<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SYNBIOTICS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
SYNBIOTICS CORPORATION
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 9, 1999
The Annual Meeting of Shareholders of Synbiotics Corporation will be held at
the Radisson Suite Hotel (Rancho Bernardo), 11520 West Bernardo Court, San
Diego, California 92127, on June 9, 1999 at 10:00 a.m. for the following
purposes:
1. To elect seven directors;
2. To consider a proposal to amend the 1995 Stock Option/Stock Issuance
Plan;
and to transact such other business as may properly come before the meeting
and any postponement or adjournment thereof.
The Board of Directors has fixed April 16, 1999, as the record date for
determining the shareholders entitled to notice of and to vote at the Annual
Meeting and any postponement or adjournment thereof.
WE WOULD BE GRATEFUL IF YOU WOULD PROMPTLY SIGN AND RETURN THE ENCLOSED
PROXY CARD.
Michael K. Green
Secretary
May 3, 1999
<PAGE>
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Synbiotics Corporation, a California corporation (the
"Company"), 11011 Via Frontera, San Diego, California 92127, of proxies in the
accompanying form to be used at the Annual Meeting of Shareholders to be held
at the Radisson Suite Hotel (Rancho Bernardo), 11520 West Bernardo Court, San
Diego, California 92127, at 10:00 a.m. on June 9, 1999, and any postponement
or adjournment thereof.
A proxy may be revoked at any time before it is exercised. Any shareholder
giving a proxy may revoke it prior to its use at the Annual Meeting (1) by
delivering a written notice expressly revoking the proxy to the Company's
Secretary at the Company's offices, (2) by signing and delivering to the
Company at its offices, or to the place of the Annual Meeting, a later dated
proxy or (3) by attending the Annual Meeting and casting his or her votes
personally. A proxy is not revoked by the death or incapacity of the maker
unless, before the vote is counted, written notice of such death or incapacity
is received by the Company.
On the matters coming before the Annual Meeting as to which a choice has
been specified by the shareholder on the proxy, the shares will be voted
accordingly. If the proxy is returned and no choice is so specified, the
shares will be voted FOR the election of the seven nominees for director
listed in this Proxy Statement, FOR the approval of proposal 2 described in
the Notice of Meeting and this Proxy Statement, and in the discretion of the
proxyholders as to any other business which may properly come before the
Annual Meeting.
April 16, 1999, has been fixed as the record date for determining the
shareholders entitled to notice of and to vote at the Annual Meeting. As of
the close of business on such date, the Company had 8,973,238 shares of common
stock outstanding and entitled to vote. Outstanding shares of common stock are
entitled to one vote each on all matters. Under California law, shareholders
are permitted to cumulate votes for the election of directors whose names have
been placed in nomination. Therefore, in voting for directors, each
outstanding share of common stock would be entitled to seven votes which may
be cast for one candidate or distributed in any manner among the nominees for
director. However, the right to cumulate votes in favor of one or more
candidates may not be exercised until the candidate or candidates have been
nominated and any shareholder has given notice at the Annual Meeting of the
intention to cumulate votes.
The proxyholders (if authority to vote for one or more nominees is not
withheld) will have full discretion and authority to vote cumulatively and to
allocate votes among any or all of the Board of Directors nominees as they may
determine or, if authority to vote for a specified candidate or candidates has
been withheld, among those candidates for whom authority to vote has not been
withheld.
The expense of printing and mailing proxy material will be borne by the
Company. The approximate date these proxy solicitation materials will be first
sent to shareholders is May 3, 1999.
<PAGE>
ELECTION OF DIRECTORS
(Item 1 on the Proxy Card)
Seven directors are to be elected at the Annual Meeting to serve until the
next Annual Meeting and until their respective successors are elected or
appointed. Unless authority to vote for one or more nominees is withheld, it
is intended that the proxyholders will vote for the election of the nominees
named below. In the event any of them shall become unable or unwilling to
accept nomination or election, the shares represented by the enclosed proxy
will be voted for the election of such other person as the Board of Directors
may recommend in his or her place. Each of the nominees named is currently a
member of the Board of Directors of the Company.
The following information is furnished regarding the nominees of the
Company.
<TABLE>
<CAPTION>
Name; Positions; Business Experience During the Director
Past Five Years; Directorships in Reporting Companies Since Age
----------------------------------------------------- -------- ---
<S> <C> <C>
Patrick Owen Burns................................................. 1997 61
Senior Consultant of Early Stage Enterprises, L.L.C. since October
1997; Vice President of R&D Funding Corp, an affiliate of
Prudential Securities Inc., and Senior Vice President of
Prudential Securities Inc. from 1986 to February, 1997; Director
of Progen Industries, Ltd.
Kenneth M. Cohen................................................... 1996 44
President and Chief Executive Officer of the Company since May
1996; Executive Vice President and Chief Operating Officer of
Canji, Inc. from March 1995 to February 1996; Vice President of
Argus Pharmaceuticals, Inc. from May 1990 to March 1995.
James C. DeCesare.................................................. 1993 68
Consultant to the animal health and pharmaceutical industries
since 1992.
Brenda D. Gavin, DVM............................................... 1996 50
Becomes President of S. R. One, Limited, a venture capital firm,
in May 1999; Vice President of S. R. One, Limited from 1989 to
April 1999; Director of Oxis International, Inc.
M. Blake Ingle, Ph.D. ............................................. 1994 57
Private investor; President and Chief Executive Officer of Canji,
Inc. March 1993 to February 1996; Acting President of Telios
Pharmaceuticals, Inc. from December 1994 to June 1995; Director of
Corvas International, Inc. and Vical, Inc.
Joseph Klein III................................................... 1998 38
Healthcare Analyst for The Kaufmann Fund since June 1998;
Portfolio Manager and Chairman of Investment Advisory Committee of
T. Rowe Price Health Sciences Fund from December 1995 to February
1998; Vice President and Healthcare Analyst of T. Rowe Price
Associates, Inc. from April 1990 to February 1998; Director of
Guilford Pharmaceuticals, Inc. and NPS Pharmaceuticals, Inc.
Donald E. Phillips................................................. 1987 66
Private investor; Chairman of the Board of Directors of the
Company since August 1994; Vice Chairman of the Board of Directors
of the Company from 1993 to August 1994; Director of Great Lakes
REIT, Inc. and Potash Corporation of Saskatchewan (Canada).
</TABLE>
The Board of Directors of the Company held a total of eleven meetings during
the year ended December 31, 1998. Each director attended more than seventy-
five percent (75%) of the meetings of the Board of Directors (and the Board
committees of which he or she was a member) held during the time he or she was
a member of the Board.
2
<PAGE>
The Company currently has Compensation and Audit Committees of the Board of
Directors. The Company does not have a Nominating Committee of the Board of
Directors. The current membership of each committee is as follows:
<TABLE>
<S> <C>
Compensation Committee Audit Committee
M. Blake Ingle, Ph.D., Chairman Patrick Owen Burns
Joseph Klein III James C. DeCesare, Chairman
Donald E. Phillips Brenda D. Gavin, DVM
</TABLE>
The function of the Compensation Committee is to review the Company's
compensation policies and advise as to executive compensation and stock option
matters. The Audit Committee oversees the Company's accounting and financial
reporting policies, reviews with the independent accountants the accounting
principles and practices followed, reviews the annual audit and financial
results and makes recommendations to the Board regarding any of the preceding.
The Audit Committee met three times and the Compensation Committee met four
times during the year ended December 31, 1998.
Dr. Ingle became an executive officer of Telios Pharmaceuticals, Inc. in
December 1994, shortly after that company's primary product failed a clinical
trial. In January 1995, Telios filed a voluntary bankruptcy petition. Telios
subsequently emerged from bankruptcy via the sale of the company to Integra
Life Sciences. The Company believes these facts do not impugn Dr. Ingle's
ability or integrity in any way.
For their services as directors, each of the outside directors of the
Company receives fees of $1,000, plus $500 for travel, for each Board of
Directors meeting attended, except for Dr. Gavin. Dr. Gavin does not receive a
fee as S. R. One, Limited does not allow its representatives to accept
director fees from the companies for which they serve as directors. Outside
directors also receive $500 for each telephonic Board of Directors meeting,
and receive $500 for each committee meeting they attend as committee members
which are held on a different day than a Board of Directors meeting. Employee
directors do not receive any fees for attendance at meetings of the Board of
Directors or committee meetings. In addition, Mr. Phillips was paid fees of
$24,996 during the year ended December 31, 1998 pursuant to a consulting
agreement with the Company. On July 30, 1998, pursuant to the Automatic Grant
Program under the 1995 Stock Option/Stock Issuance Plan (the "1995 Plan"), Mr.
Burns, Mr. DeCesare, Dr. Gavin, Dr. Ingle and Mr. Phillips were each granted
options to purchase 7,000 shares of common stock at $3.063 per share. The
options, which expire on July 30, 2008, vest ratably over a one-year period
following the grant date. On September 4, 1998, pursuant to the Automatic
Grant Program under the 1995 Plan, Mr. Klein was granted an option to purchase
7,000 shares of common stock at $2.500 per share. The option, which expires on
September 24, 2008, vests ratably over a one-year period following the grant
date.
3
<PAGE>
Executive Officers and Significant Employees
Executive Officers
<TABLE>
<CAPTION>
Name, Age, and Other Business Experience
Position During the Past Five Years
-------- ---------------------------------------------
<S> <C>
President and Chief Executive Officer - since Kenneth M. Cohen (44)
May 1996 Formerly, Executive Vice President and Chief
Operating Officer of Canji, Inc., March
1995 -February 1996; Vice President of Argus
Pharmaceuticals, Inc., May 1990 - March 1995
Vice President - Finance, Chief Financial Michael K. Green (43)
Officer and Secretary - since May 1991
Vice President - since February 1998; Francois Guillemin (48)
President Formerly, Director of the Diagnostics
and Director General of Synbiotics Europe, Division of Rhone-Merieux, S.A., 1991 - June
SAS - since July 1997 1997
Vice President - Research and Development Serge Leterme (39)
since October 1998; Director of Product Formerly, Director of Research and
Development - August 1997 - September 1998 Development of the Diagnostics Division of
Rhone-Merieux, S.A., 1993 - June 1997
Vice President and General Manager, Animal Paul A. Rosinack (52)
Health - since October 1996 Formerly, President and Chief Executive
Officer of International Canine Genetics,
Inc., December
1992 - October 1996
</TABLE>
Significant Employees
<TABLE>
<CAPTION>
Name, Age, and Other Business Experience
Position During the Past Five Years
-------- ---------------------------------------------
<S> <C>
Corporate Controller - since March 1991 Keith A. Butler (37)
Director of Operations - since September 1992 Clifford Frank (49)
Director of Marketing - since October 1996 Stephen T. Peterson, DVM (48)
Formerly, Director of Marketing of
International Canine Genetics, Inc.,
December 1993 - October 1996
Director of Business Development - since 1992 Gregory A. Soulds (52)
(with the Company since 1983)
</TABLE>
4
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
common stock as of April 16, 1999, of each of the Company's directors,
director nominees, 5% shareholders and the Named Executive Officers, and of
the directors and executive officers of the Company as a group. Except as
noted, each person has sole investment and voting power over the shares shown.
Percentages are calculated in accordance with the method set forth in the
Securities and Exchange Commission's rules.
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Name and Address of Beneficial Owner Beneficial Owner of Class
------------------------------------ ---------------- --------
<S> <C> <C>
Patrick Owen Burns(/1/)............................... 34,850 *
22 Sidney Place
Brooklyn, NY 11201
Kenneth M. Cohen(/1/)................................. 222,281 2.3%
c/o Synbiotics Corporation
11011 Via Frontera
San Diego, CA 92127
James C. DeCesare(/1/)................................ 50,125 *
5260 S. Landings Drive, #200
Ft. Myers, FL 33919
Brenda D. Gavin, DVM(/3/)............................. 974,902 10.2%
c/o S. R. One, Limited
Bay Colony Executive Park
565 Swedesford Road
Suite 315
Wayne, PA 19087
Michael K. Green(/1/)................................. 96,655 1.0%
c/o Synbiotics Corporation
11011 Via Frontera
San Diego, CA 92127
Francois Guillemin(/1/)............................... 48,512 *
c/o Synbiotics Europe, SAS
2 rue Alexander Fleming
69367 Lyons, Cedex 07, France
M. Blake Ingle, Ph.D.(/1/)............................ 55,750 *
Plaza Del Mar 300-6
12526 High Bluff Drive
San Diego, CA 92130
Joseph Klein III(/1/)................................. 25,250 *
1724 Hillside Road
Stevenson, MD 21153
Serge Leterme, Ph.D.(/1/)............................. 18,375 *
c/o Synbiotics Corporation
11011 Via Frontera
San Diego, CA 92127
Donald E. Phillips(/1/)............................... 69,750 *
372 Fannin Landing Circle
Brandon, MS 39042
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Name and Address of Beneficial Owner Beneficial Owner of Class
------------------------------------ ---------------- --------
<S> <C> <C>
Paul A. Rosinack(/1/)............................... 72,961 *
c/o Synbiotics Corporation
11011 Via Frontera
San Diego, CA 92127
Gregory A. Soulds(/1/)(/4/)......................... 27,781 *
c/o Synbiotics Corporation
11011 Via Frontera
San Diego, CA 92127
Gruber & McBaine Capital Management(/2/)............ 1,100,100 11.6%
c/o John P. Broadhurst, Esq.
Shartsis, Friese & Ginsburg
One Maritime Plaza
18th Floor
San Francisco, CA 94111
Merial SAS.......................................... 621,378 6.5%
29 Avenue Tony Garnier
69007 Lyons
France
S. R. One, Limited(/3/)............................. 962,652 10.1%
Bay Colony Executive Park
565 Swedesford Road
Suite 315
Wayne, PA 19087
All executive officers and directors as a
group(/1/)(/3/) (11 persons)....................... 1,697,202 17.8%
</TABLE>
- --------
* Less than one percent.
(1) Includes options to purchase shares of common stock, which are exercisable
on or before June 15, 1999, as follows: Mr. Burns - 33,250 shares; Mr.
Cohen - 155,312 shares; Mr. DeCesare - 40,250 shares; Dr. Gavin - 12,250
shares; Mr. Green - 88,124 shares; Mr. Guillemin - 26,562; Dr. Ingle -
31,250 shares; Mr. Klein - 5,250; Dr. Leterme - 15,000; Mr. Phillips -
59,750 shares; Mr. Rosinack - 60,827 shares; Mr. Soulds - 20,187 shares.
(2) 485,400 shares are owned by a group of managed investment accounts who
have granted their respective powers of attorney to Gruber & McBaine
Capital Management LLC ("GMCM") to handle any and all necessary filings
with respect to voting and dispositive power of these securities. The
remaining 614,700 shares are owned by a group of four persons who granted
their respective powers of attorney to GMCM to handle any and all
necessary filings with respect to voting and dispositive power of these
securities. The direct ownership of these 614,700 shares is as follows:
Jon D. Gruber ("Gruber") - 91,900 shares; J. Patterson McBaine
("McBaine") - 99,200 shares; Lagunitas Partners, a California Limited
Partnership ("Lagunitas") - 232,500 shares; Proactive Partners, a
California Limited Partnership ("Proactive") - 191,100 shares. Gruber and
McBaine are the member managers of GMCM. GMCM is the general partner of
Lagunitas. Gruber and McBaine are general partners in the entity which is
the general partner of Proactive. Gruber and McBaine disclaim beneficial
ownership of the shares held by Lagunitas and Proactive except to the
extent of their respective pecuniary interests. GMCM disclaims beneficial
ownership of the shares held by Gruber, McBaine, Lagunitas and the group
of managed investment accounts.
(3) Includes 962,652 shares owned by S. R. One, Limited, of which Dr. Gavin is
a Vice President. Dr. Gavin disclaims any beneficial ownership of these
shares.
(4) Mr. Soulds' information is included in the interest of full disclosure.
6
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table provides certain summary information concerning the
compensation earned by the Company's President and Chief Executive Officer and
the other executive officers whose total 1998 salary and bonus exceeded
$100,000 (the "Named Executive Officers"), and the only other person, although
not an executive officer, whose total 1998 salary and bonus exceeded $100,000
for services rendered in all capacities to the Company for the fiscal years
ended December 31, 1998, 1997 and 1996:
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensations
----------------------------------------------- -------------
Awards
-------------
Other Securities
Annual Underlying All Other
Name and Principal Fiscal Compen- Options/ Compen-
Position Year Salary ($)(/1/) Bonus ($) sation ($) SARS (#) sation ($)(/2/)
------------------ ------ --------------- --------- ---------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth M. Cohen........ 1998 $242,156 $31,008(/3/) -- 50,000 $4,115
President and Chief
Executive Officer 1997 $230,625 $14,175(/4/) -- 25,000 $3,165
1996 $141,490 $42,188 $38,750(/5/) 225,000 --
Michael K. Green........ 1998 $143,500 $18,375(/3/) -- 25,000 $3,875
Vice President 1997 $130,000 $ 8,400(/4/) -- 25,000 $3,120
1996 $115,326 $24,000 -- 30,000 $2,768
Francois Guillemin...... 1998 $146,846 $ 7,385(/3/) -- 25,000 --
Vice President 1997 $ 77,744 -- -- 50,000 --
Serge Leterme........... 1998 $100,489 $15,000(/3/) $ 4,687(/6/) 25,000 --
Vice President 1997 $ 36,357 -- -- 20,000 --
Paul A. Rosinack........ 1998 $168,373 $21,560(/3/) $12,504(/7/) 25,000 $2,552
Vice President 1997 $162,129 $ 9,856(/4/) $12,504(/7/) 50,000 --
1996 $ 29,743 -- $ 2,084(/7/) 25,000 --
Gregory A. Soulds....... 1998 $112,349 $14,387(/3/) -- -- $3,033
Director - Business 1997 $106,999 $ 6,576(/4/) -- -- $2,568
Development 1996 $104,389 -- -- 5,000 $2,505
</TABLE>
- --------
(1) Includes amounts deferred under the 401(k) Compensation Deferral Savings
Plan pursuant to Section 401(k) of the Internal Revenue Code of 1986, as
amended.
(2) Consists of matching contributions made by the Company to Mr. Cohen's
401(k) account, Mr. Green's 401(k) account, Mr. Rosinack's 401(k) account
and Mr. Soulds' 401(k) account.
(3) Includes grants of restricted Synbiotics common stock during 1998 with a
fair market value of $4.00 per share as follows: Mr. Cohen - 6,977 shares;
Mr. Green - 4,134 shares; Mr. Guillemin - 1,662 shares; Dr. Leterme -
3,375; Mr. Rosinack - 4,851 shares; Mr. Soulds - 3,237 shares.
(4) Includes grants of restricted Synbiotics common stock during 1997 with a
fair market value of $3.19 per share as follows: Mr. Cohen - 4,002 shares;
Mr. Green - 2,372 shares; Mr. Rosinack - 2,783 shares; Mr. Soulds - 1,857
shares.
(5) Consists of a direct grant of 10,000 shares of Synbiotics common stock
with a fair market value of $3.875 per share.
(6) Forgiveness of a loan made to Dr. Leterme to defray relocation expenses at
the rate of $18,750 per year. As of December 31, 1998, the balance due was
$70,313.
(7) Forgiveness of a loan made to Mr. Rosinack to defray relocation expenses
at the rate of $12,504 per year. As of December 31, 1998, the balance due
was $21,871.
7
<PAGE>
The following table contains information concerning the grant of stock
options to the Named Executive Officers:
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
- --------------------------------------------------------------------------
Number of
Securities % of Total
Underlying Options/SARs
Options/SARs Granted to
Granted Employees in Exercise
Name (#)(/1/) Fiscal Year Price ($/Sh) Expiration Date
---- ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Kenneth M. Cohen 50,000 16.71% $3.06 7/30/08
Michael K. Green 25,000 8.35% $3.06 7/30/08
Francois Guillemin 25,000 8.35% $3.06 7/30/08
Serge Leterme 25,000 8.35% $3.06 5/20/08
Paul A. Rosinack 25,000 8.35% $3.06 7/30/08
</TABLE>
- --------
(1) The options become exercisable ratably over a four-year period following
the date of grant, which was July 30, 1998, except for Dr. Leterme whose
date of grant was May 20, 1998. Each option has a maximum term of 10
years, subject to earlier termination in the event of the optionee's
cessation of service with the Company.
The following table provides information, with respect to the Named
Executive Officers and Mr. Soulds, concerning the exercise of options during
the last fiscal year and unexercised options held as of the end of the fiscal
year:
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARS at Options/SARS at
Shares December 31, 1998 December 31, 1998
Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized Unexercisable Unexercisable(/1/)
---- -------------- -------- -------------------- ------------------
<S> <C> <C> <C> <C>
Kenneth M. Cohen........ -- -- 100,937 $ --
199,063 $ --
Michael K. Green........ -- -- 78,124 $ --
51,876 $ --
Francois Guillemin...... -- -- 17,187 $ --
57,813 $ --
Serge Leterme........... -- -- 9,375 $ --
35,625 $ --
Paul A. Rosinack........ -- -- 44,600 $ --
85,227 $ --
Gregory A. Soulds....... 2,500 $188 20,375 $ --
1,875 $ --
</TABLE>
- --------
(1) Value is defined as market price of the Company's common stock at fiscal
year end less exercise price. The closing sale price of the Company's
common stock at December 31, 1998 was $2.56.
The Company has not granted any stock appreciation rights ("SARs").
8
<PAGE>
Employment Contracts and Change-in-Control Arrangements
Synbiotics entered into an Employment Agreement dated May 7, 1996 with
Kenneth M. Cohen, its Chief Executive Officer and President. The Employment
Agreement provides for salary at an initial rate of $225,000 per annum,
options to purchase 225,000 shares of Synbiotics common stock (at $3.875 per
share) and a direct grant of 10,000 shares of unregistered Synbiotics common
stock. In addition, he is eligible for a cash bonus of up to 30% of his annual
salary. If Mr. Cohen is terminated without cause, he will receive six months'
salary at his then base salary rate. If Mr. Cohen is terminated in connection
with an acquisition of the Company, he will receive an additional six months'
salary and all unvested stock options will immediately vest.
Synbiotics entered into an Employment Agreement dated June 23, 1997 with
Michael K. Green, its Chief Financial Officer and Vice President - Finance.
The Employment Agreement provides for salary at an initial rate of $140,000.
If Mr. Green is terminated without cause, he will receive six months' salary
at his then base salary rate. If Mr. Green is terminated in connection with an
acquisition of the Company, he will receive an additional six months' salary
and all unvested stock options will immediately vest.
Synbiotics entered into an Employment Agreement dated July 9, 1997 with
Francois Guillemin, its Vice President and President and Director General of
Synbiotics Europe, SAS. The Employment Agreement provides for salary at an
initial rate of $140,000 per annum and options to purchase 50,000 shares of
Synbiotics common stock (at $3.6875 per share). In addition, the Company has
provided Mr. Guillemin with a company car, and is bearing the leasing costs,
and reasonable expenses incurred by Mr. Guillemin for business activities, of
the company car in an annual amount up to $11,500 per year. If Mr. Guillemin
is terminated without cause, he will receive six months' salary at his then
base salary rate plus the amount of legal severance in France; provided,
however, that the total amount to be received will be equal to the greater of
12 months' salary or the total amount of legal severance in France. If Mr.
Guillemin is terminated in connection with an acquisition of the Company, he
will receive an additional six months' salary and all unvested stock options
will immediately vest.
Synbiotics entered into an Employment Agreement dated September 1, 1998 with
Serge Leterme, its Vice President of Research and Development. The Employment
Agreement provides for salary at an initial rate of $120,000. If Dr. Leterme
is terminated without cause, he will receive six months' salary at his then
base salary rate. If Dr. Leterme is terminated in connection with an
acquisition of the Company, he will receive an additional six months' salary
and all unvested stock options will immediately vest.
Synbiotics entered into an Employment Agreement dated October 25, 1996 with
Paul A. Rosinack, its Vice President and General Manager, Animal Health. The
Employment Agreement provides for salary at an initial rate of $160,000 per
annum and options to purchase 25,000 shares of Synbiotics common stock (at
$4.125 per share). If Mr. Rosinack is terminated without cause, he will
receive six months' salary at his then base salary rate. If Mr. Rosinack is
terminated in connection with an acquisition of the Company, he will receive
an additional six months' salary and all unvested stock options will
immediately vest.
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF ALL SEVEN NOMINEES, SET
FORTH IN ITEM 1 ON THE PROXY CARD. The six persons receiving the highest
number of votes will be elected as directors. Abstentions and broker non-votes
will have no influence in the election of directors.
9
<PAGE>
AMENDMENT OF 1995 STOCK OPTION/STOCK ISSUANCE PLAN
(Item 2 on the Proxy Card)
On April 27, 1995, the Board of Directors adopted the Company's 1995 Stock
Option/Stock Issuance Plan (the "1995 Plan"). The 1995 Plan is intended to
unify the Company's stock option program; upon shareholder approval of the
1995 Plan all outstanding options under the Company's 1983, 1984, 1986, 1987,
1988, 1991 and 1994 Stock Option Plans (the "Prior Plans") were incorporated
into the 1995 Plan and the Prior Plans were terminated as to any future
grants. (The 1983, 1984, 1986, 1987 and 1988 Stock Option Plans have already
expired by their own terms.) The 1,300,000 shares of Company common stock
authorized for issuance under the 1995 Plan were 282,055 more than the sum of
the 711,862 shares currently the subject of options outstanding as of April
27, 1995 under the Prior Plans and 306,083 shares reserved and available for
issuance under, but not as of April 27, 1995 the subject of any grants under,
the Prior Plans.
The 1995 Plan also differed from the Prior Plans in that it (a) allows the
grant of both incentive stock options and non-qualified stock options, (b)
provides for automatic stock option grants to Directors, (c) allows direct
stock issuances, and (d) provides for acceleration of vesting upon a hostile
takeover of the Company. The 1995 Plan also differed from one or more of the
Prior Plans in several other ways, many of which involve providing flexibility
to the Company in areas where the Prior Plans did not allow flexibility.
On April 25, 1997, the Board of Directors approved amendments to the 1995
Plan to incorporate the 1996 Stock Option Plan into the 1995 Plan, add an
additional 450,000 shares to the maximum authorized for issuance under the
1995 Plan (making a total, together with the previous authorization and the
250,000 shares authorized under the 1996 Stock Option Plan, of 2,000,000
shares), provide for additional flexibility as permitted under recent changes
to Rule 16b-3 under the Securities Exchange Act of 1934, and make certain non-
material changes in other areas.
The 1996 Stock Option Plan authorized only the grant of nonstatutory
options, and only to persons who are not directors or officers. Otherwise, the
1996 Stock Option Plan is essentially similar to the 1995 Plan's Discretionary
Grant Program.
On March 29, 1999, the Board of Directors approved an amendment (the
"Amendment") to the 1995 Plan to incorporate the 1998 Stock Option Plan into
the 1995 Plan and add an additional 600,000 shares to the maximum authorized
for issuance under the 1995 Plan (making a total, together with the previous
amended authorization and including the 152,565 shares authorized under the
1998 Stock Option Plan, of 2,752,565 shares).
The 1998 Stock Option Plan authorizes only the grant of nonstatutory
options, and only to persons who are not directors or officers. In addition,
the 1998 Stock Option Plan gives the Plan Administrator complete discretion in
establishing the options' exercise price per share. Otherwise, the 1998 Stock
Option Plan is essentially similar to the 1995 Plan's Discretionary Grant
Program. Options to purchase all 152,565 of the 1998 Stock Option Plan's
authorized shares were granted to former optionholders of Prisma Acquisition
Corp. ("Prisma") in exchange for their Prisma Options, pursuant to the terms
of Synbiotics' March 1998 acquisition of Prisma. As of April 16, 1999, options
to purchase 10,613 shares under the 1998 Stock Option Plan have been
exercised, and the remaining options to purchase 141,952 are still
outstanding.
Synbiotics currently has available under the 1995 Plan only 49,516 shares
which have not already been issued and are not subject to currently
outstanding options. Of those shares, 42,000 will be subjected to options to
non-employee directors on June 9, 1999. Therefore, unless the Amendment is
approved Synbiotics will essentially have run out of shares for option grants
and direct issuances.
There are currently outstanding under the 1995 Plan and the 1998 Stock
Option Plan options to purchase a total of 1,956,737 shares, and with the
additional 600,000 shares requested by the Amendment, a total of 2,556,737
will be potentially exercisable.
Under the 1995 Plan, the Amendment requires shareholder approval to become
effective.
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Plan Structure
The 1995 Plan is divided into three separate parts:
. The "Discretionary Grant Program" under which directors, employees and
consultants may, at the discretion of the Plan Administrator, be granted
options to purchase shares of the Common Stock at an exercise price not less
than 85% of the fair market value of each such share on the grant date;
provided, that the exercise price may be below 85% of fair market value 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 (above 15%) of
the discount from fair market value exercise price. The granted options may
be either incentive stock options which are designed to meet the
requirements of Section 422 of the Internal Revenue Code or nonstatutory
options not intended to satisfy such requirements.
. The "Stock Issuance Program" under which eligible individuals will be
allowed to effect immediate purchases of Common Stock at the fair market
value of each such share, or at discounts of up to 15% (or, under certain
conditions, more) from the fair market value of any such share, including
shares which may be issued in consideration for past services without any
cash payment required of the participant.
. The "Automatic Grant Program," under which an option grant will be made to
each individual upon first joining the Board of Directors as a nonemployee
member and subsequent annual automatic option grants will be made to each
individual who is re-elected as a nonemployee director of Synbiotics.
As of March 31, 1999, approximately 135 officers and employees were eligible
to participate in the Discretionary Grant Program and the Stock Issuance
Program. There are currently six nonemployee directors standing for re-election
who will be eligible to receive automatic grants under the Automatic Grant
Program.
Plan Administration
Option grants under the Discretionary Grant Program and stock issuances under
the Stock Issuance Program are to be made by the Board or by a committee of two
or more nonemployee Board members or, as to discretionary option grants to any
person other than directors, officers or 10% stockholders, by a committee of
any two or more directors (the "Plan Administrator"). The selected committee
members serve for such period of time as the Board may determine and will be
subject to removal by the Board at any time.
The Plan Administrator has the sole and exclusive authority, subject to the
provisions of the 1995 Plan, to determine the eligible individuals who are to
receive options under the Discretionary Grant Program or the Stock Issuance
Program, the number of shares to be covered by each granted option or issuance,
the date or dates on which the option is to become exercisable and the maximum
term for which the option is to remain outstanding. The Plan Administrator has
the authority to determine whether the granted option is to be an incentive
stock option ("Incentive Option") under the Federal tax laws and to establish
rules and regulations for proper plan administration. Options grants under the
Automatic Grant Program are made in strict compliance with the express
provisions of that program, and the Plan Administrator does not have any
discretionary authority with respect to those option grants.
Effect on Prior Plans
The 1995 Plan replaced and serves as the successor to the Prior Plans and the
1996 Stock Option Plan (the "Expanded Prior Plans"). No further option grants
will be made under the Expanded Prior Plans and all options outstanding under
the Expanded Prior Plans have been incorporated into the 1995 Plan and treated
as outstanding options under the 1995 Plan. However, each outstanding option so
incorporated shall continue to be governed solely by the terms of the documents
evidencing such option. No provision of the 1995 Plan adversely affects or
diminishes the rights or obligations of the optionees of the incorporated
options. Subject to the rights of the optionee under the incorporated option
documents, the Plan Administrator's discretion under the 1995 Plan may be
exercised with respect to incorporated options to the same extent as it is
exercisable with respect to options originally granted under the 1995 Plan.
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The Amendment would make the 1998 Stock Option Plan an Expanded Prior Plan.
Issuable Shares
The maximum number of shares of Common Stock reserved for issuance over the
10 year term of the 1995 Plan, measured from the Effective Date of the 1995
Plan can not exceed 2,000,000 shares. The Amendment would increase that maximum
number to 2,752,565. Such authorized share reserve is comprised of (i) the
number of shares that remained available for issuance under the Expanded Prior
Plans, including the shares subject to the outstanding options incorporated
into the 1995 Plan and any other shares that would have been available for
future option grant or share issuance under the Expanded Prior Plans, and (ii)
an additional 600,000 shares (which would become a total of 1,332,055 shares if
the Amendment is approved). The share reserve available for issuance under the
1995 Plan will be subject to periodic adjustment for changes in Synbiotics'
Common Stock occasioned by stock splits, stock dividends, recapitalizations,
conversions or other changes affecting the outstanding Common Stock as a class
without Synbiotics' receipt of consideration. To the extent any of the
incorporated options are subsequently exercised, the number of shares issued
under those options will reduce, on a share-for-share basis, the number of
shares available for issuance under the 1995 Plan.
Should an option expire or terminate for any reason prior to exercise in full
(including options canceled in accordance with the cancellation-regrant
provisions described below), the shares subject to the portion of the option
not so exercised will be available for subsequent option grants or share
issuances under the 1995 Plan. All shares issued under the 1995 Plan, whether
or not such shares are subsequently reacquired by Synbiotics pursuant to its
repurchase rights under the 1995 Plan, will reduce on a share-for-share basis
the number of shares of Common Stock available for subsequent grants.
No more than 800,000 shares may be granted to any one optionee over the
lifetime of the 1995 Plan.
Terms of Discretionary Grant Program
Option Price and Term. No option will have a term in excess of 10 years
measured from the grant date. The option price per share for incentive stock
options will not be less than 100% of the fair market value of each share of
Synbiotics Common Stock issuable under the option on the grant date of such
option. The option price per share for nonstatutory stock options may not be
less than 85% of the fair market value per share of each share of Synbiotics
Common Stock issuable under the option on the grant date of such option;
provided, that nonstatutory options may be granted having an exercise price
below 85% of fair market value 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 (above 15%) of the discount from fair market value exercise
price.
Valuation. For purposes of establishing the option exercise price for
Synbiotics Common Stock, the "Fair Market Value" per share of the stock on any
relevant date will be the closing selling price per share on such date, as
quoted on the Nasdaq National Market. If there is no reported selling price for
such date, then the closing selling price for the last previous date for which
such quotation exists will be determinative of Fair Market Value.
Vesting of Options. The vesting schedule for each granted option will be
determined by the Plan Administrator and will be set forth in the instrument
evidencing such grant. The granted option may be (i) immediately exercisable
for vested shares, (ii) immediately exercisable for unvested shares subject to
Synbiotics' repurchase rights or (iii) exercisable in installments for vested
shares over the optionee's period of service.
Payment. Upon exercise of the option, the option price for the purchased
shares will become immediately payable in cash or in shares of common stock
valued at fair market value on the date of exercise. The option my also be
exercised through a cashless exercise procedure pursuant to which the optionee
provides irrevocable written instructions to a designated brokerage firm to
effect the immediate sale of the purchased shares and remit to Synbiotics, out
of the said proceeds, an amount equal to the aggregate option price payable for
the purchased
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<PAGE>
shares plus all applicable withholding taxes. The Plan Administrator may assist
any optionee (including a director or an officer) in the exercise of one or
more outstanding options under the 1995 Plan by (i) authorizing a loan from
Synbiotics or (ii) permitting the optionee to pay the option price in
installments over a period of years. The term and conditions of any such loan
or installment payment will be established by the Plan Administrator in its
sole discretion, but in no event will the maximum credit extended to the
optionee exceed the aggregate option price for the purchased shares plus any
Federal or State tax liability incurred in connection with the option exercise.
Termination of Service. Should the optionee cease to remain in Synbiotics'
service while holding one or more options under the 1995 Plan, then those
options will not remain exercisable beyond the limited post-service period
designated by the Plan Administrator at the time of the option grant (subject
to certain minimum post-service periods). Under no circumstances, however, may
any option be exercised after the specified expiration date of the option term.
Each such option will, during the period it remains exercisable, be exercisable
for the number of shares for which the option was exercisable on the date of
the optionee's cessation of service.
Should the optionee die while holding one or more outstanding options, then
the personal representative of the optionee's estate or the person or persons
to whom each such option is transferred pursuant to the optionee's will or in
accordance with the laws of inheritance will have the right to exercise such
option for any or all of the shares for which the option is exercisable on the
date of the optionee's cessation of service, less any option shares
subsequently purchased by the optionee prior to death. Such right will lapse,
and the option will terminate, upon the earlier of (i) the end of the limited
post-service period designated by the Plan Administrator at the time of the
option grant or (ii) the specified expiration date of the option term.
The Plan Administrator will have complete discretion to extend the period
following the optionee's termination of service during which his or her
outstanding options may be exercised and/or to accelerate the exercisability of
such options in whole or in part. Such discretion may be exercised at any time
while the options remain outstanding, whether before or after the optionee's
actual cessation of service.
Corporate Transaction. Except to the extent otherwise provided in the option
documents, each option share will become fully vested in the event of certain
Corporate Transactions unless the option is assumed or is replaced with a cash
incentive program which preserves the material benefits of the options. Upon
consummation of the Corporate Transaction all options which are not assumed
will be canceled and cease to exist. The options or cash incentive programs
which replace any options which do not accelerate will provide for full vesting
in the event of involuntary termination of employment within 18 months
following the Corporate Transaction.
For purposes of the above, a Corporate Transaction includes (i) a merger or
consolidation in which Synbiotics is not the surviving entity (except for a
transaction the principal purpose of which is to change the State of
incorporation), (ii) the sale, transfer or other disposition of all or
substantially all of the assets of Synbiotics, or (iii) any reverse merger in
which Synbiotics is the surviving entity but in which securities possessing
more than fifty percent (50%) of the total combined voting power of Synbiotics
are transferred to holders different from those who held Synbiotics' securities
immediately prior to such merger.
Shareholder Rights and Option Assignability. No optionee is to have any
shareholder rights with respect to the option shares until such optionee has
exercised the option, paid the option price for the purchased shares and been
issued a stock certificate for such shares. Unless the Plan Administrator
expressly approves in writing, options are not assignable or transferable other
than by will or by the laws of inheritance following the optionee's death, and
the option may, during the optionee's lifetime, be exercised only by the
optionee.
Cancellation/Regrant. The Plan Administrator has the authority to effect, on
one or more separate occasions, the cancellation of outstanding options under
the Discretionary Grant Program which have exercise prices in excess of the
then current market price of the Common Stock and to issue replacement options
with an exercise price based on the lower market price of the Common Stock at
the time of grant.
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Terms of Stock Issuance Program
Issue Price. The purchase price per share will not be less than 85% of the
fair market value of a share of Synbiotics Common Stock on the date the Plan
Administrator authorizes the issuance.
Vesting of shares. The vesting schedule for each share issued will be
determined by the Plan Administrator and set forth in the issuance agreement.
The shares may be fully and immediately vested upon issuance or may vest in one
or more installments, subject to Synbiotics' repurchase right, over the
participant's period of service.
Shareholder Rights. The recipient of the share issuance will have full
shareholder rights, including voting and dividend rights, with respect to the
issued shares, whether or not the shares are vested. However, the recipient may
not sell, transfer or assign any unvested shares issued under the 1995 Plan
except for certain limited family transfers.
Repurchase Rights. Should the recipient of unvested shares cease to remain in
Synbiotics' service before vesting in such shares, then those unvested shares
are to be immediately surrendered to Synbiotics for cancellation, and the
recipient will have no further stockholder rights with respect to those shares.
To the extent the surrendered shares were previously issued to the recipient
for consideration paid in cash or promissory note, Synbiotics will refund the
cash consideration paid for the surrendered shares and cancel the principal
balance of the note to the extent attributable to such surrendered shares.
Payment. Upon issuance of the shares, the issue price for the purchased
shares will become immediately payable in cash or (upon Plan Administrator
approval) by promissory note payable to Synbiotics' order. The promissory note
may, at the discretion of the Plan Administrator, be subject to cancellation
over the participant's period of service. Shares may also be issued for past
services, without any cash or other payment required of the participant.
Corporate Transaction. Except to the extent otherwise provided in the stock
issuance documents, all repurchase rights will terminate and each share will
become fully vested in the event of a Corporate Transaction (as defined above)
unless the repurchase rights are assigned to the successor corporation.
Following consummation of the Corporate Transaction, all repurchase rights
which are not assigned to the successor will terminate and cease to exist. The
assigned purchase rights will terminate and cease to exist in the event of
involuntary termination of employment within 18 months following the Corporate
Transaction.
Terms of Automatic Grant Program
Each individual who first becomes a nonemployee Board member, whether through
election by the stockholders or appointment by the Synbiotics Board, and who
was not otherwise in the prior employ of Synbiotics is automatically granted,
at the time of such initial election or appointment, a non-statutory stock
option to purchase 7,000 shares of Synbiotics Common Stock. Further, at each
annual Stockholders Meeting, each individual who is at that time reelected as a
nonemployee Board member is automatically granted a nonstatutory stock option
under the Automatic Grant Program to purchase an additional 7,000 shares of
Synbiotics Common Stock. There is no limit on the number of such 7,000-share
option grants the nonemployee Synbiotics Board member may receive over his or
her period of Board service.
Each such option grant is subject to the following terms and conditions:
<TABLE>
<C> <S>
(i) The option price per share is equal to 100% of the Fair Market Value per
share of Common Stock on the grant date.
(ii) Each option has a term of 10 years measured from the grant date.
(iii) Each automatic grant is immediately exercisable in full, provided that
any shares issued upon the exercise of an automatic option grant shall
be subject to repurchase at the option exercise price if the Board
member ceases to be in service prior to the vesting of such shares.
</TABLE>
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<TABLE>
<C> <S>
(iv) The shares vest in four equal quarterly installments over the optionee's
period of service following the automatic option grant.
(v) The options remain exercisable during the remainder of their term
following the optionee's cessation of Synbiotics Board membership for any
reason, provided that the option shall be exercisable following the
termination of service only with respect to the shares which were vested
as of such termination of service date. Should the optionee die while any
option is still exercisable, then such option may be exercised by the
personal representative of the optionee's estate or the person to whom
the grant is transferred by the optionee's will or the laws of
inheritance.
(vi) The remaining terms and conditions of the option in general conform to
the terms described above for option grants made under the Discretionary
Grant Program and are incorporated into the option agreement evidencing
the automatic grant.
</TABLE>
Each option share will become fully vested in the event of a Corporate
Transaction (as defined above). Upon consummation of the Corporate Transaction,
all options will be canceled and cease to exist.
Changes in Capitalization
In the event any change is made to the Common Stock issuable under the 1995
Plan by reason of any recapitalization, stock dividend, stock split,
combination of shares, exchange of shares, or other change in corporate
structure effected without Synbiotics' receipt of consideration, appropriate
adjustments will be made to (i) the maximum number and/or class of securities
issuable under the 1995 Plan, (ii) the number and/or class of securities and
price per share in effect under each outstanding option (including all
discretionary and automatic option grants under the 1995 Plan and all option
grants incorporated from the Expanded Prior Plans), and (iii) the number and/or
class of securities per nonemployee member of the Board for which option grants
will subsequently be made under the Automatic Grant Program.
Each outstanding option which is assumed or is otherwise to continue in
effect after a Corporate Transaction win be appropriately adjusted to apply and
pertain to the number and class of securities which would have been issuable,
in connection with such Corporate Transaction, to an actual holder of the same
number of shares of Synbiotics Common Stock as are subject to such option
immediately prior to such Corporate Transaction. Appropriate adjustments will
also be made to the option price payable per share and to the number and class
of securities available for issuance under the 1995 Plan.
Option grants under the 1995 Plan will not affect the right of Synbiotics to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
Special Tax Withholding Election
The Plan Administrator may provide one or more participants in the 1995 Plan
with the election to have Synbiotics withhold, from the shares of Common Stock
otherwise issuable upon the exercise of non-qualified options or the vesting of
unvested shares, a portion of those shares in satisfaction of the tax liability
incurred in connection with their acquisition or vesting. Any election so made
will be subject to the approval of the Plan Administrator, and no shares will
be accepted in satisfaction of such tax liability except to the extent the Plan
Administrator approves the election. Alternatively, one or more participants
may be granted the right, subject to Plan Administrator approval, to deliver
existing shares of Common Stock in satisfaction of such tax liability. The
withheld or delivered shares will be valued at their then current fair market
value.
Amendment and Termination
The Board of Directors may amend or modify the 1995 Plan in any or all
respects whatsoever. However, no such amendment may adversely affect the rights
of existing optionees without their consent and unless
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<PAGE>
otherwise necessary to comply with applicable tax laws and regulations. In
addition, shareholder approval of and amendment or modification of the 1995
Plan must be obtained if it is required by law or regulation or, in a
particular instance, by a Board of Directors decision that shareholder approval
should be required.
The Board may terminate the 1995 Plan at any time, and the 1995 Plan will in
all events terminate on April 25, 2005. Each stock option outstanding at the
time of such termination will remain in force in accordance with the provisions
of the instruments evidencing such grant.
Federal Tax Consequences
Options granted under the 1995 Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-qualified options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as described
below:
Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize income for
alternative minimum tax purposes in the year the option is exercised and
regular taxable income in the year in which the purchased shares are sold or
otherwise made the subject of disposition.
For Federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. The optionee will make a qualifying
disposition of the purchased shares if the sale or other disposition of such
shares is made after the optionee has held the shares for more than two years
after the grant date of the option and more than one year after the exercise
date. If the optionee fails to satisfy either of these two holding periods
prior to the sale or other disposition of the purchased shares, then a
disqualifying disposition will result.
Upon a qualifying disposition of the shares, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares over
(ii) the exercise price paid for such shares. If there is a disqualifying
disposition of the shares, then the excess of (i) the fair market value of
those shares on the date the option was exercised over (ii) the exercise price
paid for the shares will be taxable as ordinary income. Any additional gain
recognized upon the disposition will be a capital gain.
If the optionee makes a disqualifying disposition of the purchased shares,
then Synbiotics will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the date the option was exercised over (ii) the
exercise price paid for the shares. In no other instance will Synbiotics be
allowed a deduction with respect to the optionee's disposition of the purchased
shares.
Non-qualified Options. No taxable income is recognized by an optionee upon
the grant of a non-qualified option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the date of exercise
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
Special provisions of the Internal Revenue Code apply to the acquisition of
Common Stock under a non-qualified option, if the purchased shares are subject
to repurchase by Synbiotics. These special provisions may be summarized as
follows:
A. If the shares acquired upon exercise of the non-qualified option are subject
to repurchase by Synbiotics at the original exercise price in the event of
the optionee's termination of service prior to vesting in such shares, the
optionee will not recognize any taxable income at the time of exercise but
will have to report as ordinary income, as and when Synbiotics' repurchase
right lapses, an amount equal to the excess of (i) the fair market value of
the shares on the date Synbiotics' repurchase right lapses with respect to
such shares over (ii) the exercise price paid for the shares.
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B. The optionee may, however, elect under Section 83(b) of the Internal Revenue
Code to include as ordinary income in the year of exercise of the non-
qualified option an amount equal to the excess of (i) the fair market value
of the purchased shares on the date of exercise (determined as if the shares
were not subject to Synbiotics' repurchase right) over (ii) the exercise
price paid for such shares. If the Section 83(b) election is made, the
optionee will not recognize any additional income as and when the
Synbiotics' repurchase right lapses.
Synbiotics will be entitled to a business expense deduction equal to the
amount of ordinary income recognized by the optionee with respect to the
exercised non-qualified option. The deduction will in general be allowed for
the taxable year of Synbiotics in which such ordinary income is recognized by
the optionee.
Direct Stock Issuances. The tax consequences of individuals who receive
direct stock issuances under the 1995 Plan will be substantially the same as
the treatment described above for the exercise of non-qualified stock options.
Accounting Treatment
Option grants with exercise prices less than the fair market value of the
option shares on the grant date and direct stock issuances at purchase prices
less than the fair market value of the issued shares will result in a
compensation expense charge to Synbiotics' earnings equal to the difference
between such exercise or purchase prices and the fair market value of the
shares on the option grant date or (for direct stock issuances) the fair market
value on the issue date. Such expense will be accrued by Synbiotics over the
period the optionee or share recipient vests in the option shares or directly-
issued shares. Option grants and direct stock issuances at 100% of fair market
value will not result in any charge to Synbiotics' earnings. Whether or not
granted at a discount, the number of outstanding options may be a factor in
determining Synbiotics' earnings per share.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE AMENDMENT TO THE 1995 STOCK
OPTION/STOCK ISSUANCE PLAN (ITEM 2 ON THE PROXY CARD). Approval will require
the affirmative vote of a majority of those shares which are present or
represented at the Meeting. Abstentions will have the same effect as votes
against approval of the Amendment of the 1995 Plan. Broker non-votes will,
assuming the shares are represented at the Meeting for any purpose, have the
same effect as votes against approval of the Amendment of the 1995 Plan; but if
the shares are entirely not represented at the Meeting the broker non-votes
will have no effect on the proposal to approve the Amendment of the 1995 Plan.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership of the Company's equity securities with the Securities and Exchange
Commission. Officers, directors and greater than 10% shareholders are required
by SEC regulations to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely on its review of the copies of such forms furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that during the fiscal year ended December 31, 1998, all Section 16(a)
filing requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with.
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SHAREHOLDER PROPOSALS
To be included in the Company's proxy materials for the Annual Meeting of
Shareholders to be held in 1999, a shareholder proposal must be received at the
offices of the Company, 11011 Via Frontera, San Diego, CA 92127, not later than
January 7, 2000.
OTHER MATTERS
PricewaterhouseCoopers LLP has served as the independent accountants of the
Company for a number of years. Although management anticipates that this
relationship will continue to be maintained during fiscal 1999, as in previous
years, it is not proposed that any formal action be taken at the Annual Meeting
with respect to the continued employment of PricewaterhouseCoopers LLP.
Representatives of PricewaterhouseCoopers LLP are expected to be present at the
Company's Annual Meeting with the opportunity to make a statement if they
desire to do so and they are expected to be available to respond to appropriate
questions.
The Board of Directors, at this time, knows of no other business which will
be presented to the meeting. If any other business is properly brought before
the meeting, it is intended that the proxies in the enclosed form will be voted
in respect thereof in accordance with the judgment of the persons voting the
proxies.
The Company's Annual Report, including the Company's audited financial
statements for the fiscal year ended December 31, 1998, is being mailed
herewith to all shareholders of record. THE COMPANY WILL PROVIDE WITHOUT CHARGE
TO ANY BENEFICIAL OWNER OF COMMON STOCK ON APRIL 16, 1999, UPON THE WRITTEN
REQUEST OF ANY SUCH PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-
KSB FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION. SUCH REQUESTS SHOULD BE DIRECTED TO MICHAEL K. GREEN, VICE
PRESIDENT - FINANCE OF THE COMPANY, AT 11011 VIA FRONTERA, SAN DIEGO, CA 92127.
Whether you intend to be present at this meeting or not, you are urged to
return your proxy promptly.
By order of the Board of Directors
Michael K. Green
Secretary
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APPENDIX A
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NOTE: THIS ITEM IS BEING FILED WITH THE COMMISSION PURSUANT TO INSTRUCTION 3 TO
ITEM 10(B) OF SCHEDULE 14A. THE ITEM IS NOT PART OF THE PROXY STATEMENT AND
WILL NOT BE DISTRIBUTED TO THE COMPANY'S SHAREHOLDERS IN CONJUNCTION WITH THE
SOLICITATION OF PROXIES.
SYNBIOTICS CORPORATION
1995 STOCK OPTION/STOCK ISSUANCE PLAN
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as amended through March 29, 1999
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ARTICLE ONE
GENERAL PROVISIONS
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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
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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.
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B. Committees. Administration of the Discretionary Option Grant and
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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
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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
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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
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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
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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.
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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 2,752,565 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 1,332,055 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.
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D. Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration,
appropriate adjustments shall be made to (i) the maximum number and/or
class of securities issuable under the Plan, (ii) the maximum number
and/or class of securities for which the share reserve is to increase
automatically each year, (iii) the number and/or class of securities
for which any one person may be granted options and direct stock
issuances over the term of the Plan, (iv) the number and/or class of
securities for which automatic option grants are to be subsequently
made under the Automatic Option Grant Program and (v) the number
and/or class of securities and the exercise price per share in effect
under each outstanding option (including any option incorporated from
the Predecessor Plan) in order to prevent the dilution or enlargement
of benefits thereunder. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
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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
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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.
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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
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Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of
such exercise and (b) the Corporation to deliver the
certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares
must be made on the exercise date.
B. Exercise and Term of Options. Each option shall be exercisable at
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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.
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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
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<PAGE>
option to such greater period of time as the Plan
Administrator shall deem appropriate, but in no event
beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to
the number of vested shares of Common Stock for which
such option is exercisable at the time of the Optionee's
cessation of Service but also with respect to one or more
additional installments in which the Optionee would have
vested under the option had the Optionee continued in
Service.
D. Stockholder Rights. The holder of an option shall have no stockholder
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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
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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
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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.
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A. Eligibility. Incentive Options may only be granted to Employees.
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B. Exercise Price. The exercise price per share shall not be less than
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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
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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
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<PAGE>
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
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granted is a 10% stockholder (within the meaning of Internal Revenue
Code Section 424(d)), then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per
share of Common Stock on the option grant date, and the option term
shall not exceed five (5) years measured from the option grant date.
III. CORPORATE TRANSACTION
A. In the event of any Corporate Transaction, each outstanding option
shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction,
become fully exercisable for all of the shares of Common Stock at the
time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. However, an
outstanding option shall NOT so accelerate if and to the extent: (i)
such option is, in connection with the Corporate Transaction, either
to be assumed by the successor corporation (or parent thereof) or to
be replaced with a comparable option to purchase shares of the capital
stock of the successor corporation (or parent thereof), (ii) such
option is to be replaced with a cash incentive program of the
successor corporation which preserves the spread existing on the
unvested option shares at the time of the Corporate Transaction and
provides for subsequent payout in accordance with the same vesting
schedule applicable to such option or (iii) the acceleration of such
option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant. The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and
conclusive.
B. All outstanding repurchase rights shall also terminate automatically,
and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate
Transaction, except to the extent: (i) those repurchase rights are to
be assigned to the 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
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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
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<PAGE>
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
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expiration of the one (1)-year period measured from the effective date
of the Involuntary Termination.
F. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction or Change in Control shall remain exercisable as
an Incentive Option only to the extent the applicable One Hundred
Thousand Dollar limitation is not exceeded. To the extent such dollar
limitation is exceeded, the accelerated portion of such option shall
be exercisable as a Non-Statutory Option under the Federal tax laws.
G. The grant of options under the Discretionary Option Grant Program
shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time and from
time to time, with the consent of the affected option holders, the cancellation
of any or all outstanding options under the Discretionary Option Grant Program
(including outstanding options incorporated from the Predecessor Plan) and to
grant in substitution new options covering the same or different number of
shares of Common Stock but with an exercise price per share based on the Fair
Market Value per share of Common Stock on the new option grant date.
ARTICLE THREE
STOCK ISSUANCE PROGRAM
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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
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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
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<PAGE>
(ii) past services rendered to the Corporation (or any Parent
or Subsidiary).
B. Vesting Provisions
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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
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<PAGE>
would otherwise occur upon the non-completion of the vesting
schedule applicable to such shares. Such waiver shall result in
the immediate vesting of the Participant's interest in the shares
of Common Stock as to which the waiver applies. Such waiver may
be effected at any time, whether before or after the
Participant's cessation of Service or the attainment or non-
attainment of the applicable performance objectives.
II. CORPORATE TRANSACTION
A. All of the outstanding repurchase rights under the Stock Issuance
Program shall terminate automatically, and all the shares of Common
Stock subject to those terminated rights shall immediately vest in
full, in the event of any Corporate Transaction, except to the extent
(i) those repurchase rights are assigned to the successor corporation
(or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations
imposed in the stock issuance agreement.
B. Any repurchase rights that are assigned in the Corporate Transaction
shall automatically terminate, and all the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in
the event the Optionee's Service should subsequently terminate by
reason of an Involuntary Termination within eighteen (18) months
following the effective date of such Corporate Transaction.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in escrow
by the Corporation until the Participant's interest in such shares vests or may
be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
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I. OPTION TERMS
A. Grant Dates. Option grants shall be made on the dates specified
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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
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Meeting. There shall be no limit on the number of such 7,000-
share option grants any one non-employee director may receive
over his or her period of Board service.
B. Exercise Price.
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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
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from the option grant date.
D. Exercise and Vesting of Options. Each option shall be immediately
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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
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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.
-11-
<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
-12-
<PAGE>
acceleration of one or more outstanding options and the termination of
repurchase rights on one or more outstanding shares upon the
occurrence of such events as the Plan Administrator may determine,
including upon a Corporate Transaction regardless or whether or not
such options are to be assumed or replaced or the repurchase rights
are to be assigned in the Corporate Transaction.
B. The Plan Administrator shall not have the discretion to provide for
the acceleration of any options granted under the Automatic Option
Grant Program.
II. FINANCING
A. The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program
or the purchase price for shares issued under the Stock Issuance
Program by delivering a promissory note payable in one or more
installments. The terms of any such promissory note (including the
interest rate and the terms of repayment) shall be established by the
Plan Administrator in its sole discretion. Promissory notes may be
authorized with or without security or collateral. In all events, the
maximum credit available to the Optionee or Participant may not exceed
the sum of (i) the aggregate option exercise price or purchase price
payable for the purchased shares plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share
purchase.
B. The Plan Administrator may, in its discretion, determine that one or
more such promissory notes shall be subject to forgiveness by the
Corporation in whole or in part upon such terms as the Plan
Administrator may deem appropriate.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of options or upon the issuance or vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable
Federal, state and local income and employment tax withholding
requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock
under the Plan (other than the options granted or the shares issued
under the Automatic Option Grant Program) with the right to use shares
of Common Stock in satisfaction of all or part of the federal, state
and local income or employment taxes incurred by such holders in
connection with the exercise of their options or the vesting of their
shares. Such right may be provided to any such holder in either or
both of the following formats:
(i) Stock Withholding: The election to have the Corporation
-----------------
withhold, from the shares of Common Stock otherwise issuable
upon the exercise of such Non-Statutory Option or the vesting of
such shares, a portion of those shares with an aggregate Fair
Market Value 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.
-13-
<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
-14-
<PAGE>
the Stock Issuance Program that are in each instance in excess of the
number of shares then available for issuance under the Plan, provided
any excess shares actually issued under those programs are held in
escrow until there is obtained stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan. If such stockholder approval (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.
-15-
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
-----
B. CHANGE IN CONTROL shall mean a change in ownership or control of the
-----------------
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any person or related
group of persons (other than the Corporation or a person that directly
or indirectly controls, is controlled by, or is under common control
with, the Corporation), of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders
which the Board does not recommend such stockholders to accept, or
(ii) a change in the composition of the Board over a period of thirty-six
(36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B)
have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (A) who were still in office at the time the Board approved
such election or nomination.
C. CORPORATE TRANSACTION shall mean either of the following stockholder-
---------------------
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is
to change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all or substantially all
of the assets of the Company in liquidation or dissolution of the
Company, or
(iii) any reverse merger in which the Company is the surviving entity but
in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities
are transferred to holders different from those who held such
securities immediately prior to such merger.
D. CORPORATION shall mean Synbiotics Corporation, a California corporation.
-----------
E. EMPLOYEE shall mean an individual who is in the employ of the Corporation
--------
(or any Parent or Subsidiary), subject to the control and direction of the
employer entity as to both the work to be performed and the manner and
method of performance.
F. FAIR MARKET VALUE per share of Common Stock on any relevant date shall be
-----------------
determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such
A-1.
<PAGE>
price is reported by the National Association of Securities Dealers
on the Nasdaq National Market or any successor system. If there is
no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any stock exchange,
then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for
the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(iii) 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.
--------------------
A-2.
<PAGE>
L. PARENT shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
M. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability of
--------------------------------------------
the Optionee or the Participant to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of
twelve (12) months or more.
N. PREDECESSOR 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, 1996 Stock Option Plan and 1998
Stock Option Plan.
O. SERVICE shall mean the provision of services to the Corporation (or any
-------
Parent or Subsidiary) by a person in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant.
P. SUBSIDIARY shall mean any corporation (other than the Corporation) in an
----------
unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain
owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
Q. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market Value per
--------------- -------
share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest
reported price per share of Common Stock paid by the tender offeror in
effecting such Hostile Take-Over. However, if the surrendered option is an
Incentive Option, the Take-Over Price shall not exceed the clause (i) price
per share.
A-3.
<PAGE>
COMMON STOCK PROXY SYNBIOTICS CORPORATION COMMON STOCK PROXY
11011 VIA FRONTERA, SAN DIEGO, CALIFORNIA 92127
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Kenneth M. Cohen and Michael K. Green, jointly
and severally, as proxyholders, each with full power to appoint his substitute,
and hereby authorizes them to vote as designated below, all the shares of Common
Stock of Synbiotics Corporation held of record by the undersigned at the close
of business on April 16, 1999, at the Annual Meeting of Shareholders to be held
on June 9, 1999, or any postponement or adjournment thereof, and to vote in
their discretion on such other business as may come before the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
1. ELECTION OF DIRECTORS.
[_] FOR all nominees listed below (except as marked to the contrary below)
[_] WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
CHECK THE BOX "FOR" AND STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
BELOW.)
Nominees: Patrick Owen Burns, Kenneth M. Cohen, James C. DeCesare, Brenda
D. Gavin, M. Blake Ingle, Joseph Klein III, Donald E. Phillips
2. APPROVAL OF THE AMENDMENT OF THE 1995 STOCK OPTION/STOCK ISSUANCE PLAN.
[_] FOR [_] AGAINST [_] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER AND WILL BE VOTED BY THE PROXYHOLDERS AT THEIR
DISCRETION AS TO ANY OTHER MATTERS PROPERLY TRANSACTED AT THE ANNUAL MEETING.
IF THIS PROXY IS PROPERLY EXECUTED AND NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
Dated: ______________ , 1999
- ----------------------------
(Shareholder's Signature)
- ----------------------------
(Shareholder's Signature)
Please sign exactly as your name appears on this Proxy. If signing for trusts,
estates, partnerships, or corporations, title or capacity should be stated. If
shares are held jointly, each holder should sign.
PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING. [_]
