising and promotion costs which were higher during the
first quarter of 1995 resulting from the introduction of the Company's ICT
GOLD(TM) HW canine heartworm diagnostic test.
On February 27, 1996 and February 28, 1996, the Company sold a total of 614,000
shares of Texas Biotechnology Corporation ("TBC") common stock on the American
Stock Exchange at an average selling price of $3.573 per share. As a result of
the transactions, the Company recognized a gain of $385,00 during the first
quarter of 1996. As a result of the sale of the shares, the Company's ownership
of TBC was reduced to approximately 3%. During the period April 25, 1996 to May
2, 1996, the Company sold its remaining 614,000 shares of TBC common stock on
the American Stock Exchange at an average selling price of $4.205 per share. As
a result of the transactions, the Company will recognize a gain of $774,000
during the second quarter of 1996. The net proceeds received from the sales,
which totalled $4,727,000, will be used primarily for working capital
requirements and to fund business opportunities such as acquisitions.
The Company's business is seasonal, and is concentrated within the canine
heartworm selling season, which falls mainly in the quarters ending March 31 and
June 30 of each year. Sales and results from operations in the quarters ending
September 30 and December 31 of each year are expected to be less favorable than
in the heartworm selling season.
7
<PAGE>
FINANCIAL CONDITION
Management believes that the Company's present capital resources, which included
working capital of $7,797,000 at March 31, 1996, are sufficient to meet its
current working capital needs.
PART II. OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS:
------------------
None.
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.
ITEM 5. OTHER INFORMATION:
------------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
---------------------------------
(a) Exhibits
--------
10.53 Distribution Agreement between the Registrant and Daiichi
Pharmaceutical Co., Ltd., dated January 16, 1996./(1)/
10.54 License Agreement between the Registrant and Engene
Biotechnologies, Inc., dated March 6, 1996./(1) /
10.55 Research and Development Agreement between the Registrant and
Engene Biotechnologies, Inc., dated March 6, 1996./(1)/
10.56 Scientific Advisor Agreement between the Registrant and J.
Kevin Steele, dated March 6, 1996./(1)/
8
<PAGE>
10.57 Inducement Agreement between the Registrant and Engene
Biotechnologies, Inc., dated March 6, 1996./(1)/
11.1 Computation of Earnings Per Share.
27 Financial Data Schedule (for electronic filing purposes only).
______________________
(1) Certain confidential portions of this exhibit have been
omitted by means of blacking out the text (the "Mark").
This exhibit has been filed separately with the Secretary of
the Commission without the Mark pursuant to the Company's
Application Requesting Confidential Treatment under Rule 24-
b-2 under the Securities Exchange Act of 1934, as amended.
(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, thereto duly
authorized.
SYNBIOTICS CORPORATION
Date: May 15, 1996 /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)
9
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
- ----------- -------
10.53 Distribution Agreement between the Registrant and Daiichi Pharmaceutical
Co., Ltd., dated January 16, 1996./(1)/
10.54 License Agreement between the Registrant and Engene Biotechnologies,
Inc., dated March 6, 1996./(1)/
10.55 Research and Development Agreement between the Registrant and Engene
Biotechnologies, Inc., dated March 6, 1996./(1)/
10.56 Scientific Advisor Agreement between the Registrant and J. Kevin Steele,
dated March 6, 1996./(1)/
10.57 Inducement Agreement between the Registrant and Engene Biotechnologies,
Inc., dated March 6, 1996./(1)/
11.1 Computation of Loss Per Share.
27 Financial Data Schedule (for electronic filing purposes only).
_____________________
(1) Certain confidential portions of this exhibit have been omitted by means
of blacking out the text (the "Mark"). This exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant
to the Company's Application Requesting Confidential Treatment under Rule
24b-2 under the Securities Exchange Act of 1934, as amended.
10
<PAGE>
DISTRIBUTION AGREEMENT EXHIBIT 10.53
-------------
This Distribution Agreement (hereinafter called the "Agreement") is entered as
of January 16, 1996 (hereinafter called the "Effective Date") by and between
Synbiotics Corporation (hereinafter called "Synbiotics"), a California
corporation, with its principal office at 11011 Via Frontera, San Diego,
California, U.S.A. and Daiichi Pharmaceutical Co., Ltd. (hereinafter called
"Distributor"), a Japanese corporation, with its principal office at 14-10,
Nihonbashi 3-Chome, Chuo-Ku, Tokyo 103, Japan.
WITNESSETH
WHEREAS, Synbiotics is engaged in business activity relating to veterinary
vaccines and diagnostics including the "Products" (as hereinafter defined), and
WHEREAS, Distributor is engaged in business activity relating to manufacture,
sale and marketing of pharmaceutical products for human and veterinary use, and
WHEREAS, Synbiotics and Distributor entered into the Non-Disclosure Agreement
containing the Products on April 11, 1995 and Distributor evaluated the
commercialization of the Products, and
WHEREAS, Distributor has now expressed the desire to import the Products from
Synbiotics and sell the Products for veterinary use in the "Territory" (as
hereinafter defined) and Synbiotics is willing to accept such desire;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
Synbiotics and Distributor agree as follows:
1. Definition. In this Agreement the following terms shall have the meanings
-----------
respectively indicated in this Section 1.
(a) The "Products" shall mean the Synbiotics' unlabeled veterinary
vaccines and diag nostics which are expressly set forth in Attachment A.
(b) The "Territory" shall mean Japan.
(c) The "Trademarks" shall mean Synbiotics' trademarks (English and
Japanese) for the Products in the Territory applied or owned by Synbiotics.
(d) The "Preshipment Sample" shall mean the sample from each shipment of
the Products which Synbiotics provide to Distributor for quality testing
purpose and has the same lot number with such Products to be shipped.
2. Appointment. Synbiotics hereby appoints Distributor for the term of this
------------
Agreement as, and Distributor agrees to act as, Synbiotics' exclusive
distributor of the Products for the Territory, subject to all the terms and
conditions hereof. So long during the term of this Agreement as Distributor
remains in full compliance with this Agreement, Synbiotics will not appoint
another distributor for the Products in the Territory. Distributor shall
refrain from establishing or maintaining any branch, warehouse or distribution
depot for the Products outside the Territory, and shall not engage in any
advertising or promotional activities relating to the Products directed to
customers located
1
<PAGE>
outside the Territory. Distributor shall sell no units of the Products which it
believes are intended for end use outside the Territory.
Synbiotics reserves the right to change, modify or discontinue any Product or
add Product to Attachment A or remove any discontinued Product therefrom,
subject to Distributor's prior written consent.
3. Payment and Supply Terms.
-------------------------
(a) The Products will be delivered to Distributor on F.O.B. basis. The
initial price and the minimum order of the Products shall be mutually agreed
upon by both parties hereto product by product basis, promptly after filing
the New Animal Drug Application ("NADA") by Distributor in Territory. If
the circumstances on which the initial price is based (i.e., market
situation, production costs, etc.) change substantially, the parties will
negotiate in order to fix a new price. New price will apply to all
shipments made after the date of the determination of such negotiation by
written. Distributor will pay all charges, including without limitation
freight, shipping, customs charges and expenses, cost of special packaging
or handling and insurance premiums, and shall be responsible for all taxes,
including but not limited to sales, value added and use taxes, duties and
other governmental assessments accrued in Japan, and Synbiotics will pay and
be responsible for those accrued in the U.S.A.
Payment shall be in U.S. dollars. Terms of payment will be net ninety (90)
days from airway bill of lading date, unless Synbiotics determines that
Distributor's credit is not satisfactory, in which case payment terms shall
be C.O.D., payment in advance or by letter of credit, at Synbiotics'
discretion. Late payment will be assessed at 1.5% per month service fee, to
the extent allowed by law.
(b) In consideration for the exclusive distribution rights granted
herein, Distributor shall pay to Synbiotics a licensing fee of [*] to be
paid as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
(1) The first payment
Amount : [*]
Payment accrual date : Upon the execution of this Agreement
Due date : Within thirty (30) days following the above payment
accrual date
(2) The second payment
Amount : [*]
Payment accrual date : Upon the first successful registration in the Territory
of diagnostics listed in Attachment A
Due date : Within thirty (30) days following the above payment
accrual date
</TABLE>
__________________________
[*] Certain confidential portions of this exhibit have been omitted by means of
blacking out the text (the "Mark"). This exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company's
Application Requesting Confidential Treatment under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(3) The third payment
Amount : [*]
Payment accrual date : Upon the first successful registration in the
Territory of SENTRYPAR DHP/L, SENTRYPAR DHP or
SENTRYVAC DHP/L listed in Attachment A as the
Product
Due date : Within thirty (30) days following the above payment
accrual date
</TABLE>
(c) All taxes levied by any governmental authority in the Territory upon
the payments according to the Section 3(b) shall be borne by Synbiotics. If
so required by the applicable law, Distributor shall withhold the amounts of
such taxes due prior to payment to Synbiotics, and shall pay the amounts of
such taxes to the governmental authority in a timely manner and shall
promptly transmit to Synbiotics, an official tax certificate or other
suitable document.
(d) During the term of this Agreement:
(1) Synbiotics shall provide Distributor, at Synbiotics' expense,
with samples of any applicable printed marketing materials that
Synbiotics may in its discretion produce for the Products.
Distributor will prepare and produce similar and any additional
materials needed to promote the Products in the Territory.
(2) Subject to the terms and conditions of this Agreement,
Synbiotics shall supply Distributor with the Products and shall fill
Distributor's written purchase orders for the Products with a
request delivery date not less than ninety (90) days after the date
the purchase order is received by Synbiotics. Distributor shall be
responsible at its expense for the packaging, labeling or otherwise
required to sell the Products in the Territory.
(3) The specification and test method of the Products (herein
after called the "Specifications") shall be mutually agreed upon by
both parties separately.
(4) Synbiotics shall provide Distributor, free of charge, with the
Preshipment Sample. The quantity, the shipment schedule and other
conditions of the Preshipment Sample shall be mutually agreed upon
by both parties separately.
(5) Synbiotics will provide Distributor with, and Distributor will
accept, such training as Synbiotics deems appropriate at locations
specified by Synbiotics; each party will bear its own expenses in
connection with such training.
(e) The Products will be deemed accepted when it passes the national
assay by the competent authority in the Territory.
4. License, Trademarks.
--------------------
(a) Distributor shall sell the Products under the Trademarks in the
Territory.
(b) Synbiotics shall, at its sole expense, use its best effort to obtain
the registration all of the Trademarks in the Territory and shall grant to
Distributor a royalty free exclusive license to use the Trademarks, but only
with res pect to the sale of the Products in compliance with this Agreement.
3
<PAGE>
(c) In case the Trademark for a certain product in the Products cannot
be used in the Territory as a result of anteriority or for any other reason,
Distributor shall select a proper trademark for such product on condition
that Synbiotics will, at its sole expense, file the application for said
Trademarks.
(d) Distributor agrees that it will not use, without Synbiotics' prior
written consent, any mark which is likely to be similar to or confused with
Synbiotics' corporate mark.
(e) Distributor agrees that it has not registered and will not register
the name "Synbiotics" or any forms thereof for use in connection with any
business entity without the prior written approval of Synbiotics.
(f) Distributor agrees that its use of the Trademarks shall not create
in its favor any right, title or interest therein and acknowledges
Synbiotics' exclusiv e right, title and interest in the Trademarks.
(g) Distributor hereby acknowledges and agrees that any and all rights,
title and interest in any and all Trademarks and other proprietary rights
that are related in any way to the production, manufacture or sale of the
Products, or form the basis for the development of the Products are owned
wholly and exclusively by Synbiotics, and Synbiotics shall seek to secure
and maintain any such rights. In the event that Synbiotics seek to secure
or maintain or initiate any infringement action regarding such rights,
distributor agrees to cooperate with Synbiotics in any way reasonably
requested.
5. Marking. Distributor shall use in connection with all packaging,
--------
literature, labels and other printed matter, an expression to the effect that
the Products are manufactured by Synbiotics and are imported and distributed by
Distributor.
6. Distributor Covenants and Responsibilities. Except as expressly and
-------------------------------------------
unambiguously provided herein, Distributor represents, warrants and agrees:
(a) to provide Synbiotics, within six (6) months after filing an
application for necessary regulatory approval for each Product to the
competent authority, a binding, non-cancelable Distributor purchase order
for the total quantity of such Products during the initial three (3) months.
Distributor shall provide Synbiotics, promptly after launch of each Product,
a purchase order for the period of three (3) months and the forecast for
succeeding nine (9) month period. Distributor shall, within ten (10) days
before the end of each three month period thereafter, send Synbiotics a
rolled-forward and revised nine (9) month forecast and a purchase order for
the quantities of the Products specified in the first three (3) month period
thereof.
(b) to use its best efforts to successfully market (including, without
limitation, conducting periodic promotions and market research, maintaining
a well-staffed sales force and adequate inventory, and prompt inclusion of
the Products, to the extent possible, in applicable trade shows and in
Distributor's catalogs and other promotional materials), to distribute and
support (including training and other support) the Products on a continuing
basis and to comply with good business practices and all laws and
regulations relevant to this Agreement or the subject matter hereof.
(c) to keep Synbiotics informed of relevant market trends, customer
needs, competitive activity, economic and regulatory conditions and
Distributor's sales and inventory by the Products. Distributor will also
provide Synbiotics with a written quarterly report with respect to these
matters.
(d) that it does not currently represent or promote any lines or products
that compete with the Products. Distributor will conduct its business in a
manner that reflects favorably on the Products and shall not represent,
promote or otherwise try to sell within the Territory any lines or products
that compete with the Products covered by this Agreement during the period
when such particular Product is covered by this
4
<PAGE>
Agreement, without Synbiotics' prior written consent which shall not be
unreasonably withheld by Synbiotics.
(e) to ascertain and comply, at Distributor's sole expense, with all
applicable laws and regulations and standards of industry or professional
conduct.
(f) to use best efforts, at its sole expense, to obtain and maintain any
applicable approvals, registrations, notifications or the like with regard
to marketing, using (for diagnostic, vaccine and/or therapeutic use, as may
be specified by Synbiotics), selling, labelling or otherwise promoting or
making claims regarding the Products or their uses in the Territory. This
includes, without limitation, conducting any necessary pre-clinical and
clinical studies and preparing and filing any necessary applications or
documents.
(g) to keep Synbiotics informed as to serious problems encountered with
the Products and any resolutions arrived at for those problems, and to
communicate promptly to Synbiotics any and all modifications, design changes
or improvements of the Products suggested by any customer, employee or
agent. Distributor further agrees that Synbiotics shall have any and all
right, title and interest in and to any such suggested modifications, design
changes or improvements of the Products, without the payment of any
additional consideration therefor either to Distributor, or its employees,
agents or customers. Distributor will also promptly notify Synbiotics of
any infringement of any Trademarks relating to the Products.
(h) to communicate to Synbiotics any referrals outside the Territory that
come to Distributor's attention relating to the Products.
(i) to properly handle, transport and store all shipments of the Products
after they have arrived at Japan.
7. Compliance with United States Laws.
-----------------------------------
(a) Distributor acknowledges that the export from the United States of
the Products may be subject to regulation by the U.S. Export Administration
Act of 1979, as amended, and the rules and regulations promulgated
thereunder, which restrict exports and re-exports of any products or direct
product thereof. Distributor agrees to comply with U.S. Export
Administration Regulations as in effect from time to time (including,
without limitation, all record-keeping requirements imposed thereunder), and
will not re-export the Products in violation of such Regulations.
(b) Without limitation of the foregoing, Distributor agrees to commit
no act which, directly or indirectly, would violate any United States law,
regulation, or treaty, or any other international treaty or agreement,
relating to or applicable to the export or re-export of the Products, to
which the United States adheres or with which the United States complies.
(c) Distributor agrees to indemnify and hold harmless Synbiotics from any
and all fines, damages, losses, costs and expenses (including reasonable
attorneys' fees) incurred by Synbiotics as a result of the breach of this
Section 7 by Distributor.
8. Confidentiality. Distributor agrees that all inventions, trade secrets,
----------------
know-how and ideas it obtains from Synbiotics and all other business, marketing,
technical and financial information it obtains from Synbiotics are the
confidential property of Synbiotics ("Proprietary Information"). Distributor
will hold in confidence and not disclose any Proprietary Information, provided
however that this Distributor's nondisclosure obligation shall not apply to the
extent that it may be necessary to disclose, on a confidential basis,
Proprietary Information to the third party mutually agreed by both parties
hereto or Distributor's outside experts or the competent authorities for the
purpose of this
5
<PAGE>
Agreement and to information it can document has entered the public domain and
is generally available to the public through no fault of the Distributor.
Distributor will promptly report to Synbiotics any actual or suspected violation
of the terms of this Section 8, and will take all reasonable further steps
request by Synbiotics to prevent, control, or remedy any such violation.
Distributor shall, upon the termination of this Agreement, return to Synbiotics
all tangible manifestations of Proprietary Information received by Distributor
pursuant to this Agreement (and all extracts, summaries, analyses, copies and
reproductions thereof).
9. Warranty and Disclaimer. Synbiotics warrants only to Distributor as
------------------------
follows:
(a) Synbiotics warrants that the Products when shipped to Distributor by
Synbiotics will conform to the Specifications therefor. The Products
purchased from Synbiotics which do not comply with the warranty will be
replaced. If Synbiotics cannot, or determines that it is not practical to
replace the Product, the purchase price therefor will be refunded.
(b) Synbiotics represent that it is not aware of any actual or potential
violation, infringement or misappropriation of any third party's rights (or
any claim or potential claim thereof) by the Products. Synbiotics shall
hold Distributor and its officers, directors, agents and employees harmless
from liability resulting from infringement by the Product of any patent,
copyrights, trade secret or other proprietary rights of a third party,
provided Synbiotics is promptly notified of any and all threats, claims and
proceedings related thereto and given reasonable assistance and the
opportunity to assume sole control over the defense and all negotiations for
a settlement or compromise: Synbiotics will not be responsible for any
settlement it does not approve in writing.
SYNBIOTICS MAKES NO OTHER WARRANTIES WITH RESPECT TO THE PRODUCTS OR ANY
SERVICES AND DISCLAIMS ALL OTHER WARRANTIES, INCLUDING WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT,
EXCEPT AS SET FORTH ABOVE. The above warranties do not extend to any
Product that is modified or altered, is not maintained to Synbiotics'
maintenance recommendations, is transported, handled or stored in a manner
other than that specified by Synbiotics, has its serial number removed or
altered or is treated with abuse, negligence or other improper treatment
(including, without limitation, use outside the recommended environment), or
is combined with other products, processes or materials where the alleged
infringement relates to such combination, or where Distributor continues
allegedly infringing activity after being notified thereof or after being
informed of combinations that would have avoided the alleged infringement.
Distributor's sole remedy with respect to any warranty or defect is as
stated above. Distributor will be responsible for all claims, damages,
settlements, expenses and attorneys fees incurred by Synbiotics with respect
to Distributor's customers or their claims beyond Synbiotics' above warranty
obligation to Distributor.
10. Returns.
--------
(a) Subject to Section 10(b), Distributor shall be entitled to replace
the Products which remain unsold on the expiration date for such Products as
specified on the Product label by returning such Products to Synbiotics
within sixty (60) days after the expiration date. All returned Products
must be in unopened original packaging, which shall conspicuously bear the
Material Return Authorization Number, Distributor obtains from Synbiotics
prior to return. Distributor shall receive a credit on all properly
refunded Products equal to fifty percent (50%) of the lower of (i) the
invoice price for such Product on the date it is returned or (ii) the
invoice price for such Product on the date it was ordered. The credit may
be applied by Distributor to future orders of the Products.
(b) Due to Federal regulations, "biological products" shipped out of the
continental United States cannot be returned. Therefore, any such
merchandise must be disposed of according to local laws and
6
<PAGE>
regulations. Synbiotics accepts no responsibility or liability for improper
disposal of said merchandise. Authorization to destroy merchandise which
would, but for such Federal regulations, be returned for repair, replacement
or credit must be obtained in writing from Synbiotics' Customer Service
Department prior to destroying such merchandise, and Synbiotics reserves the
right to inspect and verify such merchandise before granting such
authorization to destroy.
11. Exchange of Adverse Information and Data. The parties shall promptly
-----------------------------------------
provide each other with any adverse or unexpected information and data on the
Product, received or reported form any source.
12. Limited Liability. EXCEPT AS EXPRESSLY AND UNAMBIGUOUSLY PROVIDED HEREIN,
------------------
SYNBIOTICS WILL NOT BE LIABLE UNDER ANY SECTION OF THIS AGREEMENT OR UNDER ANY
CONTRACT, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY
(A) FOR NAY AMOUNTS IN EXCESS IN THE AGGREGATE OF THE AMOUNTS PAID TO SYNBIOTICS
HEREUNDER DURING THE TWELVE MONTH PERIOD PRIOR TO THE DATE THE CAUSE OF ACTION
AROSE, OR (B) FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES OR (C) FOR DAMAGES
ARISING FROM THE LOSS OF PROFITS OR LOSS OF BUSINESS, EXCEPT FOR ANY DAMAGES
CAUSED BY SYNBIOTICS' NEGLIGENCE OR WILLFULNESS. DISTRIBUTOR SHALL INDEMNIFY
SYNBIOTICS AGAINST ALL CLAIMS ASSERTED BY ITS CUSTOMERS OR OTHER THIRD PARTIES
AS A RESULT OF DISTRIBUTOR'S ACTS OR OMISSIONS.
13. Force Majeure. Neither party hereto shall be liable to the other party for
--------------
any losses or damages attributable to a default in or breach of this Agreement
which is the result of war (whether declared or undeclared), acts of God,
revolution, strike, fire, earthquake, flood, pestilence, riot, enactment or
change of laws and regulations, accident(s), labor trouble, or shortage of or
inability or obtain material, equipment or transport or any other cause beyond
reasonable control of such party, and the performance of obligations hereunder
shall be suspended during, but not longer than, the existence of such cause.
14. Relationship of Parties. The parties hereto expressly understand and agree
------------------------
that Distributor is an independent contractor in the performance of each and
every part of this Agreement, is not an agent, partner or joint venturer of or
with Synbiotics, and is solely responsible for all of its employees and agents
and its labor costs and expenses arising in connection therewith and is
responsible for and will indemnify, defend and hold harmless Synbiotics from any
and all claims, liabilities, damages, debts, settlements, costs, attorney's
fees, expenses and liabilities of any type whatsoever that may arise on account
of Distributor's activities or omissions, or those of its employees or agents,
including without limitation, providing unauthorized representations or
warranties ( or failing to effectively disclaim all warranties and liabilities
on behalf of Synbiotics) to its customers or breaching any term, representation
or warranty of this Agreement. Synbiotics is in no manner associated with or
otherwise connected with the actual performance of this Agreement on the part of
Distributor, nor with Distributor's employment of other persons or incurring of
other expenses. Except as expressly provided herein, Synbiotics shall have no
right to exercise any control whatsoever over the activities or operations of
Distributor.
15. Assignment. This Agreement and the rights hereunder are not transferable or
-----------
assignable by a party without the prior written consent of the other party,
except to a person or entity who acquires all or substantially all of the assets
or business of Synbiotics, whether by sale, merger or otherwise. This Agreement
shall be binding upon and inure to the benefit of any permitted assignee
hereunder of Synbiotics or Distributor. Any said permitted assignee of a
party's interest shall expressly assume in writing the performance of all the
terms and conditions of this Agreement to be performed by said party.
16. Term and Termination. Unless terminated earlier as provided herein, this
---------------------
Agreement shall ave a term extending ten (10) years from the Effective Date.
7
<PAGE>
This Agreement shall be automatically renewed for a three (3) year period after
the initial term, unless either party is otherwise notified by the other in
writing at least one hundred eighty (180) days prior to the termination of the
initial term or the renewed term.
Distributor understands that after the date specified above or earlier
termination, it shall have no right whatsoever to purchase the Products or
continue as a dealer or distributor or other wise regardless of any undocumented
continuation of the relationship with Synbiotics.
(a) This Agreement may be terminated by a party for cause immediately by
written notice upon the occurrence of any of the following events:
(1) If the other ceases to do business, or otherwise terminates its
business operations; or
(2) If the other breaches any provision of this Agreement and fails
to fully cure such breach within thirty (30) days of written notice
describing the breach; or
(3) If the other seeks protection under any bankruptcy, receivership,
creditors arrangement, composition or comparable proceeding, or if any
such proceeding is instituted against the other.
(b) Each party understands that the rights of termination hereunder are
absolute.
Subject to Section 16(f), neither party shall incur any liability whatsoever
for any damage, loss or expenses of any kind suffered or incurred by the
other arising from or incident to any termination of this Agreement by such
party which complies with the terms of this Agreement whether or not such
party is aware of any such damage, loss or expenses.
(c) In the event of any termination, Synbiotics may elect to continue or
terminate any purchase order then pending.
(d) In addition to any provisions that survive termination or expirations
according to their terms and any restrictions on Distributor's distribution
of Products, the following sections shall survive termination or expiration
of this Agreement: Sections 8, 9, 12, 14 and Sections 16 through 18.
(e) Upon expiration or termination, if Distributor has any right, title or
interest in Trademarks or any registration related thereto or in anything
referred to in Section 4(e), it will immediately assign all such right title
and interest to Synbiotics and take all necessary action to ensure that
Synbiotics obtains the full benefit thereof or, if Synbiotics so requests in
writing with respect to any such item, take any necessary action to
surrender and cancel such item and the related rights, title and interest.
(f) Termination is not the sole remedy for breach under this Agreement
and, whether or not termination is effected, all other remedies for breach
will remain available.
17. Duties of Distributor Upon Expiration or Termination. Notwithstanding any
-----------------------------------------------------
other provision of this Agreement, upon the termination of this Agreement for
any reason whatsoever or expiration of this Agreement, Distributor shall:
(a) Pay to Synbiotics, in full within thirty (30) days of such
termination, any payment accrued prior to the effective date of expiration
or termination hereof. Synbiotics shall be entitled to offset and deduct
from any money due Distributor, whether or not arising under this Agreement,
any all amounts due Synbiotics from Distributor.
8
<PAGE>
It is expressly understood that upon expiration or termination for any
reason whatsoever, Distributor shall be relieved from the payment obligation
hereunder except any payment mentioned above.
(b) Promptly return to Synbiotics any documentation or data, including
without limitation all promotional material delivered to Distributor.
(c) Cooperate with Synbiotics in completing all outstanding obligations
to customers, including the fulfillment, at Distributor's expense, of each
warranty term and condition.
18. General.
--------
(a) Amendment and Waiver - Except as other wise expressly provided
herein, any provision of this Agreement may be amended and the observance of
any provision of this Agreement may be waived (either generally or in any
particular instance and either retroactively or prospectively) only with the
written consent of the parties. However, it is the intention of the parties
that this Agreement be controlling over additional or different terms of any
purchase order, confirmation, invoice or similar document, even if accepted
in writing by both parties, and that waivers and amendments shall be
effective only if made by non-pre-printed agreements clearly specified as
and und erstood by both parties to be an amendment or waiver.
(b) Governing Law - This Agreement shall be governed by and construed
under the law of the State of California without regard to conflicts of law
principles.
(c) Arbitration - In the event of any disputes,controversies or
differences which may arise between the parties hereto, out of or in
relation to or in connection with this Agreement, or for the breach thereof,
upon the request of either party, the parties agree to meet and discuss in
good faith a possible resolution thereof. If the matter is not resolved
within ninety (90) days following the request for discussions, then the
matter shall be settled by arbitration upon the initiation o arbitration by
either party. If the arbitration is initiated by Distributor, it shall be
held in San Francisco, U.S.A. in accordance with the rules of Conciliation
and Arbitration of the International Chamber of Commerce. If the arbitration
is initiated by Synbiotics, it shall be held in Tokyo, Japan in accordance
with the rules of the Japan Commercial Arbitration Association. The award
shall be final binding upon the parties hereto.
(d) Heading and Language - Heading and captions are for convenience only
and are not to be used in the interpretation of this Agreement. The official
text of this Agreement shall be the English language, and such English text
shall be controlling in all respects, notwithstanding any translation hereof
under the laws or regulations of any other country. The parties undertake to
use the English language in respect of all documents and communications
contemplated hereby, except where another language must be used under the
laws and regulations of another country. In any such case, a certified
English translation shall be supplied to the other party by the party using
such document or making such communication.
(e) Notice - For purposes of this Agreement, and for all notices and
correspondence hereunder, the addresses of the respective parties have been
set out at the beginning of this Agreement, and no change of address shall
be binding upon the other party hereto until written notice thereof is
received by such party at the address shown herein. all notices shall be
deemed received when personally delivered or one (1) business day after
being sent via telefax.
(f) Entire Agreement - This Agreement, together with all exhibits and
schedules hereto, constitutes the entire agreement among the parties
pertaining to the subject matter hereof and completely supersedes all prior
or contemporaneous agreements, understandings, arrangements, commitments,
negotiations, and discussions of the parties, whether oral or written (all
of which shall have no substantive significance or evidentiary effect).
Each party acknowledges, represents and warrants that it has not relied on
any
9
<PAGE>
representation, agreement, understanding, arrangement or commitment which
has not been expressly set forth in this Agreement. Each party
acknowledges, represents and warrants that this Agreement is fully
integrated and not in need of parol evidence in order to reflect the
intentions of the parties. The parties specifically intend that the literal
words of this Agreement shall, alone, conclusively determine all questions
concerning the parties' intent. This Agreement does not contain or
constitute any express or impled license to make, have made or modify any
Product under any circumstances.
(g) Equitable Remedies - Distributor acknowledges and agrees that the
legal remedies available to Synbiotics in the event Distributor violates the
covenants and agreements made in this Agreement would be inadequate and that
Synbiotics shall be entitled, without posting any bond or other security, to
temporary, preliminary and permanent injunctive relief, specific performance
and other equitable remedies in the event of such a violation, in addition
to any other remedies which Synbiotics may have at law or in equity.
(h) Severability - If any provision of this Agreement is held to be
illegal or unenforceable, that provision shall be limited or eliminated to
the minimum extent necessary so that this Agreement shall otherwise remain
in full force and effect and enforceable.
SYNBIOTICS DISTRIBUTOR
SYNBIOTICS CORPORATION DAIICHI PHARMACEUTICAL CO., LTD.
a California corporation a Japanese corporation
By: /s/ Robert L. Widerkehr By: /s/ Tadashi Suzuki
_______________________ __________________
Name: Robert L. Widerkehr Name: Tadashi Suzuki
Title: President and CEO Title: President and CEO
10
<PAGE>
Attachment A
PRODUCTS
CANINE VACCINES
---------------
SENTRYPAR DHP/L
SENTRYPAR DHP
SENTRYVAC DHP/L
SENTRYPAR
FELINE VACCINES
---------------
PANAVAC RC
VACSYN/FeLV
DIAGNOSTICS
-----------
ICT GOLD HW
ICT GOLD FeLV
11
<PAGE>
MEMORANDUM
This Memorandum dated and effective as of January 16, 1996 by and between
Synbiotics Corporation ("Synbiotics") a California corporation, and Daiichi
Pharmaceutical Co., Ltd. ("Distributor"), a Japanese corporation.
WITNESSETH
WHEREAS, Synbiotics and Distributor have entered into a Distribution Agreement
(the "Agreement") of on even date herewith, and
WHEREAS, Distributor has expressed its desire to confirm the non-restriction of
the research by The Kitasato Institute, a Japanese corporation, with its
principal office at 9-1, Shirogane 5-Chome, Minato-Ku, Tokyo 108, Japan, with
respect to the competitive product of the Products (as defined in the
Agreement), and any other third party who will support Distributor's performance
of the Agreement and is agreed upon by the parties (the "Third Party"), and
WHEREAS, Synbiotics is willing to accept such desire;
NOW THEREFORE, for and in consideration of the premises and covenants contained
herein and in the Agreement, Synbiotics and Distributor agree as follows:
1. Distributor shall have the obligation to have the Third Party observe the
provision of the nondisclosure obligation specified in Section 8 of the
Agreement, and Distributor shall remain the responsibility for the Third Party's
activity concerned; provided, however, that it is expressly understood that
Distributor shall no have any obligation to have the Third Party observe any
other terms and conditions of the Agreement, including, but not limited to, the
same or similar obligation to observe the provision of Section 6(d) of the
Agreement.
2. The provisions of this Memorandum shall in no way alter the obligations and
duties of Distributor under the Agreement except as expressly set forth herein.
Distributor shall indemnify and hold Synbiotics and its affiliates harmless
against claims, losses, liabilities, damages, deficiencies, costs and expenses,
including reasonable attorneys' fees and expenses of investigation incurred by
Synbiotics or any of its affiliates as a result of any failure by Third Party to
perform or comply with Section 8 of the Agreement.
Subject to above confirmation, the Agreement shall continue in full force and
effect.
SYNBIOTICS DISTRIBUTOR
SYNBIOTICS CORPORATION DAIICHI PHARMACEUTICAL CO., LTD.
a California corporation a Japanese corporation
By: /s/ Robert L. Widerkehr By: /s/ Tadashi Suzuki
----------------------- ------------------
Name: Robert L. Widerkehr Name: Tadashi Suzuki
Title: President and CEO Title: President and CEO
1
<PAGE>
LICENSE AGREEMENT EXHIBIT 10.54
-------------
This License Agreement (this "Agreement") is made as of March 6, 1996 by and
between SYNBIOTICS CORPORATION, a California corporation ("Synbiotics") and
ENGENE BIOTECHNOLOGIES, INC., a California corporation ("Licensor").
WHEREAS, Synbiotics desires to exploit the commercial uses of the Technology and
related products in the Licensed Field;
WHEREAS, Synbiotics has requested, and Licensor has agreed to grant to
Synbiotics, an exclusive, worldwide, perpetual license to the Technology in the
Licensed Field.
WHEREAS, Synbiotics and Licensor desire to set forth herein certain agreed
arrangements and procedures for Licensor to designate a representative to serve
on Synbiotics' Scientific Advisory Board; and
WHEREAS, Synbiotics and Licensor desire to agree upon certain provisions of a
right of first refusal in the event that Licensor desires to sell its rights to
the Excluded Products.
NOW, THEREFORE, in consideration of the above premises and the mutual terms,
covenants and conditions set forth below, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
-----------
The following terms as used in this Agreement shall have the meanings as defined
with respect to each such term.
1.1 Affiliate. "Affiliate" shall mean any corporation or other business entity
---------
which controls, is controlled by or is under common control with any party. A
corporation or business entity shall be regarded as in control of another
corporation or business entity if it owns or directly or indirectly controls at
least fifty percent (50%) of the voting stock of the other corporation or
business entity.
1.2 Development Agreement. "Development Agreement" shall mean the Research and
---------------------
Development Agreement, dated today, between Licensor and Synbiotics.
1.3 Licensor Patents. "Licensor Patents" shall mean any and all (i) issued and
----------------
pending U.S. and foreign patents (including, without limitation, any
divisionals, continuations, continuations in part and reissues thereof) for
inventions relating to the Technology invented by Licensor or which patents have
been, or are in the future, acquired by Licensor and (ii) rights to patents and
patent applications relating to the Technology licensed or sublicensed to
Licensor with respect to which Licensor has the right to grant sublicenses.
1.4 Effective Date. "Effective Date" shall mean March 6, 1996.
--------------
____________________
[*] Certain confidential portions of this exhibit have been omitted by means of
blacking out the text (the "Mark"). This exhibit has been filed separately
with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 24b-2
under the Securities Exchange Act of 1934, as amended.
1
<PAGE>
1.5 Excluded Product(s). "Excluded Product(s)" shall mean any [*] and
-------------------
diagnostic test or other product invented by Licensor or otherwise acquired by
Licensor designed to identify, regulate, prevent or treat [*].
1.6 [*] Product(s). "[*] Product(s)" shall mean any diagnostic tests for [*]
--------------
utilizing the unique sequence of [*] characterized by Engene.
1.7 [*] Product(s). "[*] Product(s)" shall mean any diagnostic tests for [*].
--------------
1.8 Licensed Field. "Licensed Field" shall mean any market or application
--------------
related to animal health, agriculture, aquaculture, foodstuff safety and
zoonoses. Notwithstanding the foregoing, "Licensed Field" shall not include any
market for, and application of, the Products related to human diagnostics and
human therapeutics.
1.9 Net Sales. "Net Sales" shall mean the total invoice amount for sales to
---------
unaffiliated entities less (i) normal and customary cash and trade discounts,
returns and allowances, transportation charges or allowances, if any, paid or
allowed by Licensor, and (ii) sales, value added and other similar taxes paid by
Licensor with respect to the sale of any [*] Product, if included in the selling
price. In the event of a transaction between Licensor and an Affiliate, "Net
Sales" shall be deemed to be the total gross amount invoiced by Licensor if that
amount is the same as the amount invoiced for similar sales to non-affiliated
third parties and otherwise the amount of Net Sales shall be the amount invoiced
by the Affiliate on its sale of the item, in either case less (i) normal and
customary cash and trade discounts, returns and allowances, transportation
charges or allowances, if any, paid or allowed by Licensor, and (ii) sales,
value added and other similar taxes paid by Licensor with respect to the sale of
any [*] Product, if included in the selling price.
1.10 Product(s). "Product(s)" shall mean any vaccine, construct, probe,
----------
diagnostic test, automatable assay technique or other product incorporating the
Technology for use and application in the Licensed Field. Notwithstanding the
foregoing, "Product(s)" shall not include any Excluded Products.
1.11 Technology. "Technology" shall mean all of (i) the polymerase chain
----------
reaction based technology, processes, know-how, ideas, concepts, trade secrets
and techniques (including without limitation, all improvements and modifications
thereto), invented by Licensor (whether or not patentable) and, to the extent
licensable or sublicensable, acquired now or in the future by Licensor and (ii)
the recombinant deoxyribonucleic acid based technology, sequences, processes,
know-how, ideas, concepts, trade secrets and techniques (including without
limitation, all improvements and modifications thereto), invented by Licensor
(whether or not patentable) and, to the extent licensable or sublicensable,
acquired now or in the future by Licensor. "Technology" also includes (i) all
of Licensor's technology, processes, know-how, ideas, concepts, trade secrets,
techniques (including without limitation, all improvements and modifications
thereto) invented by Licensor (whether or not patentable) and, to the extent
licensable or sublicensable, acquired now or in the future by Licensor, relating
to [*] and (ii) any vaccine, probe, diagnostic test, automatable assay technique
or other product set forth on attached Exhibit B.
---------
ARTICLE 2
GRANT OF LICENSE
----------------
2.1 Grant of License. Subject to the terms and conditions of this Agreement,
----------------
Licensor hereby irrevocably grants to Synbiotics the exclusive (even as to
Licensor), fully-paid, royalty-free, perpetual, worldwide license (the
"License") to the Technology and to the Licensor Patents to develop, have
developed, make, have made, import into the United States, have imported into
the United States, market, have marketed, distribute, have distributed, sell and
have sold Products (excluding [*] Products) for use in the Licensed Field. This
license includes the right to sublicense and the right to grant the right to
further sublicenses. Upon termination of this Agreement, no existing
sublicenses granted by Synbiotics or any of its sublicensees shall be affected
and such sublicenses shall remain in effect according to their terms.
2
<PAGE>
2.2 Sublicense of Rights to [*] Products. Notwithstanding Section 2.1 above,
------------------------------------
Licensor hereby irrevocably grants to Synbiotics an exclusive (even as to
Licensor), fully-paid, royalty-free, perpetual license (the "[*] License") to
develop, have developed, make, have made, import, have imported, market, have
marketed, distribute, have distributed, sell and have sold [*] Products for use
in the Licensed Field solely in such territories as Synbiotics is not prohibited
from developing, making, manufacturing, marketing, importing, using, selling and
distributing such [*] Products; immediately upon receipt of written notice from
Synbiotics indicating that Synbiotics has obtained the right to market [*]
Products in a previously prohibited territory, Licensor shall grant to
Synbiotics an exclusive (even as to Licensor), fully-paid, royalty-free,
perpetual license to develop, have developed, make, have made, import, have
imported, market, have marketed, distribute, have distributed, sell and have
sold [*] Products for use in the Licensed Field in the territories identified in
Synbiotics' notice to Licensor. All licenses granted pursuant to this Section
2.2 shall include the right to sublicense and the right to grant the right to
further sublicenses. Upon termination of this Agreement, no existing
sublicenses granted by Synbiotics or any of its sublicensees pursuant to the
rights set forth in this Section 2.2 shall be affected and such sublicenses
shall remain in effect according to their terms.
2.3 Exclusion from Licensed Field. In the event that Synbiotics has completed
-----------------------------
the USDA application process for approval to sell a [*] Product by the third
anniversary of the Effective Date, then [*] Products shall be excluded from the
definition of Products; provided, however, Licensor shall have the obligation to
pay Synbiotics a [*] payment in the nature of a royalty on its Net Sales of all
[*] Products throughout the useful life of such products to the extent permitted
by law. [*] Products shall not be excluded from the definition of Products and
the terms set forth in the preceding sentence shall not apply if the reason for
Synbiotics not filing an application with the USDA for approval to sell a [*]
Product prior to the third anniversary of the Effective Date is the failure of
Licensor to perform in a timely manner its obligations under the Development
Agreement with respect to the development of any [*] Product.
2.4 No Conflicting Agreements. Licensor shall not enter into any agreements
-------------------------
that conflict with the license, rights or obligations provided under this
Agreement. Prior to signing any agreement with any other party pursuant to
which Licensor assigns to, or grants or licenses to, such party any rights to
the Licensor Patents or Technology, Licensor shall specifically exclude the
right to develop, have developed, make, have made, market, have marketed,
import, have imported, distribute, have distributed, sell and have sold Products
in the Licensed Field from any such assignment, grant or license.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 Synbiotics Representations. Synbiotics represents and warrants to Licensor
--------------------------
that as of the Effective Date:
(a) it is a corporation duly organized, validly existing and in good
standing under the laws of the State of California;
(b) all corporate acts required to execute and deliver this Agreement have
been duly taken by Synbiotics; the execution, delivery and performance
hereof by Synbiotics have been duly authorized; and this Agreement, as so
executed and delivered, is a valid and binding obligation of Synbiotics,
enforceable against it in accordance with its terms; and
(c) the execution and delivery of this Agreement by Synbiotics, and the
performance of its obligations hereunder, do not require the consent of any
third party and will not violate, with or without notice, the lapse of time
or both, any agreement, contract, license or permit to which Synbiotics is
a party or its organizational documents.
3.2 Licensor Representations. Licensor represents and warrants to Synbiotics
------------------------
that as of the Effective Date:
3
<PAGE>
(a) to the best of its knowledge, it has the sole and exclusive right,
title and interest in and to the Licensor Patents and the Technology;
(b) it has the right and title to grant the present and future rights and
licenses in favor of Synbiotics contained in this Agreement;
(c) neither it nor anyone authorized to act on its behalf has entered into
any agreement or understanding with any third party that grants rights,
licenses, assignments, immunities or options of any kind under the Licensor
Patents or the Technology;
(d) it is a corporation duly organized, validly existing and in good
standing under the laws of the State of California;
(e) all corporate acts required to execute and deliver this Agreement have
been duly taken by Licensor; the execution, delivery and performance hereof
by Licensor has been duly authorized; and this Agreement, as so executed
and delivered, is a valid and binding obligation of Licensor, enforceable
against it in accordance with its terms;
(f) the execution and delivery of this Agreement by Licensor, and the
performance of its obligations hereunder, do not require the consent of any
third party and will not violate, with or without notice, the lapse of time
or both, any agreement, contract, license or permit to which Licensor is a
party or its organizational documents;
(g) it (i) is not aware of any infringement of any patent or other
proprietary rights of any third party that will result from manufacture,
marketing, distribution and sale of the Products in the Licensed Field in
any territory, (ii) has received no notice of infringement or
misappropriation of any alleged rights asserted by any third party in
relation to the Licensor Patents or the Technology, and (iii) is not in
default with respect to any license agreement related to the Licensor
Patents and the Technology;
(h) that each of its employees and contractors has entered into a contract
which provides for assignment to Licensor of all inventions made by him or
her during the course of his or her employment, and nondisclosure of
confidential information of Licensor and of others to which access is
gained through Licensor; and
(i) it has delivered to Synbiotics true and complete copies or descriptions
of all material agreements, instruments, commitments, contracts or other
obligations, whether oral or written, to which Licensor is a party or to
which its assets are subject.
3.3 Covenants of Licensor. Licensor covenants and agrees that, for the
---------------------
duration of this Agreement:
(a) it shall promptly, but in any event within three (3) business days,
notify Synbiotics, and provide copies or transcriptions, of any action,
request, order, instruction, communication, complaint, notice, public
announcement or inquiry by the United States Department of Agriculture
("USDA") or any submission, filing, letter or other communication by
Licensor to the USDA with respect to any of the Products which is sent by
or is received by or which comes to the attention of Licensor, including
but not limited to field actions, investigations or recalls of the
Products.
(b) it shall not take, or omit to take, or suffer to occur, any action
which would result in any representation or warranty made by Licensor in
Section 3.2 from becoming at any future date untrue (assuming it were made
on and as of such future date).
4
<PAGE>
ARTICLE 4
RIGHTS TO EXCLUDED PRODUCTS
---------------------------
4.1 Option to License Excluded Products.
-----------------------------------
(a) Licensor hereby grants to Synbiotics an option to acquire the exclusive
right to negotiate a worldwide license to each of the Excluded Products.
The option referenced in this Section 4.1 shall be exercised in the
following manner: Licensor shall forthwith after developing, licensing-in
or otherwise acquiring any Excluded Product during the period beginning on
the Effective Date and ending upon the later of (i) the third anniversary
of the Effective Date or (ii) the expiration or termination of the
Development Agreement, provide Synbiotics with a written notice of
availability of such Excluded Product ("Written Notice"). For a period of
thirty (30) days following delivery of the Written Notice (the "Synbiotics
Option Period"), Synbiotics shall have the right to exercise such option.
Synbiotics shall exercise said option by providing written notice of
exercise to Licensor within the Synbiotics Option Period. In the event
that Synbiotics fails to exercise its option in accordance with the terms
of this Section 4.1, Licensor or its designee or licensee may sell, market,
distribute and otherwise exploit the Excluded Product which was the subject
of the Written Notice.
(b) If Synbiotics exercises such option, then for sixty (60) days after the
expiration of the Synbiotics Option Period, Licensor shall negotiate with
Synbiotics (and not with anyone else) in good faith toward a definitive
licensing agreement (which shall include the right to grant sublicenses) on
terms mutually agreeable to Licensor and Synbiotics. The licensing
agreement shall contain terms as are customarily found in licensing
agreements and as the parties may mutually agree. During such 60-day
period, Licensor shall make no disclosures to nor negotiate with any third
party concerning the Excluded Product.
(c) In the event that Licensor and Synbiotics are not able to negotiate a
licensing agreement on mutually agreeable terms within sixty (60) days
following the expiration of the Synbiotics Option Period, and if the
parties have not mutually agreed to extend such 60-day period, Licensor
hereby agrees that if it intends to accept any offer from a third party,
Licensor shall promptly notify Synbiotics in writing with full details (the
"First Refusal Notice") and Synbiotics shall have the right, exercisable by
written notice to Licensor within fifteen (15) days of delivery of the
First Refusal Notice, to enter into a licensing agreement (which shall
include the right to grant sublicenses) with Licensor on the terms and
conditions of such third party offer. This right of first refusal, with
respect to each Excluded Product, shall survive termination of negotiations
pursuant to Section 4.1(b) for a period of two (2) years.
ARTICLE 5
TECHNOLOGY TRANSFER
-------------------
5.1 Transfer of Technology. Within five (5) days following the Effective Date,
----------------------
Licensor shall provide Synbiotics or a sublicensee designated by Synbiotics,
with all physical embodiments and manifestations of the Products (including,
without limitation, any previously manufactured quantities of the Products), and
the Technology (including, without limitation, copies of all laboratory
notebooks, designs, specifications, formulas, procedures, data and other
information). Licensor shall pay all costs of shipping, packaging, copying and
similar or related costs in connection therewith.
5.2 Technical Assistance. For a period beginning on the Effective Date and
--------------------
ending on the later of (i) three (3) years after the Effective Date or (ii) the
expiration or earlier termination of the Development Agreement, Licensor shall
provide to Synbiotics, or a sublicensee designated by Synbiotics, at Licensor's
sole option and expense (excluding reasonable travel and out-of-pocket
expenditures), reasonable technical assistance and instruction (not to exceed
fifty (50) hours per year) in understanding, interpreting and applying the
Technology for the purposes of
5
<PAGE>
further developing the Technology and developing and commercializing the
Products. Licensor shall make its employees and consultants (including J. Kevin
Steele and David Telford) reasonably available for consultation by telephone, or
in person at Synbiotics'(or its sublicensees) offices in connection with such
assistance and instruction, all at the sole expense of Licensor.
5.3 Patents. During the term of the License, Licensor shall direct and cause,
-------
upon the request of Synbiotics, appropriate patent applications to be prepared
and prosecuted in all relevant territories in a timely fashion with respect to
any inventions included in the Technology and Products whether arising out of
inventions made solely by Licensor employees or consultants or inventions made
jointly by Synbiotics' and Licensor's employees and consultants. Any such
application(s) shall be made and prosecuted at the expense of Synbiotics through
attorneys named by Synbiotics. Synbiotics shall have complete control of the
patent prosecution process, including whether or not to file a patent
application.
5.4 Further Acts; Enforcement. Licensor agrees to perform, during and after
-------------------------
the term of this Agreement, all acts deemed necessary or desirable by Synbiotics
to permit and assist Synbiotics, at Synbiotics' sole expense (including
compensating Licensor $100 per hour for the time of Licensor's professionals),
in evidencing, obtaining, maintaining, defending and enforcing Synbiotics rights
with respect to the Technology and Products in any and all countries. Such acts
may include, but are not limited to, execution of documents and assistance or
cooperation in legal proceedings. Licensor hereby irrevocably designates and
appoints Synbiotics and its duly authorized officers and agents, as Licensor's
attorneys-in-fact to act for and in behalf and instead of Licensor, to execute
and file any documents and to do all other lawfully permitted acts to further
the above purposes with the same legal force and effect as if executed by
Licensor.
ARTICLE 6
PAYMENTS
--------
6.1 License Fee. As consideration for this Agreement, Synbiotics will pay
-----------
Licensor an up-front fee of [*] and shall provide Licensor with a stock
certificate representing [*] shares of Synbiotics Common Stock, no par value,
within five (5) days following the execution of the Investment Representation, a
copy of which is attached hereto as Exhibit A, by Licensor.
---------
ARTICLE 7
SCIENTIFIC ADVISOR BOARD
------------------------
7.1 Licensor's Right to Position on Scientific Advisor Board. Synbiotics and
--------------------------------------------------------
Engene hereby agree that for a period commencing on the Effective Date and
ending upon the later of (i) three (3) years following the execution of this
Agreement or (ii) the expiration or earlier termination of the Development
Agreement, Kevin Steele shall serve on Synbiotics' Scientific Advisory Board
("Licensor Advisor"). Synbiotics acknowledges and agrees that the Licensor
Advisor shall be entitled to receive all option grants and other forms of
compensation paid by Synbiotics to members of its Scientific Advisory Board as
outlined in any stock option or other plan composed for advisors, consultants or
other key contributors to Synbiotics.
ARTICLE 8
CONFIDENTIALITY
---------------
8.1 Confidential Information. Licensor agrees that it shall maintain in
------------------------
confidence any information regarding Synbiotics received before or during the
term of this Agreement and identified as confidential or otherwise protected and
any information regarding the Technology and the Products (hereinafter, such
information shall collectively be
6
<PAGE>
referred to as "Confidential Information"), and without the express written
permission of Synbiotics shall neither use, publish, disseminate nor disclose
such Confidential Information except for the furtherance of the purposes of this
Agreement. Subject to the next sentence, the foregoing obligations of
confidentiality and non-use shall survive the expiration or termination of this
Agreement. The obligations of the first sentence shall not apply to any
information which: (i) is now or hereafter comes into the public domain
otherwise than by breach of this Agreement, or (ii) is brought to Licensor by a
third party who rightfully obtained and possesses it and does not require that
it be retained in confidence by Licensor (and who does not thereby breach any
contract). Furthermore, the obligations of the first sentence shall not apply
to any information (excluding any information regarding the Technology and the
Products) which is shown by written records to be already in possession of
Licensor other than as a result of having received it from Synbiotics.
8.2 Publication. Licensor shall have no right to publish information regarding
-----------
the Technology or the Products without the express written consent of
Synbiotics. Licensor shall likewise restrict and prevent its employees,
consultants and agents from publishing information regarding the Technology or
the Products.
ARTICLE 9
INDEMNITIES AND "WARRANTY"
--------------------------
9.1 Licensor Indemnification. Licensor agrees to and shall defend, indemnify
------------------------
and hold Synbiotics, its officers, directors, employees, agents and shareholders
harmless (including attorneys fees to defend, and any damages, penalties,
settlements, costs or expenses awarded or incurred) from and against any claim,
liability, suit or proceeding initiated by or on behalf of a third party based
upon negligence, warranty, strict liability or violation of government
regulation, (but specifically excluding, without limitation any claim,
liability, suit or proceeding based upon infringement of patent or other
proprietary rights,) arising from or occurring as a result of any use of the
Technology or Products (including, without limitation, any manufacture of the
Products) by Licensor.
9.2 Synbiotics Indemnification. Synbiotics agrees to and shall defend,
--------------------------
indemnify and hold Licensor, its officers, directors, employees, agents and
shareholders harmless (including attorneys fees to defend, and any damages,
penalties, settlements, costs or expenses awarded or incurred) from and against
any claim, liability, suit or proceeding initiated by or on behalf of a third
party based upon negligence, warranty, strict liability or violation of
government regulation, (but specifically excluding, without limitation any
claim, liability, suit or proceeding based upon infringement of patent or other
proprietary rights,) arising from or occurring as a result of any use of the
Technology or Products (including, without limitation, any manufacture of the
Products) by Synbiotics.
9.3 Defense of Claims. If any lawsuit or enforcement action is filed against
-----------------
any indemnified person, written notice thereof shall be given to the
indemnifying company as promptly as practicable (and in any event within fifteen
(15) days after the service of the citation or summons); provided that the
failure of any indemnified person to give timely notice shall not affect rights
to indemnification hereunder except to the extent that the indemnifying company
demonstrates actual damage caused by such failure. After such notice, if the
indemnifying Company shall acknowledge in writing to such indemnified person
that the indemnifying company shall be obligated under the terms of its
indemnity hereunder in connection with such lawsuit or action, then the
indemnifying company shall be entitled, if it so elects, to take control of the
defense and investigation of such lawsuit or action and to employ and engage
attorneys of its own choice (subject to the approval (for competence,
experience, independence and absence of conflict of interest) of the indemnified
person) to handle and defend the same, at the indemnifying company's cost, risk
and expense; and such indemnified person shall thereafter cooperate in all
reasonable respects with the indemnifying company and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom. The fees of such attorneys, and all amounts payable by the
indemnifying company under this Section, shall be payable as incurred and on
demand. The indemnified person may also, through independent counsel and at its
own cost, participate in such investigation, trial and defense of such lawsuit
or action and any appeal arising therefrom.
7
<PAGE>
9.4 Settlements. An indemnifying company shall have the absolute right to
-----------
effect a settlement of any action or claim against an indemnified person where
the settlement calls only for money to be paid on behalf of an indemnified
person, provided the indemnifying company makes all such payments directly to
the third party. However, no settlement calling for anything to be done (or not
done) by an indemnified person other than the payment of money (or calling for
the payment of money directly by the indemnified person) may be effected by the
indemnifying company without the prior written approval of the indemnified
person. No indemnified person shall enter into a settlement calling for or
necessitating the payment of money (under this Section or otherwise), or for any
other thing, by the indemnifying company without the prior written approval of
the indemnifying company.
9.5 Warranty. Licensor represents and warrants to Synbiotics that, to the best
--------
of its knowledge, no patents or other proprietary rights of any third party have
been infringed by the Technology.
ARTICLE 10
TERM AND TERMINATION
--------------------
10.1 Term. This Agreement shall be effective as of the Effective Date and shall
----
continue in full force and effect indefinitely, unless terminated earlier as
provided in Section 10.2.
10.2 Termination. If either party materially breaches or defaults in the
-----------
performance of this Agreement and such breach or default is not cured within
thirty (30) days after the giving of notice of default by the other party
specifying such breach or default, then the party giving such notice may, in
addition to all other remedies available at law or in equity, terminate this
Agreement immediately for cause and such termination shall be effective on the
date when a notice of termination is received by the breaching or defaulting
party.
(a) The failure of a party to assert its rights for any material breach or
default of this Agreement shall not be deemed a waiver of such rights nor
shall any waiver be implied by the making or acceptance of any payment.
(b) Termination shall only relieve the parties of obligations which would
have arisen under this Agreement after the effective date of termination
and shall in no way relieve the parties of any obligations existing on the
date of such termination.
10.3 Survival.
--------
(a) If Synbiotics terminates this Agreement pursuant to Section 10.2
hereof, the provisions of Sections 2.1, 2.3, 2.4, 3.3, 4.1, 5.2, 5.3, 5.4,
8.1, 8.2, 9.1, 9.2, 9.3, 10.3, 10.4 and 12.1 shall survive.
(b) If Licensor terminates this Agreement pursuant to Section 10.2 hereof,
the provisions of Section 8.1 shall survive.
10.4 Rights in Bankruptcy. All rights and licenses granted under or pursuant to
--------------------
this Agreement by Licensor are, and shall otherwise be deemed to be, for
purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to
"intellectual property" as defined under Section 101 of the Bankruptcy Code.
The parties agree that Synbiotics as licensee of such rights under this
Agreement, shall retain and may fully exercise all of its rights and elections
under the Bankruptcy Code. The parties further agree that, in the event of the
commencement of a bankruptcy proceeding by or against Licensor under the
Bankruptcy Code, Synbiotics shall be entitled to a complete duplicate of (or
complete access to, as appropriate) any such intellectual property and all
embodiments of such intellectual property, and same, if not already in its
possession, shall be promptly delivered to Synbiotics upon any such commencement
of a bankruptcy proceeding upon its written request therefor.
8
<PAGE>
ARTICLE 11
NOTICES
-------
11.1 Notices. All notices or other communications provided for in this
-------
Agreement shall be in writing and shall be considered delivered upon the latest
of actual receipt, or personal or courier delivery, or sending by facsimile with
confirmation of receipt in good order requested and received, or on the third
--
business day after they are deposited in the United States mail, certified first
class or air mail postage prepaid, addressed to the respective parties as
follows:
(a) If to Synbiotics: Synbiotics Corporation
11011 Via Frontera
San Diego, CA 92127
Attention: Chief Executive Officer
Facsimile Number: (619) 451-5719
with a copy to: Brobeck, Phleger & Harrison
550 West C Street, Suite 1300
San Diego, CA 92101
Attention: Hayden J. Trubitt, Esq.
Facsimile Number: (619) 234-3848
(b) If to Contractor: Engene Biotechnologies, Inc.
16236 San Dieguito Road
Suite 4-21
San Diego, CA 92067
Attention: J. Kevin Steele
Facsimile Number: (619) 759-9434
with a copy to: Huth, Lynett and Scudi
5440 Morehouse Drive, Suite 4400
San Diego, CA 92121
Attention: Morgan Scudi, Esq.
Facsimile Number: (619) 558-1122
The parties may, at any time, change their addresses or other information in
this Article by written notice delivered under this Article.
ARTICLE 12
ASSIGNMENT
----------
12.1 Assignment. Neither party shall assign this Agreement nor delegate any of
----------
its duties hereunder to another without the prior written consent of the other
party; provided, however, that either party may (even without such consent)
--------
assign this Agreement to a successor in ownership of all or substantially all of
its business assets to which this Agreement pertains whether by sale of assets,
merger, consolidation or otherwise; provided further, that consent to assignment
----------------
to or delegation to a party's Affiliate shall not be unreasonably withheld; and
provided further, that the party assigning its rights or delegating its
- ----------------
obligations hereunder shall remain primarily liable for its obligations
hereunder. Any other purported assignment shall be void. This Agreement shall
be a binding obligation of the successors and permitted assigns of each party
hereto.
9
<PAGE>
ARTICLE 13
SEVERABILITY
------------
13.1 Severability. All provisions contained herein are severable and in the
------------
event that any of them shall be held to be to any extent invalid or otherwise
unenforceable by any court of competent jurisdiction, such provision shall be
construed as if it were written so as to effectuate to the greatest possible
extent the parties' expressed intent; and in every case the remainder of this
Agreement shall not be affected thereby and shall remain valid and enforceable,
as if such affected provision were not contained herein.
ARTICLE 14
HEADINGS
--------
14.1 Headings. The Article, Section and paragraph headings herein are for
--------
convenience only and shall not affect the construction or interpretation of this
Agreement.
ARTICLE 15
RELATIONSHIP OF PARTIES
-----------------------
15.1 Relationship of Parties. The relationship of the parties to this Agreement
-----------------------
is that of independent contractors. The parties are not, by virtue of this
Agreement or otherwise, in an employer-employee, principal-agent, joint venture
or partnership relationship with each other. Each party agrees not to represent
to any other person, or to assert in any form or forum, that the parties'
relationship is an employer-employee, principal-agent, joint venture or
partnership relationship. Each party acknowledges that it has no authority to
make representations on behalf of or to bind or commit the other party, and each
party covenants and agrees not to purport to make any representation on behalf
of the other party or to purport to bind or commit the other party in any way.
Each party acknowledges that it is responsible for its own tax withholding and
other obligations with regard to its own employees, and that the other party has
no responsibility whatsoever for withholding tax and other employment
obligations of the first party.
ARTICLE 16
LAW GOVERNING AND DISPUTE RESOLUTION
------------------------------------
16.1 Law Governing. This Agreement shall be governed by and construed in
-------------
accordance with the internal laws of the State of California.
16.2 Equitable Remedies. Each party acknowledges and agrees that the legal
------------------
remedies available to the other party in the event the first party violates the
covenants and agreements made in this Agreement would be inadequate and that the
other party shall be entitled, without posting any bond or other security, to
temporary, preliminary and permanent injunctive relief, specific performance and
other equitable remedies in the event of such a violation, in addition to any
other remedies which the other party may have at law or in equity.
ARTICLE 17
PUBLICATION OF CONTRACTOR'S AFFILIATION WITH SYNBIOTICS
-------------------------------------------------------
17.1 Limitations with Respect to Publicity. Neither party to this Agreement
-------------------------------------
shall without the express written consent of the other use the name of the other
either expressly or by implication in any advertising, sales or financial
promotional materials. Notwithstanding the foregoing sentence, Synbiotics may
use Licensor's name in connection with Synbiotics' disclosures made (i) to
prospective and current investors in Synbiotics' shareholder reports, business
10
<PAGE>
plans, offering materials and other financing documents and (ii) to satisfy the
Company's reporting requirements under United States federal or state securities
laws.
17.2 Marketing. Notwithstanding the provisions of Section 17.1 above, Licensor
---------
will endeavor to recommend informally, and to use reasonable efforts to further
the business of, diagnostic products developed and/or marketed by Synbiotics.
ARTICLE 18
ENTIRE AGREEMENT, MODIFICATION, ETC.
------------------------------------
18.1 Entire Agreement. This instrument contains the entire and only agreement
----------------
between the parties respecting the subject matter hereof and supersedes all
prior or contemporaneous negotiations, understandings or agreements (provided
that the Research Agreement by and among Synbiotics and Licensor dated September
6, 1994, the Development Agreement and any and all written agreements regarding
secrecy, confidentiality, nondisclosure and non-use shall not be superseded and
shall remain in full force and effect); and, any representation, promise or
condition in connection therewith not incorporated herein shall not be binding
on either party.
18.2 Modification. No alteration, amendment or modification of this Agreement
------------
shall be valid unless made in writing and signed by a duly authorized
representative of Synbiotics and Licensor.
18.3 Waiver. No waiver of any provision of this Agreement shall be binding
------
unless and until set forth expressly in writing and signed by a duly authorized
officer of the waiving party. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
preceding or succeeding breach of the same or any other term or provision, or a
waiver of any contemporaneous breach of any other term or provision, or a
continuing waiver of the same or any other term or provision. No failure or
delay by a party in exercising any right, power, or privilege hereunder or other
conduct by a party shall operate as a waiver thereof, in the particular case or
in any past or future case, and no single or partial exercise thereof shall
preclude the full exercise or further exercise of any right, power, or
privilege. No action taken pursuant to this Agreement shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained herein.
18.4 No Third Party Rights. This Agreement is for the benefit of the parties
---------------------
hereto and is not intended to, and shall not be construed as benefitting or
creating rights in any person or entity other than the signatories hereto.
18.5 Interpretation. Each party has cooperated in the drafting and preparation
--------------
of this Agreement and therefore, in any construction hereof, this Agreement
shall not be construed against any party as the draftsman thereof.
18.6 Further Assurances. Each of the parties hereto shall execute and deliver
------------------
all additional documents and instruments and shall do any and all acts and
things reasonably requested or otherwise necessary (a) in connection with the
performance of the obligations undertaken in the Agreement, (b) to perfect and
evidence the transactions contemplated by this Agreement, and/or (c) otherwise
to effectuate in good faith the intent of the parties.
18.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, taken together,
shall constitute one and the same instrument.
[Remainder of This Page Intentionally Left Blank]
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
Effective Date.
SYNBIOTICS CORPORATION
By: /s/ Robert L. Widerkehr
----------------------------
Its: President and CEO
Date: March 6, 1996
ENGENE BIOTECHNOLOGIES, INC.
By: /s/ J. Kevin Steele
------------------------
Its: President
Date: March 6, 1996
I hereby agree to be bound by Article 5 hereinabove, as if the word "Licensor"
therein referred to me personally.
/s/ J. Kevin Steele
-------------------
/s/ David Telford
-------------------
[SIGNATURE PAGE TO LICENSE AGREEMENT]
12
<PAGE>
EXHIBIT A
---------
INVESTMENT REPRESENTATION
Synbiotics Corporation,
a California corporation
Engene Biotechnologies, Inc., a California corporation ("Engene") is acquiring
the number of shares of common stock of Synbiotics Corporation, a California
corporation, indicated below (the "Securities") in its own name and for its own
account (or for a trust account if it is a trustee), and no other person has any
interest in or right with respect to the Securities, nor has Engene agreed to
give any person any such interest or right in the future.
Engene is acquiring the Securities for investment and not with a view to or for
sale in connection with any distribution of the Securities. Engene recognizes
that the Securities have not been registered under the Federal Securities Act of
1933 or qualified under the California Corporate Securities Law of 1968, or the
securities laws of any other state, that any disposition of the Securities is
subject to restrictions imposed by federal and state law, and that the
certificates representing the Securities will bear a restrictive legend. Engene
also recognizes that it cannot dispose of the Securities absent registration and
qualification, or an available exemption from registration and qualification,
and that no undertaking has been made with regard to registering or qualifying
the Securities in the future. Engene understands that the availability of any
exemption in the future will depend in part on circumstances outside its control
and that Engene may be required to hold the Securities for a substantial period.
Engene recognizes that no public market exists with respect to the Securities
and no representation has been made to me that such a public market will exist
at a future date. Engene understands that neither the California Commissioner
of Corporations nor any other state commissioner of corporations has made any
finding or determination relating to the fairness for investment of the
Securities offered by Synbiotics Corporation and that no commissioner of
corporations of any state has or will recommend or endorse the Securities.
ENGENE BIOTECHNOLOGIES, INC.
By: /s/ J. Kevin Steele
- ------------------------
Title: President
###-##-####
- --------------------------
Taxpayer Identification or
Social Security Number
Address: 16236 San Dieguito Road
Suite 4-21
Rancho Santa Fe, CA 92067
Date: March 6, 1995
Number of Shares purchased: [*]
A-1
<PAGE>
EXHIBIT B
---------
EXISTING PRODUCTS
[*]
B-1
<PAGE>
RESEARCH AND DEVELOPMENT AGREEMENT EXHIBIT 10.55
-------------
This Research and Development Agreement (this "Agreement") is made as of March
6, 1996 by and between ENGENE BIOTECHNOLOGIES, INC., a California corporation
("Contractor") and SYNBIOTICS CORPORATION, a California corporation
("Synbiotics").
ARTICLE 1
DEFINITIONS
-----------
The following terms will have the following meanings when used herein:
1.1 Affiliate. "Affiliate" shall mean any corporation or other business entity
---------
which controls, is controlled by or is under common control with any party. A
corporation or business entity shall be regarded as in control of another
corporation or business entity if it owns directly or directly or indirectly
controls at least fifty percent (50%) of the voting stock of the other
corporation or business entity.
1.2 Development Plan. "Development Plan" shall have the meaning set forth in
----------------
Section 3.1.1 of this Agreement.
1.3 Effective Date. "Effective Date" shall mean March 6, 1996.
--------------
1.4 Initial Project Schedule. "Initial Project Schedule" shall have the
------------------------
meaning set forth in Section 3.1.2 of this Agreement.
1.5 Intellectual Property. "Intellectual Property" shall mean all inventions,
---------------------
improvements, discoveries, sequences, works of authorship, trade secrets,
technology, ideas, know-how, processes, methods, formulas, data and techniques
arising from Contractor's specific work on the Projects, and all title, patents,
patent rights, copyrights, trade secret rights, and other intellectual property
rights anywhere in the world related thereto.
1.6 License Agreement. "License Agreement" shall mean the agreement so named,
-----------------
dated today, between Contractor and Synbiotics.
1.7 PCR Product(s). "PCR Product(s)" shall mean all Synbiotics Product(s)
--------------
specifically incorporating any Rights relating specifically to polymerase chain
reaction based technology.
1.8 Project(s). "Project(s)" shall mean the research and development projects
----------
specified in the Development Plans attached to the Initial Project Schedule or
any Subsequent Project Schedule.
1.9 Net Sales. "Net Sales" shall mean the total invoice amount for sales to
---------
unaffiliated entities less (i) normal and customary cash and trade discounts,
returns and allowances, transportation charges or allowances, if any, paid or
allowed by Synbiotics, and (ii) sales, value added and other similar taxes paid
by Synbiotics with respect to the sale of a product, if included in the selling
price. In the event of a transaction between Synbiotics
_____________________
[*] Certain confidential portions of this exhibit have been omitted by means of
blacking out the text (the "Mark"). This exhibit has been filed separately
with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 24b-2
under the Securities Exchange Act of 1934, as amended.
1
<PAGE>
and an Affiliate, "Net Sales" shall be deemed to be the total gross amount
invoiced by Synbiotics if that amount is the same as the amount invoiced for
similar sales to non-affiliated third parties and otherwise the amount of Net
Sales shall be the amount invoiced by the Affiliate on its sale of the item, in
either case less (i) normal and customary cash and trade discounts, returns and
allowances, transportation charges or allowances, if any, paid or allowed by
Synbiotics, and (ii) sales, value added and other similar taxes paid by
Synbiotics with respect to the sale of the product, if included in the selling
price.
1.10 Research Agreement. "Research Agreement" shall mean the agreement so
------------------
named, dated September 6, 1994, between Synbiotics and Contractor.
1.11 Rights. "Rights" shall mean any inventions, improvements, discoveries,
------
sequences, works of authorship, trade secrets, technology, ideas, know-how,
processes, methods, formulas, data and techniques, patents, patent rights, trade
secrets and other intellectual property rights licensed to Synbiotics pursuant
to Article 3 of the License Agreement.
1.12 Specifications. "Specifications" shall mean the specifications established
--------------
by Synbiotics for each Synbiotics Product (including, without limitation,
sensitivity, size, shape, color, tolerances, materials, labelling, packaging,
etc.)
1.13 Subsequent Product Schedule. "Subsequent Product Schedule" shall have the
---------------------------
meaning set forth in Section 3.1.2 of this Agreement.
1.14 Synbiotics Product(s). "Synbiotics Product(s)" shall mean any vaccine,
---------------------
construct, probe, diagnostic test or automatable assay technique incorporating
any Rights developed for Synbiotics by Contractor hereunder. Without limitation
Synbiotics Product(s) shall also include any vaccine, construct, probe,
diagnostic test or automatable assay technique incorporating the Rights (i) for
use in detecting [*] utilizing the unique sequence of [*] characterized by
Contractor and (ii) set forth on attached Exhibit B.
---------
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTIES
--------------------------------------------------------
2.1 Representations and Warranties of Synbiotics. Synbiotics represents and
--------------------------------------------
warrants to Contractor that as of the Effective Date:
(a) it is a corporation duly organized, validly existing and in good
standing under the laws of the State of California;
(b) all corporate acts required to execute and deliver this Agreement have
been duly taken by Synbiotics; the execution, delivery and performance
hereof by Synbiotics have been duly authorized; and this Agreement, as so
executed and delivered, is a valid and binding obligation of Synbiotics,
enforceable against it in accordance with its terms; and
(c) the execution and delivery of this Agreement by Synbiotics, and the
performance of its obligations hereunder, do not require the consent of any
third party and will not violate, with or without notice, the lapse of time
or both, any agreement, contract, license or permit to which Synbiotics is
a party or its organizational documents.
2.2 Representations and Warranties of Contractor. Contractor represents and
--------------------------------------------
warrants to Synbiotics that as of the Effective Date:
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(a) it is a corporation duly organized, validly existing and in good
standing under the laws of the State of California;
(b) all corporate acts required to execute and deliver this Agreement have
been duly taken by Contractor; the execution, delivery and performance
hereof by Contractor have been duly authorized; and this Agreement, as so
executed and delivered, is a valid and binding obligation of Contractor,
enforceable against it in accordance with its terms;
(c) the execution and delivery of this Agreement by Contractor, and the
performance of its obligations hereunder, do not require the consent of any
third party and will not violate, with or without notice, the lapse of time
or both, any agreement, contract, license or permit to which Contractor is
a party or its organizational documents;
(d) it has the right and title to grant the present and future rights and
assignments in favor of Synbiotics contained in this Agreement;
(e) neither it nor anyone authorized to act on its behalf has entered into
any agreement or understanding with any third party that grants rights,
licenses, assignments, immunities or options of any kind which would
interfere with its ability to perform its obligations under this Agreement;
and
(f) each of its employees has entered into a contract which provides for
assignment to Contractor of all inventions and intellectual property made
by him or her during the course of his or her employment, and non-
disclosure of confidential information of Contractor and of others to which
access is gained through Contractor.
2.3 Covenants of Contractor. Contractor covenants and agrees that for the
-----------------------
duration of this Agreement:
(a) subject to the terms hereof, it will maintain at all times all relevant
regulatory approvals and licenses for its research and laboratory
facilities in its reasonable judgment sufficient in capacity to allow
Contractor to perform the work contemplated by this Agreement within the
timeframe contemplated in this Agreement;
(b) if during the conduct of work on any Project any of Contractor's
employees or consultants shall, to the knowledge of Contractor, make a
discovery, improvement or invention relating to work on the Project or
otherwise create Intellectual Property, Contractor will promptly make the
fact of such discovery, improvement or invention or Intellectual Property
known to Synbiotics;
(c) it shall not take, or omit to take, or suffer to occur, any action
which would result in any representation or warranty made by Contractor in
Section 2.2 from becoming at any future date untrue (assuming it were made
on and as of such future date);
(d) it shall not enter into any agreement or take or fail to take any
action which shall restrict its legal right to grant to Synbiotics the
rights contemplated under this Agreement or the License Agreement;
(e) it shall promptly, but in no event more than three (3) business days,
notify Synbiotics, and provide copies or transcriptions, of any action,
request, order, instruction, communication, complaint, notice, public
announcement or inquiry by the United States Department of Agriculture
("USDA") or any submission, filing, letter or other communication by
Contractor to the USDA with respect to any of the Synbiotics Products which
is sent by or is received by or which comes to the attention of Contractor,
including but not limited to field actions, investigations or recalls of
the Synbiotics Products; and
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(f) it will use its best efforts to, as soon as practicable, after
receiving a request from Synbiotics to manufacture any Synbiotics Products
pursuant to Section 4.1, establish a USDA licensed manufacturing facility
sufficient in size to allow it to perform its manufacturing obligations
under Section 4.1, and shall maintain and expand such facility, as
necessary to perform its obligations, for so long as it continues to
manufacture any Synbiotics Products.
ARTICLE 3
RESEARCH SERVICES TO BE PROVIDED
--------------------------------
3.1 Contractor's Research Obligations.
---------------------------------
3.1.1 Development Plan. Contractor shall use its best efforts to complete
----------------
each Project, in accordance with the development plan therefor, which shall
include the Specifications, development schedule, deliverables, and other
conditions of the proposed development (the "Development Plan"). All
Development Plans shall be contain commercially reasonable terms and shall
be prepared by Synbiotics after reasonable consultation with Contractor.
3.1.2 Contractor's Development Obligations. Synbiotics shall provide to
------------------------------------
Contractor within thirty (30) days following the Effective Date, a schedule
setting forth at least two (2) Projects that Synbiotics intends to fund
(the "Initial Project Schedule"), together with a Development Plan with
respect to each such Project. During the fourth calendar quarter of each
calendar year during the term of the Agreement, Synbiotics shall present to
Engene an additional schedule setting forth each of the Projects that
Synbiotics intends to fund during the ensuing calendar year ("Subsequent
Project Schedule"), together with a Development Plan with respect to each
such Project. In connection with each of the Projects set forth in a
Subsequent Product Schedule, Contractor covenants to make available to
Synbiotics a development group comparable in size and experience to the
development group committed to each of the Projects identified in the
Initial Project Schedule.
3.1.3 Termination of Project.
----------------------
(a) Synbiotics may terminate any Project or Projects, at any time
upon delivering written notice of such termination to Contractor
("Termination Notice"). Upon any such termination, Synbiotics shall
have no obligation to compensate Contractor for any further work
conducted on such Project after the end of the calendar month in
which the Termination Notice was sent to Contractor.
(b) In the event that any Project is terminated pursuant to this
Section 3.1.3, Synbiotics shall have the right (but not the
obligation) to (i) undertake or continue, the Project independently
of Contractor and (ii) cause Contractor to resume work on the
Project whether or not Synbiotics has performed or continues to
perform any work on the Project. If Synbiotics elects to undertake
or continue the Project, Contractor shall make available to
Synbiotics any and all work product produced in connection with such
Project.
3.2 Synbiotics' Obligations. Synbiotics shall not contract with any third
-----------------------
party to perform any research project where such project calls for a PCR Product
as a deliverable unless Contractor has first been offered an opportunity to
conduct such research project. Nothing contained in this Section 3.2 shall be
interpreted to restrict Synbiotics ability to carry on any research project
independent from Contractor.
3.3 Records and Notes. Contractor shall, in accordance with its established
-----------------
practice, keep complete, accurate and authentic accounts, notes, data and
records of the work performed under this Agreement. Contractor shall
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promptly and fully disclose to Synbiotics any and all information, data and
results obtained from conducting the Projects. Synbiotics may, upon prior
written notice and at reasonable times, inspect and make copies of such
accounts, notes, data and records at Contractor's facilities.
3.4 Reports and Meetings. Synbiotics may appoint a liaison who shall have full
--------------------
access to Contractor's facilities to monitor and otherwise obtain knowledge and
information about the research on the Projects. Synbiotics' liaison shall meet
with Contractor on a semimonthly basis. During such meetings Contractor shall
orally communicate to the Synbiotics liaison information obtained through work
on the Projects being monitored. Contractor shall in addition, within ten (10)
days following the completion of each calendar month, provide Synbiotics
separate written status reports detailing the information obtained through work
accomplished in the most recently completed calendar month on respective
Projects (the "Project Monthly Reports"). Within thirty (30) days of the
completion of the work with respect to a Project, the parties shall jointly
author a final report summarizing the work accomplished and identifying all
inventions conceived and reduced to practice and all other Intellectual
Property.
3.5 Work for Third Parties. Nothing contained in this Agreement (except as set
----------------------
forth in Sections 3.1, 3.2 and 4.2) prohibits or constrains either party from
cooperating or working with third parties; provided, however, that Contractor
agrees to remain exclusively available to Synbiotics for further consultation,
and correspondingly agrees for the term of this Agreement and for three years
following the expiration or termination of this Agreement pursuant to Article 9,
not to perform any research for Contractor's own account or for any other person
relating to the Rights. If any such research is proposed to Contractor by any
person, Contractor shall immediately notify Synbiotics in writing, giving all
specifics.
3.6 Good Laboratory Practices. Contractor shall conduct all nonclinical
-------------------------
laboratory research or studies and/or manufacturing in accordance with Good
Laboratory Practice standards and Good Manufacturing Practices standards, and
will document the adherence of its facilities, equipment, personnel, methods,
practices, records and controls to the applicable standards and regulations.
3.7 QA/QC. Contractor shall be the sole party responsible for quality
-----
assurance and quality control in the manufacturing of any Synbiotics Products
pursuant to the Projects.
ARTICLE 4
MANUFACTURING SERVICES
----------------------
4.1 Option to Cause Contractor to Manufacture. Contractor hereby agrees, upon
-----------------------------------------
the request of Synbiotics, to manufacture any or all of the primer sets required
by Synbiotics for the Synbiotics Products. The price at which Synbiotics will
purchase primer sets manufactured by Contractor pursuant to this Section 4.1 and
the terms and conditions upon which such primer sets will be provided to
Synbiotics shall be negotiated by Contractor and Synbiotics in good faith, and
shall reflect industry average prices and standard terms and conditions for the
manufacture of such products. Synbiotics has no obligation to request
Contractor to manufacture if, and to the extent, Synbiotics chooses to
manufacture by itself.
4.2 Use of Third Party Manufacturers. Prior to contracting with any third
--------------------------------
party for the manufacture of any primer sets for a Synbiotics Products,
Synbiotics shall first notify Contractor in writing of its desire to cause
Contractor to manufacture such primer sets (the "Written Notice") and then for
thirty (30) days after Contractor's receipt of the Written Notice, negotiate
with Contractor (and not with anyone else) in good faith toward a definitive
manufacturing agreement on terms as contemplated by Section 4.1 and otherwise
mutually agreeable to Contractor and Synbiotics.
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ARTICLE 5
COMPENSATION FOR SERVICES
-------------------------
5.1 Contractor Compensation. Contractor shall be compensated during the term
-----------------------
of each Project at the rate of [*] per month for the first Project performed
under this Agreement (except that for so long as any project is being performed
pursuant to the Research Agreement the compensation for the first Project to be
performed under this Agreement shall be [*] per month) and [*] per month for
each additional Project (the "Fee"). The Fee during each of the first twelve
(12) consecutive months of this Agreement, including payments made to Contractor
pursuant to the Research Agreement, shall be at least [*] per month. The Fee
with respect to each Project shall be paid in arrears on the last day of each
month and shall be prorated if a Project is completed in mid-month.
5.2 Milestone Payments. As partial consideration for the research and
------------------
development efforts of Contractor under this Agreement, Synbiotics shall pay
Contractor milestone payments (subject to Contractor executing an Investment
Representation in the form attached hereto as Exhibit A prior to each payment)
---------
at the times set forth below.
5.2.1 [*] shares of Synbiotics Common Stock, no par value, upon Synbiotics
achieving aggregate Net Sales of PCR Products of at least [*] prior to the
first anniversary of the Effective Date.
5.2.2 [*] shares of Synbiotics Common Stock, no par value, upon Synbiotics
achieving aggregate Net Sales of PCR Products of at least [*] during the
one-year period commencing on the first anniversary of the Effective Date.
5.2.3 [*] shares of Synbiotics Common Stock, no par value, upon Synbiotics
achieving Net Sales of PCR Products of at least [*] during the one-year
period commencing on the second anniversary of the Effective Date.
5.3 "Royalty" Payments.
------------------
5.3.1 Synbiotics shall pay to Contractor a payment in the nature of a
royalty on its Net Sales of all Synbiotics Products. The royalty rate
shall be [*] of Net Sales for each Synbiotics Product, to the extent
permitted by law. Synbiotics' royalty obligations will continue throughout
the entire useful life of each Synbiotics Product. Royalties shall be paid
within forty-five (45) days of the end of each calendar quarter with
respect to royalty-bearing sales occurring in that quarter. Synbiotics
shall keep and maintain detailed and accurate books and records with regard
to Net Sales, royalties and calculation thereof.
5.3.2 If a law or governmental regulation requires withholding of taxes on
any royalty payment due hereunder, such taxes shall be deducted from any
amount to be remitted hereunder and shall be paid to the proper taxing
authority, and proof of payment shall be provided to the party on whose
behalf such taxes were paid as evidence of such payment in such form as
required by the tax authorities having jurisdiction.
5.3.3 Each royalty payment shall be accompanied by a written report,
prepared and signed by a financial officer of Synbiotics, showing for the
quarter for which payment is being made, the Net Sales of each Synbiotics
Product sold and the royalties which shall have accrued with respect
thereto and currency conversion calculations, if any. In the event that,
for any quarter following the first quarter in which a Synbiotics Product
is sold for which such a royalty would be payable, no such royalty is due,
Synbiotics shall report the same to Contractor.
5.3.4 At the request and expense of Contractor, Synbiotics shall permit an
independent certified public accountant appointed by Contractor and
reasonably acceptable to Synbiotics, at reasonable times and upon
reasonable notice (but not exceeding once in any twelve (12) month period),
to examine those records as may be necessary (with respect to any calendar
year ending not more than three (3) years prior to such
6
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party's request) to: (i) determine the correctness of any report or payment
under this Agreement; or (ii) obtain information as to the Synbiotics
Product sales for such calendar year. Said independent certified public
accountant shall verify to the requesting party only the amount of payment
due or costs incurred hereunder and disclose no other information revealed
in its audit. Results of any such examination shall be made available to
the parties. Any amount of deficiency, or overcharge, shall be paid or
refunded promptly to Contractor, plus interest at the commercial prime
lending rate of Citibank, N.A., New York (or equivalent banking
institution) until the date paid. Contractor shall bear the full cost of
the performance of any such audit unless such audit discloses a variance of
more than five percent (5%) from the amount of the original report, royalty
or payment calculation, in which case Synbiotics shall bear the full cost
of the performance of such audit.
5.4 No Reimbursement. Synbiotics shall have no obligation to purchase for
----------------
Contractor or reimburse Contractor for the expense of purchasing any equipment
or supplies needed to perform the Projects.
ARTICLE 6
OWNERSHIP OF INTELLECTUAL PROPERTY
----------------------------------
6.1 Assignment and Perfection of Intellectual Property Rights. All right,
---------------------------------------------------------
title and interest in and to Intellectual Property and other results, whether
patentable or not, conceived by Contractor or any employee, consultant or agent
of Contractor in the course of performing work on a Project (including, without
limitation, any Synbiotics Products) shall be the property of Synbiotics, and
Contractor shall assign to Synbiotics (at such times and using such forms of
instrument as Synbiotics may request) any and all rights Contractor or any such
person may have or may assert to any such Intellectual Property. Upon request
of Synbiotics, Contractor shall use its best efforts to cause any such employee,
consultant or agent to make application for a patent with respect to any
Intellectual Property conceived of, and resulting from the research with regard
to the Projects conducted by such employee, consultant or agent pursuant to this
Agreement. Any such application(s) shall be made and prosecuted at the expense
of Synbiotics and through attorneys named by Synbiotics. Synbiotics shall have
complete control of the patent prosecution process, including whether or not to
file a patent application. Any and all expenses, including travel for or in
connection with the preparation, filing, prosecution, assignment and recording
of such application shall be paid by Synbiotics without reference to sums
otherwise provided in this Agreement.
6.2 Further Acts; Enforcement. Contractor agrees to perform, during and after
-------------------------
the term of this Agreement, all acts deemed necessary or desirable by Synbiotics
to permit and assist Synbiotics, at Synbiotics' sole expense (including
compensating Contractor at $100 per hour for the time of Contractor's
professionals, plus reimbursement of Contractor's out-of-pocket expenses), in
evidencing, obtaining, maintaining, defending and enforcing Synbiotics' rights
with respect to Intellectual Property and/or Contractor's assignment with
respect to Intellectual Property in any and all countries. Such acts may
include, but are not limited to, execution of documents and assistance or
cooperation in legal proceedings. Contractor hereby irrevocably designates and
appoints Synbiotics and its duly authorized officers and agents, as Contractor's
agents and attorneys-in-fact to act for and in behalf and instead of Contractor,
to execute and file any documents and to do all other lawfully permitted acts to
further the above purposes with the same legal force and effect as if executed
by Contractor.
ARTICLE 7
CONFIDENTIALITY
---------------
7.1 Confidential Information. Contractor agrees that it shall maintain (and
------------------------
shall cause its employees, consultants and agents to maintain) in confidence any
information regarding Synbiotics or its Intellectual Property received before or
during the term of this Agreement and identified as confidential or otherwise
protected and any information regarding the results of Contractor's work on any
Project (hereinafter, such information shall collectively be referred
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to as "Confidential Information"), and without the express written permission
of Synbiotics shall neither use, publish, disseminate nor disclose such
Confidential Information except for the furtherance of the purposes of this
Agreement. Subject to the next sentence, the foregoing obligations of
confidentiality and non-use shall survive the expiration or termination of this
Agreement. The obligations of the first sentence shall not apply to any
information which: (i) is now or hereafter comes into the public domain
otherwise than by breach of this Agreement, or (ii) is brought to Contractor by
a third party who rightfully obtained and possesses it and does not require that
it be maintained confidential by the receiving party (and who does not thereby
breach any contract). Furthermore, the obligations of the first sentence shall
not apply to any information (excluding any information relating to Rights)
which is shown by written records to be already in the possession of Contractor
other than as a result of having received it from Synbiotics.
7.2 Publication of Results of Work. Contractor shall have no right to publish
------------------------------
information regarding the results of its work on a Project without the express
written consent of Synbiotics. Contractor shall likewise restrict and prevent
its employees, consultants and agents from so publishing the results of work on
a Project.
ARTICLE 8
PUBLICATION OF CONTRACTOR'S AFFILIATION WITH SYNBIOTICS
-------------------------------------------------------
8.1 Limitations with Respect to Publicity. Neither party to this Agreement
-------------------------------------
shall without the express written consent of the other use the name of the other
either expressly or by implication in any advertising, sales or financial
promotional materials. Notwithstanding the foregoing sentence, Synbiotics may
use Contractor's name in connection with Synbiotics' disclosures made (i) to
prospective and current investors in Synbiotics' shareholder reports, business
plans, offering materials and other financing documents and (ii) to satisfy the
Company's reporting requirements under United States federal or state securities
laws.
8.2 Marketing. Notwithstanding the provisions of Section 8.1 above, Contractor
---------
will endeavor to recommend informally, and to use reasonable efforts to further
the business of, diagnostic products developed and/or marketed by Synbiotics.
ARTICLE 9
INDEMNITIES AND "WARRANTY"
--------------------------
9.1 Contractor Indemnification. Contractor agrees to and shall defend,
--------------------------
indemnify and hold Synbiotics, its officers, directors, employees, agents and
shareholders harmless (including attorneys fees to defend, and any damages,
penalties, settlements, costs or expenses awarded or incurred) from and against
any claim, liability, suit or proceeding based upon negligence, warranty, strict
liability or violation of government regulation, (but specifically excluding,
without limitation any claim, liability, suit or proceeding initiated by or on
behalf of a third party based upon infringement of patent or other proprietary
rights,) arising from or occurring as a result of any development or use of the
Rights or Synbiotics Products (including, without limitation, any manufacture of
the Synbiotics Products) by Contractor.
9.2 Synbiotics Indemnification. Synbiotics agrees to and shall defend,
--------------------------
indemnify and hold Contractor, its officers, directors, employees, agents and
shareholders harmless (including attorneys fees to defend, and any damages,
penalties, settlements, costs or expenses awarded or incurred) from and against
any claim, liability, suit or proceeding initiated by or on behalf of a third
party based upon negligence, warranty, strict liability or violation of
government regulation, (but specifically excluding, without limitation any
claim, liability, suit or proceeding based upon infringement of patent or other
proprietary rights,) arising from or occurring as a result of any development or
use of the Rights or Synbiotics Products (including, without limitation, any
manufacture of the Synbiotics Products) by Synbiotics.
8
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9.3 Defense of Claims. If any lawsuit or enforcement action is filed against
-----------------
any indemnified person, written notice thereof shall be given to the
indemnifying company as promptly as practicable (and in any event within fifteen
(15) days after the service of the citation or summons); provided that the
failure of any indemnified person to give timely notice shall not affect rights
to indemnification hereunder except to the extent that the indemnifying company
demonstrates actual damage caused by such failure. After such notice, if the
indemnifying Company shall acknowledge in writing to such indemnified person
that the indemnifying company shall be obligated under the terms of its
indemnity hereunder in connection with such lawsuit or action, then the
indemnifying company shall be entitled, if it so elects, to take control of the
defense and investigation of such lawsuit or action and to employ and engage
attorneys of its own choice (subject to the approval (for competence,
experience, independence and absence of conflict of interest) of the indemnified
person) to handle and defend the same, at the indemnifying company's cost, risk
and expense; and such indemnified person shall thereafter cooperate in all
reasonable respects with the indemnifying company and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom. The fees of such attorneys, and all amounts payable by the
indemnifying company under this Section, shall be payable as incurred and on
demand. The indemnified person may also, through independent counsel and at its
own cost, participate in such investigation, trial and defense of such lawsuit
or action and any appeal arising therefrom.
9.4 Settlements. An indemnifying company shall have the absolute right to
-----------
effect a settlement of any action or claim against an indemnified person where
the settlement calls only for money to be paid on behalf of an indemnified
person, provided the indemnifying company makes all such payments directly to
the third party. However, no settlement calling for anything to be done (or not
done) by an indemnified person other than the payment of money (or calling for
the payment of money directly by the indemnified person) may be effected by the
indemnifying company without the prior written approval of the indemnified
person. No indemnified person shall enter into a settlement calling for or
necessitating the payment of money (under this Section or otherwise), or for any
other thing, by the indemnifying company without the prior written approval of
the indemnifying company.
9.5 Warranty. If a Project deliverable is a construct or a probe, and such
--------
construct or probe proves unsatisfactory for any reason at any time before USDA
licensure of a related diagnostic product, Synbiotics may, at its option,
require Contractor to create and deliver a replacement construct or probe.
ARTICLE 10
TERM AND TERMINATION
--------------------
10.1 Term. The initial term of this Agreement shall commence of the Effective
----
Date and, unless earlier terminated in accordance with the express terms of this
Agreement, shall expire on the third anniversary of the Effective Date. At the
end of the initial term, this Agreement shall automatically be renewed for
additional terms of one (1) year, unless either party provides the other written
notice of termination at least ninety (90) days prior to the commencement of an
additional term.
The term of this Agreement shall begin on the Effective Date and, unless earlier
terminated in accordance with the express terms of this Agreement, shall expire
on the third anniversary of the Effective Date. This Agreement shall be
automatically renewed for additional one (1) year terms after the initial term,
unless either party is otherwise notified by the other in writing at least
ninety (90) days prior to the termination of the initial term.
10.2 Termination. If either party materially breaches or defaults in the
-----------
performance of this Agreement and such breach or default is not cured within
thirty (30) days after the giving of notice of default by the other party
specifying such breach or default, then the party giving such notice may, in
addition to all other remedies available at law or in equity, terminate this
Agreement immediately for cause and such termination shall be effective on the
date when a notice of termination is received by the breaching or defaulting
party.
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10.2.1 The failure of a party to assert its rights for any material
breach or default of this Agreement shall not be deemed a waiver of such
rights nor shall any waiver be implied by the making or acceptance of
any payment.
10.2.2 Termination shall only relieve the parties of obligations which
would have arisen under this Agreement after the effective date of
termination and shall in no way relieve the parties of any obligations
existing on the date of such termination.
10.3 Survival. All obligations under Sections 3.4, 5.2, 5.3, 6.1, 6.2, 10.3 and
--------
Articles 7 and 9 shall continue notwithstanding any termination or expiration of
this Agreement.
ARTICLE 11
NOTICES
-------
All notices or other communications provided for in this Agreement shall be in
writing and shall be considered delivered upon the latest of actual receipt, or
personal or courier delivery, or sending by facsimile with confirmation of
receipt in good order requested and received, or on the third business day after
--
they are deposited in the United States mail, certified first class postage
prepaid, addressed to the respective parties as follows:
(a) If to Synbiotics: Synbiotics Corporation
11011 Via Frontera
San Diego, CA 92127
Attention: Chief Executive Officer
Facsimile Number: (619) 451-5719
with a copy to: Brobeck, Phleger & Harrison
550 West C Street, Suite 1300
San Diego, CA 92101
Attention: Hayden J. Trubitt, Esq.
Facsimile Number: (619) 234-3848
(b) If to Contractor: Engene Biotechnologies, Inc.
16236 San Dieguito Road
Suite 4-21
Rancho Santa Fe, CA 92067
Attention: J. Kevin Steele
Facsimile Number: (619) 759-9434
with a copy to: Huth, Lynett and Scudi
5440 Morehouse Drive, Suite 4400
San Diego, CA 92121
Attention: Morgan Scudi, Esq.
Facsimile Number: (619) 558-1122
The parties may, at any time, change their addresses or other information in
this Article by written notice delivered under this Article.
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ARTICLE 12
ASSIGNMENT
----------
Neither party shall assign this Agreement nor delegate any of its duties
hereunder to another without the prior written consent of the other party;
provided, however, that either party may (even without such consent) assign this
- --------
Agreement to a successor in ownership of all or substantially all of its
business assets to which this Agreement pertains whether by sale of assets,
merger, consolidation or otherwise; provided further, that consent to assignment
----------------
to or delegation to a party's Affiliate shall not be unreasonably withheld; and
provided further, that the party assigning its rights or delegating its
- ----------------
obligations hereunder shall remain primarily liable for its obligations
hereunder. Any other purported assignment shall be void. This Agreement shall
be a binding obligation of the successors and permitted assigns of each party
hereto.
ARTICLE 13
SEVERABILITY
------------
All provisions contained herein are severable and in the event that any of them
shall be held to be to any extent invalid or otherwise unenforceable by any
court of competent jurisdiction, such provision shall be construed as if it were
written so as to effectuate to the greatest possible extent the parties'
expressed intent; and in every case the remainder of this Agreement shall not be
affected thereby and shall remain valid and enforceable, as if such affected
provision were not contained herein.
ARTICLE 14
HEADINGS
--------
The Article, Section and paragraph headings herein are for convenience only and
shall not affect the construction or interpretation of this Agreement.
ARTICLE 15
RELATIONSHIP OF PARTIES
-----------------------
The relationship of the parties to this Agreement is that of independent
contractors. The parties are not, by virtue of this Agreement or otherwise, in
an employer-employee, principal-agent, joint venture or partnership relationship
with each other. Each party agrees not to represent to any other person, or to
assert in any form or forum, that the parties' relationship is an employer-
employee, principal-agent, joint venture or partnership relationship. Each
party acknowledges that it has no authority to make representations on behalf of
or to bind or commit the other party, and each party covenants and agrees not to
purport to make any representation on behalf of the other party or to purport to
bind or commit the other party in any way. Each party acknowledges that it is
responsible for its own tax withholding and other obligations with regard to its
own employees, and that the other party has no responsibility whatsoever for
withholding tax and other employment obligations of the first party.
ARTICLE 16
LAW GOVERNING AND DISPUTE RESOLUTION
------------------------------------
16.1 Law Governing. This Agreement shall be governed by and construed in
-------------
accordance with the internal laws of the State of California.
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16.2 Equitable Remedies. Each party acknowledges and agrees that the legal
------------------
remedies available to the other party in the event the first party violates the
covenants and agreements made in this Agreement would be inadequate and that the
other party shall be entitled, without posting any bond or other security, to
temporary, preliminary and permanent injunctive relief, specific performance and
other equitable remedies in the event of such a violation, in addition to any
other remedies which the other party may have at law or in equity.
ARTICLE 17
ENTIRE AGREEMENT, MODIFICATION, ETC.
------------------------------------
17.1 Entire Agreement. This instrument, including the Project Master Schedule,
----------------
contains the entire and only agreement between the parties respecting the
subject matter hereof and supersedes all prior or contemporaneous negotiations,
understandings or agreements (provided that the Research Agreement, the License
Agreement and any and all written agreements regarding secrecy, confidentiality,
nondisclosure and non-use shall not be superseded and shall remain in full force
and effect); and, any representation, promise or condition in connection
therewith not incorporated herein shall not be binding on either party.
17.2 Modification. No alteration, amendment, modification, renewal or extension
------------
of this Agreement shall be valid unless made in writing and signed by a duly
authorized representative of Synbiotics and Contractor.
17.3 Waiver. No waiver of any provision of this Agreement shall be binding
------
unless and until set forth expressly in writing and signed by duly authorized
officer of the waiving party. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
preceding or succeeding breach of the same or any other term or provision, or a
waiver of any contemporaneous breach of any other term or provision, or a
continuing waiver of the same or any other term or provision. No failure or
delay by a party in exercising any right, power, or privilege hereunder or other
conduct by a party shall operate as a waiver thereof, in the particular case or
in any past or future case, and no single or partial exercise thereof shall
preclude the full exercise or further exercise of any right, power, or
privilege. No action taken pursuant to this Agreement shall be deemed to
constitute a waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained herein.
17.4 No Third Party Rights. This Agreement is for the benefit of the parties
---------------------
hereto and is not intended to, and shall not be construed as benefitting or
creating rights in any person or entity other than the signatories hereto.
17.5 Interpretation. Each party has cooperated in the drafting and preparation
--------------
of this Agreement and therefore, in any construction hereof, this Agreement
shall not be construed against any party as the draftsman thereof.
17.6 Further Assurances. Each of the parties hereto shall execute and deliver
------------------
all additional documents and instruments and shall do any and all acts and
things reasonably requested or otherwise necessary (a) in connection with the
performance of the obligations undertaken in the Agreement, (b) to perfect and
evidence the transactions contemplated by this Agreement, and/or (c) otherwise
to effectuate in good faith the intent of the parties.
17.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, taken together,
shall constitute one and the same instrument.
[Remainder of This Page Intentionally Left Blank]
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
Effective Date.
SYNBIOTICS CORPORATION
By: /s/ Robert L. Widerkehr
-----------------------
Its: President and CEO
Date: March 6, 1996
ENGENE BIOTECHNOLOGIES, INC.
By: /s/ J. Kevin Steele
----------------------
Its: President
Date: March 6, 1996
I hereby agree to be bound by Sections 3.5 and 7.2 hereinabove, as if the word
"Contractor" therein referred to me personally.
/s/ J. Kevin Steele
-----------------------
/s/ David Telford
-----------------------
[SIGNATURE PAGE TO RESEARCH AND DEVELOPMENT AGREEMENT]
<PAGE>
EXHIBIT A
---------
INVESTMENT REPRESENTATION
Synbiotics Corporation,
a California corporation
Engene Biotechnologies, Inc., a California corporation ("Engene") is acquiring
the number of shares of common stock of Synbiotics Corporation, a California
corporation, indicated below (the "Securities") in its own name and for its own
account (or for a trust account if it is a trustee), and no other person has any
interest in or right with respect to the Securities, nor has Engene agreed to
give any person any such interest or right in the future.
Engene is acquiring the Securities for investment and not with a view to or for
sale in connection with any distribution of the Securities. Engene recognizes
that the Securities have not been registered under the Federal Securities Act of
1933 or qualified under the California Corporate Securities Law of 1968, or the
securities laws of any other state, that any disposition of the Securities is
subject to restrictions imposed by federal and state law, and that the
certificates representing the Securities will bear a restrictive legend. Engene
also recognizes that it cannot dispose of the Securities absent registration and
qualification, or an available exemption from registration and qualification,
and that no undertaking has been made with regard to registering or qualifying
the Securities in the future. Engene understands that the availability of any
exemption in the future will depend in part on circumstances outside its control
and that Engene may be required to hold the Securities for a substantial period.
Engene recognizes that no public market exists with respect to the Securities
and no representation has been made to me that such a public market will exist
at a future date. Engene understands that neither the California Commissioner
of Corporations nor any other state commissioner of corporations has made any
finding or determination relating to the fairness for investment of the
Securities offered by Synbiotics Corporation and that no commissioner of
corporations of any state has or will recommend or endorse the Securities.
ENGENE BIOTECHNOLOGIES, INC.
By: /s/ J. Kevin Steele
-------------------
Title: President
###-##-####
- --------------------------
Taxpayer Identification or
Social Security Number
Address: 16236 San Dieguito Road
Suite 4-21
Rancho Santa Fe, CA 92067
Date: March 6, 1995
Number of Shares purchased: [*]
A-1
<PAGE>
EXHIBIT B
---------
EXISTING PRODUCTS
[*]
B-1
<PAGE>
SCIENTIFIC ADVISOR AGREEMENT EXHIBIT 10.56
---------------------------- -------------
(Scientific Advisory Board)
THIS SCIENTIFIC ADVISOR AGREEMENT ("Agreement") is entered into as of March 6,
1996, by and between J. Kevin Steele ("Advisor") and Synbiotics Corporation, a
California corporation ("Synbiotics").
Advisor and Synbiotics agree as follows:
1. Description of Services. Synbiotics hereby retains Advisor and Advisor
-----------------------
hereby agrees to serve during the term of this Agreement as a member of
Synbiotics' Scientific Advisory Board. As such, Advisor shall advise Synbiotics
from time to time on scientific aspects of research, development, manufacturing,
marketing and legal issues affecting the Company and its business.
2. Compensation.
------------
A. Consulting Fee. Synbiotics shall grant to Advisor, under its 1995
--------------
Stock Option/Stock Issuance Plan, a non-statutory stock option to purchase
[*] shares of Synbiotics Common Stock at then fair market value upon the
completion of each year of service on Synbiotics' Scientific Advisory
Board.
B. Travel Expenses. Synbiotics shall reimburse Advisor for all out-of-
---------------
pocket expenses (round trip tourist or coach class transportation, hotel,
meals) reasonably incurred by Advisor in connection with any trip made by
Advisor at the specific request of and with prior written approval of
Synbiotics.
C. Other Expenses. Synbiotics shall reimburse Advisor for all other
--------------
reasonable expenses actually incurred which are incidental to the services
performed hereunder and which have been approved in writing in advance by
Synbiotics.
D. Invoices. Advisor shall provide Synbiotics with monthly invoices
--------
detailing the expenses and reimbursements which Advisor believes are due
under this Agreement. Invoices should specify the period for which
compensation is claimed. Travel costs and other expenses claimed must be
itemized. All invoices must be substantiated by receipts for
transportation and lodging and all other items for expenses amounting to
more than $20.00 where receipts are normally issued. The invoices should
be submitted to Synbiotics Corporation, 11011 Via Frontera, San Diego, CA
92127. Synbiotics agrees to pay approved invoices within 45 days of
receipt.
3. Independent Contractor. Advisor's relationship with Synbiotics shall be
----------------------
that of an independent contractor and nothing in this Agreement shall be
construed to create an employer-employee relationship between Synbiotics and
Advisor. Synbiotics agrees that during the term of this Agreement, or any
extension or renewal thereof, Advisor may be employed by other persons, firms or
corporations engaged in a business similar to (but not directly competitive in
the sale of animal health diagnostic products) that of Synbiotics, provided,
however, that the provisions of this
___________________
[*] Certain confidential portions of this exhibit have been omitted by means of
blacking out the text (the "Mark"). This exhibit has been filed separately
with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 24b-2
under the Securities Exchange Act of 1934, as amended.
1
<PAGE>
Agreement shall be strictly observed by Advisor with respect to such other
persons, firms, or corporations. Since Advisor will not be an employee of
Synbiotics, it is understood that Advisor will not be entitled to any of the
benefits under Synbiotics' retirement or group insurance plans or any other
employee benefits. Advisor is solely responsible for all taxes, withholdings,
and other similar statutory obligations, including, but not limited to, Workers
Compensation Insurance, Social Security, federal, state, or any other employee
payroll taxes; and Advisor agrees to defend, indemnify and hold Synbiotics
harmless from any and all claims made by any entity on account of an alleged
failure by Advisor to satisfy any such tax or withholding obligations. In the
performance of all services hereunder, Advisor shall comply with all applicable
laws and regulations.
4. No Conflict with Existing Agreements. Synbiotics hereby states that
------------------------------------
Synbiotics does not desire to acquire from Advisor any secret or confidential
know-how or information which Advisor may have acquired from others.
Accordingly, Advisor represents and warrants that Advisor is free to divulge to
Synbiotics, without any obligation to, or violation of any right of others, any
and all information, practice or techniques which Advisor will describe,
demonstrate, divulge or in any other manner make known to Synbiotics during
Advisor's performance of services hereunder. Advisor shall defend, indemnify
and hold harmless Synbiotics from and against any and all liability, loss, cost,
expense, damage, claims or demands for actual or alleged violation of the rights
of others in any trade secret, know-how or other confidential information by
reason of Synbiotics' receipt or use of the services or information described
above, or otherwise in connection therewith.
5. Advisor Inventions. Advisor warrants that Advisor shall promptly and fully
------------------
disclose and assign to Synbiotics all Inventions made by Advisor (in whole or in
part, either alone or jointly with others) resulting from or arising out of
Advisor's acquisition of Synbiotics confidential information that Advisor is
made aware of as a result of Advisor's services hereunder and will, if
Synbiotics shall so request, assist in every proper way (at the expense of
Synbiotics) to obtain for the benefit of Synbiotics patents on such Inventions
in any and all countries; all such Inventions to be and remain the sole property
of Synbiotics whether or not disclosed, assigned or patented. Advisor
represents and warrants that, Advisor has no contractual or other obligations to
any third party which preclude or in any way encumber the right to assign to
Synbiotics the full and exclusive right, title and interest in and to any and
all Inventions made by Advisor resulting from or arising out of Advisor's
services hereunder. The decision to file (or not to file) a patent application
or applications on any such Inventions shall be in Synbiotics' sole discretion.
Synbiotics shall compensate Advisor at a reasonable rate for time actually spent
at Synbiotics' request on such assistance. As used in this Agreement, the term
"Inventions" means any and all inventions, discoveries, designs, formulas, works
of authorship, strains, cell lines, compositions, ideas, technology,
improvements, trade secrets, processes, techniques and know-how, of any kind or
nature, whether or not patentable, but only if related to Synbiotics' business,
which are invented, conceived, discovered, developed or reduced to practice by
Advisor, either alone or jointly with others, and result from or arise out of
Advisor's acquisition of Synbiotics confidential information that Advisor is
made aware of as a result of Advisor's services hereunder.
6. Non-Disclosure and Non-Use. The parties hereto acknowledge that during the
--------------------------
course of Advisor's services to Synbiotics pursuant to this Agreement it will
become necessary or desirable for Synbiotics to disclose to Advisor a
substantial amount of Synbiotics Proprietary Information. "Proprietary
Information" is information that was or will be developed, created, or
discovered by or on behalf of Synbiotics, or which becomes or will become known
by Synbiotics, or was or is conveyed to Synbiotics, which has commercial value
in Synbiotics' business. "Proprietary Information" includes, but is not limited
to, information about operations and maintenance, trade secrets, cell lines,
strains, designs, technology, ideas, know-how, processes, formulas,
compositions, data, techniques, improvements, inventions (whether patentable or
not), works of authorship, business and product development plans, customers and
other information concerning Synbiotics' actual or anticipated business,
research or development, or which is received in confidence by or for Synbiotics
from any other person. "Proprietary Information" does not include information
that Advisor demonstrates to Synbiotics' satisfaction, by written evidence, is
in the public domain by reason of prior publication not directly or indirectly
resulting from any act or omission of Advisor. Advisor fully understands that
the maintenance of such Proprietary Information in strict confidence and the
confinement of its use to Synbiotics is of vital importance to Synbiotics.
Advisor agrees that the Proprietary Information divulged to Advisor by
Synbiotics
2
<PAGE>
or which Advisor acquires in connection with or as a result of Advisor's
services hereunder shall be regarded by Advisor as confidential. Advisor shall
not use, nor shall Advisor disclose, any Proprietary Information to any person
either during or after the period of this Agreement, except to those employees
of Advisor or Synbiotics as may be necessary in the regular course of Advisor's
duties hereunder, or except as otherwise authorized in writing by the President
of Synbiotics.
7. Synbiotics Materials. Advisor recognizes that all Synbiotics Materials
--------------------
made or received by Advisor during the period of this Agreement are and shall be
the exclusive property of Synbiotics, and Advisor shall keep the same at all
times in Advisor's custody and subject to Advisor's control, and shall surrender
the same to Synbiotics immediately upon request of Synbiotics. "Synbiotics
Materials" are documents or other media or tangible items that contain or embody
Proprietary Information or any other information concerning the business,
operations, or plans of Synbiotics, whether such documents have been prepared by
Advisor or by others. "Synbiotics Materials" include, but are not limited to,
blueprints, drawings, photographs, charts, graphs, notebooks, customer lists,
computer disks, tapes or printouts, sound recordings and other printed,
typewritten, or handwritten documents, as well as samples, prototypes, models,
products and the like.
8. Exoneration. Advisor shall exonerate and hold harmless Synbiotics, its
-----------
officers, agents and employees from and against any and all liability, loss,
cost, damage, claims, demands or expenses of every kind on account of injuries
(including death) to Advisor or loss of or damage to Advisor's property arising
out of or resulting in any manner from or occurring in connection with Advisor's
performance of services hereunder unless caused by the sole negligence of
Synbiotics or its employees.
9. Termination. Advisor and Synbiotics agree that this Agreement will expire
-----------
upon the later of (i) three (3) years from the date of this Agreement or (ii)
the expiration or earlier termination of the Research and Development Agreement
between Synbiotics and Engene Biotechnologies, Inc., of even date herewith.
This Agreement shall terminate automatically in the event of Advisor's inability
for any reason to perform Advisor's services. Upon termination of this
Agreement, Synbiotics' obligation to pay any compensation, except for full-year
services or expenses already incurred, shall forthwith cease and terminate.
Termination of this Agreement for any reason shall not affect Advisor's
obligations under paragraphs 4, 5, 6, 7 and 8.
10. Remedies. Advisor acknowledges and agrees that a breach of this Agreement
--------
will result in immediate, irreparable and continuing damage to Synbiotics for
which there will be no adequate remedy at law; and agrees that in the event of
any such breach or violation or any threatened or intended breach or violation
of this Agreement, Synbiotics and its successors and assigns shall be entitled
to temporary, preliminary and permanent injunctive relief and/or restraining
orders enjoining and restraining such breach or violation or such threatened or
intended breach or violation and/or other equitable relief (without needing to
post any bond or other security) in addition to such other and further relief as
may be proper.
11. Amendments and Waivers. This Agreement may be modified, amended or
----------------------
supplemented only by a written instrument duly executed by Advisor and
Synbiotics. No term or condition or the breach thereof shall be deemed waived,
unless it is waived in writing and signed by the party against whom the waiver
is claimed. Any waiver or breach of any term or condition shall not be deemed
to be a waiver of any preceding or succeeding breach of the same or any other
term or condition. The failure of any party to insist upon strict performance
of any term or condition hereunder shall not constitute a waiver of such party's
right to demand strict compliance therewith in the future.
12. Notices. All payments, notices, requests, demands and other communications
-------
required or permitted hereunder shall be in writing and shall be delivered
personally (which shall include delivery by courier or overnight delivery
service) or sent by first class mail, postage prepaid, or sent by telecopier or
other similar facsimile transmission to the parties at their respective address
set forth below or at such other address as shall be given in writing by a party
to the other parties. Items delivered personally or by telecopier or facsimile
shall be deemed delivered on the date of actual delivery; items sent by first
class mail shall be deemed delivered three (3) days after mailing.
3
<PAGE>
If to Synbiotics: Synbiotics Corporation
11011 Via Frontera
San Diego, CA 92127
Attention: Chief Executive Officer
Telecopier: (619) 451-5719
If to Advisor: J. Kevin Steele
16236 San Dieguito Road
Suite 4-21
Rancho Santa Fe, CA 92067
Telecopier: (619) 759-9434
13. Governing Law; Jurisdiction and Venue. This Agreement shall be governed by
-------------------------------------
and construed in accordance with the laws of the State of California, without
regard to principles of conflicts of law. The parties agree that any dispute
regarding the interpretation or validity of this Agreement shall be subject to
the exclusive jurisdiction of the state and federal courts in and for the County
of San Diego, California, and each party hereby agrees to submit to the personal
and exclusive jurisdiction and venue of such courts.
14. Attorneys' Fees. If any action at law or in equity is necessary to enforce
---------------
or interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys' fees, costs and disbursements, in addition to any other
relief to which such party may be entitled.
15. Counterparts. This Agreement may be executed in multiple copies, each of
------------
which shall be deemed an original and all of which shall constitute a single
agreement binding on all parties.
16. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the parties hereto with respect to the subject matter hereof and supersedes all
prior and contemporaneous agreements, understandings and negotiations (including
those relating to a "professional services agreement"). The parties agree that
Synbiotics' and Advisor's obligations under the License Agreement and the
Research and Development Agreement dated today are not superseded. Each party
to this Agreement acknowledges that no representations, inducements, promises or
agreements have been made by any party, or any one acting on behalf of any
party, that are not embodied in this Agreement with respect to the subject
matter hereof.
17. Representation. By executing this Agreement, Advisor acknowledges that he
--------------
understands and agrees that Brobeck, Phleger & Harrison LLP represents the
interests of Synbiotics solely and that he has had the opportunity to consult
with his own attorney in connection with this Agreement.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Scientific Advisor
Agreement as of the day and year first above written.
ADVISOR SYNBIOTICS CORPORATION
/s/ J. Kevin Steele By: /s/ Robert L. Widerkehr
- -------------------- ---------------------
Title: President and CEO
Date: March 6, 1996 Date: March 6, 1996
[SIGNATURE PAGE TO SCIENTIFIC ADVISOR AGREEMENT]
5
<PAGE>
INDUCEMENT AGREEMENT EXHIBIT 10.57
-------------------- -------------
THIS INDUCEMENT AGREEMENT ("Agreement") is entered into as of March 6, 1996, by
and between Engene Biotechnologies, Inc., a California corporation ("Engene")
and Synbiotics Corporation, a California corporation ("Synbiotics").
Engene and Synbiotics agree as follows:
1. Inducement Services. Engene hereby agrees to cause Dr. J. Kevin Steele
-------------------
("Steele") to enter into a certain License Agreement between Engene and
Synbiotics, a certain Research and Development Agreement between Engene and
Synbiotics and a certain Scientific Advisor Agreement between Steele and
Synbiotics, all of even date herewith.
2. Obligations of Synbiotics. In consideration therefor, Synbiotics shall
-------------------------
issue [*] shares of Synbiotics Common Stock, no par value, to Engene.
Synbiotics shall cause Engene to be provided with a stock certificate therefor
within thirty (30) days following the execution of the Investment
Representation, a copy of which is attached hereto as Exhibit A, by Engene.
---------
Engene acknowledges that such stock is not registered under the Securities Act
and that Engene is acquiring such stock for investment rather than for
distribution.
3. Relationship of Parties. The relationship of the parties to this Agreement
-----------------------
is that of independent contractors. The parties are not, by virtue of this
Agreement or otherwise, in an employer-employee, principal-agent, joint venture
or partnership relationship with each other. Each party agrees not to represent
to any other person, or to assert in any form or forum, that the parties'
relationship is an employer-employee, principal-agent, joint venture or
partnership relationship. Each party acknowledges that it has no authority to
make representations on behalf of or to bind or commit the other party, and each
party covenants and agrees not to purport to make any representation on behalf
of the other party or to purport to bind or commit the other party in any way.
Each party acknowledges that it is responsible for its own tax withholding and
other obligations with regard to its own employees, and that the other party has
no responsibility whatsoever for withholding tax and other employment
obligations of the first party.
4. Indemnification. Engene agrees to and shall defend, indemnify and hold
---------------
Synbiotics, its officers, directors, employees, agents and shareholders harmless
(including attorneys fees to defend, and any damages, penalties, settlements,
costs or expenses awarded or incurred) from and against any claim, liability,
suit or proceeding initiated by or on behalf of a third party arising from or
occurring as a result of Engene's performance of services hereunder.
5. Amendments and Waivers. This Agreement may be modified, amended or
----------------------
supplemented only by a written instrument duly executed by Engene and
Synbiotics. No term or condition or the breach thereof shall be deemed waived,
unless it is waived in writing and signed by the party against whom the waiver
is claimed. Any waiver or breach of any term or condition shall not be deemed
to be a waiver of any preceding or succeeding breach of the same or any other
term or condition. The failure of any party to insist upon strict performance
of any term or condition hereunder shall not constitute a waiver of such party's
right to demand strict compliance therewith in the future.
_____________________
[*] Certain confidential portions of this exhibit have been omitted by means of
blacking out the text (the "Mark"). This exhibit has been filed separately
with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 24b-2
under the Securities Exchange Act of 1934, as amended.
1
<PAGE>
6. Attorneys' Fees. If any action at law or in equity is necessary to enforce
---------------
or interpret the terms of this Agreement, the prevailing party shall be entitled
to reasonable attorneys' fees, costs and disbursements, in addition to any other
relief to which such party may be entitled.
7. Counterparts. This Agreement may be executed in multiple copies, each of
------------
which shall be deemed an original and all of which shall constitute a single
agreement binding on the parties.
8. Entire Agreement. This Agreement constitutes the entire agreement between
----------------
the parties hereto with respect to the subject matter hereof and supersedes all
prior and contemporaneous agreements and understandings. The parties agree that
the License Agreement, the Research and Development Agreement and the Scientific
Advisor Agreement are not superseded. Each party to this Agreement acknowledges
that no representations, inducements, promises or agreements have been made by
any party, or any one acting on behalf of any party, that are not embodied in
this Agreement with respect to the subject matter hereof.
9. Representation. By executing this Agreement, Engene acknowledges that it
--------------
understands and agrees that Brobeck, Phleger & Harrison LLP represents the
interests of Synbiotics solely and that it has had the opportunity to consult
with its own attorney in connection with this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
ENGENE BIOTECHNOLOGIES, INC. SYNBIOTICS CORPORATION
By: /s/ J. Kevin Steele By: Robert L. Widerkehr
------------------- --------------------
Title: President Title: President and CEO
Date: March 6, 1996 Date: March 6, 1996
2
<PAGE>
EXHIBIT A
INVESTMENT REPRESENTATION
Synbiotics Corporation,
a California corporation
Engene Biotechnologies, Inc., a California corporation ("Engene") is acquiring
the number of shares of common stock of Synbiotics Corporation, a California
corporation, indicated below (the "Securities") in its own name and for its own
account, and no other person has any interest in or right with respect to the
Securities, nor has Engene agreed to give any person any such interest or right
in the future.
Engene is acquiring the Securities for investment and not with a view to or for
sale in connection with any distribution of the Securities. Engene recognizes
that the Securities have not been registered under the Federal Securities Act of
1933 or qualified under the California Corporate Securities Law of 1968, or the
securities laws of any other state, that any disposition of the Securities is
subject to restrictions imposed by federal and state law, and that the
certificates representing the Securities will bear a restrictive legend. Engene
also recognizes that it cannot dispose of the Securities absent registration and
qualification, or an available exemption from registration and qualification,
and that no undertaking has been made with regard to registering or qualifying
the Securities in the future. Engene understands that the availability of any
exemption in the future will depend in part on circumstances outside its control
and that Engene may be required to hold the Securities for a substantial period.
Engene recognizes that no public market exists with respect to the Securities
and no representation has been made to it that such a public market will exist
at a future date. Engene understands that neither the California Commissioner
of Corporations nor any other state commissioner of corporations has made any
finding or determination relating to the fairness for investment of the
Securities offered by Synbiotics Corporation and that no commissioner of
corporations of any state has recommended or endorsed or will recommend or
endorse the Securities.
ENGENE BIOTECHNOLOGIES, INC.
By: /s/ J. Kevin Steele
-------------------
Title: President
###-##-####
- ---------------------------
Taxpayer Identification or
Social Security Number
Address: 16236 San Dieguito Road
Suite 4-21
Rancho Santa Fe, CA 92067
Date: March 6, 1996
Number of Shares purchased: [*]
A-1
<PAGE>
SYNBIOTICS CORPORATION EXHIBIT 11.1
------------
COMPUTATION OF EARNINGS PER SHARE
______________________________________________________________________________
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
------------- ------------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE:
Net income per statement of operations $1,651,000 $ 754,000
========== ===========
Weighted average number of shares outstanding 5,911,000 5,803,000
========== ===========
Primary earnings per share $ .28 $ .13
========== ===========
FULLY DILUTED EARNINGS PER SHARE:
Net income per statement of operations $1,651,000 $ 754,000
========== ===========
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 5,911,000 5,803,000
Add-effect of outstanding options (as
determined by the application of the
treasury method) 13,000 3,000
---------- -----------
Weighted average number of shares, as adjusted 5,924,000 5,806,000
========== ===========
Fully diluted earnings per share $ .28 $ .13
========== ===========
</TABLE>
1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED BALANCE SHEET AS OF MARCH 31, 1996 AND THE RELATED CONDENSED
STATEMENTS OF OPERATIONS AND OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31,
1996 INCLUDED ELSEWHERE IN THIS FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,620
<SECURITIES> 715
<RECEIVABLES> 3,618
<ALLOWANCES> 46
<INVENTORY> 4,082
<CURRENT-ASSETS> 10,546
<PP&E> 4,402
<DEPRECIATION> 3,637
<TOTAL-ASSETS> 16,036
<CURRENT-LIABILITIES> 2,749
<BONDS> 0
0
0
<COMMON> 29,748
<OTHER-SE> (16,461)
<TOTAL-LIABILITY-AND-EQUITY> 16,036
<SALES> 5,750
<TOTAL-REVENUES> 5,932
<CGS> 2,779
<TOTAL-COSTS> 4,609
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