<PAGE>
As filed with the Securities and Exchange Commission on December 19, 1997
Registration No. 333-_____________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SYNBIOTICS CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3737816
(State or other jurisdiction (IRS Employer of Identification No.)
incorporation or organization)
11011 VIA FRONTERA
SAN DIEGO, CALIFORNIA 92127
(Address of principal executive offices) (Zip Code)
1995 STOCK OPTION/STOCK ISSUANCE PLAN
(Full title of the plan)
KENNETH M. COHEN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SYNBIOTICS CORPORATION
11011 VIA FRONTERA, SAN DIEGO, CALIFORNIA 92127
(Name and address of agent for service)
(619) 451-3771
(Telephone number, including area code, of agent for service)
With Copies To:
Hayden J. Trubitt, Esq.
Brobeck, Phleger & Harrison LLP
550 West C Street, Suite 1200
San Diego, CA 92101
-------------------
This Registration Statement shall become effective immediately upon filing with
the Securities and Exchange Commission, and sales of the registered securities
will thereafter be effected upon option exercises effected under the 1995 Stock
Option/Stock Issuance Plan.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
TITLE OF SECURITIES TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF REGISTRATION
REGISTERED AMOUNT TO BE REGISTERED OFFERING PRICE PER SHARE AGGREGATE OFFERING PRICE FEE/(3)/
/(2)/ /(2)/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock (under 1995 Stock
Option/Stock Issuance Plan 700,000/(1)/ $3.13 $2,191,000 N/A
Common Stock registered on this
Form, for which new
registration fees are paid /(3)/ 172,418 $3.13 $539,668 $159.20
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the 1995 Stock Option/Stock
Issuance Plan by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt
of consideration which results in an increase in the number of the
Company's outstanding shares of Common Stock.
/2/ Calculated solely for purposes of this offering under Rule 457(h) and
457(c) of the Securities Act of 1933, as amended, and based on the average
of the high and low prices of the Registrant's Common Stock as reported by
the Nasdaq National Market on December 12, 1997.
/3/ Filings fees were previously paid for Form S-8 registration statements for
the registrant's 1983, 1984 and 1986 Stock Option Plans (305,642 shares;
Registration No. 33-10742); 1987 Stock Option Plan (125,000 shares;
Registration No. 33-15712); and 1996 Stock Option Plan (250,000 shares;
Registration No. 333-25411). All outstanding stock options under the 1983,
1984, 1986, 1987 and 1996 Plans have been rolled into the registrant's 1995
Stock Option/Stock Issuance Plan. The registered shares not yet issued
under the 1983, 1984, 1986, 1987 and 1996 Plans (184,098 shares from 1983,
1984 and 1986 Plans; 93,494 shares from 1987 Plan; 250,000 shares from 1996
Plan) will be deregistered. The 1995 Stock Option/Stock Issuance Plan has
been amended to increase the number of covered shares from 1,300,000 to
2,000,000. The 1,300,000 shares had previously been registered on Form S-8
(Registration No. 33-61103). Of the 700,000 shares constituting the
increase and being registered hereby, the registration fee as to shares
(184,098 + 93,494 + 250,000 ) is satisfied by "transferring over" the
527,592 registered but unused shares from the 1983, 1984, 1986, 1986 and
1996 Plans. See Division of Corporate Finance Manual of Publicly Available
---
Telephone Interpretations, Securities Act Forms Q89 (July 1997). This
leaves 172,418 shares, for which the full Form S-8 Instruction E/Section
6(b)/Rule 457 registration fee is being paid herewith.
================================================================================
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
Synbiotics Corporation (the "Company") hereby incorporates by reference into
this Registration Statement the following documents previously filed with the
Securities and Exchange Commission (the "Commission"):
(a) The Company's Annual Report on Form 10-KSB for the year ended December 31,
1996;
(b) The Company's Quarterly Reports on Form 10-QSB for the quarters ended March
31, June 30 and September 30, 1997;
(c) The Company's Current Report on Form 8-K, filed with the Commission for an
event dated July 9, 1997;
(d) The Company's Registration Statement on Form 8-A filed with the Commission
on November 14, 1983 and declared effective on January 13, 1984 pursuant to
Section 12 of the Exchange Act, in which there is described the terms,
rights and provisions applicable to the Company's Common Stock.
All reports and other documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents.
A copy of any of the above documents will be furnished to each participant in
the 1995 Stock Option/Stock Issuance Plan, without charge, upon written or oral
request to the Corporate Secretary, Synbiotics Corporation, 11011 Via Frontera,
San Diego, California 92127, or upon telephoning the Company at (619) 451-3771.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) Section 317 of the California General Corporation Law provides for the
indemnification of officers and directors of the Company against expenses,
judgments, fines and amounts paid in settlement under certain conditions
and subject to certain limitations.
(b) Article VIII, Section 4 of the Bylaws of the Company provides that the
Company shall have the power to indemnify any person who is or was a
director, officer, employee or agent of the Company or any person who is or
was serving at the request of the Company as a director, officer, employee
or agent of another
II-1
<PAGE>
corporation, subject to certain limitations. The rights to indemnity
thereunder continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of the person. In addition, expenses incurred
by a director, officer, employee or agent in defending a civil or criminal
action, suit or proceeding by reason of the fact that he or she is or was a
director, officer, employee or agent of the Company (or was serving at the
Company's request as a director, officer, employee or agent of another
corporation) may be paid by the Company in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified
by the Company.
(c) Article Seventh of the Company's Restated Articles of Incorporation
provides that liability of the directors of the Company for monetary
damages shall be eliminated to the fullest extent permissible under
California Law. Article Eighth of the Company's Restated Articles of
Incorporation further provides that the Company is authorized to indemnify
agents (as defined in Section 317 of the California Law) in excess of the
indemnification otherwise permitted by Section 317, subject to the limits
set forth in Section 204 of the California Law.
(d) Pursuant to authorization provided under the Restated Articles of
Incorporation, the Company has entered into indemnification agreements with
its directors and officers. Generally, the indemnification agreements
attempt to provide the maximum protection permitted by California Law as it
may be amended from time to time. Moreover, the indemnification agreements
provide for certain additional indemnification. The indemnification
agreements provide for the Company to advance to the individual any and all
reasonable expenses (including legal fees and expenses) incurred in
investigating or defending an action, suit or proceeding. In order to
receive an advance of expenses, the individual must undertake to repay such
advance upon a determination that he or she is not entitled to
indemnification. The Company's Bylaws contain a provision of similar
effect relating to advancement of expenses to a director or officer,
subject to an undertaking to repay if it is ultimately determined that
indemnification is unavailable.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
ITEM 8. EXHIBITS
Exhibit
Number Exhibit
------- -------
5.1 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Brobeck, Phleger & Harrison LLP (contained in Exhibit
5.1 of this Registration Statement on Form S-8.
23.2 Consent of Independent Accountants.
24.1 Power of Attorney. Reference is made to the signature page of
this Registration Statement on Form S-8.
99.1 1995 Stock Option/Stock Issuance Plan, as amended.
99.2 Form of Notice of Grant of Stock Option.
II-2
<PAGE>
ITEM 9. UNDERTAKINGS
(1) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "1933 Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that paragraphs (a)(i) and (a)(ii) shall not apply if
the information required to be in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant
to Section 13 or Section 15(d) of the 1934 Act that are incorporated by
reference into this Registration Statement.
(b) That, for the purpose of determining any liability under the 1933 Act,
each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold upon the
termination of the offering.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the Company's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the 1934 Act) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers or controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on December 19, 1997.
SYNBIOTICS CORPORATION
By: /s/ Kenneth M. Cohen
--------------------------------------
Kenneth M. Cohen
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Kenneth M. Cohen and Michael K. Green, or either of
them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any Registration Statement
related to this Registration Statement and filed pursuant to Rule 462 under the
Securities Act of 1933, as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or their substitute or substitutes may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Kenneth M. Cohen Chief Executive Officer, December 19, 1997
- ----------------------------- President and Director
Kenneth M. Cohen (Principal Executive Officer)
/s/ Michael K. Green Chief Financial Officer and December 19, 1997
- ----------------------------- Vice President - Finance
Michael K. Green (Principal Financial Officer)
/s/ Keith A. Butler Chief Accounting Officer and December 19, 1997
- ----------------------------- Corporate Controller
Keith A. Butler (Principal Accounting Officer)
/s/ Patrick Owen Burns Director December 19, 1997
- -----------------------------
Patrick Owen Burns
/s/ James C. DeCesare Director December 19, 1997
- -----------------------------
James C. DeCesare
/s/ Brenda D. Gavin Director December 19, 1997
- -----------------------------
Brenda D. Gavin
/s/ M. Blake Ingle Director December 19, 1997
- -----------------------------
M. Blake Ingle
/s/ Donald E. Phillips Director December 19, 1997
- -----------------------------
Donald E. Phillips
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Exhibit
- ------
5.1 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Brobeck, Phleger & Harrison LLP (contained in Exhibit
5.1 of this Registration Statement on Form S-8.
23.2 Consent of Independent Accountants.
24.1 Power of Attorney. Reference is made to the signature page of
this Registration Statement on Form S-8.
99.1 1995 Stock Option/Stock Issuance Plan, as amended.
99.2 Form of Notice of Grant of Stock Option.
<PAGE>
EXHIBIT 5.1
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
December 19, 1997
Synbiotics Corporation
11011 Via Frontera
San Diego, CA 92127
Re: Synbiotics Corporation Registration Statement on Form S-8 for 700,000
---------------------------------------------------------------------
Shares of Common Stock
----------------------
Ladies and Gentlemen:
In connection with your registration on Form S-8 (the "Registration Statement")
under the Securities Act of 1933, as amended, of 700,000 shares of Common Stock
of Synbiotics Corporation (the "Company") under the 1995 Stock Option/Stock
Issuance Plan, as amended to date (the "Plan"), we advise you that, in our
opinion, if and when such shares have been issued and sold (and the
consideration therefor received) pursuant to (a) the provisions of the option
agreements issued under the Plan and in accordance with the Registration
Statement, or (b) direct stock issuances in accordance with the Plan and in
accordance with the Registration Statement, such shares will be duly-authorized,
validly-issued, fully-paid and non-assessable shares of the Company's Common
Stock.
We hereby consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us in the Registration
Statement and any further amendments thereto. Subject to the foregoing
sentence, this opinion is given as of the date hereof solely for your benefit
and may not be relied upon, circulated, quoted or otherwise referred to for any
purpose without our prior written consent.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated February 21, 1997 appearing on page 15
of Synbiotics Corporation's Annual Report on Form 10-KSB for the year ended
December 31, 1996.
PRICE WATERHOUSE LLP
San Diego, California
December 19, 1997
<PAGE>
EXHIBIT 99.1
SYNBIOTICS CORPORATION
1995 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
AS AMENDED THROUGH APRIL 25, 1997
---------------------------------
ARTICLE ONE
GENERAL PROVISIONS
------------------
I. PURPOSE OF THE PLAN
This 1995 Stock Option/Stock Issuance Plan (the "Plan") is intended to promote
the interests of Synbiotics Corporation, a California corporation, by providing
eligible persons with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation.
Capitalized terms not otherwise defined shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three separate equity programs:
(i) the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be
granted options to purchase shares of common stock of the
Corporation,
(ii) the Stock Issuance Program under which eligible persons may, at
the discretion of the Plan Administrator, be issued shares of
common stock of the Corporation directly, either through the
immediate purchase of such shares or as a bonus for services
rendered the Corporation (or any Parent or Subsidiary), and
(iii) the Automatic Option Grant Program under which non-employee
directors shall automatically receive option grants at periodic
intervals to purchase shares of common stock of the
Corporation.
B. The provisions of Articles One and Five shall apply to all equity
programs under the Plan and shall accordingly govern the interests of
all persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. Plan Administrator. Either the Board or a committee of two (2) or
------------------
more non-employee Board members appointed by the Board to administer
the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 insiders (the "Primary Committee") shall have
sole and exclusive authority to administer the Plan with respect to
Section 16 Insiders.
-1-
<PAGE>
B. Committees. Administration of the Discretionary Option Grant and
----------
Stock Issuance Programs with respect to all other persons eligible to
participate in those programs may, at the Board's discretion, be
vested in the Board, the Primary Committee or a committee of two (2)
or more Board members appointed by the Board to administer the
Discretionary Option Grant Program and Stock Issuance Program with
respect to eligible persons other than Section 16 insiders (the
"Secondary Committee"), or the Board may retain the power to
administer those programs with respect to all such persons. All Board
members are eligible to be members of the Secondary Committee,
including Board members who are Employees eligible to receive
discretionary option grants or direct stock issuances under the Plan
or any other stock option, stock appreciation, stock bonus or other
stock plan of the Corporation (or any Parent or Subsidiary).
C. Members of Committees. Members of the Primary Committee or any
---------------------
Secondary Committee shall serve for such period of time as the Board
may determine and may be removed by the Board at any time. The Board
may also at any time terminate the functions of any Secondary
Committee and assume all powers and authority previously delegated to
such committee.
D. Service as Committee Members. Service on the Primary Committee or the
----------------------------
Secondary Committee shall constitute service as a Board member, and
members of each such committee shall accordingly be entitled to full
indemnification and reimbursement as Board members for their service
on such committee. No member of the Primary Committee or the
Secondary Committee shall be liable for any act or omission made in
good faith with respect to the Plan or any option grants or stock
issuances under the Plan.
E. Authority. Each Plan Administrator shall, within the scope of its
---------
administrative functions under the Plan, have full power and authority
(subject to the express provisions of the Plan) to (i) establish such
rules and regulations as it may deem appropriate for the proper
administration of the Discretionary Option Grant Program and Stock
Issuance Program and to make such determinations under, and issue such
interpretations of, such programs and any outstanding option grants or
stock issuances as it may deem necessary or advisable, (ii) determine,
with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time
or times when such option grants are to be made, the number of shares
to be covered by each such grant, the status of the granted option as
either an Incentive Option or a Non-Statutory Option, the time or
times at which each option is to become exercisable, the vesting
schedule (if any) applicable to the option shares and the maximum term
for which the option is to remain outstanding and (iii) determine,
with respect to stock issuances under the Stock Issuance Program,
which eligible persons are to receive stock issuances, the time or
times when such issuances are to be made, the number of shares to be
issued to each Participant, the vesting schedule (if any) applicable
to the issued shares and the consideration to be paid by the
Participant for such shares. The Plan Administrator(s) shall have the
absolute discretion either to grant options in accordance with the
Discretionary Option Grant Program or to effect stock issuances in
accordance with the Stock Issuance Program. Decisions of each Plan
Administrator shall be final and binding on all parties who have an
interest in the Discretionary Option Grant Program and Stock Issuance
Program or any outstanding option or stock issuance thereunder.
F. Restriction on Discretion. The administration of the Automatic Option
-------------------------
Grant Program under Article Three shall be self executing in
accordance with the terms and conditions thereof and the Plan
Administrator shall not exercise any discretionary functions in
respect to matters governed by Article Three.
-2-
<PAGE>
IV. OPTION GRANTS AND STOCK ISSUANCES
A. Subject to Section V.B below, the persons eligible to receive stock
issuances under the Stock Issuance Program ("Participant") and/or
option grants pursuant to the Discretionary Option Grant Program
("Optionee") are as follows:
(i) officers and other employees of the Corporation (or its parent
or subsidiary corporations) who render services which
contribute to the management, growth and financial success of
the Corporation (or its parent or subsidiary corporations);
(ii) non-employee members of the Board; and
(iii) those consultants or other independent contractors who provide
valuable services to the Corporation (or its parent or
subsidiary corporations).
B. The individuals eligible to receive option grants under the Automatic
Option Grant Program shall be those individuals who serve as non-
employee Board members during the term of the Plan.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired common stock of the Corporation ("Common
Stock"), including shares repurchased by the Corporation on the open
market. The maximum number of shares of Common Stock which may be
issued over the term of the Plan shall not exceed 2,000,000 shares.
Such authorized share reserve is comprised of (i) the number of shares
available for issuance under the Predecessor Plan as last approved by
the Corporation prior to their incorporation into this Plan, including
the shares subject to the outstanding options incorporated into the
Plan and any other shares which would have been available for future
option grants under the Predecessor Plan, plus (ii) an additional
increase of 732,055 shares authorized by the Board under the Plan,
subject to stockholder approval.
B. No one person participating in the Plan may receive options and direct
stock issuances for more than 800,000 shares of Common Stock in the
aggregate over the term of the Plan.
C. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the
options (including any options incorporated from the Predecessor
Plan) expire or terminate for any reason prior to exercise in full or
(ii) the options are cancelled in accordance with the cancellation-
regrant provisions of Article Two. All shares issued under the Plan
(including shares issued upon exercise of options incorporated from
the Predecessor Plan), whether or not those shares are subsequently
repurchased by the Corporation pursuant to its repurchase rights under
the Plan, shall reduce on a share-for-share basis the number of shares
of Common Stock available for subsequent issuance under the Plan. In
addition, should the exercise price of an option under the Plan
(including any option incorporated from the Predecessor Plan) be paid
with shares of Common Stock or should shares of Common Stock otherwise
issuable under the Plan be withheld by the Corporation in satisfaction
of the withholding taxes incurred in connection with the exercise of
an option or the vesting of a stock issuance under the Plan, then the
number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is
exercised or which vest under the stock issuance, and not by the net
number of shares of Common Stock issued to the holder of such option
or stock issuance.
D. Should any change be made to the Common Stock by reason of any stock
split, stock dividend,
-3-
<PAGE>
recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration, appropriate adjustments shall
be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the maximum number and/or class of securities for
which the share reserve is to increase automatically each year, (iii)
the number and/or class of securities for which any one person may be
granted options and direct stock issuances over the term of the Plan,
(iv) the number and/or class of securities for which automatic option
grants are to be subsequently made under the Automatic Option Grant
Program and (v) the number and/or class of securities and the exercise
price per share in effect under each outstanding option (including any
option incorporated from the Predecessor Plan) in order to prevent the
dilution or enlargement of benefits thereunder. The adjustments
determined by the Plan Administrator shall be final, binding and
conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
----------------------------------
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form approved by
the Plan Administrator; provided, however, that each such document shall comply
--------
with the terms specified below. Each document evidencing an Incentive Option
shall, in addition, be subject to the provisions of the Plan applicable to such
options.
A. Exercise Price.
--------------
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent
(85%) of the Fair Market Value per share of Common Stock on the
option grant date, provided that the Plan Administrator may fix
the exercise price at less than 85% if the optionee makes a
payment to the Company (including payment made by means of a
salary reduction agreement) of no less than the excess of 85% of
the Fair Market Value of the Common Stock on the option grant
date over such exercise price.
2. The exercise price shall become immediately due upon exercise of
the option and shall, subject to the provisions of Section II of
Article Five and the documents evidencing the option, be payable
in one or more of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market
Value on the exercise date, or
(iii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant
to which the Optionee shall concurrently provide
irrevocable written instructions to (a) a Corporation-
designated brokerage firm to effect the immediate sale of
the purchased shares and remit to the Corporation, out of
the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price
payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of
such exercise and (b) the Corporation to deliver the
certificates for the purchased shares directly to such
brokerage firm in order to
-4-
<PAGE>
complete the sale transaction.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares
must be made on the exercise date.
B. Exercise and Term of Options. Each option shall be exercisable at
----------------------------
such time or times, during such period and for such number of shares
as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have a term
in excess of ten (10) years measured from the option grant date.
C. Effect of Termination of Service.
--------------------------------
1. The following provisions shall govern the exercise of any options
held by the Optionee at the time of cessation of Service or
death:
(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain
exercisable for such period of time thereafter as shall be
determined by the Plan Administrator and set forth in the
documents evidencing the option, but no such option shall
be exercisable after the expiration of the option term.
(ii) Any option exercisable in whole or in part by the Optionee
at the time of death may be subsequently exercised by the
personal representative of the Optionee's estate or by the
person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the
laws of descent and distribution.
(iii) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than
the number of vested shares for which the option is
exercisable on the date of the Optionee's cessation of
Service. Upon the expiration of the applicable exercise
period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has
not been exercised. However, the option shall, immediately
upon the Optionee's cessation of Service, terminate and
cease to be outstanding to the extent it is not
exercisable for vested shares on the date of such
cessation of Service.
(iv) In the event of a Corporate Transaction,the provisions of
Section III of this Article Two shall govern the period
for which the outstanding options are to remain
exercisable following the Optionee's cessation of Service
and shall supersede any provisions to the contrary in this
section.
2. The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service
from the period otherwise in effect for that option to such
greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the
option term, and/or
(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for
-5-
<PAGE>
which such option is exercisable at the time of the
Optionee's cessation of Service but also with respect to
one or more additional installments in which the Optionee
would have vested under the option had the Optionee
continued in Service.
D. Stockholder Rights. The holder of an option shall have no stockholder
------------------
rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the discretion
-----------------
to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase, at the
exercise price paid per share, any or all of those unvested shares.
The terms upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate
vesting schedule for the purchased shares) shall be established by the
Plan Administrator and set forth in the document evidencing such
repurchase right.
F. Limited Transferability of Options. Unless the Plan Administrator
----------------------------------
otherwise expressly approves in writing, the option shall be
exercisable only by the Optionee during the lifetime of the Optionee,
and shall not be assignable or transferable other than by will or by
the laws of descent and distribution following the Optionee's death.
However, a Non-Statutory Option may be assigned in accordance with the
terms of a Qualified Domestic Relations Order within the meaning of
Internal Revenue Code Section 414(p). The assigned option may only be
exercised by the person or persons who acquire a proprietary interest
in the option pursuant to such Qualified Domestic Relations Order.
The terms applicable to the assigned option (or portion thereof) shall
be the same as those in effect for the option immediately prior to
such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options. Except
as modified by the provisions of this Section II, all the provisions of Articles
One, Two and Five shall be applicable to Incentive Options. Options which are
specifically designated as Non-Statutory Options when issued under the Plan
shall not be subject to the terms of this Section II.
---
A. Eligibility. Incentive Options may only be granted to Employees.
-----------
B. Exercise Price. The exercise price per share shall not be less than
--------------
one hundred percent (100%) of the Fair Market Value per share of
Common Stock on the option grant date.
C. Dollar Limitation. The aggregate Fair Market Value of the shares of
-----------------
Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan
(or any other option plan of the Corporation or any Parent or
Subsidiary) may for the first time become exercisable as Incentive
Options during any one (1) calendar year shall not exceed the sum of
One Hundred Thousand Dollars ($100,000). To the extent the Employee
holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied
on the basis of the order in which such options are granted.
D. 10% Stockholder. If any Employee to whom an Incentive Option is
---------------
granted is a 10% stockholder (within the meaning of Internal Revenue
Code Section 424(d)), then the exercise price per share shall
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<PAGE>
not be less than one hundred ten percent (110%) of the Fair Market
Value per share of Common Stock on the option grant date, and the
option term shall not exceed five (5) years measured from the option
grant date.
III. CORPORATE TRANSACTION
A. In the event of any Corporate Transaction, each outstanding option
shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction,
become fully exercisable for all of the shares of Common Stock at the
time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. However, an
outstanding option shall NOT so accelerate if and to the extent: (i)
such option is, in connection with the Corporate Transaction, either
to be assumed by the successor corporation (or parent thereof) or to
be replaced with a comparable option to purchase shares of the capital
stock of the successor corporation (or parent thereof), (ii) such
option is to be replaced with a cash incentive program of the
successor corporation which preserves the spread existing on the
unvested option shares at the time of the Corporate Transaction and
provides for subsequent payout in accordance with the same vesting
schedule applicable to such option or (iii) the acceleration of such
option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant. The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and
conclusive.
B. All outstanding repurchase rights shall also terminate automatically,
and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent: (i) those repurchase rights are to
be assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction or (ii) such accelerated
vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate Transaction,
all outstanding options shall terminate and cease to be outstanding,
except to the extent assumed by the successor corporation (or parent
thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities
which would have been issuable to the Optionee in consummation of such
Corporate Transaction had the option been exercised immediately prior
to such Corporate Transaction. Appropriate adjustments shall also be
made to (i) the number and class of securities available for issuance
under the Plan on both an aggregate and per Optionee basis following
the consummation of such Corporate Transaction and (ii) the exercise
price payable per share under each outstanding option, provided the
--------
aggregate exercise price payable for such securities shall remain the
same.
E. Any options which are assumed or replaced in the Corporate Transaction
and do not otherwise accelerate at that time, shall automatically
accelerate (and any of the Corporation's outstanding repurchase rights
which do not otherwise terminate at the time of the Corporate
Transaction shall automatically terminate and the shares of Common
Stock subject to those terminated rights shall immediately vest in
full) in the event the Optionee's Service should subsequently
terminate by reason of an Involuntary Termination within eighteen (18)
months following the effective date of such Corporate Transaction.
Any options so accelerated shall remain exercisable for fully-vested
shares until the earlier of (i) the expiration of the option term or
-------
(ii) the expiration of the one (1)-year period measured from the
effective date of the Involuntary Termination.
-7-
<PAGE>
F. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction or Change in Control shall remain exercisable as
an Incentive Option only to the extent the applicable One Hundred
Thousand Dollar limitation is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall
be exercisable as a Non-Statutory Option under the Federal tax laws.
G. The grant of options under the Discretionary Option Grant Program
shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time and from
time to time, with the consent of the affected option holders, the cancellation
of any or all outstanding options under the Discretionary Option Grant Program
(including outstanding options incorporated from the Predecessor Plan) and to
grant in substitution new options covering the same or different number of
shares of Common Stock but with an exercise price per share based on the Fair
Market Value per share of Common Stock on the new option grant date.
ARTICLE THREE
STOCK ISSUANCE PROGRAM
----------------------
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program through
direct and immediate issuances without any intervening option grants. Each such
stock issuance shall be evidenced by a Stock Issuance Agreement which complies
with the terms specified below.
A. Purchase Price
--------------
1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than eighty-five percent
(85%) of the Fair Market Value per share of Common Stock on the
stock issuance date.
2. Subject to the provisions of Section II of Article Five, shares
of Common Stock may be issued under the Stock Issuance Program
for one or both of the following items of consideration which the
Plan Administrator may deem appropriate in each individual
instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any Parent or
Subsidiary).
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<PAGE>
B. Vesting Provisions
------------------
1. Shares of Common Stock issued under the Stock Issuance Program
may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more
installments over the Participant's period of Service or upon
attainment of specified performance objectives. The elements of
the vesting schedule applicable to any unvested shares of Common
Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the Participant or
the performance objectives to be attained,
(ii) the number of installments in which the shares are to
vest,
(iii) the interval or intervals (if any) which are to lapse
between installments, and
(iv) the effect which death, Permanent Disability or other
event designated by the Plan Administrator is to have upon
the vesting schedule,
shall be determined by the Plan Administrator and incorporated
into the stock issuance agreement.
2. Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend)
which the Participant may have the right to receive with respect
to the Participant's unvested shares of Common Stock by reason of
any stock dividend, stock split, recapitalization, combination of
shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same
vesting requirements applicable to the Participant's unvested
shares of Common Stock and (ii) such escrow arrangements as the
Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with respect
to any shares of Common Stock issued to the Participant under the
Stock Issuance Program, whether or not the Participant's interest
in those shares is vested. Accordingly, the Participant shall
have the right to vote such shares and to receive any regular
cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while holding
one or more unvested shares of Common Stock issued under the
Stock Issuance Program or should the performance objectives not
be attained with respect to one or more such unvested shares of
Common Stock, then those shares shall be immediately surrendered
to the Corporation for cancellation, and the Participant shall
have no further stockholder rights with respect to those shares.
To the extent the surrendered shares were previously issued to
the Participant for consideration paid in cash or cash equivalent
(including the Participant's purchase-money indebtedness), the
Corporation shall repay to the Participant the cash consideration
paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the
Participant attributable to such surrendered shares.
5. The Plan Administrator may in its discretion waive the surrender
and cancellation of one or more unvested shares of Common Stock
(or other assets attributable thereto) which would otherwise
occur upon the non-completion of the vesting schedule applicable
to such shares. Such waiver shall result in the immediate
vesting of the Participant's interest in the shares of Common
Stock as to which the waiver applies. Such waiver may be
effected at any time,
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<PAGE>
whether before or after the Participant's cessation of Service or
the attainment or non-attainment of the applicable performance
objectives.
II. CORPORATE TRANSACTION
A. All of the outstanding repurchase rights under the Stock Issuance
Program shall terminate automatically, and all the shares of Common
Stock subject to those terminated rights shall immediately vest in
full, in the event of any Corporate Transaction, except to the extent
(i) those repurchase rights are assigned to the successor corporation
(or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations
imposed in the stock issuance agreement.
B. Any repurchase rights that are assigned in the Corporate Transaction
shall automatically terminate, and all the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in
the event the Optionee's Service should subsequently terminate by
reason of an Involuntary Termination within eighteen (18) months
following the effective date of such Corporate Transaction.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in escrow
by the Corporation until the Participant's interest in such shares vests or may
be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
------------------------------
I. OPTION TERMS
A. Grant Dates. Option grants shall be made on the dates specified
-----------
below:
1. Each non-employee director who is who is first elected or
appointed as a non-employee Board member after the effective date
of the Plan shall automatically be granted, on such initial
election or appointment, a Non-Statutory Option to purchase 7,000
shares of Common Stock.
2. On the date of each Annual Stockholders Meeting, beginning with
the 1995 Annual Meeting, each individual who is to continue to
serve as a non-employee director after such meeting, shall
automatically be granted, whether or not such individual is
standing for re-election as a Board member at that Annual
Meeting, a Non-Statutory Option to purchase an additional 7,000
shares of Common Stock, provided such individual has served as a
non-employee Board member for at least six (6) months prior to
the date of such Annual Meeting. There shall be no limit on the
number of such 7,000-share option grants any one non-employee
director may receive over his or her period of Board service.
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<PAGE>
B. Exercise Price.
--------------
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock
on the option grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant
Program. Except to the extent the sale and remittance procedure
specified thereunder is utilized, payment of the exercise price
for the purchased shares must be made on the exercise date.
C. Option Term. Each option shall have a term of ten (10) years measured
-----------
from the option grant date.
D. Exercise and Vesting of Options. Each option shall be immediately
-------------------------------
exercisable for any or all of the option shares. However, any shares
purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's
cessation of Board service prior to vesting in those shares. Each
grant shall vest, and the Corporation's repurchase right shall lapse,
in a series of four (4) equal and successive quarterly installments
over the Optionee's period of continued service as a Board member,
with the first such installment to vest upon the Optionee's completion
of three (3) months of Board service measured from the option grant
date.
E. Effect of Termination of Board Service. The following provisions
--------------------------------------
shall govern the exercise of any options held by the Optionee at the
time the Optionee ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's death, the
personal representative of the Optionee's estate or the person
or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and
distribution) shall have the balance of the option term in
which to exercise each such option.
(ii) Following cessation of service on the Board for other than
death or disability, the option may not be exercised in the
aggregate for more than the number of vested shares of Common
Stock for which the option was exercisable at the time of the
Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board member by reason
of death or Permanent Disability, then all shares at the time
subject to the option shall immediately vest so that such
option may be exercised for all or any portion of such shares
as fully-vested shares of Common Stock.
(iv) Upon expiration of the option term, the option shall terminate
and cease to be outstanding for any vested shares for which the
option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Board service,
terminate and cease to be outstanding to the extent it is not
exercisable for vested shares on the date of such cessation of
Board service.
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<PAGE>
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common Stock
at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for all of the shares of Common
Stock at the time subject to such option and may be exercised for all
or any portion of such shares as fully-vested shares of Common Stock.
Immediately following the consummation of the Corporate Transaction,
each automatic option grant shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation
(or parent thereof).
B. In connection with any Change in Control, the shares of Common Stock
at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Change in
Control, become fully exercisable for all of the shares of Common
Stock at the time subject to such option and may be exercised for all
or any portion of such shares as fully-vested shares of Common Stock.
Each such option shall remain exercisable for such fully-vested option
shares until the expiration or sooner termination of the option term
or the surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a
thirty (30)-day period in which to surrender to the Corporation each
automatic option held by him or her for a period of at least six (6)
months. The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of
(i) the Take-Over Price of the shares of Common Stock at the time
subject to the surrendered option (whether or not the Optionee is
otherwise at the time vested in those shares) over (ii) the aggregate
exercise price payable for such shares. Such cash distribution shall
be paid within five (5) days following the surrender of the option to
the Corporation. No approval or consent of the Board shall be
required in connection with such option surrender and cash
distribution.
D. The grant of options under the Automatic Option Grant Program shall in
no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to
merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets.
III. REMAINING TERMS
---------------
The remaining terms of each option granted under the Automatic Option Grant
Program shall be the same as the terms in effect for option grants made under
the Discretionary Option Grant Program.
ARTICLE FIVE
MISCELLANEOUS
-------------
I. ACCELERATION
A. The Plan Administrator shall have the discretion, exercisable either
at the time an option is granted under the Discretionary Stock Option
Program, at the time that stock is issued under the Stock Issuance
Program or at any time while the option or stock remains outstanding,
to provide for the acceleration of one or more outstanding options and
the termination of repurchase rights on one or
-12-
<PAGE>
more outstanding shares upon the occurrence of such events as the Plan
Administrator may determine, including upon a Corporate Transaction
regardless or whether or not such options are to be assumed or
replaced or the repurchase rights are to be assigned in the Corporate
Transaction.
B. The Plan Administrator shall not have the discretion to provide for
the acceleration of any options granted under the Automatic Option
Grant Program.
II. FINANCING
A. The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program
or the purchase price for shares issued under the Stock Issuance
Program by delivering a promissory note payable in one or more
installments. The terms of any such promissory note (including the
interest rate and the terms of repayment) shall be established by the
Plan Administrator in its sole discretion. Promissory notes may be
authorized with or without security or collateral. In all events, the
maximum credit available to the Optionee or Participant may not exceed
the sum of (i) the aggregate option exercise price or purchase price
payable for the purchased shares plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share
purchase.
B. The Plan Administrator may, in its discretion, determine that one or
more such promissory notes shall be subject to forgiveness by the
Corporation in whole or in part upon such terms as the Plan
Administrator may deem appropriate.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of options or upon the issuance or vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable
Federal, state and local income and employment tax withholding
requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock
under the Plan (other than the options granted or the shares issued
under the Automatic Option Grant Program) with the right to use shares
of Common Stock in satisfaction of all or part of the federal, state
and local income or employment taxes incurred by such holders in
connection with the exercise of their options or the vesting of their
shares. Such right may be provided to any such holder in either or
both of the following formats:
(i) Stock Withholding: The election to have the Corporation
-----------------
withhold, from the shares of Common Stock otherwise issuable
upon the exercise of such Non-Statutory Option or the vesting of
such shares, a portion of those shares with an aggregate Fair
Market Value equal to the percentage of such taxes (not to
exceed one hundred percent (100%)) designated by the holder.
(ii) Stock Delivery: The election to deliver to the Corporation, at
--------------
the time the Non-Statutory Option is exercised or the shares
vest, one or more shares of Common Stock previously acquired by
such holder (other than in connection with the option exercise
or share vesting triggering the taxes) with an aggregate Fair
Market Value equal to the percentage of such taxes (not to
exceed one hundred percent (100%)) designated by the holder.
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<PAGE>
IV. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective on the date the Plan is adopted by the
Board, and options may be granted under the Discretionary Option Grant
Program from and after the effective date. However, no options
granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Plan is approved by the Corporation's
stockholders. If such stockholder approval is not obtained within
twelve (12) months after such effective date, then all options
previously granted under this Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares
shall be issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor Plan, and no
further option grants shall be made under the Predecessor Plan after
the effective date of the Plan. All options outstanding under the
Predecessor Plan as of such date shall, immediately upon approval of
the Plan by the Corporations's stockholders, be incorporated into the
Plan and treated as outstanding options under the Plan. However, each
outstanding option so incorporated shall continue to be governed
solely by the terms of the documents evidencing such option. No
provision of the Plan shall be deemed to adversely affect or otherwise
diminish the rights or obligations of the holders of such incorporated
options with respect to their acquisition of shares of Common Stock
which may exist under the terms of the Predecessor Plan under which
such incorporated option was issued. Subject to the rights of the
optionee under the incorporated option documents and Predecessor Plan,
the discretion delegated to the Plan Administrator hereunder may be
exercised with respect to incorporated options to the same extent as
it is exercisable with respect to options originally granted under
this Plan.
C. The option/vesting acceleration provisions of Article Two relating to
Corporate Transactions and Changes in Control may, in the Plan
Administrator's discretion, be extended to one or more options
incorporated from the Predecessor Plan which do not otherwise provide
for such acceleration.
D. The Plan shall terminate upon the earliest of (i) April 27, 2005, (ii)
--------
the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of the options or the
issuance of shares (whether vested or unvested) under the Plan or
(iii) the termination of all outstanding options in connection with a
Corporate Transaction. Upon such Plan termination, all options and
unvested stock issuances outstanding on such date shall thereafter
continue to have force and effect in accordance with the provisions of
the documents evidencing such options or issuances.
V. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such
amendment or modification shall adversely affect the rights and
obligations with respect to options or unvested stock issuances at the
time outstanding under the Plan unless the Optionee or the Participant
consents to such amendment or modification. In addition, certain
amendments may require stockholder approval if so determined by the
Board or pursuant to applicable laws or regulations.
B. If stockholder approval is required, pursuant to the previous
sentence, to amend the Plan to increase the number of shares of Common
Stock available for issuance under the Plan, then upon Board approval
of such an amendment, options to purchase shares of Common Stock may
be granted under the Discretionary Option Grant Program and shares of
Common Stock may be issued under the Stock Issuance Program that are
in each instance in excess of the number of shares then available for
issuance under the Plan, provided any excess shares actually issued
under those programs are held in
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<PAGE>
escrow until there is obtained stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan. If such stockholder approval (if so
required) is not obtained within twelve (12) months after the date the
first such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease
to be outstanding and (ii) the Corporation shall promptly refund to
the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow,
together with interest (at the applicable Short Term Federal Rate) for
the period the shares were held in escrow, and such shares shall
thereupon be automatically cancelled and cease to be outstanding.
VI. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares of Common
Stock under the Plan shall be used for general corporate purposes.
VII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option under the
Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any option or (ii) under the Stock Issuance Program shall
be subject to the Corporation's procurement of all approvals and
permits required by regulatory authorities having jurisdiction over
the Plan, the options granted under it and the shares of Common Stock
issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or delivered
under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws,
including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and
all applicable listing requirements of any stock exchange (or the
Nasdaq National Market, if applicable) on which Common Stock is then
listed for trading.
VIII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant any right
to continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee or the
Participant, which rights are hereby expressly reserved by each, to terminate
such person's Service at any time for any reason, with or without cause.
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<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
-----
B. CHANGE IN CONTROL shall mean a change in ownership or control of the
-----------------
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any person or related
group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934) of
securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the
Corporation's stockholders which the Board does not recommend such
stockholders to accept, or
(ii) a change in the composition of the Board over a period of thirty-six
(36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of such period or
(B) have been elected or nominated for election as Board members
during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time the
Board approved such election or nomination.
C. CORPORATE TRANSACTION shall mean either of the following stockholder-
---------------------
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is
to change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all or substantially all
of the assets of the Company in liquidation or dissolution of the
Company, or
(iii) any reverse merger in which the Company is the surviving entity but
in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities
are transferred to holders different from those who held such
securities immediately prior to such merger.
D. CORPORATION shall mean Synbiotics Corporation, a California corporation.
-----------
E. EMPLOYEE shall mean an individual who is in the employ of the Corporation
--------
(or any Parent or Subsidiary), subject to the control and direction of the
employer entity as to both the work to be performed and the manner and
method of performance.
F. FAIR MARKET VALUE per share of Common Stock on any relevant date shall be
-----------------
determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such
price is reported by the National Association of Securities Dealers
on the Nasdaq National Market or
A-1
<PAGE>
any successor system. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for
which such quotation exists.
(ii) If the Common Stock is at the time listed on any stock exchange,
then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for
the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time not traded on the Nasdaq National
Market or listed on any stock exchange, then the Fair Market Value
shall be determined according to whatever method is from time to
time approved in good faith by the Board.
G. HOSTILE TAKE-OVER shall mean a change in ownership of the Corporation
-----------------
effected through acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the Securities Exchange Act of 1934) of securities
possessing more than fifty percent (50%) of the total combined voting power
of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders which the
Board does not recommend such stockholders to accept.
H. INCENTIVE OPTION shall mean an option which satisfies the requirements of
----------------
Internal Revenue Code Section 422.
I. INVOLUNTARY TERMINATION shall mean the termination of the Service of any
-----------------------
individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a change in his
or her position with the Corporation which materially reduces his or
her level of responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and any non-
discretionary and objective-standard incentive payment or bonus
award) by more than fifteen percent (15%) or (C) a relocation of such
individual's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is effected
by the Corporation without the individual's consent.
J. MISCONDUCT shall mean the commission of any act of fraud, embezzlement or
----------
dishonesty by the Optionee or Participant, any unauthorized use or
disclosure by such person of confidential information or trade secrets of
the Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by such person adversely affecting the business or affairs of
the Corporation (or any Parent or Subsidiary) in a material manner. The
foregoing definition shall not be deemed to be inclusive of all the acts or
omissions which the Corporation (or any Parent or Subsidiary) may consider
as grounds for the dismissal or discharge of any Optionee, Participant or
other person in the Service of the Corporation (or any Parent or
Subsidiary).
K. NON-STATUTORY OPTION shall mean an option which is not an Incentive Option.
--------------------
L. PARENT shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending
A-2
<PAGE>
with the Corporation, provided each corporation in the unbroken chain
(other than the Corporation) owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
M. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability of
--------------------------------------------
the Optionee or the Participant to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of
twelve (12) months or more.
N. PREDECESSOR PLAN shall mean, collectively, the Corporation's existing 1986
----------------
Stock Option Plan, 1987 Stock Option Plan, 1988 Stock Option Plan, 1991
Stock Option Plan, 1994 Stock Option Plan, and 1996 Stock Option Plan.
O. SERVICE shall mean the provision of services to the Corporation (or any
-------
Parent or Subsidiary) by a person in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant.
P. SUBSIDIARY shall mean any corporation (other than the Corporation) in an
----------
unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain
owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
Q. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market Value per
--------------- -------
share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest
reported price per share of Common Stock paid by the tender offeror in
effecting such Hostile Take-Over. However, if the surrendered option is an
Incentive Option, the Take-Over Price shall not exceed the clause (i) price
per share.
A-3
<PAGE>
EXHIBIT 99.2
FORM OF NOTICE OF GRANT OF STOCK OPTION
SYNBIOTICS CORPORATION
NOTICE OF GRANT OF STOCK OPTION
-------------------------------
Notice is hereby given of the following stock option grant (the "Option") to
purchase shares of the Common Stock of Synbiotics Corporation (the "Company") in
accordance with the Company's 1995 Stock Option/Stock Issuance Plan:
Optionee: ________________________________________________
- --------
Grant Date: _____________________________________________
- ----------
Option Price: $_________________________ per share
- ------------
Number of Option Shares: ______________ shares
- -----------------------
Vesting Commencement Date: ______________________
- -------------------------
Expiration Date: ________________________________________
- ---------------
Type of Option: ____ Incentive Stock Option
- --------------
____ Non-Statutory Stock Option
Exercise Schedule:
- -----------------
The Option Shares shall vest in a series of successive equal quarterly
installments over sixteen (16) quarters of Service completed by the Optionee
commencing with the Vesting Commencement Date.
Other Special Provisions:
- ------------------------
None.
Optionee agrees to be bound by the terms and conditions of the Option as set
forth in the Stock Option Agreement attached hereto as Exhibit "A." Optionee
also understands that the Option is granted subject to and in accordance with
the express terms and conditions of the Synbiotics Corporation 1995 Stock
Option/Stock Issuance Plan (the "Plan"), a copy of which is attached hereto as
Exhibit "B," and agrees to be bound by the terms and conditions of the Plan.
Optionee hereby acknowledges receipt of a copy of the official plan prospectus
in the form attached hereto as Exhibit "C."
-1-
<PAGE>
NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in the Stock Option Agreement or the
- ---------------------------------
Plan shall confer upon the Optionee the right to continue in the Service of the
Company for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Company or the Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason whatsoever, with or without cause.
SYNBIOTICS CORPORATION
By: _______________________________
Title: ____________________________
___________________________________
OPTIONEE
Address:
___________________________________
___________________________________
Dated: _________________, 199__
-2-
<PAGE>
EXHIBIT A
---------
SYNBIOTICS CORPORATION
STOCK OPTION AGREEMENT
----------------------
WITNESSETH:
-----------
RECITALS
- --------
A. Synbiotics Corporation (the "Company") has adopted the 1995 Stock
Option/Stock Issuance Plan (the "Plan") for the purpose of attracting and
retaining the services of selected key employees (including officers and
directors) and consultants and other independent contractors who contribute to
the financial success of the Company or its parent or subsidiary corporations.
B. Optionee is an individual who is to render valuable services to the Company
or its parent or subsidiary corporations, and this Agreement is executed
pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the Company's grant of a stock option to Optionee.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions set forth in
---------------
this Agreement, the Company hereby grants to Optionee, as of the grant date (the
"Grant Date") specified in the accompanying Notice of Grant of Stock Option (the
"Notice of Grant"), a stock option to purchase up to that number of shares of
the Company's Common Stock (the "Option Shares") as is specified in the Notice
of Grant. The Option Shares shall be purchasable from time to time during the
option term at the option price per share (the "Option Price") specified in the
Notice of Grant.
2. OPTION TERM. This option shall have a maximum term of ten (10) years
-----------
measured from the Grant Date and shall accordingly expire at the close of
business on the expiration date (the "Expiration Date") specified in the Notice
of Grant, unless sooner terminated in accordance with Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY. This option shall be neither transferable nor
-----------------------
assignable by Optionee other than by will or by the laws of descent and
distribution following the Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. EXERCISABILITY. This option shall become exercisable for the Option Shares
--------------
in one or more installments as specified in the Notice of Grant. As the option
becomes exercisable for the Option Shares in one or more such installments,
those installments shall accumulate and the option shall remain exercisable for
the accumulated installments until the Expiration Date or the sooner termination
of the option term under Paragraph 5 or 6 of this Agreement.
5. TERMINATION OF SERVICE. The option term specified in Paragraph 2 shall
----------------------
terminate (and this option shall cease to be exercisable) prior to the
Expiration Date should one of the following provisions become applicable:
(i) Except to the extent otherwise provided in subparagraphs (ii)
through (iii) below, should Optionee cease to remain in the Service
of the Company at any time during the option term, then this option
shall not remain exercisable for more than a thirty (30)-day period
commencing with the date of such cessation of Service. Upon the
expiration of such thirty (30)-day period or (if earlier) upon the
A-1
<PAGE>
specified Expiration Date of the option term, this option shall
terminate and cease to be outstanding.
(ii) Should Optionee die while in Service or within the thirty (30)-day
period following his or her cessation of Service, then the personal
representative of the Optionee's estate or the person or persons to
whom this option is transferred pursuant to the Optionee's will or
in accordance with the law of descent and distribution shall have
the right to exercise this option. Such right shall lapse, and this
option shall terminate and cease to remain exercisable, upon the
earlier of (A) the expiration of the twelve (12)-month period
-------
measured from the date of Optionee's death or (B) the Expiration
Date.
(iii) Should Optionee become permanently disabled and cease by reason
thereof to remain in Service at any time during the option term,
then this option shall not remain exercisable for more than a twelve
(12) month period commencing with the date of such cessation of
Service. Upon the expiration of such limited period of
exercisability or (if earlier) upon the Expiration Date, this option
shall terminate and cease to be outstanding.
(iv) In no event shall this option be exercisable at any time after the
specified Expiration Date of the option term.
(v) During the limited post-Service period of exercisability determined
in accordance with subparagraphs (i) through (iii) above, this
option may not be exercised for more than the number of Option
Shares (if any) for which this option is, at the time of the
Optionee's cessation of Service, exercisable in accordance with
either the normal exercise provisions specified in the Notice of
Grant or the special acceleration provisions of Paragraph 6 of this
Agreement. However, the number of Option Shares purchasable after
the Optionee's death shall be reduced for any Option Shares
purchased by the Optionee after his or her cessation of Service but
prior to death.
(vi) For purposes of this Paragraph 5 and for all other purposes under
this Agreement, the following definitions shall be in effect:
A. The Optionee shall be deemed to remain in SERVICE for so long as
the Optionee continues to render periodic services to the Company
or any parent or subsidiary corporation, whether as an Employee,
a non-employee member of the Company's Board of Directors or an
independent consultant or advisor.
B. The Optionee shall be deemed to be an EMPLOYEE and to continue in
the Company's employ for so long as the Optionee remains in the
employ of the Company or one or more of its parent or subsidiary
corporations, subject to the control and direction of the
employer entity as to both the work to be performed and the
manner and method of performance.
C. The Optionee shall be deemed to be PERMANENTLY DISABLED if the
Optionee is, by reason of any medically determinable physical or
mental impairment expected to result in death or to be of
continuous duration of not less than twelve (12) consecutive
months or more, unable to perform his or her usual duties for the
Company or the parent or subsidiary corporation retaining his or
her services.
D. A corporation shall be considered to be a SUBSIDIARY corporation
of the Company if it is a member of an unbroken chain of
corporations beginning with the Company, provided each such
corporation in the chain (other than the last corporation) owns,
at the time of determination, stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the
other corporations in such chain.
A-2
<PAGE>
E. A corporation shall be considered to be a PARENT corporation of
the Company if it is a member of an unbroken chain ending with
the Company, provided each such corporation in the chain (other
than the Company) owns, at the time of determination, stock
possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
6. CORPORATE TRANSACTION.
---------------------
A. For purposes of this Section III, a "Corporate Transaction" shall be
one or more of the following stockholder-approved transactions:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal
purpose of which is to change the State of the Company's
incorporation,
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Company in liquidation or dissolution
of the Company, or
(iii) any reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's
outstanding securities are transferred to holders different
from those who held such securities immediately prior to such
merger.
B. If this option is to be assumed in connection with the Corporate
Transaction or is otherwise to continue in effect, then it shall be
appropriately adjusted, immediately after such Corporate Transaction,
to apply and pertain to the number and class of securities which would
have been issuable, in consummation of such Corporate Transaction, to
an actual holder of the same number of shares of Common Stock as are
subject to such option immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the option
price payable per share, provided that the aggregate option price
payable for such securities shall remain the same.
C. In the event of any Corporate Transaction in which this option will
not be assumed or otherwise continued (after such adjustment as may be
required under paragraph B), the exercisability of this option shall
automatically accelerate so that, immediately prior to the specified
effective date for the Corporate Transaction, it shall become fully
exercisable with respect to the total number of shares of Common Stock
at the time subject to such option and may be exercised for all or any
portion of such shares. This option, to the extent not previously
exercised, shall terminate upon the consummation of the Corporate
Transaction and cease to be exercisable, unless it is expressly
assumed by the successor corporation or parent thereof.
D. The exercisability of this option as an incentive stock option under
the Federal tax laws (if designated as such in the Notice of Grant)
shall, in connection with any such Corporate Transaction, be subject
to the applicable dollar limitation of Paragraph 18.
E. This Agreement shall not in any way affect the right of the Company to
adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or
assets.
7. ADJUSTMENT IN OPTION SHARES.
---------------------------
A. In the event any change is made to the Common Stock issuable under the
Plan by reason of any stock
A-3
<PAGE>
split, stock dividend, recapitalization, combination of shares,
exchange of shares, or other change affecting the outstanding Common
Stock as a class without the Company's receipt of consideration, then
appropriate adjustments shall be made to (i) the total number of
Option Shares subject to this option and (ii) the Option Price payable
per share in order to reflect such change and thereby preclude a
dilution or enlargement of benefits hereunder.
B. If this option is to be assumed in connection with a Corporate
Transaction or is otherwise to continue in effect, then this option
shall, immediately after such Corporate Transaction, be appropriately
adjusted to apply and pertain to the number and class of securities
which would have been issued to the Optionee in the consummation of
such Corporate Transaction had the option been exercised immediately
prior to such Corporate Transaction. Appropriate adjustments shall
also be made to the Option Price payable per share, provided the
--------
aggregate Option Price payable hereunder shall remain the same.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall not have any
----------------------------
of the rights of a stockholder with respect to the Option Shares until such
individual shall have exercised the option, paid the Option Price for the
purchased shares and been issued a stock certificate for such shares.
9. MANNER OF EXERCISING OPTION.
---------------------------
A. In order to exercise this option with respect to all or any part of
the Option Shares for which this option is at the time exercisable,
Optionee (or in the case of exercise after Optionee's death, the
Optionee's executor, administrator, heir or legatee, as the case may
be) must take the following actions:
(i) Execute and deliver to the Secretary of the Company (a) a
written notice of exercise (the "Exercise Notice"), in
substantially the form of Exhibit I attached hereto, in which
---------
there is specified the number of Option Shares for which the
option is exercised.
(ii) Pay the aggregate Option Price for the purchased shares in one
or more of the following alternative forms:
1. full payment in cash or check drawn to the Company's order;
2. full payment in shares of Common Stock of the Company held
by the Optionee for at least six (6) months and valued at
Fair Market Value on the Exercise Date (as such terms are
defined below);
3. full payment in a combination of shares of Common Stock of
the Company held by the Optionee for at least six (6) months
and valued at Fair Market Value on the Exercise Date, and
cash or check drawn to the Company's order;
4. full payment effected through a broker-dealer sale and
remittance procedure pursuant to which the Optionee (I)
shall provide irrevocable written instructions to a
designated brokerage firm to effect the immediate sale of
the purchased shares and remit to the Company, out of the
sale proceeds available on the settlement date, sufficient
funds to cover the aggregate Option Price payable for the
purchased shares plus all applicable Federal and State
income and employment taxes required to be withheld by the
Company by reason of such purchase and (II) shall provide
written directives to the Company to deliver the
certificates for the purchased shares directly to such
brokerage firm in order to complete the sale
A-4
<PAGE>
transaction; or
5. full payment in any other form which the Plan Administrator
may, in its discretion, approve at the time of exercise in
accordance with the provisions of Paragraph 15 of this
Agreement./1/
(iii) Furnish to the Company appropriate documentation that the
person or persons exercising the option (if other than the
Optionee) have the right to exercise this option.
B. For purposes of this Agreement, the Fair Market Value of a share of
Common Stock on any relevant date shall be determined in accordance
with subparagraphs (i) and (ii) below, and the Exercise Date shall be
the date on which the executed Exercise Notice is delivered to the
Company. Except to the extent the sale and remittance procedure
specified above is utilized for the exercise of the option, payment of
the Option Price for the purchased shares must accompany the Exercise
Notice. The procedure for measuring Fair Market Value shall be as
follows:
(i) If the Common Stock is not at the time listed or admitted to
trading on any national stock exchange but is traded on the
NASDAQ National Market System, Fair Market Value shall be the
closing selling price per share of Common Stock on the date in
question, as such price is reported by the National Association
of Securities Dealers through the NASDAQ National Market System
or any successor system. If there is no reported closing
selling price for the Common Stock on the date in question,
then the closing selling price on the last preceding date for
which such quotation exists shall be determinative of Fair
Market Value.
(ii) If the Common Stock is at the time listed or admitted to
trading on any national stock exchange, then the Fair Market
Value shall be the closing selling price per share of Common
Stock on the date in question on the stock exchange determined
by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
reported sale of Common Stock on such exchange on the date in
question, then the Fair Market Value shall be the closing
selling price on the exchange on the last preceding date for
which such quotation exists.
(iii) If shares of the series of common stock to be valued at the
time are neither listed nor admitted to trading on any stock
exchange nor traded in the over-the-counter market, then the
fair market value shall be determined by the Plan Administrator
after taking into account such factors as the Plan
Administrator shall deem appropriate, including one or more
independent professional appraisals.
C. As soon after the Exercise Date as practical, the Company shall mail
or deliver to or on behalf of the Optionee (or to any other person or
persons exercising this option) a certificate or certificates
representing the purchased shares.
D. In no event may this option be exercised for any fractional shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
------------------------------------
- ----------------
/1/ Authorization of a Company loan or installment payment pursuant to this
provision may, under currently proposed Treasury Regulations, result in the
loss of incentive stock option treatment under the Federal tax laws.
A-5
<PAGE>
A. The exercise of this option and the issuance of the Option Shares upon
such exercise shall be subject to compliance by the Company and the
Optionee with all applicable requirements of law relating thereto and
with all applicable regulations of any stock exchange on which shares
of the Option Shares may be listed at the time of such exercise and
issuance.
B. In connection with the exercise of this option, Optionee shall execute
and deliver to the Company such representations in writing as may be
requested by the Company in order for it to comply with the applicable
requirements of federal and state securities laws.
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
----------------------
Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of the
Company.
12. LIABILITY OF COMPANY.
--------------------
A. If the Option Shares covered by this Agreement exceed, as of the Grant
Date, the number of shares of Common Stock which may without
stockholder approval be issued under the Plan, then this option shall
be void with respect to such excess shares, unless stockholder
approval of an amendment sufficiently increasing the number of shares
of Common Stock issuable under the Plan is obtained in accordance with
the provisions of Article 4, Section III of the Plan.
B. The inability of the Company to obtain approval from any regulatory
body having authority deemed by the Company to be necessary to the
lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Company of any liability with respect to the non-
issuance or sale of the Common Stock as to which such approval shall
not have been obtained. The Company, however, shall use its best
efforts to obtain all such approvals.
13. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement or in the
---------------------------------
Plan shall confer upon the Optionee any right to continue in the Service of the
Company (or any parent or subsidiary corporation of the Company employing or
retaining Optionee) for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Company (or any parent or
subsidiary corporation of the Company employing or retaining Optionee) or the
Optionee, which rights are hereby expressly reserved by each, to terminate the
Optionee's Service at any time for any reason whatsoever, with or without cause.
14. NOTICES. Any notice required to be given or delivered to the Company under
-------
the terms of this Agreement shall be in writing and addressed to the Company in
care of the Corporate Secretary at the Company's principal corporate offices.
Any notice required to be given or delivered to Optionee shall be in writing and
addressed to Optionee at the address indicated below Optionee's signature line
on the Notice of Grant. All notices shall be deemed to have been given or
delivered upon personal delivery or upon deposit in the U.S. mail, postage
prepaid and properly addressed to the party to be notified.
15. LOANS. The Plan Administrator may, in its absolute discretion and without
-----
any obligation to do so, assist the Optionee in the exercise of this option by
(i) authorizing the extension of a loan to the Optionee from the Company or (ii)
permitting the Optionee to pay the Option Price for the purchased Common Stock
in installments over a period of years. The terms of any loan or installment
method of payment (including the interest rate, the collateral requirements and
terms of repayment) shall be established by the Plan Administrator in its sole
discretion.
16. CONSTRUCTION. This Agreement and the option evidenced hereby are made and
------------
granted pursuant to the Plan and are in all respects limited by and subject to
the express terms and provisions of the Plan. All decisions of the Plan
Administrator with respect to any question or issue arising under the Plan or
this Agreement shall be conclusive and
A-6
<PAGE>
binding on all persons having an interest in this option.
17. GOVERNING LAW. The interpretation, performance, and enforcement of this
-------------
Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In the event
------------------------------------------------- ------
this option is designated as an incentive stock option in the Notice of Grant,
the following terms and conditions shall also apply to the grant:
A. This option shall cease to qualify for favorable tax treatment as an
incentive stock option under the Federal tax laws if (and to the
extent) this option is exercised for one or more Option Shares: (i)
more than three (3) months after the date the Optionee ceases to be an
Employee for any reason other than death or permanent disability (as
defined in Paragraph 5) or (ii) more than one (1) year after the date
the Optionee ceases to be an Employee by reason of permanent
disability.
B. No installment under this option (whether annual or monthly) shall
qualify for favorable tax treatment as an incentive stock option under
the Federal tax laws if (and to the extent) the aggregate fair market
value (determined at the Grant Date) of the Common Stock for which
such installment first becomes exercisable hereunder will, when added
to the aggregate fair market value (determined as of the respective
date or dates of grant) of any earlier installments of Common Stock
for which this option or any other post-1986 incentive stock options
granted to the Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Company or any parent or
subsidiary corporations) first become exercisable during the same
calendar year, exceed One Hundred Thousand Dollars ($100,000) in the
aggregate.
C. Should the exercisability of this option be accelerated upon a
Corporate Transaction, then this option shall qualify for favorable
tax treatment as an incentive stock option under the Federal tax laws
only to the extent the aggregate fair market value (determined at the
Grant Date) of the Common Stock for which this option first becomes
exercisable at the time the Corporate Transaction occurs does not,
when added to the aggregate fair market value (determined as of the
respective date or dates of grant) of any earlier installments of
Common Stock for which this option or any other post-1986 incentive
stock options granted to the Optionee prior to the Grant Date (whether
under the Plan or any other option plan of the Company or any parent
or subsidiary corporations) first become exercisable during the
calendar year in which the Corporate Transaction occurs, exceed One
Hundred Thousand Dollars ($100,000) in the aggregate.
D. To the extent this option should fail to qualify as an incentive stock
option under the Federal tax laws, the Optionee will recognize
compensation income in connection with the acquisition of one or more
Option Shares hereunder, and the Optionee must make appropriate
arrangements for the satisfaction of all Federal, State or local
income tax withholding requirements and Federal social security
employee tax requirements applicable to such compensation income.
19. ADDITIONAL TERMS APPLICABLE TO A NON-STATUTORY STOCK OPTION. In the event
-----------------------------------------------------------
this option is designated as a non-statutory stock option in the Notice of
Grant, Optionee hereby agrees to make appropriate arrangements with the Company
or parent or subsidiary corporation employing Optionee for the satisfaction of
any Federal, State or local income tax withholding requirements and Federal
social security employee tax requirements applicable to the exercise of this
option.
A-7
<PAGE>
EXHIBIT I
---------
NOTICE OF EXERCISE OF STOCK OPTION
----------------------------------
I hereby notify Synbiotics Corporation (the "Company") that I elect to purchase
_________ shares of the Company's Common Stock (the "Purchased Shares") pursuant
to that certain option (the "Option") granted to me under the Company's 1995
Stock Option/Stock Issuance Plan (the "Plan") on ________________, 199_ to
purchase up to __________ shares of such Common Stock at an option price of
$_________ per share (the "Option Price").
Concurrently with the delivery of this Exercise Notice to the Secretary of the
Company, I shall pay to the Company the Option Price for the Purchased Shares in
accordance with the provisions of my agreement with the Company evidencing the
Option and shall deliver whatever additional documents may be required by such
agreement as a condition for exercise.
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Date Optionee
Address: _______________________
_____________________
Print name in exact manner
it is to appear on the
stock certificate:
_____________________
_____________________
Address to which certificate
is to be sent, if different
from address above:
_____________________
_____________________
Social Security Number: _____________________
A-I-1
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EXHIBIT B
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Reference is made to Exhibit 99.1 of this Registration Statement on Form S-8.
B-1
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EXHIBIT C
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Reference is made to this Registration Statement on Form S-8.
C-1
