-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U4CyMXeUv5thlXSKAirPS8kw43LNl0Wxket8fN6ACh7pwYEomKp7wxff1Zm8dMcc sILhNiV+Iv5mlqwHGFkzMg== 0000898430-96-001920.txt : 19960517 0000898430-96-001920.hdr.sgml : 19960517 ACCESSION NUMBER: 0000898430-96-001920 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYNBIOTICS CORP CENTRAL INDEX KEY: 0000719483 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 953737816 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-11303 FILM NUMBER: 96564990 BUSINESS ADDRESS: STREET 1: 11011 VIA FRONTERA CITY: SAN DIEGO STATE: CA ZIP: 92127 BUSINESS PHONE: 6194513771 10QSB 1 QUARTERLY REPORT ================================================================================ U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________ FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 OR [_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-11303 SYNBIOTICS CORPORATION (Exact name of small business issuer as specified in its charter) CALIFORNIA 95-3737816 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 11011 VIA FRONTERA San Diego, California 92127 (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code: (619) 451-3771 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] As of April 30, 1996, 5,974,880 shares of Common Stock were outstanding. Transitional Small Business Disclosure Format: Yes [_] No [X] ================================================================================ SYNBIOTICS CORPORATION INDEX
PAGE ----- Part I. Condensed Statement of Operations - Three months ended March 31, 1996 and 1995 3 Condensed Balance Sheet - March 31, 1996 and December 31, 1995 4 Condensed Statement of Cash Flows - Three months ended March 31, 1996 and 1995 5 Notes to Condensed Financial Statements 6 Management's Discussion and Analysis or Plan of Operation 7 Part II. Other Information 8
2 ITEM 1. FINANCIAL STATEMENTS -------------------- SYNBIOTICS CORPORATION CONDENSED STATEMENT OF OPERATIONS (UNAUDITED) - -------------------------------------------------------------------------------
Three Months Ended March 31, ------------------------ 1996 1995 ---------- ---------- Revenues: Product sales $5,750,000 $4,826,000 License fees and other 171,000 50,000 Interest 11,000 9,000 ---------- ---------- 5,932,000 4,885,000 Cost and expenses: Cost of sales 2,779,000 2,183,000 Research and development 216,000 201,000 Selling and marketing 1,229,000 1,378,000 General and administrative 385,000 351,000 ---------- ---------- 4,609,000 4,113,000 ---------- ---------- Income before gain on sale of securities available for sale 1,323,000 772,000 Gain on sale of securities available for sale 385,000 ---------- ---------- Income before income taxes 1,708,000 772,000 Provision for income taxes 57,000 18,000 ---------- ---------- Net income $1,651,000 $ 754,000 ========== ========== Net income per share $ .28 $ .13 ========== ========== Weighted average shares outstanding 5,911,000 5,803,000 ========== ==========
Net income per share was computed based upon the weighted average number of shares outstanding, including common stock equivalents. See accompanying notes to condensed financial statements. 3 ITEM 1. FINANCIAL STATEMENTS (CONTINUED) -------------------- SYNBIOTICS CORPORATION CONDENSED BALANCE SHEET ________________________________________________________________________________
March 31, December 31, 1996 1995 ------------ ------------- (unaudited) (audited) ASSETS Current assets: Cash and equivalents $ 1,620,000 $ 1,017,000 Securities available for sale 715,000 Accounts receivable 3,572,000 1,430,000 Inventories 4,082,000 3,439,000 Other current assets 557,000 578,000 ------------ ------------- Total current assets 10,546,000 6,464,000 Property and equipment, net 765,000 879,000 Securities available for sale 2,840,000 2,533,000 Other assets 1,885,000 1,582,000 ------------ ------------- $16,036,000 $ 11,458,000 ============ ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 2,063,000 $ 1,613,000 Other current liabilities 686,000 697,000 ------------ ------------- Total current liabilities 2,749,000 2,310,000 ------------ ------------- Shareholders' equity: Common stock, no par value, 24,800,000 shares authorized, 5,970,000 and 5,816,000 shares issued and outstanding at March 31, 1996 and December 31, 1995 29,748,000 29,351,000 Unrealized holding gains (losses) from securities available for sale 1,056,000 (1,035,000) Accumulated deficit (17,517,000) (19,168,000) ------------ ------------- Total shareholders' equity 13,287,000 9,148,000 ------------ ------------- $ 16,036,000 $ 11,458,000 ============ =============
See accompanying notes to condensed financial statements. 4 ITEM 1. FINANCIAL STATEMENTS (CONTINUED) -------------------- SYNBIOTICS CORPORATION CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED) ________________________________________________________________________________
Three Months Ended March 31, ------------------------- 1996 1995 ----------- ----------- Cash flows from operating activities: Net income $ 1,651,000 $ 754,000 Adjustments to reconcile net income to net cash used for operating activities: Depreciation and amortization 231,000 251,000 Gain on sale of securities available for sale (385,000) Changes in assets and liabilities: Accounts receivable (2,142,000) (579,000) Inventories (643,000) (107,000) Other assets 16,000 65,000 Accounts payable and accrued expenses 450,000 379,000 Other liabilities (11,000) 6,000 ----------- ---------- Net cash (used for) provided by operating activities (833,000) 769,000 ----------- ---------- Cash flows from investing activities: Acquisition of property and equipment (16,000) (60,000) Investment in securities available for sale (715,000) (5,000) Proceeds from sale of securities available for sale 2,167,000 ----------- ---------- Net cash provided by (used for) investing activities 1,436,000 (65,000) ----------- ---------- Net increase in cash and equivalents 603,000 704,000 Cash and equivalents - beginning of year 1,017,000 447,000 ----------- ---------- Cash and equivalents - end of period $ 1,620,000 $1,151,000 =========== ==========
See accompanying notes to condensed financial statements. 5 ITEM 1. FINANCIAL STATEMENTS (CONTINUED) -------------------- SYNBIOTICS CORPORATION NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) _______________________________________________________________________________ NOTE 1 - INTERIM FINANCIAL STATEMENTS: The accompanying balance sheet as of March 31, 1996 and the statements of operations and of cash flows for the three month periods ended March 31, 1996 and 1995 have been prepared by Synbiotics Corporation (the Company) and have not been audited. These financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the financial position, results of operations and cash flows for all periods presented. The financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB filed for the year ended December 31, 1995. Interim operating results are not necessarily indicative of operating results for the full year. NOTE 2 - SECURITIES AVAILABLE FOR SALE: Included in current assets are securities available for sale which consist primarily of short-term commercial paper. NOTE 3 - INVENTORIES: Inventories consist of the following:
March 31, December 31, 1996 1995 ---------- ------------ Raw materials $1,044,000 $ 665,000 Work in process 642,000 633,000 Finished goods 2,396,000 2,141,000 ---------- ------------ $4,082,000 $3,439,000 ========== ============
6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION --------------------------------------------------------- RESULTS OF OPERATIONS Total revenue for the first quarter of 1996 increased by $1,047,000 or 21% over the first quarter of 1995. Product sales during the first quarter of 1996 increased $924,000 or 19%. The increase is due to an increase of $644,000 or 49% in vaccine sales and a $280,000 or 8% increase in diagnostic sales. Vaccine sales increased primarily due to $640,000 of international shipments of bulk feline leukemia vaccine to Rhone-Merieux, which bottles and markets the Company's feline leukemia vaccine under its own brand name in certain parts of Europe, for which there were no comparable sales during the first quarter of 1995. The increased diagnostic sales are primarily due to sales of the Company's ICT GOLD(TM) HW product, which was introduced in March 1995, and sales of D-TEC/(R)/ CB (canine brucellosis) which had been on back order for approximately one year as a result of third-party manufacturer production problems. License fees and other revenue during the first quarter of 1996 increased $121,000 or 242% over the first quarter of 1995 due to increased royalties earned on certain of the Company's products which are licensed to Rhone Merieux, Inc. (located in Athens, Georgia) and license fees received in conjunction with an exclusive distribution agreement with Daiichi Pharmaceutical Co., Ltd. for the distribution of the Company's vaccine and diagnostic products in Japan. The Daiichi arrangement is not expected to generate significant revenues until at least 1998. The cost of sales as a percentage of product revenue increased to 48% during the first quarter of 1996 as compared to 45% for the first quarter of 1995. The increase is due primarily to increased unapplied manufacturing overhead, resulting from a larger percentage of product sales during 1996 being generated from products which are manufactured for the Company by third parties. The Company's manufacturing costs are predominantly fixed costs. Among the Company's major products, DiroCHEK/(R)/ canine heartworm diagnostic products are manufactured at Company facilities, whereas ICT GOLD(TM) HW and all vaccines are manufactured by third parties. In addition to affecting gross margins, this shift in product mix renders the Company relatively more dependent on the third- party manufacturers. Selling and marketing expenses during the first quarter of 1996 decreased by $149,000 or 11% from the first quarter of 1995. The decrease is due primarily to a reduction in advertising and promotion costs which were higher during the first quarter of 1995 resulting from the introduction of the Company's ICT GOLD(TM) HW canine heartworm diagnostic test. On February 27, 1996 and February 28, 1996, the Company sold a total of 614,000 shares of Texas Biotechnology Corporation ("TBC") common stock on the American Stock Exchange at an average selling price of $3.573 per share. As a result of the transactions, the Company recognized a gain of $385,00 during the first quarter of 1996. As a result of the sale of the shares, the Company's ownership of TBC was reduced to approximately 3%. During the period April 25, 1996 to May 2, 1996, the Company sold its remaining 614,000 shares of TBC common stock on the American Stock Exchange at an average selling price of $4.205 per share. As a result of the transactions, the Company will recognize a gain of $774,000 during the second quarter of 1996. The net proceeds received from the sales, which totalled $4,727,000, will be used primarily for working capital requirements and to fund business opportunities such as acquisitions. The Company's business is seasonal, and is concentrated within the canine heartworm selling season, which falls mainly in the quarters ending March 31 and June 30 of each year. Sales and results from operations in the quarters ending September 30 and December 31 of each year are expected to be less favorable than in the heartworm selling season. 7 FINANCIAL CONDITION Management believes that the Company's present capital resources, which included working capital of $7,797,000 at March 31, 1996, are sufficient to meet its current working capital needs. PART II. OTHER INFORMATION --------------------------- ITEM 1. LEGAL PROCEEDINGS: ------------------ None. ITEM 2. CHANGES IN SECURITIES: ---------------------- None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES: -------------------------------- None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: ---------------------------------------------------- None. ITEM 5. OTHER INFORMATION: ------------------ None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K: --------------------------------- (a) Exhibits -------- 10.53 Distribution Agreement between the Registrant and Daiichi Pharmaceutical Co., Ltd., dated January 16, 1996./(1)/ 10.54 License Agreement between the Registrant and Engene Biotechnologies, Inc., dated March 6, 1996./(1) / 10.55 Research and Development Agreement between the Registrant and Engene Biotechnologies, Inc., dated March 6, 1996./(1)/ 10.56 Scientific Advisor Agreement between the Registrant and J. Kevin Steele, dated March 6, 1996./(1)/ 8 10.57 Inducement Agreement between the Registrant and Engene Biotechnologies, Inc., dated March 6, 1996./(1)/ 11.1 Computation of Earnings Per Share. 27 Financial Data Schedule (for electronic filing purposes only). ______________________ (1) Certain confidential portions of this exhibit have been omitted by means of blacking out the text (the "Mark"). This exhibit has been filed separately with the Secretary of the Commission without the Mark pursuant to the Company's Application Requesting Confidential Treatment under Rule 24- b-2 under the Securities Exchange Act of 1934, as amended. (b) Reports on Form 8-K ------------------- None. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereto duly authorized. SYNBIOTICS CORPORATION Date: May 15, 1996 /s/ Michael K. Green ---------------------- Michael K. Green Vice President of Finance and Chief Financial Officer (signing both as a duly authorized officer and as principal financial officer) 9 EXHIBIT INDEX Exhibit No. Exhibit - ----------- ------- 10.53 Distribution Agreement between the Registrant and Daiichi Pharmaceutical Co., Ltd., dated January 16, 1996./(1)/ 10.54 License Agreement between the Registrant and Engene Biotechnologies, Inc., dated March 6, 1996./(1)/ 10.55 Research and Development Agreement between the Registrant and Engene Biotechnologies, Inc., dated March 6, 1996./(1)/ 10.56 Scientific Advisor Agreement between the Registrant and J. Kevin Steele, dated March 6, 1996./(1)/ 10.57 Inducement Agreement between the Registrant and Engene Biotechnologies, Inc., dated March 6, 1996./(1)/ 11.1 Computation of Loss Per Share. 27 Financial Data Schedule (for electronic filing purposes only). _____________________ (1) Certain confidential portions of this exhibit have been omitted by means of blacking out the text (the "Mark"). This exhibit has been filed separately with the Secretary of the Commission without the Mark pursuant to the Company's Application Requesting Confidential Treatment under Rule 24b-2 under the Securities Exchange Act of 1934, as amended. 10 EX-10.53 2 DISTRIBUTION AGREEMENT DISTRIBUTION AGREEMENT EXHIBIT 10.53 ------------- This Distribution Agreement (hereinafter called the "Agreement") is entered as of January 16, 1996 (hereinafter called the "Effective Date") by and between Synbiotics Corporation (hereinafter called "Synbiotics"), a California corporation, with its principal office at 11011 Via Frontera, San Diego, California, U.S.A. and Daiichi Pharmaceutical Co., Ltd. (hereinafter called "Distributor"), a Japanese corporation, with its principal office at 14-10, Nihonbashi 3-Chome, Chuo-Ku, Tokyo 103, Japan. WITNESSETH WHEREAS, Synbiotics is engaged in business activity relating to veterinary vaccines and diagnostics including the "Products" (as hereinafter defined), and WHEREAS, Distributor is engaged in business activity relating to manufacture, sale and marketing of pharmaceutical products for human and veterinary use, and WHEREAS, Synbiotics and Distributor entered into the Non-Disclosure Agreement containing the Products on April 11, 1995 and Distributor evaluated the commercialization of the Products, and WHEREAS, Distributor has now expressed the desire to import the Products from Synbiotics and sell the Products for veterinary use in the "Territory" (as hereinafter defined) and Synbiotics is willing to accept such desire; NOW THEREFORE, in consideration of the mutual covenants herein contained, Synbiotics and Distributor agree as follows: 1. Definition. In this Agreement the following terms shall have the meanings ----------- respectively indicated in this Section 1. (a) The "Products" shall mean the Synbiotics' unlabeled veterinary vaccines and diag nostics which are expressly set forth in Attachment A. (b) The "Territory" shall mean Japan. (c) The "Trademarks" shall mean Synbiotics' trademarks (English and Japanese) for the Products in the Territory applied or owned by Synbiotics. (d) The "Preshipment Sample" shall mean the sample from each shipment of the Products which Synbiotics provide to Distributor for quality testing purpose and has the same lot number with such Products to be shipped. 2. Appointment. Synbiotics hereby appoints Distributor for the term of this ------------ Agreement as, and Distributor agrees to act as, Synbiotics' exclusive distributor of the Products for the Territory, subject to all the terms and conditions hereof. So long during the term of this Agreement as Distributor remains in full compliance with this Agreement, Synbiotics will not appoint another distributor for the Products in the Territory. Distributor shall refrain from establishing or maintaining any branch, warehouse or distribution depot for the Products outside the Territory, and shall not engage in any advertising or promotional activities relating to the Products directed to customers located 1 outside the Territory. Distributor shall sell no units of the Products which it believes are intended for end use outside the Territory. Synbiotics reserves the right to change, modify or discontinue any Product or add Product to Attachment A or remove any discontinued Product therefrom, subject to Distributor's prior written consent. 3. Payment and Supply Terms. ------------------------- (a) The Products will be delivered to Distributor on F.O.B. basis. The initial price and the minimum order of the Products shall be mutually agreed upon by both parties hereto product by product basis, promptly after filing the New Animal Drug Application ("NADA") by Distributor in Territory. If the circumstances on which the initial price is based (i.e., market situation, production costs, etc.) change substantially, the parties will negotiate in order to fix a new price. New price will apply to all shipments made after the date of the determination of such negotiation by written. Distributor will pay all charges, including without limitation freight, shipping, customs charges and expenses, cost of special packaging or handling and insurance premiums, and shall be responsible for all taxes, including but not limited to sales, value added and use taxes, duties and other governmental assessments accrued in Japan, and Synbiotics will pay and be responsible for those accrued in the U.S.A. Payment shall be in U.S. dollars. Terms of payment will be net ninety (90) days from airway bill of lading date, unless Synbiotics determines that Distributor's credit is not satisfactory, in which case payment terms shall be C.O.D., payment in advance or by letter of credit, at Synbiotics' discretion. Late payment will be assessed at 1.5% per month service fee, to the extent allowed by law. (b) In consideration for the exclusive distribution rights granted herein, Distributor shall pay to Synbiotics a licensing fee of [*] to be paid as follows:
(1) The first payment Amount : [*] Payment accrual date : Upon the execution of this Agreement Due date : Within thirty (30) days following the above payment accrual date (2) The second payment Amount : [*] Payment accrual date : Upon the first successful registration in the Territory of diagnostics listed in Attachment A Due date : Within thirty (30) days following the above payment accrual date
__________________________ [*] Certain confidential portions of this exhibit have been omitted by means of blacking out the text (the "Mark"). This exhibit has been filed separately with the Secretary of the Commission without the Mark pursuant to the Company's Application Requesting Confidential Treatment under Rule 24b-2 under the Securities Exchange Act of 1934, as amended. 2
(3) The third payment Amount : [*] Payment accrual date : Upon the first successful registration in the Territory of SENTRYPAR DHP/L, SENTRYPAR DHP or SENTRYVAC DHP/L listed in Attachment A as the Product Due date : Within thirty (30) days following the above payment accrual date
(c) All taxes levied by any governmental authority in the Territory upon the payments according to the Section 3(b) shall be borne by Synbiotics. If so required by the applicable law, Distributor shall withhold the amounts of such taxes due prior to payment to Synbiotics, and shall pay the amounts of such taxes to the governmental authority in a timely manner and shall promptly transmit to Synbiotics, an official tax certificate or other suitable document. (d) During the term of this Agreement: (1) Synbiotics shall provide Distributor, at Synbiotics' expense, with samples of any applicable printed marketing materials that Synbiotics may in its discretion produce for the Products. Distributor will prepare and produce similar and any additional materials needed to promote the Products in the Territory. (2) Subject to the terms and conditions of this Agreement, Synbiotics shall supply Distributor with the Products and shall fill Distributor's written purchase orders for the Products with a request delivery date not less than ninety (90) days after the date the purchase order is received by Synbiotics. Distributor shall be responsible at its expense for the packaging, labeling or otherwise required to sell the Products in the Territory. (3) The specification and test method of the Products (herein after called the "Specifications") shall be mutually agreed upon by both parties separately. (4) Synbiotics shall provide Distributor, free of charge, with the Preshipment Sample. The quantity, the shipment schedule and other conditions of the Preshipment Sample shall be mutually agreed upon by both parties separately. (5) Synbiotics will provide Distributor with, and Distributor will accept, such training as Synbiotics deems appropriate at locations specified by Synbiotics; each party will bear its own expenses in connection with such training. (e) The Products will be deemed accepted when it passes the national assay by the competent authority in the Territory. 4. License, Trademarks. -------------------- (a) Distributor shall sell the Products under the Trademarks in the Territory. (b) Synbiotics shall, at its sole expense, use its best effort to obtain the registration all of the Trademarks in the Territory and shall grant to Distributor a royalty free exclusive license to use the Trademarks, but only with res pect to the sale of the Products in compliance with this Agreement. 3 (c) In case the Trademark for a certain product in the Products cannot be used in the Territory as a result of anteriority or for any other reason, Distributor shall select a proper trademark for such product on condition that Synbiotics will, at its sole expense, file the application for said Trademarks. (d) Distributor agrees that it will not use, without Synbiotics' prior written consent, any mark which is likely to be similar to or confused with Synbiotics' corporate mark. (e) Distributor agrees that it has not registered and will not register the name "Synbiotics" or any forms thereof for use in connection with any business entity without the prior written approval of Synbiotics. (f) Distributor agrees that its use of the Trademarks shall not create in its favor any right, title or interest therein and acknowledges Synbiotics' exclusiv e right, title and interest in the Trademarks. (g) Distributor hereby acknowledges and agrees that any and all rights, title and interest in any and all Trademarks and other proprietary rights that are related in any way to the production, manufacture or sale of the Products, or form the basis for the development of the Products are owned wholly and exclusively by Synbiotics, and Synbiotics shall seek to secure and maintain any such rights. In the event that Synbiotics seek to secure or maintain or initiate any infringement action regarding such rights, distributor agrees to cooperate with Synbiotics in any way reasonably requested. 5. Marking. Distributor shall use in connection with all packaging, -------- literature, labels and other printed matter, an expression to the effect that the Products are manufactured by Synbiotics and are imported and distributed by Distributor. 6. Distributor Covenants and Responsibilities. Except as expressly and ------------------------------------------- unambiguously provided herein, Distributor represents, warrants and agrees: (a) to provide Synbiotics, within six (6) months after filing an application for necessary regulatory approval for each Product to the competent authority, a binding, non-cancelable Distributor purchase order for the total quantity of such Products during the initial three (3) months. Distributor shall provide Synbiotics, promptly after launch of each Product, a purchase order for the period of three (3) months and the forecast for succeeding nine (9) month period. Distributor shall, within ten (10) days before the end of each three month period thereafter, send Synbiotics a rolled-forward and revised nine (9) month forecast and a purchase order for the quantities of the Products specified in the first three (3) month period thereof. (b) to use its best efforts to successfully market (including, without limitation, conducting periodic promotions and market research, maintaining a well-staffed sales force and adequate inventory, and prompt inclusion of the Products, to the extent possible, in applicable trade shows and in Distributor's catalogs and other promotional materials), to distribute and support (including training and other support) the Products on a continuing basis and to comply with good business practices and all laws and regulations relevant to this Agreement or the subject matter hereof. (c) to keep Synbiotics informed of relevant market trends, customer needs, competitive activity, economic and regulatory conditions and Distributor's sales and inventory by the Products. Distributor will also provide Synbiotics with a written quarterly report with respect to these matters. (d) that it does not currently represent or promote any lines or products that compete with the Products. Distributor will conduct its business in a manner that reflects favorably on the Products and shall not represent, promote or otherwise try to sell within the Territory any lines or products that compete with the Products covered by this Agreement during the period when such particular Product is covered by this 4 Agreement, without Synbiotics' prior written consent which shall not be unreasonably withheld by Synbiotics. (e) to ascertain and comply, at Distributor's sole expense, with all applicable laws and regulations and standards of industry or professional conduct. (f) to use best efforts, at its sole expense, to obtain and maintain any applicable approvals, registrations, notifications or the like with regard to marketing, using (for diagnostic, vaccine and/or therapeutic use, as may be specified by Synbiotics), selling, labelling or otherwise promoting or making claims regarding the Products or their uses in the Territory. This includes, without limitation, conducting any necessary pre-clinical and clinical studies and preparing and filing any necessary applications or documents. (g) to keep Synbiotics informed as to serious problems encountered with the Products and any resolutions arrived at for those problems, and to communicate promptly to Synbiotics any and all modifications, design changes or improvements of the Products suggested by any customer, employee or agent. Distributor further agrees that Synbiotics shall have any and all right, title and interest in and to any such suggested modifications, design changes or improvements of the Products, without the payment of any additional consideration therefor either to Distributor, or its employees, agents or customers. Distributor will also promptly notify Synbiotics of any infringement of any Trademarks relating to the Products. (h) to communicate to Synbiotics any referrals outside the Territory that come to Distributor's attention relating to the Products. (i) to properly handle, transport and store all shipments of the Products after they have arrived at Japan. 7. Compliance with United States Laws. ----------------------------------- (a) Distributor acknowledges that the export from the United States of the Products may be subject to regulation by the U.S. Export Administration Act of 1979, as amended, and the rules and regulations promulgated thereunder, which restrict exports and re-exports of any products or direct product thereof. Distributor agrees to comply with U.S. Export Administration Regulations as in effect from time to time (including, without limitation, all record-keeping requirements imposed thereunder), and will not re-export the Products in violation of such Regulations. (b) Without limitation of the foregoing, Distributor agrees to commit no act which, directly or indirectly, would violate any United States law, regulation, or treaty, or any other international treaty or agreement, relating to or applicable to the export or re-export of the Products, to which the United States adheres or with which the United States complies. (c) Distributor agrees to indemnify and hold harmless Synbiotics from any and all fines, damages, losses, costs and expenses (including reasonable attorneys' fees) incurred by Synbiotics as a result of the breach of this Section 7 by Distributor. 8. Confidentiality. Distributor agrees that all inventions, trade secrets, ---------------- know-how and ideas it obtains from Synbiotics and all other business, marketing, technical and financial information it obtains from Synbiotics are the confidential property of Synbiotics ("Proprietary Information"). Distributor will hold in confidence and not disclose any Proprietary Information, provided however that this Distributor's nondisclosure obligation shall not apply to the extent that it may be necessary to disclose, on a confidential basis, Proprietary Information to the third party mutually agreed by both parties hereto or Distributor's outside experts or the competent authorities for the purpose of this 5 Agreement and to information it can document has entered the public domain and is generally available to the public through no fault of the Distributor. Distributor will promptly report to Synbiotics any actual or suspected violation of the terms of this Section 8, and will take all reasonable further steps request by Synbiotics to prevent, control, or remedy any such violation. Distributor shall, upon the termination of this Agreement, return to Synbiotics all tangible manifestations of Proprietary Information received by Distributor pursuant to this Agreement (and all extracts, summaries, analyses, copies and reproductions thereof). 9. Warranty and Disclaimer. Synbiotics warrants only to Distributor as ------------------------ follows: (a) Synbiotics warrants that the Products when shipped to Distributor by Synbiotics will conform to the Specifications therefor. The Products purchased from Synbiotics which do not comply with the warranty will be replaced. If Synbiotics cannot, or determines that it is not practical to replace the Product, the purchase price therefor will be refunded. (b) Synbiotics represent that it is not aware of any actual or potential violation, infringement or misappropriation of any third party's rights (or any claim or potential claim thereof) by the Products. Synbiotics shall hold Distributor and its officers, directors, agents and employees harmless from liability resulting from infringement by the Product of any patent, copyrights, trade secret or other proprietary rights of a third party, provided Synbiotics is promptly notified of any and all threats, claims and proceedings related thereto and given reasonable assistance and the opportunity to assume sole control over the defense and all negotiations for a settlement or compromise: Synbiotics will not be responsible for any settlement it does not approve in writing. SYNBIOTICS MAKES NO OTHER WARRANTIES WITH RESPECT TO THE PRODUCTS OR ANY SERVICES AND DISCLAIMS ALL OTHER WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT, EXCEPT AS SET FORTH ABOVE. The above warranties do not extend to any Product that is modified or altered, is not maintained to Synbiotics' maintenance recommendations, is transported, handled or stored in a manner other than that specified by Synbiotics, has its serial number removed or altered or is treated with abuse, negligence or other improper treatment (including, without limitation, use outside the recommended environment), or is combined with other products, processes or materials where the alleged infringement relates to such combination, or where Distributor continues allegedly infringing activity after being notified thereof or after being informed of combinations that would have avoided the alleged infringement. Distributor's sole remedy with respect to any warranty or defect is as stated above. Distributor will be responsible for all claims, damages, settlements, expenses and attorneys fees incurred by Synbiotics with respect to Distributor's customers or their claims beyond Synbiotics' above warranty obligation to Distributor. 10. Returns. -------- (a) Subject to Section 10(b), Distributor shall be entitled to replace the Products which remain unsold on the expiration date for such Products as specified on the Product label by returning such Products to Synbiotics within sixty (60) days after the expiration date. All returned Products must be in unopened original packaging, which shall conspicuously bear the Material Return Authorization Number, Distributor obtains from Synbiotics prior to return. Distributor shall receive a credit on all properly refunded Products equal to fifty percent (50%) of the lower of (i) the invoice price for such Product on the date it is returned or (ii) the invoice price for such Product on the date it was ordered. The credit may be applied by Distributor to future orders of the Products. (b) Due to Federal regulations, "biological products" shipped out of the continental United States cannot be returned. Therefore, any such merchandise must be disposed of according to local laws and 6 regulations. Synbiotics accepts no responsibility or liability for improper disposal of said merchandise. Authorization to destroy merchandise which would, but for such Federal regulations, be returned for repair, replacement or credit must be obtained in writing from Synbiotics' Customer Service Department prior to destroying such merchandise, and Synbiotics reserves the right to inspect and verify such merchandise before granting such authorization to destroy. 11. Exchange of Adverse Information and Data. The parties shall promptly ----------------------------------------- provide each other with any adverse or unexpected information and data on the Product, received or reported form any source. 12. Limited Liability. EXCEPT AS EXPRESSLY AND UNAMBIGUOUSLY PROVIDED HEREIN, ------------------ SYNBIOTICS WILL NOT BE LIABLE UNDER ANY SECTION OF THIS AGREEMENT OR UNDER ANY CONTRACT, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY (A) FOR NAY AMOUNTS IN EXCESS IN THE AGGREGATE OF THE AMOUNTS PAID TO SYNBIOTICS HEREUNDER DURING THE TWELVE MONTH PERIOD PRIOR TO THE DATE THE CAUSE OF ACTION AROSE, OR (B) FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES OR (C) FOR DAMAGES ARISING FROM THE LOSS OF PROFITS OR LOSS OF BUSINESS, EXCEPT FOR ANY DAMAGES CAUSED BY SYNBIOTICS' NEGLIGENCE OR WILLFULNESS. DISTRIBUTOR SHALL INDEMNIFY SYNBIOTICS AGAINST ALL CLAIMS ASSERTED BY ITS CUSTOMERS OR OTHER THIRD PARTIES AS A RESULT OF DISTRIBUTOR'S ACTS OR OMISSIONS. 13. Force Majeure. Neither party hereto shall be liable to the other party for -------------- any losses or damages attributable to a default in or breach of this Agreement which is the result of war (whether declared or undeclared), acts of God, revolution, strike, fire, earthquake, flood, pestilence, riot, enactment or change of laws and regulations, accident(s), labor trouble, or shortage of or inability or obtain material, equipment or transport or any other cause beyond reasonable control of such party, and the performance of obligations hereunder shall be suspended during, but not longer than, the existence of such cause. 14. Relationship of Parties. The parties hereto expressly understand and agree ------------------------ that Distributor is an independent contractor in the performance of each and every part of this Agreement, is not an agent, partner or joint venturer of or with Synbiotics, and is solely responsible for all of its employees and agents and its labor costs and expenses arising in connection therewith and is responsible for and will indemnify, defend and hold harmless Synbiotics from any and all claims, liabilities, damages, debts, settlements, costs, attorney's fees, expenses and liabilities of any type whatsoever that may arise on account of Distributor's activities or omissions, or those of its employees or agents, including without limitation, providing unauthorized representations or warranties ( or failing to effectively disclaim all warranties and liabilities on behalf of Synbiotics) to its customers or breaching any term, representation or warranty of this Agreement. Synbiotics is in no manner associated with or otherwise connected with the actual performance of this Agreement on the part of Distributor, nor with Distributor's employment of other persons or incurring of other expenses. Except as expressly provided herein, Synbiotics shall have no right to exercise any control whatsoever over the activities or operations of Distributor. 15. Assignment. This Agreement and the rights hereunder are not transferable or ----------- assignable by a party without the prior written consent of the other party, except to a person or entity who acquires all or substantially all of the assets or business of Synbiotics, whether by sale, merger or otherwise. This Agreement shall be binding upon and inure to the benefit of any permitted assignee hereunder of Synbiotics or Distributor. Any said permitted assignee of a party's interest shall expressly assume in writing the performance of all the terms and conditions of this Agreement to be performed by said party. 16. Term and Termination. Unless terminated earlier as provided herein, this --------------------- Agreement shall ave a term extending ten (10) years from the Effective Date. 7 This Agreement shall be automatically renewed for a three (3) year period after the initial term, unless either party is otherwise notified by the other in writing at least one hundred eighty (180) days prior to the termination of the initial term or the renewed term. Distributor understands that after the date specified above or earlier termination, it shall have no right whatsoever to purchase the Products or continue as a dealer or distributor or other wise regardless of any undocumented continuation of the relationship with Synbiotics. (a) This Agreement may be terminated by a party for cause immediately by written notice upon the occurrence of any of the following events: (1) If the other ceases to do business, or otherwise terminates its business operations; or (2) If the other breaches any provision of this Agreement and fails to fully cure such breach within thirty (30) days of written notice describing the breach; or (3) If the other seeks protection under any bankruptcy, receivership, creditors arrangement, composition or comparable proceeding, or if any such proceeding is instituted against the other. (b) Each party understands that the rights of termination hereunder are absolute. Subject to Section 16(f), neither party shall incur any liability whatsoever for any damage, loss or expenses of any kind suffered or incurred by the other arising from or incident to any termination of this Agreement by such party which complies with the terms of this Agreement whether or not such party is aware of any such damage, loss or expenses. (c) In the event of any termination, Synbiotics may elect to continue or terminate any purchase order then pending. (d) In addition to any provisions that survive termination or expirations according to their terms and any restrictions on Distributor's distribution of Products, the following sections shall survive termination or expiration of this Agreement: Sections 8, 9, 12, 14 and Sections 16 through 18. (e) Upon expiration or termination, if Distributor has any right, title or interest in Trademarks or any registration related thereto or in anything referred to in Section 4(e), it will immediately assign all such right title and interest to Synbiotics and take all necessary action to ensure that Synbiotics obtains the full benefit thereof or, if Synbiotics so requests in writing with respect to any such item, take any necessary action to surrender and cancel such item and the related rights, title and interest. (f) Termination is not the sole remedy for breach under this Agreement and, whether or not termination is effected, all other remedies for breach will remain available. 17. Duties of Distributor Upon Expiration or Termination. Notwithstanding any ----------------------------------------------------- other provision of this Agreement, upon the termination of this Agreement for any reason whatsoever or expiration of this Agreement, Distributor shall: (a) Pay to Synbiotics, in full within thirty (30) days of such termination, any payment accrued prior to the effective date of expiration or termination hereof. Synbiotics shall be entitled to offset and deduct from any money due Distributor, whether or not arising under this Agreement, any all amounts due Synbiotics from Distributor. 8 It is expressly understood that upon expiration or termination for any reason whatsoever, Distributor shall be relieved from the payment obligation hereunder except any payment mentioned above. (b) Promptly return to Synbiotics any documentation or data, including without limitation all promotional material delivered to Distributor. (c) Cooperate with Synbiotics in completing all outstanding obligations to customers, including the fulfillment, at Distributor's expense, of each warranty term and condition. 18. General. -------- (a) Amendment and Waiver - Except as other wise expressly provided herein, any provision of this Agreement may be amended and the observance of any provision of this Agreement may be waived (either generally or in any particular instance and either retroactively or prospectively) only with the written consent of the parties. However, it is the intention of the parties that this Agreement be controlling over additional or different terms of any purchase order, confirmation, invoice or similar document, even if accepted in writing by both parties, and that waivers and amendments shall be effective only if made by non-pre-printed agreements clearly specified as and und erstood by both parties to be an amendment or waiver. (b) Governing Law - This Agreement shall be governed by and construed under the law of the State of California without regard to conflicts of law principles. (c) Arbitration - In the event of any disputes,controversies or differences which may arise between the parties hereto, out of or in relation to or in connection with this Agreement, or for the breach thereof, upon the request of either party, the parties agree to meet and discuss in good faith a possible resolution thereof. If the matter is not resolved within ninety (90) days following the request for discussions, then the matter shall be settled by arbitration upon the initiation o arbitration by either party. If the arbitration is initiated by Distributor, it shall be held in San Francisco, U.S.A. in accordance with the rules of Conciliation and Arbitration of the International Chamber of Commerce. If the arbitration is initiated by Synbiotics, it shall be held in Tokyo, Japan in accordance with the rules of the Japan Commercial Arbitration Association. The award shall be final binding upon the parties hereto. (d) Heading and Language - Heading and captions are for convenience only and are not to be used in the interpretation of this Agreement. The official text of this Agreement shall be the English language, and such English text shall be controlling in all respects, notwithstanding any translation hereof under the laws or regulations of any other country. The parties undertake to use the English language in respect of all documents and communications contemplated hereby, except where another language must be used under the laws and regulations of another country. In any such case, a certified English translation shall be supplied to the other party by the party using such document or making such communication. (e) Notice - For purposes of this Agreement, and for all notices and correspondence hereunder, the addresses of the respective parties have been set out at the beginning of this Agreement, and no change of address shall be binding upon the other party hereto until written notice thereof is received by such party at the address shown herein. all notices shall be deemed received when personally delivered or one (1) business day after being sent via telefax. (f) Entire Agreement - This Agreement, together with all exhibits and schedules hereto, constitutes the entire agreement among the parties pertaining to the subject matter hereof and completely supersedes all prior or contemporaneous agreements, understandings, arrangements, commitments, negotiations, and discussions of the parties, whether oral or written (all of which shall have no substantive significance or evidentiary effect). Each party acknowledges, represents and warrants that it has not relied on any 9 representation, agreement, understanding, arrangement or commitment which has not been expressly set forth in this Agreement. Each party acknowledges, represents and warrants that this Agreement is fully integrated and not in need of parol evidence in order to reflect the intentions of the parties. The parties specifically intend that the literal words of this Agreement shall, alone, conclusively determine all questions concerning the parties' intent. This Agreement does not contain or constitute any express or impled license to make, have made or modify any Product under any circumstances. (g) Equitable Remedies - Distributor acknowledges and agrees that the legal remedies available to Synbiotics in the event Distributor violates the covenants and agreements made in this Agreement would be inadequate and that Synbiotics shall be entitled, without posting any bond or other security, to temporary, preliminary and permanent injunctive relief, specific performance and other equitable remedies in the event of such a violation, in addition to any other remedies which Synbiotics may have at law or in equity. (h) Severability - If any provision of this Agreement is held to be illegal or unenforceable, that provision shall be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and enforceable. SYNBIOTICS DISTRIBUTOR SYNBIOTICS CORPORATION DAIICHI PHARMACEUTICAL CO., LTD. a California corporation a Japanese corporation By: /s/ Robert L. Widerkehr By: /s/ Tadashi Suzuki _______________________ __________________ Name: Robert L. Widerkehr Name: Tadashi Suzuki Title: President and CEO Title: President and CEO 10 Attachment A PRODUCTS CANINE VACCINES --------------- SENTRYPAR DHP/L SENTRYPAR DHP SENTRYVAC DHP/L SENTRYPAR FELINE VACCINES --------------- PANAVAC RC VACSYN/FeLV DIAGNOSTICS ----------- ICT GOLD HW ICT GOLD FeLV 11 MEMORANDUM This Memorandum dated and effective as of January 16, 1996 by and between Synbiotics Corporation ("Synbiotics") a California corporation, and Daiichi Pharmaceutical Co., Ltd. ("Distributor"), a Japanese corporation. WITNESSETH WHEREAS, Synbiotics and Distributor have entered into a Distribution Agreement (the "Agreement") of on even date herewith, and WHEREAS, Distributor has expressed its desire to confirm the non-restriction of the research by The Kitasato Institute, a Japanese corporation, with its principal office at 9-1, Shirogane 5-Chome, Minato-Ku, Tokyo 108, Japan, with respect to the competitive product of the Products (as defined in the Agreement), and any other third party who will support Distributor's performance of the Agreement and is agreed upon by the parties (the "Third Party"), and WHEREAS, Synbiotics is willing to accept such desire; NOW THEREFORE, for and in consideration of the premises and covenants contained herein and in the Agreement, Synbiotics and Distributor agree as follows: 1. Distributor shall have the obligation to have the Third Party observe the provision of the nondisclosure obligation specified in Section 8 of the Agreement, and Distributor shall remain the responsibility for the Third Party's activity concerned; provided, however, that it is expressly understood that Distributor shall no have any obligation to have the Third Party observe any other terms and conditions of the Agreement, including, but not limited to, the same or similar obligation to observe the provision of Section 6(d) of the Agreement. 2. The provisions of this Memorandum shall in no way alter the obligations and duties of Distributor under the Agreement except as expressly set forth herein. Distributor shall indemnify and hold Synbiotics and its affiliates harmless against claims, losses, liabilities, damages, deficiencies, costs and expenses, including reasonable attorneys' fees and expenses of investigation incurred by Synbiotics or any of its affiliates as a result of any failure by Third Party to perform or comply with Section 8 of the Agreement. Subject to above confirmation, the Agreement shall continue in full force and effect. SYNBIOTICS DISTRIBUTOR SYNBIOTICS CORPORATION DAIICHI PHARMACEUTICAL CO., LTD. a California corporation a Japanese corporation By: /s/ Robert L. Widerkehr By: /s/ Tadashi Suzuki ----------------------- ------------------ Name: Robert L. Widerkehr Name: Tadashi Suzuki Title: President and CEO Title: President and CEO 1 EX-10.54 3 LICENSE AGREEMENT LICENSE AGREEMENT EXHIBIT 10.54 ------------- This License Agreement (this "Agreement") is made as of March 6, 1996 by and between SYNBIOTICS CORPORATION, a California corporation ("Synbiotics") and ENGENE BIOTECHNOLOGIES, INC., a California corporation ("Licensor"). WHEREAS, Synbiotics desires to exploit the commercial uses of the Technology and related products in the Licensed Field; WHEREAS, Synbiotics has requested, and Licensor has agreed to grant to Synbiotics, an exclusive, worldwide, perpetual license to the Technology in the Licensed Field. WHEREAS, Synbiotics and Licensor desire to set forth herein certain agreed arrangements and procedures for Licensor to designate a representative to serve on Synbiotics' Scientific Advisory Board; and WHEREAS, Synbiotics and Licensor desire to agree upon certain provisions of a right of first refusal in the event that Licensor desires to sell its rights to the Excluded Products. NOW, THEREFORE, in consideration of the above premises and the mutual terms, covenants and conditions set forth below, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS ----------- The following terms as used in this Agreement shall have the meanings as defined with respect to each such term. 1.1 Affiliate. "Affiliate" shall mean any corporation or other business entity --------- which controls, is controlled by or is under common control with any party. A corporation or business entity shall be regarded as in control of another corporation or business entity if it owns or directly or indirectly controls at least fifty percent (50%) of the voting stock of the other corporation or business entity. 1.2 Development Agreement. "Development Agreement" shall mean the Research and --------------------- Development Agreement, dated today, between Licensor and Synbiotics. 1.3 Licensor Patents. "Licensor Patents" shall mean any and all (i) issued and ---------------- pending U.S. and foreign patents (including, without limitation, any divisionals, continuations, continuations in part and reissues thereof) for inventions relating to the Technology invented by Licensor or which patents have been, or are in the future, acquired by Licensor and (ii) rights to patents and patent applications relating to the Technology licensed or sublicensed to Licensor with respect to which Licensor has the right to grant sublicenses. 1.4 Effective Date. "Effective Date" shall mean March 6, 1996. -------------- ____________________ [*] Certain confidential portions of this exhibit have been omitted by means of blacking out the text (the "Mark"). This exhibit has been filed separately with the Secretary of the Commission without the Mark pursuant to the Company's Application Requesting Confidential Treatment under Rule 24b-2 under the Securities Exchange Act of 1934, as amended. 1 1.5 Excluded Product(s). "Excluded Product(s)" shall mean any [*] and ------------------- diagnostic test or other product invented by Licensor or otherwise acquired by Licensor designed to identify, regulate, prevent or treat [*]. 1.6 [*] Product(s). "[*] Product(s)" shall mean any diagnostic tests for [*] -------------- utilizing the unique sequence of [*] characterized by Engene. 1.7 [*] Product(s). "[*] Product(s)" shall mean any diagnostic tests for [*]. -------------- 1.8 Licensed Field. "Licensed Field" shall mean any market or application -------------- related to animal health, agriculture, aquaculture, foodstuff safety and zoonoses. Notwithstanding the foregoing, "Licensed Field" shall not include any market for, and application of, the Products related to human diagnostics and human therapeutics. 1.9 Net Sales. "Net Sales" shall mean the total invoice amount for sales to --------- unaffiliated entities less (i) normal and customary cash and trade discounts, returns and allowances, transportation charges or allowances, if any, paid or allowed by Licensor, and (ii) sales, value added and other similar taxes paid by Licensor with respect to the sale of any [*] Product, if included in the selling price. In the event of a transaction between Licensor and an Affiliate, "Net Sales" shall be deemed to be the total gross amount invoiced by Licensor if that amount is the same as the amount invoiced for similar sales to non-affiliated third parties and otherwise the amount of Net Sales shall be the amount invoiced by the Affiliate on its sale of the item, in either case less (i) normal and customary cash and trade discounts, returns and allowances, transportation charges or allowances, if any, paid or allowed by Licensor, and (ii) sales, value added and other similar taxes paid by Licensor with respect to the sale of any [*] Product, if included in the selling price. 1.10 Product(s). "Product(s)" shall mean any vaccine, construct, probe, ---------- diagnostic test, automatable assay technique or other product incorporating the Technology for use and application in the Licensed Field. Notwithstanding the foregoing, "Product(s)" shall not include any Excluded Products. 1.11 Technology. "Technology" shall mean all of (i) the polymerase chain ---------- reaction based technology, processes, know-how, ideas, concepts, trade secrets and techniques (including without limitation, all improvements and modifications thereto), invented by Licensor (whether or not patentable) and, to the extent licensable or sublicensable, acquired now or in the future by Licensor and (ii) the recombinant deoxyribonucleic acid based technology, sequences, processes, know-how, ideas, concepts, trade secrets and techniques (including without limitation, all improvements and modifications thereto), invented by Licensor (whether or not patentable) and, to the extent licensable or sublicensable, acquired now or in the future by Licensor. "Technology" also includes (i) all of Licensor's technology, processes, know-how, ideas, concepts, trade secrets, techniques (including without limitation, all improvements and modifications thereto) invented by Licensor (whether or not patentable) and, to the extent licensable or sublicensable, acquired now or in the future by Licensor, relating to [*] and (ii) any vaccine, probe, diagnostic test, automatable assay technique or other product set forth on attached Exhibit B. --------- ARTICLE 2 GRANT OF LICENSE ---------------- 2.1 Grant of License. Subject to the terms and conditions of this Agreement, ---------------- Licensor hereby irrevocably grants to Synbiotics the exclusive (even as to Licensor), fully-paid, royalty-free, perpetual, worldwide license (the "License") to the Technology and to the Licensor Patents to develop, have developed, make, have made, import into the United States, have imported into the United States, market, have marketed, distribute, have distributed, sell and have sold Products (excluding [*] Products) for use in the Licensed Field. This license includes the right to sublicense and the right to grant the right to further sublicenses. Upon termination of this Agreement, no existing sublicenses granted by Synbiotics or any of its sublicensees shall be affected and such sublicenses shall remain in effect according to their terms. 2 2.2 Sublicense of Rights to [*] Products. Notwithstanding Section 2.1 above, ------------------------------------ Licensor hereby irrevocably grants to Synbiotics an exclusive (even as to Licensor), fully-paid, royalty-free, perpetual license (the "[*] License") to develop, have developed, make, have made, import, have imported, market, have marketed, distribute, have distributed, sell and have sold [*] Products for use in the Licensed Field solely in such territories as Synbiotics is not prohibited from developing, making, manufacturing, marketing, importing, using, selling and distributing such [*] Products; immediately upon receipt of written notice from Synbiotics indicating that Synbiotics has obtained the right to market [*] Products in a previously prohibited territory, Licensor shall grant to Synbiotics an exclusive (even as to Licensor), fully-paid, royalty-free, perpetual license to develop, have developed, make, have made, import, have imported, market, have marketed, distribute, have distributed, sell and have sold [*] Products for use in the Licensed Field in the territories identified in Synbiotics' notice to Licensor. All licenses granted pursuant to this Section 2.2 shall include the right to sublicense and the right to grant the right to further sublicenses. Upon termination of this Agreement, no existing sublicenses granted by Synbiotics or any of its sublicensees pursuant to the rights set forth in this Section 2.2 shall be affected and such sublicenses shall remain in effect according to their terms. 2.3 Exclusion from Licensed Field. In the event that Synbiotics has completed ----------------------------- the USDA application process for approval to sell a [*] Product by the third anniversary of the Effective Date, then [*] Products shall be excluded from the definition of Products; provided, however, Licensor shall have the obligation to pay Synbiotics a [*] payment in the nature of a royalty on its Net Sales of all [*] Products throughout the useful life of such products to the extent permitted by law. [*] Products shall not be excluded from the definition of Products and the terms set forth in the preceding sentence shall not apply if the reason for Synbiotics not filing an application with the USDA for approval to sell a [*] Product prior to the third anniversary of the Effective Date is the failure of Licensor to perform in a timely manner its obligations under the Development Agreement with respect to the development of any [*] Product. 2.4 No Conflicting Agreements. Licensor shall not enter into any agreements ------------------------- that conflict with the license, rights or obligations provided under this Agreement. Prior to signing any agreement with any other party pursuant to which Licensor assigns to, or grants or licenses to, such party any rights to the Licensor Patents or Technology, Licensor shall specifically exclude the right to develop, have developed, make, have made, market, have marketed, import, have imported, distribute, have distributed, sell and have sold Products in the Licensed Field from any such assignment, grant or license. ARTICLE 3 REPRESENTATIONS AND WARRANTIES ------------------------------ 3.1 Synbiotics Representations. Synbiotics represents and warrants to Licensor -------------------------- that as of the Effective Date: (a) it is a corporation duly organized, validly existing and in good standing under the laws of the State of California; (b) all corporate acts required to execute and deliver this Agreement have been duly taken by Synbiotics; the execution, delivery and performance hereof by Synbiotics have been duly authorized; and this Agreement, as so executed and delivered, is a valid and binding obligation of Synbiotics, enforceable against it in accordance with its terms; and (c) the execution and delivery of this Agreement by Synbiotics, and the performance of its obligations hereunder, do not require the consent of any third party and will not violate, with or without notice, the lapse of time or both, any agreement, contract, license or permit to which Synbiotics is a party or its organizational documents. 3.2 Licensor Representations. Licensor represents and warrants to Synbiotics ------------------------ that as of the Effective Date: 3 (a) to the best of its knowledge, it has the sole and exclusive right, title and interest in and to the Licensor Patents and the Technology; (b) it has the right and title to grant the present and future rights and licenses in favor of Synbiotics contained in this Agreement; (c) neither it nor anyone authorized to act on its behalf has entered into any agreement or understanding with any third party that grants rights, licenses, assignments, immunities or options of any kind under the Licensor Patents or the Technology; (d) it is a corporation duly organized, validly existing and in good standing under the laws of the State of California; (e) all corporate acts required to execute and deliver this Agreement have been duly taken by Licensor; the execution, delivery and performance hereof by Licensor has been duly authorized; and this Agreement, as so executed and delivered, is a valid and binding obligation of Licensor, enforceable against it in accordance with its terms; (f) the execution and delivery of this Agreement by Licensor, and the performance of its obligations hereunder, do not require the consent of any third party and will not violate, with or without notice, the lapse of time or both, any agreement, contract, license or permit to which Licensor is a party or its organizational documents; (g) it (i) is not aware of any infringement of any patent or other proprietary rights of any third party that will result from manufacture, marketing, distribution and sale of the Products in the Licensed Field in any territory, (ii) has received no notice of infringement or misappropriation of any alleged rights asserted by any third party in relation to the Licensor Patents or the Technology, and (iii) is not in default with respect to any license agreement related to the Licensor Patents and the Technology; (h) that each of its employees and contractors has entered into a contract which provides for assignment to Licensor of all inventions made by him or her during the course of his or her employment, and nondisclosure of confidential information of Licensor and of others to which access is gained through Licensor; and (i) it has delivered to Synbiotics true and complete copies or descriptions of all material agreements, instruments, commitments, contracts or other obligations, whether oral or written, to which Licensor is a party or to which its assets are subject. 3.3 Covenants of Licensor. Licensor covenants and agrees that, for the --------------------- duration of this Agreement: (a) it shall promptly, but in any event within three (3) business days, notify Synbiotics, and provide copies or transcriptions, of any action, request, order, instruction, communication, complaint, notice, public announcement or inquiry by the United States Department of Agriculture ("USDA") or any submission, filing, letter or other communication by Licensor to the USDA with respect to any of the Products which is sent by or is received by or which comes to the attention of Licensor, including but not limited to field actions, investigations or recalls of the Products. (b) it shall not take, or omit to take, or suffer to occur, any action which would result in any representation or warranty made by Licensor in Section 3.2 from becoming at any future date untrue (assuming it were made on and as of such future date). 4 ARTICLE 4 RIGHTS TO EXCLUDED PRODUCTS --------------------------- 4.1 Option to License Excluded Products. ----------------------------------- (a) Licensor hereby grants to Synbiotics an option to acquire the exclusive right to negotiate a worldwide license to each of the Excluded Products. The option referenced in this Section 4.1 shall be exercised in the following manner: Licensor shall forthwith after developing, licensing-in or otherwise acquiring any Excluded Product during the period beginning on the Effective Date and ending upon the later of (i) the third anniversary of the Effective Date or (ii) the expiration or termination of the Development Agreement, provide Synbiotics with a written notice of availability of such Excluded Product ("Written Notice"). For a period of thirty (30) days following delivery of the Written Notice (the "Synbiotics Option Period"), Synbiotics shall have the right to exercise such option. Synbiotics shall exercise said option by providing written notice of exercise to Licensor within the Synbiotics Option Period. In the event that Synbiotics fails to exercise its option in accordance with the terms of this Section 4.1, Licensor or its designee or licensee may sell, market, distribute and otherwise exploit the Excluded Product which was the subject of the Written Notice. (b) If Synbiotics exercises such option, then for sixty (60) days after the expiration of the Synbiotics Option Period, Licensor shall negotiate with Synbiotics (and not with anyone else) in good faith toward a definitive licensing agreement (which shall include the right to grant sublicenses) on terms mutually agreeable to Licensor and Synbiotics. The licensing agreement shall contain terms as are customarily found in licensing agreements and as the parties may mutually agree. During such 60-day period, Licensor shall make no disclosures to nor negotiate with any third party concerning the Excluded Product. (c) In the event that Licensor and Synbiotics are not able to negotiate a licensing agreement on mutually agreeable terms within sixty (60) days following the expiration of the Synbiotics Option Period, and if the parties have not mutually agreed to extend such 60-day period, Licensor hereby agrees that if it intends to accept any offer from a third party, Licensor shall promptly notify Synbiotics in writing with full details (the "First Refusal Notice") and Synbiotics shall have the right, exercisable by written notice to Licensor within fifteen (15) days of delivery of the First Refusal Notice, to enter into a licensing agreement (which shall include the right to grant sublicenses) with Licensor on the terms and conditions of such third party offer. This right of first refusal, with respect to each Excluded Product, shall survive termination of negotiations pursuant to Section 4.1(b) for a period of two (2) years. ARTICLE 5 TECHNOLOGY TRANSFER ------------------- 5.1 Transfer of Technology. Within five (5) days following the Effective Date, ---------------------- Licensor shall provide Synbiotics or a sublicensee designated by Synbiotics, with all physical embodiments and manifestations of the Products (including, without limitation, any previously manufactured quantities of the Products), and the Technology (including, without limitation, copies of all laboratory notebooks, designs, specifications, formulas, procedures, data and other information). Licensor shall pay all costs of shipping, packaging, copying and similar or related costs in connection therewith. 5.2 Technical Assistance. For a period beginning on the Effective Date and -------------------- ending on the later of (i) three (3) years after the Effective Date or (ii) the expiration or earlier termination of the Development Agreement, Licensor shall provide to Synbiotics, or a sublicensee designated by Synbiotics, at Licensor's sole option and expense (excluding reasonable travel and out-of-pocket expenditures), reasonable technical assistance and instruction (not to exceed fifty (50) hours per year) in understanding, interpreting and applying the Technology for the purposes of 5 further developing the Technology and developing and commercializing the Products. Licensor shall make its employees and consultants (including J. Kevin Steele and David Telford) reasonably available for consultation by telephone, or in person at Synbiotics'(or its sublicensees) offices in connection with such assistance and instruction, all at the sole expense of Licensor. 5.3 Patents. During the term of the License, Licensor shall direct and cause, ------- upon the request of Synbiotics, appropriate patent applications to be prepared and prosecuted in all relevant territories in a timely fashion with respect to any inventions included in the Technology and Products whether arising out of inventions made solely by Licensor employees or consultants or inventions made jointly by Synbiotics' and Licensor's employees and consultants. Any such application(s) shall be made and prosecuted at the expense of Synbiotics through attorneys named by Synbiotics. Synbiotics shall have complete control of the patent prosecution process, including whether or not to file a patent application. 5.4 Further Acts; Enforcement. Licensor agrees to perform, during and after ------------------------- the term of this Agreement, all acts deemed necessary or desirable by Synbiotics to permit and assist Synbiotics, at Synbiotics' sole expense (including compensating Licensor $100 per hour for the time of Licensor's professionals), in evidencing, obtaining, maintaining, defending and enforcing Synbiotics rights with respect to the Technology and Products in any and all countries. Such acts may include, but are not limited to, execution of documents and assistance or cooperation in legal proceedings. Licensor hereby irrevocably designates and appoints Synbiotics and its duly authorized officers and agents, as Licensor's attorneys-in-fact to act for and in behalf and instead of Licensor, to execute and file any documents and to do all other lawfully permitted acts to further the above purposes with the same legal force and effect as if executed by Licensor. ARTICLE 6 PAYMENTS -------- 6.1 License Fee. As consideration for this Agreement, Synbiotics will pay ----------- Licensor an up-front fee of [*] and shall provide Licensor with a stock certificate representing [*] shares of Synbiotics Common Stock, no par value, within five (5) days following the execution of the Investment Representation, a copy of which is attached hereto as Exhibit A, by Licensor. --------- ARTICLE 7 SCIENTIFIC ADVISOR BOARD ------------------------ 7.1 Licensor's Right to Position on Scientific Advisor Board. Synbiotics and -------------------------------------------------------- Engene hereby agree that for a period commencing on the Effective Date and ending upon the later of (i) three (3) years following the execution of this Agreement or (ii) the expiration or earlier termination of the Development Agreement, Kevin Steele shall serve on Synbiotics' Scientific Advisory Board ("Licensor Advisor"). Synbiotics acknowledges and agrees that the Licensor Advisor shall be entitled to receive all option grants and other forms of compensation paid by Synbiotics to members of its Scientific Advisory Board as outlined in any stock option or other plan composed for advisors, consultants or other key contributors to Synbiotics. ARTICLE 8 CONFIDENTIALITY --------------- 8.1 Confidential Information. Licensor agrees that it shall maintain in ------------------------ confidence any information regarding Synbiotics received before or during the term of this Agreement and identified as confidential or otherwise protected and any information regarding the Technology and the Products (hereinafter, such information shall collectively be 6 referred to as "Confidential Information"), and without the express written permission of Synbiotics shall neither use, publish, disseminate nor disclose such Confidential Information except for the furtherance of the purposes of this Agreement. Subject to the next sentence, the foregoing obligations of confidentiality and non-use shall survive the expiration or termination of this Agreement. The obligations of the first sentence shall not apply to any information which: (i) is now or hereafter comes into the public domain otherwise than by breach of this Agreement, or (ii) is brought to Licensor by a third party who rightfully obtained and possesses it and does not require that it be retained in confidence by Licensor (and who does not thereby breach any contract). Furthermore, the obligations of the first sentence shall not apply to any information (excluding any information regarding the Technology and the Products) which is shown by written records to be already in possession of Licensor other than as a result of having received it from Synbiotics. 8.2 Publication. Licensor shall have no right to publish information regarding ----------- the Technology or the Products without the express written consent of Synbiotics. Licensor shall likewise restrict and prevent its employees, consultants and agents from publishing information regarding the Technology or the Products. ARTICLE 9 INDEMNITIES AND "WARRANTY" -------------------------- 9.1 Licensor Indemnification. Licensor agrees to and shall defend, indemnify ------------------------ and hold Synbiotics, its officers, directors, employees, agents and shareholders harmless (including attorneys fees to defend, and any damages, penalties, settlements, costs or expenses awarded or incurred) from and against any claim, liability, suit or proceeding initiated by or on behalf of a third party based upon negligence, warranty, strict liability or violation of government regulation, (but specifically excluding, without limitation any claim, liability, suit or proceeding based upon infringement of patent or other proprietary rights,) arising from or occurring as a result of any use of the Technology or Products (including, without limitation, any manufacture of the Products) by Licensor. 9.2 Synbiotics Indemnification. Synbiotics agrees to and shall defend, -------------------------- indemnify and hold Licensor, its officers, directors, employees, agents and shareholders harmless (including attorneys fees to defend, and any damages, penalties, settlements, costs or expenses awarded or incurred) from and against any claim, liability, suit or proceeding initiated by or on behalf of a third party based upon negligence, warranty, strict liability or violation of government regulation, (but specifically excluding, without limitation any claim, liability, suit or proceeding based upon infringement of patent or other proprietary rights,) arising from or occurring as a result of any use of the Technology or Products (including, without limitation, any manufacture of the Products) by Synbiotics. 9.3 Defense of Claims. If any lawsuit or enforcement action is filed against ----------------- any indemnified person, written notice thereof shall be given to the indemnifying company as promptly as practicable (and in any event within fifteen (15) days after the service of the citation or summons); provided that the failure of any indemnified person to give timely notice shall not affect rights to indemnification hereunder except to the extent that the indemnifying company demonstrates actual damage caused by such failure. After such notice, if the indemnifying Company shall acknowledge in writing to such indemnified person that the indemnifying company shall be obligated under the terms of its indemnity hereunder in connection with such lawsuit or action, then the indemnifying company shall be entitled, if it so elects, to take control of the defense and investigation of such lawsuit or action and to employ and engage attorneys of its own choice (subject to the approval (for competence, experience, independence and absence of conflict of interest) of the indemnified person) to handle and defend the same, at the indemnifying company's cost, risk and expense; and such indemnified person shall thereafter cooperate in all reasonable respects with the indemnifying company and such attorneys in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom. The fees of such attorneys, and all amounts payable by the indemnifying company under this Section, shall be payable as incurred and on demand. The indemnified person may also, through independent counsel and at its own cost, participate in such investigation, trial and defense of such lawsuit or action and any appeal arising therefrom. 7 9.4 Settlements. An indemnifying company shall have the absolute right to ----------- effect a settlement of any action or claim against an indemnified person where the settlement calls only for money to be paid on behalf of an indemnified person, provided the indemnifying company makes all such payments directly to the third party. However, no settlement calling for anything to be done (or not done) by an indemnified person other than the payment of money (or calling for the payment of money directly by the indemnified person) may be effected by the indemnifying company without the prior written approval of the indemnified person. No indemnified person shall enter into a settlement calling for or necessitating the payment of money (under this Section or otherwise), or for any other thing, by the indemnifying company without the prior written approval of the indemnifying company. 9.5 Warranty. Licensor represents and warrants to Synbiotics that, to the best -------- of its knowledge, no patents or other proprietary rights of any third party have been infringed by the Technology. ARTICLE 10 TERM AND TERMINATION -------------------- 10.1 Term. This Agreement shall be effective as of the Effective Date and shall ---- continue in full force and effect indefinitely, unless terminated earlier as provided in Section 10.2. 10.2 Termination. If either party materially breaches or defaults in the ----------- performance of this Agreement and such breach or default is not cured within thirty (30) days after the giving of notice of default by the other party specifying such breach or default, then the party giving such notice may, in addition to all other remedies available at law or in equity, terminate this Agreement immediately for cause and such termination shall be effective on the date when a notice of termination is received by the breaching or defaulting party. (a) The failure of a party to assert its rights for any material breach or default of this Agreement shall not be deemed a waiver of such rights nor shall any waiver be implied by the making or acceptance of any payment. (b) Termination shall only relieve the parties of obligations which would have arisen under this Agreement after the effective date of termination and shall in no way relieve the parties of any obligations existing on the date of such termination. 10.3 Survival. -------- (a) If Synbiotics terminates this Agreement pursuant to Section 10.2 hereof, the provisions of Sections 2.1, 2.3, 2.4, 3.3, 4.1, 5.2, 5.3, 5.4, 8.1, 8.2, 9.1, 9.2, 9.3, 10.3, 10.4 and 12.1 shall survive. (b) If Licensor terminates this Agreement pursuant to Section 10.2 hereof, the provisions of Section 8.1 shall survive. 10.4 Rights in Bankruptcy. All rights and licenses granted under or pursuant to -------------------- this Agreement by Licensor are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the Bankruptcy Code, licenses of rights to "intellectual property" as defined under Section 101 of the Bankruptcy Code. The parties agree that Synbiotics as licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code. The parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against Licensor under the Bankruptcy Code, Synbiotics shall be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property, and same, if not already in its possession, shall be promptly delivered to Synbiotics upon any such commencement of a bankruptcy proceeding upon its written request therefor. 8 ARTICLE 11 NOTICES ------- 11.1 Notices. All notices or other communications provided for in this ------- Agreement shall be in writing and shall be considered delivered upon the latest of actual receipt, or personal or courier delivery, or sending by facsimile with confirmation of receipt in good order requested and received, or on the third -- business day after they are deposited in the United States mail, certified first class or air mail postage prepaid, addressed to the respective parties as follows: (a) If to Synbiotics: Synbiotics Corporation 11011 Via Frontera San Diego, CA 92127 Attention: Chief Executive Officer Facsimile Number: (619) 451-5719 with a copy to: Brobeck, Phleger & Harrison 550 West C Street, Suite 1300 San Diego, CA 92101 Attention: Hayden J. Trubitt, Esq. Facsimile Number: (619) 234-3848 (b) If to Contractor: Engene Biotechnologies, Inc. 16236 San Dieguito Road Suite 4-21 San Diego, CA 92067 Attention: J. Kevin Steele Facsimile Number: (619) 759-9434 with a copy to: Huth, Lynett and Scudi 5440 Morehouse Drive, Suite 4400 San Diego, CA 92121 Attention: Morgan Scudi, Esq. Facsimile Number: (619) 558-1122 The parties may, at any time, change their addresses or other information in this Article by written notice delivered under this Article. ARTICLE 12 ASSIGNMENT ---------- 12.1 Assignment. Neither party shall assign this Agreement nor delegate any of ---------- its duties hereunder to another without the prior written consent of the other party; provided, however, that either party may (even without such consent) -------- assign this Agreement to a successor in ownership of all or substantially all of its business assets to which this Agreement pertains whether by sale of assets, merger, consolidation or otherwise; provided further, that consent to assignment ---------------- to or delegation to a party's Affiliate shall not be unreasonably withheld; and provided further, that the party assigning its rights or delegating its - ---------------- obligations hereunder shall remain primarily liable for its obligations hereunder. Any other purported assignment shall be void. This Agreement shall be a binding obligation of the successors and permitted assigns of each party hereto. 9 ARTICLE 13 SEVERABILITY ------------ 13.1 Severability. All provisions contained herein are severable and in the ------------ event that any of them shall be held to be to any extent invalid or otherwise unenforceable by any court of competent jurisdiction, such provision shall be construed as if it were written so as to effectuate to the greatest possible extent the parties' expressed intent; and in every case the remainder of this Agreement shall not be affected thereby and shall remain valid and enforceable, as if such affected provision were not contained herein. ARTICLE 14 HEADINGS -------- 14.1 Headings. The Article, Section and paragraph headings herein are for -------- convenience only and shall not affect the construction or interpretation of this Agreement. ARTICLE 15 RELATIONSHIP OF PARTIES ----------------------- 15.1 Relationship of Parties. The relationship of the parties to this Agreement ----------------------- is that of independent contractors. The parties are not, by virtue of this Agreement or otherwise, in an employer-employee, principal-agent, joint venture or partnership relationship with each other. Each party agrees not to represent to any other person, or to assert in any form or forum, that the parties' relationship is an employer-employee, principal-agent, joint venture or partnership relationship. Each party acknowledges that it has no authority to make representations on behalf of or to bind or commit the other party, and each party covenants and agrees not to purport to make any representation on behalf of the other party or to purport to bind or commit the other party in any way. Each party acknowledges that it is responsible for its own tax withholding and other obligations with regard to its own employees, and that the other party has no responsibility whatsoever for withholding tax and other employment obligations of the first party. ARTICLE 16 LAW GOVERNING AND DISPUTE RESOLUTION ------------------------------------ 16.1 Law Governing. This Agreement shall be governed by and construed in ------------- accordance with the internal laws of the State of California. 16.2 Equitable Remedies. Each party acknowledges and agrees that the legal ------------------ remedies available to the other party in the event the first party violates the covenants and agreements made in this Agreement would be inadequate and that the other party shall be entitled, without posting any bond or other security, to temporary, preliminary and permanent injunctive relief, specific performance and other equitable remedies in the event of such a violation, in addition to any other remedies which the other party may have at law or in equity. ARTICLE 17 PUBLICATION OF CONTRACTOR'S AFFILIATION WITH SYNBIOTICS ------------------------------------------------------- 17.1 Limitations with Respect to Publicity. Neither party to this Agreement ------------------------------------- shall without the express written consent of the other use the name of the other either expressly or by implication in any advertising, sales or financial promotional materials. Notwithstanding the foregoing sentence, Synbiotics may use Licensor's name in connection with Synbiotics' disclosures made (i) to prospective and current investors in Synbiotics' shareholder reports, business 10 plans, offering materials and other financing documents and (ii) to satisfy the Company's reporting requirements under United States federal or state securities laws. 17.2 Marketing. Notwithstanding the provisions of Section 17.1 above, Licensor --------- will endeavor to recommend informally, and to use reasonable efforts to further the business of, diagnostic products developed and/or marketed by Synbiotics. ARTICLE 18 ENTIRE AGREEMENT, MODIFICATION, ETC. ------------------------------------ 18.1 Entire Agreement. This instrument contains the entire and only agreement ---------------- between the parties respecting the subject matter hereof and supersedes all prior or contemporaneous negotiations, understandings or agreements (provided that the Research Agreement by and among Synbiotics and Licensor dated September 6, 1994, the Development Agreement and any and all written agreements regarding secrecy, confidentiality, nondisclosure and non-use shall not be superseded and shall remain in full force and effect); and, any representation, promise or condition in connection therewith not incorporated herein shall not be binding on either party. 18.2 Modification. No alteration, amendment or modification of this Agreement ------------ shall be valid unless made in writing and signed by a duly authorized representative of Synbiotics and Licensor. 18.3 Waiver. No waiver of any provision of this Agreement shall be binding ------ unless and until set forth expressly in writing and signed by a duly authorized officer of the waiving party. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach of the same or any other term or provision, or a waiver of any contemporaneous breach of any other term or provision, or a continuing waiver of the same or any other term or provision. No failure or delay by a party in exercising any right, power, or privilege hereunder or other conduct by a party shall operate as a waiver thereof, in the particular case or in any past or future case, and no single or partial exercise thereof shall preclude the full exercise or further exercise of any right, power, or privilege. No action taken pursuant to this Agreement shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants or agreements contained herein. 18.4 No Third Party Rights. This Agreement is for the benefit of the parties --------------------- hereto and is not intended to, and shall not be construed as benefitting or creating rights in any person or entity other than the signatories hereto. 18.5 Interpretation. Each party has cooperated in the drafting and preparation -------------- of this Agreement and therefore, in any construction hereof, this Agreement shall not be construed against any party as the draftsman thereof. 18.6 Further Assurances. Each of the parties hereto shall execute and deliver ------------------ all additional documents and instruments and shall do any and all acts and things reasonably requested or otherwise necessary (a) in connection with the performance of the obligations undertaken in the Agreement, (b) to perfect and evidence the transactions contemplated by this Agreement, and/or (c) otherwise to effectuate in good faith the intent of the parties. 18.7 Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original, and all of which counterparts, taken together, shall constitute one and the same instrument. [Remainder of This Page Intentionally Left Blank] 11 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date. SYNBIOTICS CORPORATION By: /s/ Robert L. Widerkehr ---------------------------- Its: President and CEO Date: March 6, 1996 ENGENE BIOTECHNOLOGIES, INC. By: /s/ J. Kevin Steele ------------------------ Its: President Date: March 6, 1996 I hereby agree to be bound by Article 5 hereinabove, as if the word "Licensor" therein referred to me personally. /s/ J. Kevin Steele ------------------- /s/ David Telford ------------------- [SIGNATURE PAGE TO LICENSE AGREEMENT] 12 EXHIBIT A --------- INVESTMENT REPRESENTATION Synbiotics Corporation, a California corporation Engene Biotechnologies, Inc., a California corporation ("Engene") is acquiring the number of shares of common stock of Synbiotics Corporation, a California corporation, indicated below (the "Securities") in its own name and for its own account (or for a trust account if it is a trustee), and no other person has any interest in or right with respect to the Securities, nor has Engene agreed to give any person any such interest or right in the future. Engene is acquiring the Securities for investment and not with a view to or for sale in connection with any distribution of the Securities. Engene recognizes that the Securities have not been registered under the Federal Securities Act of 1933 or qualified under the California Corporate Securities Law of 1968, or the securities laws of any other state, that any disposition of the Securities is subject to restrictions imposed by federal and state law, and that the certificates representing the Securities will bear a restrictive legend. Engene also recognizes that it cannot dispose of the Securities absent registration and qualification, or an available exemption from registration and qualification, and that no undertaking has been made with regard to registering or qualifying the Securities in the future. Engene understands that the availability of any exemption in the future will depend in part on circumstances outside its control and that Engene may be required to hold the Securities for a substantial period. Engene recognizes that no public market exists with respect to the Securities and no representation has been made to me that such a public market will exist at a future date. Engene understands that neither the California Commissioner of Corporations nor any other state commissioner of corporations has made any finding or determination relating to the fairness for investment of the Securities offered by Synbiotics Corporation and that no commissioner of corporations of any state has or will recommend or endorse the Securities. ENGENE BIOTECHNOLOGIES, INC. By: /s/ J. Kevin Steele - ------------------------ Title: President ###-##-#### - -------------------------- Taxpayer Identification or Social Security Number Address: 16236 San Dieguito Road Suite 4-21 Rancho Santa Fe, CA 92067 Date: March 6, 1995 Number of Shares purchased: [*] A-1 EXHIBIT B --------- EXISTING PRODUCTS [*] B-1 EX-10.55 4 RESEARCH & DEVELOPMENT AGREEMENT RESEARCH AND DEVELOPMENT AGREEMENT EXHIBIT 10.55 ------------- This Research and Development Agreement (this "Agreement") is made as of March 6, 1996 by and between ENGENE BIOTECHNOLOGIES, INC., a California corporation ("Contractor") and SYNBIOTICS CORPORATION, a California corporation ("Synbiotics"). ARTICLE 1 DEFINITIONS ----------- The following terms will have the following meanings when used herein: 1.1 Affiliate. "Affiliate" shall mean any corporation or other business entity --------- which controls, is controlled by or is under common control with any party. A corporation or business entity shall be regarded as in control of another corporation or business entity if it owns directly or directly or indirectly controls at least fifty percent (50%) of the voting stock of the other corporation or business entity. 1.2 Development Plan. "Development Plan" shall have the meaning set forth in ---------------- Section 3.1.1 of this Agreement. 1.3 Effective Date. "Effective Date" shall mean March 6, 1996. -------------- 1.4 Initial Project Schedule. "Initial Project Schedule" shall have the ------------------------ meaning set forth in Section 3.1.2 of this Agreement. 1.5 Intellectual Property. "Intellectual Property" shall mean all inventions, --------------------- improvements, discoveries, sequences, works of authorship, trade secrets, technology, ideas, know-how, processes, methods, formulas, data and techniques arising from Contractor's specific work on the Projects, and all title, patents, patent rights, copyrights, trade secret rights, and other intellectual property rights anywhere in the world related thereto. 1.6 License Agreement. "License Agreement" shall mean the agreement so named, ----------------- dated today, between Contractor and Synbiotics. 1.7 PCR Product(s). "PCR Product(s)" shall mean all Synbiotics Product(s) -------------- specifically incorporating any Rights relating specifically to polymerase chain reaction based technology. 1.8 Project(s). "Project(s)" shall mean the research and development projects ---------- specified in the Development Plans attached to the Initial Project Schedule or any Subsequent Project Schedule. 1.9 Net Sales. "Net Sales" shall mean the total invoice amount for sales to --------- unaffiliated entities less (i) normal and customary cash and trade discounts, returns and allowances, transportation charges or allowances, if any, paid or allowed by Synbiotics, and (ii) sales, value added and other similar taxes paid by Synbiotics with respect to the sale of a product, if included in the selling price. In the event of a transaction between Synbiotics _____________________ [*] Certain confidential portions of this exhibit have been omitted by means of blacking out the text (the "Mark"). This exhibit has been filed separately with the Secretary of the Commission without the Mark pursuant to the Company's Application Requesting Confidential Treatment under Rule 24b-2 under the Securities Exchange Act of 1934, as amended. 1 and an Affiliate, "Net Sales" shall be deemed to be the total gross amount invoiced by Synbiotics if that amount is the same as the amount invoiced for similar sales to non-affiliated third parties and otherwise the amount of Net Sales shall be the amount invoiced by the Affiliate on its sale of the item, in either case less (i) normal and customary cash and trade discounts, returns and allowances, transportation charges or allowances, if any, paid or allowed by Synbiotics, and (ii) sales, value added and other similar taxes paid by Synbiotics with respect to the sale of the product, if included in the selling price. 1.10 Research Agreement. "Research Agreement" shall mean the agreement so ------------------ named, dated September 6, 1994, between Synbiotics and Contractor. 1.11 Rights. "Rights" shall mean any inventions, improvements, discoveries, ------ sequences, works of authorship, trade secrets, technology, ideas, know-how, processes, methods, formulas, data and techniques, patents, patent rights, trade secrets and other intellectual property rights licensed to Synbiotics pursuant to Article 3 of the License Agreement. 1.12 Specifications. "Specifications" shall mean the specifications established -------------- by Synbiotics for each Synbiotics Product (including, without limitation, sensitivity, size, shape, color, tolerances, materials, labelling, packaging, etc.) 1.13 Subsequent Product Schedule. "Subsequent Product Schedule" shall have the --------------------------- meaning set forth in Section 3.1.2 of this Agreement. 1.14 Synbiotics Product(s). "Synbiotics Product(s)" shall mean any vaccine, --------------------- construct, probe, diagnostic test or automatable assay technique incorporating any Rights developed for Synbiotics by Contractor hereunder. Without limitation Synbiotics Product(s) shall also include any vaccine, construct, probe, diagnostic test or automatable assay technique incorporating the Rights (i) for use in detecting [*] utilizing the unique sequence of [*] characterized by Contractor and (ii) set forth on attached Exhibit B. --------- ARTICLE 2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTIES -------------------------------------------------------- 2.1 Representations and Warranties of Synbiotics. Synbiotics represents and -------------------------------------------- warrants to Contractor that as of the Effective Date: (a) it is a corporation duly organized, validly existing and in good standing under the laws of the State of California; (b) all corporate acts required to execute and deliver this Agreement have been duly taken by Synbiotics; the execution, delivery and performance hereof by Synbiotics have been duly authorized; and this Agreement, as so executed and delivered, is a valid and binding obligation of Synbiotics, enforceable against it in accordance with its terms; and (c) the execution and delivery of this Agreement by Synbiotics, and the performance of its obligations hereunder, do not require the consent of any third party and will not violate, with or without notice, the lapse of time or both, any agreement, contract, license or permit to which Synbiotics is a party or its organizational documents. 2.2 Representations and Warranties of Contractor. Contractor represents and -------------------------------------------- warrants to Synbiotics that as of the Effective Date: 2 (a) it is a corporation duly organized, validly existing and in good standing under the laws of the State of California; (b) all corporate acts required to execute and deliver this Agreement have been duly taken by Contractor; the execution, delivery and performance hereof by Contractor have been duly authorized; and this Agreement, as so executed and delivered, is a valid and binding obligation of Contractor, enforceable against it in accordance with its terms; (c) the execution and delivery of this Agreement by Contractor, and the performance of its obligations hereunder, do not require the consent of any third party and will not violate, with or without notice, the lapse of time or both, any agreement, contract, license or permit to which Contractor is a party or its organizational documents; (d) it has the right and title to grant the present and future rights and assignments in favor of Synbiotics contained in this Agreement; (e) neither it nor anyone authorized to act on its behalf has entered into any agreement or understanding with any third party that grants rights, licenses, assignments, immunities or options of any kind which would interfere with its ability to perform its obligations under this Agreement; and (f) each of its employees has entered into a contract which provides for assignment to Contractor of all inventions and intellectual property made by him or her during the course of his or her employment, and non- disclosure of confidential information of Contractor and of others to which access is gained through Contractor. 2.3 Covenants of Contractor. Contractor covenants and agrees that for the ----------------------- duration of this Agreement: (a) subject to the terms hereof, it will maintain at all times all relevant regulatory approvals and licenses for its research and laboratory facilities in its reasonable judgment sufficient in capacity to allow Contractor to perform the work contemplated by this Agreement within the timeframe contemplated in this Agreement; (b) if during the conduct of work on any Project any of Contractor's employees or consultants shall, to the knowledge of Contractor, make a discovery, improvement or invention relating to work on the Project or otherwise create Intellectual Property, Contractor will promptly make the fact of such discovery, improvement or invention or Intellectual Property known to Synbiotics; (c) it shall not take, or omit to take, or suffer to occur, any action which would result in any representation or warranty made by Contractor in Section 2.2 from becoming at any future date untrue (assuming it were made on and as of such future date); (d) it shall not enter into any agreement or take or fail to take any action which shall restrict its legal right to grant to Synbiotics the rights contemplated under this Agreement or the License Agreement; (e) it shall promptly, but in no event more than three (3) business days, notify Synbiotics, and provide copies or transcriptions, of any action, request, order, instruction, communication, complaint, notice, public announcement or inquiry by the United States Department of Agriculture ("USDA") or any submission, filing, letter or other communication by Contractor to the USDA with respect to any of the Synbiotics Products which is sent by or is received by or which comes to the attention of Contractor, including but not limited to field actions, investigations or recalls of the Synbiotics Products; and 3 (f) it will use its best efforts to, as soon as practicable, after receiving a request from Synbiotics to manufacture any Synbiotics Products pursuant to Section 4.1, establish a USDA licensed manufacturing facility sufficient in size to allow it to perform its manufacturing obligations under Section 4.1, and shall maintain and expand such facility, as necessary to perform its obligations, for so long as it continues to manufacture any Synbiotics Products. ARTICLE 3 RESEARCH SERVICES TO BE PROVIDED -------------------------------- 3.1 Contractor's Research Obligations. --------------------------------- 3.1.1 Development Plan. Contractor shall use its best efforts to complete ---------------- each Project, in accordance with the development plan therefor, which shall include the Specifications, development schedule, deliverables, and other conditions of the proposed development (the "Development Plan"). All Development Plans shall be contain commercially reasonable terms and shall be prepared by Synbiotics after reasonable consultation with Contractor. 3.1.2 Contractor's Development Obligations. Synbiotics shall provide to ------------------------------------ Contractor within thirty (30) days following the Effective Date, a schedule setting forth at least two (2) Projects that Synbiotics intends to fund (the "Initial Project Schedule"), together with a Development Plan with respect to each such Project. During the fourth calendar quarter of each calendar year during the term of the Agreement, Synbiotics shall present to Engene an additional schedule setting forth each of the Projects that Synbiotics intends to fund during the ensuing calendar year ("Subsequent Project Schedule"), together with a Development Plan with respect to each such Project. In connection with each of the Projects set forth in a Subsequent Product Schedule, Contractor covenants to make available to Synbiotics a development group comparable in size and experience to the development group committed to each of the Projects identified in the Initial Project Schedule. 3.1.3 Termination of Project. ---------------------- (a) Synbiotics may terminate any Project or Projects, at any time upon delivering written notice of such termination to Contractor ("Termination Notice"). Upon any such termination, Synbiotics shall have no obligation to compensate Contractor for any further work conducted on such Project after the end of the calendar month in which the Termination Notice was sent to Contractor. (b) In the event that any Project is terminated pursuant to this Section 3.1.3, Synbiotics shall have the right (but not the obligation) to (i) undertake or continue, the Project independently of Contractor and (ii) cause Contractor to resume work on the Project whether or not Synbiotics has performed or continues to perform any work on the Project. If Synbiotics elects to undertake or continue the Project, Contractor shall make available to Synbiotics any and all work product produced in connection with such Project. 3.2 Synbiotics' Obligations. Synbiotics shall not contract with any third ----------------------- party to perform any research project where such project calls for a PCR Product as a deliverable unless Contractor has first been offered an opportunity to conduct such research project. Nothing contained in this Section 3.2 shall be interpreted to restrict Synbiotics ability to carry on any research project independent from Contractor. 3.3 Records and Notes. Contractor shall, in accordance with its established ----------------- practice, keep complete, accurate and authentic accounts, notes, data and records of the work performed under this Agreement. Contractor shall 4 promptly and fully disclose to Synbiotics any and all information, data and results obtained from conducting the Projects. Synbiotics may, upon prior written notice and at reasonable times, inspect and make copies of such accounts, notes, data and records at Contractor's facilities. 3.4 Reports and Meetings. Synbiotics may appoint a liaison who shall have full -------------------- access to Contractor's facilities to monitor and otherwise obtain knowledge and information about the research on the Projects. Synbiotics' liaison shall meet with Contractor on a semimonthly basis. During such meetings Contractor shall orally communicate to the Synbiotics liaison information obtained through work on the Projects being monitored. Contractor shall in addition, within ten (10) days following the completion of each calendar month, provide Synbiotics separate written status reports detailing the information obtained through work accomplished in the most recently completed calendar month on respective Projects (the "Project Monthly Reports"). Within thirty (30) days of the completion of the work with respect to a Project, the parties shall jointly author a final report summarizing the work accomplished and identifying all inventions conceived and reduced to practice and all other Intellectual Property. 3.5 Work for Third Parties. Nothing contained in this Agreement (except as set ---------------------- forth in Sections 3.1, 3.2 and 4.2) prohibits or constrains either party from cooperating or working with third parties; provided, however, that Contractor agrees to remain exclusively available to Synbiotics for further consultation, and correspondingly agrees for the term of this Agreement and for three years following the expiration or termination of this Agreement pursuant to Article 9, not to perform any research for Contractor's own account or for any other person relating to the Rights. If any such research is proposed to Contractor by any person, Contractor shall immediately notify Synbiotics in writing, giving all specifics. 3.6 Good Laboratory Practices. Contractor shall conduct all nonclinical ------------------------- laboratory research or studies and/or manufacturing in accordance with Good Laboratory Practice standards and Good Manufacturing Practices standards, and will document the adherence of its facilities, equipment, personnel, methods, practices, records and controls to the applicable standards and regulations. 3.7 QA/QC. Contractor shall be the sole party responsible for quality ----- assurance and quality control in the manufacturing of any Synbiotics Products pursuant to the Projects. ARTICLE 4 MANUFACTURING SERVICES ---------------------- 4.1 Option to Cause Contractor to Manufacture. Contractor hereby agrees, upon ----------------------------------------- the request of Synbiotics, to manufacture any or all of the primer sets required by Synbiotics for the Synbiotics Products. The price at which Synbiotics will purchase primer sets manufactured by Contractor pursuant to this Section 4.1 and the terms and conditions upon which such primer sets will be provided to Synbiotics shall be negotiated by Contractor and Synbiotics in good faith, and shall reflect industry average prices and standard terms and conditions for the manufacture of such products. Synbiotics has no obligation to request Contractor to manufacture if, and to the extent, Synbiotics chooses to manufacture by itself. 4.2 Use of Third Party Manufacturers. Prior to contracting with any third -------------------------------- party for the manufacture of any primer sets for a Synbiotics Products, Synbiotics shall first notify Contractor in writing of its desire to cause Contractor to manufacture such primer sets (the "Written Notice") and then for thirty (30) days after Contractor's receipt of the Written Notice, negotiate with Contractor (and not with anyone else) in good faith toward a definitive manufacturing agreement on terms as contemplated by Section 4.1 and otherwise mutually agreeable to Contractor and Synbiotics. 5 ARTICLE 5 COMPENSATION FOR SERVICES ------------------------- 5.1 Contractor Compensation. Contractor shall be compensated during the term ----------------------- of each Project at the rate of [*] per month for the first Project performed under this Agreement (except that for so long as any project is being performed pursuant to the Research Agreement the compensation for the first Project to be performed under this Agreement shall be [*] per month) and [*] per month for each additional Project (the "Fee"). The Fee during each of the first twelve (12) consecutive months of this Agreement, including payments made to Contractor pursuant to the Research Agreement, shall be at least [*] per month. The Fee with respect to each Project shall be paid in arrears on the last day of each month and shall be prorated if a Project is completed in mid-month. 5.2 Milestone Payments. As partial consideration for the research and ------------------ development efforts of Contractor under this Agreement, Synbiotics shall pay Contractor milestone payments (subject to Contractor executing an Investment Representation in the form attached hereto as Exhibit A prior to each payment) --------- at the times set forth below. 5.2.1 [*] shares of Synbiotics Common Stock, no par value, upon Synbiotics achieving aggregate Net Sales of PCR Products of at least [*] prior to the first anniversary of the Effective Date. 5.2.2 [*] shares of Synbiotics Common Stock, no par value, upon Synbiotics achieving aggregate Net Sales of PCR Products of at least [*] during the one-year period commencing on the first anniversary of the Effective Date. 5.2.3 [*] shares of Synbiotics Common Stock, no par value, upon Synbiotics achieving Net Sales of PCR Products of at least [*] during the one-year period commencing on the second anniversary of the Effective Date. 5.3 "Royalty" Payments. ------------------ 5.3.1 Synbiotics shall pay to Contractor a payment in the nature of a royalty on its Net Sales of all Synbiotics Products. The royalty rate shall be [*] of Net Sales for each Synbiotics Product, to the extent permitted by law. Synbiotics' royalty obligations will continue throughout the entire useful life of each Synbiotics Product. Royalties shall be paid within forty-five (45) days of the end of each calendar quarter with respect to royalty-bearing sales occurring in that quarter. Synbiotics shall keep and maintain detailed and accurate books and records with regard to Net Sales, royalties and calculation thereof. 5.3.2 If a law or governmental regulation requires withholding of taxes on any royalty payment due hereunder, such taxes shall be deducted from any amount to be remitted hereunder and shall be paid to the proper taxing authority, and proof of payment shall be provided to the party on whose behalf such taxes were paid as evidence of such payment in such form as required by the tax authorities having jurisdiction. 5.3.3 Each royalty payment shall be accompanied by a written report, prepared and signed by a financial officer of Synbiotics, showing for the quarter for which payment is being made, the Net Sales of each Synbiotics Product sold and the royalties which shall have accrued with respect thereto and currency conversion calculations, if any. In the event that, for any quarter following the first quarter in which a Synbiotics Product is sold for which such a royalty would be payable, no such royalty is due, Synbiotics shall report the same to Contractor. 5.3.4 At the request and expense of Contractor, Synbiotics shall permit an independent certified public accountant appointed by Contractor and reasonably acceptable to Synbiotics, at reasonable times and upon reasonable notice (but not exceeding once in any twelve (12) month period), to examine those records as may be necessary (with respect to any calendar year ending not more than three (3) years prior to such 6 party's request) to: (i) determine the correctness of any report or payment under this Agreement; or (ii) obtain information as to the Synbiotics Product sales for such calendar year. Said independent certified public accountant shall verify to the requesting party only the amount of payment due or costs incurred hereunder and disclose no other information revealed in its audit. Results of any such examination shall be made available to the parties. Any amount of deficiency, or overcharge, shall be paid or refunded promptly to Contractor, plus interest at the commercial prime lending rate of Citibank, N.A., New York (or equivalent banking institution) until the date paid. Contractor shall bear the full cost of the performance of any such audit unless such audit discloses a variance of more than five percent (5%) from the amount of the original report, royalty or payment calculation, in which case Synbiotics shall bear the full cost of the performance of such audit. 5.4 No Reimbursement. Synbiotics shall have no obligation to purchase for ---------------- Contractor or reimburse Contractor for the expense of purchasing any equipment or supplies needed to perform the Projects. ARTICLE 6 OWNERSHIP OF INTELLECTUAL PROPERTY ---------------------------------- 6.1 Assignment and Perfection of Intellectual Property Rights. All right, --------------------------------------------------------- title and interest in and to Intellectual Property and other results, whether patentable or not, conceived by Contractor or any employee, consultant or agent of Contractor in the course of performing work on a Project (including, without limitation, any Synbiotics Products) shall be the property of Synbiotics, and Contractor shall assign to Synbiotics (at such times and using such forms of instrument as Synbiotics may request) any and all rights Contractor or any such person may have or may assert to any such Intellectual Property. Upon request of Synbiotics, Contractor shall use its best efforts to cause any such employee, consultant or agent to make application for a patent with respect to any Intellectual Property conceived of, and resulting from the research with regard to the Projects conducted by such employee, consultant or agent pursuant to this Agreement. Any such application(s) shall be made and prosecuted at the expense of Synbiotics and through attorneys named by Synbiotics. Synbiotics shall have complete control of the patent prosecution process, including whether or not to file a patent application. Any and all expenses, including travel for or in connection with the preparation, filing, prosecution, assignment and recording of such application shall be paid by Synbiotics without reference to sums otherwise provided in this Agreement. 6.2 Further Acts; Enforcement. Contractor agrees to perform, during and after ------------------------- the term of this Agreement, all acts deemed necessary or desirable by Synbiotics to permit and assist Synbiotics, at Synbiotics' sole expense (including compensating Contractor at $100 per hour for the time of Contractor's professionals, plus reimbursement of Contractor's out-of-pocket expenses), in evidencing, obtaining, maintaining, defending and enforcing Synbiotics' rights with respect to Intellectual Property and/or Contractor's assignment with respect to Intellectual Property in any and all countries. Such acts may include, but are not limited to, execution of documents and assistance or cooperation in legal proceedings. Contractor hereby irrevocably designates and appoints Synbiotics and its duly authorized officers and agents, as Contractor's agents and attorneys-in-fact to act for and in behalf and instead of Contractor, to execute and file any documents and to do all other lawfully permitted acts to further the above purposes with the same legal force and effect as if executed by Contractor. ARTICLE 7 CONFIDENTIALITY --------------- 7.1 Confidential Information. Contractor agrees that it shall maintain (and ------------------------ shall cause its employees, consultants and agents to maintain) in confidence any information regarding Synbiotics or its Intellectual Property received before or during the term of this Agreement and identified as confidential or otherwise protected and any information regarding the results of Contractor's work on any Project (hereinafter, such information shall collectively be referred 7 to as "Confidential Information"), and without the express written permission of Synbiotics shall neither use, publish, disseminate nor disclose such Confidential Information except for the furtherance of the purposes of this Agreement. Subject to the next sentence, the foregoing obligations of confidentiality and non-use shall survive the expiration or termination of this Agreement. The obligations of the first sentence shall not apply to any information which: (i) is now or hereafter comes into the public domain otherwise than by breach of this Agreement, or (ii) is brought to Contractor by a third party who rightfully obtained and possesses it and does not require that it be maintained confidential by the receiving party (and who does not thereby breach any contract). Furthermore, the obligations of the first sentence shall not apply to any information (excluding any information relating to Rights) which is shown by written records to be already in the possession of Contractor other than as a result of having received it from Synbiotics. 7.2 Publication of Results of Work. Contractor shall have no right to publish ------------------------------ information regarding the results of its work on a Project without the express written consent of Synbiotics. Contractor shall likewise restrict and prevent its employees, consultants and agents from so publishing the results of work on a Project. ARTICLE 8 PUBLICATION OF CONTRACTOR'S AFFILIATION WITH SYNBIOTICS ------------------------------------------------------- 8.1 Limitations with Respect to Publicity. Neither party to this Agreement ------------------------------------- shall without the express written consent of the other use the name of the other either expressly or by implication in any advertising, sales or financial promotional materials. Notwithstanding the foregoing sentence, Synbiotics may use Contractor's name in connection with Synbiotics' disclosures made (i) to prospective and current investors in Synbiotics' shareholder reports, business plans, offering materials and other financing documents and (ii) to satisfy the Company's reporting requirements under United States federal or state securities laws. 8.2 Marketing. Notwithstanding the provisions of Section 8.1 above, Contractor --------- will endeavor to recommend informally, and to use reasonable efforts to further the business of, diagnostic products developed and/or marketed by Synbiotics. ARTICLE 9 INDEMNITIES AND "WARRANTY" -------------------------- 9.1 Contractor Indemnification. Contractor agrees to and shall defend, -------------------------- indemnify and hold Synbiotics, its officers, directors, employees, agents and shareholders harmless (including attorneys fees to defend, and any damages, penalties, settlements, costs or expenses awarded or incurred) from and against any claim, liability, suit or proceeding based upon negligence, warranty, strict liability or violation of government regulation, (but specifically excluding, without limitation any claim, liability, suit or proceeding initiated by or on behalf of a third party based upon infringement of patent or other proprietary rights,) arising from or occurring as a result of any development or use of the Rights or Synbiotics Products (including, without limitation, any manufacture of the Synbiotics Products) by Contractor. 9.2 Synbiotics Indemnification. Synbiotics agrees to and shall defend, -------------------------- indemnify and hold Contractor, its officers, directors, employees, agents and shareholders harmless (including attorneys fees to defend, and any damages, penalties, settlements, costs or expenses awarded or incurred) from and against any claim, liability, suit or proceeding initiated by or on behalf of a third party based upon negligence, warranty, strict liability or violation of government regulation, (but specifically excluding, without limitation any claim, liability, suit or proceeding based upon infringement of patent or other proprietary rights,) arising from or occurring as a result of any development or use of the Rights or Synbiotics Products (including, without limitation, any manufacture of the Synbiotics Products) by Synbiotics. 8 9.3 Defense of Claims. If any lawsuit or enforcement action is filed against ----------------- any indemnified person, written notice thereof shall be given to the indemnifying company as promptly as practicable (and in any event within fifteen (15) days after the service of the citation or summons); provided that the failure of any indemnified person to give timely notice shall not affect rights to indemnification hereunder except to the extent that the indemnifying company demonstrates actual damage caused by such failure. After such notice, if the indemnifying Company shall acknowledge in writing to such indemnified person that the indemnifying company shall be obligated under the terms of its indemnity hereunder in connection with such lawsuit or action, then the indemnifying company shall be entitled, if it so elects, to take control of the defense and investigation of such lawsuit or action and to employ and engage attorneys of its own choice (subject to the approval (for competence, experience, independence and absence of conflict of interest) of the indemnified person) to handle and defend the same, at the indemnifying company's cost, risk and expense; and such indemnified person shall thereafter cooperate in all reasonable respects with the indemnifying company and such attorneys in the investigation, trial and defense of such lawsuit or action and any appeal arising therefrom. The fees of such attorneys, and all amounts payable by the indemnifying company under this Section, shall be payable as incurred and on demand. The indemnified person may also, through independent counsel and at its own cost, participate in such investigation, trial and defense of such lawsuit or action and any appeal arising therefrom. 9.4 Settlements. An indemnifying company shall have the absolute right to ----------- effect a settlement of any action or claim against an indemnified person where the settlement calls only for money to be paid on behalf of an indemnified person, provided the indemnifying company makes all such payments directly to the third party. However, no settlement calling for anything to be done (or not done) by an indemnified person other than the payment of money (or calling for the payment of money directly by the indemnified person) may be effected by the indemnifying company without the prior written approval of the indemnified person. No indemnified person shall enter into a settlement calling for or necessitating the payment of money (under this Section or otherwise), or for any other thing, by the indemnifying company without the prior written approval of the indemnifying company. 9.5 Warranty. If a Project deliverable is a construct or a probe, and such -------- construct or probe proves unsatisfactory for any reason at any time before USDA licensure of a related diagnostic product, Synbiotics may, at its option, require Contractor to create and deliver a replacement construct or probe. ARTICLE 10 TERM AND TERMINATION -------------------- 10.1 Term. The initial term of this Agreement shall commence of the Effective ---- Date and, unless earlier terminated in accordance with the express terms of this Agreement, shall expire on the third anniversary of the Effective Date. At the end of the initial term, this Agreement shall automatically be renewed for additional terms of one (1) year, unless either party provides the other written notice of termination at least ninety (90) days prior to the commencement of an additional term. The term of this Agreement shall begin on the Effective Date and, unless earlier terminated in accordance with the express terms of this Agreement, shall expire on the third anniversary of the Effective Date. This Agreement shall be automatically renewed for additional one (1) year terms after the initial term, unless either party is otherwise notified by the other in writing at least ninety (90) days prior to the termination of the initial term. 10.2 Termination. If either party materially breaches or defaults in the ----------- performance of this Agreement and such breach or default is not cured within thirty (30) days after the giving of notice of default by the other party specifying such breach or default, then the party giving such notice may, in addition to all other remedies available at law or in equity, terminate this Agreement immediately for cause and such termination shall be effective on the date when a notice of termination is received by the breaching or defaulting party. 9 10.2.1 The failure of a party to assert its rights for any material breach or default of this Agreement shall not be deemed a waiver of such rights nor shall any waiver be implied by the making or acceptance of any payment. 10.2.2 Termination shall only relieve the parties of obligations which would have arisen under this Agreement after the effective date of termination and shall in no way relieve the parties of any obligations existing on the date of such termination. 10.3 Survival. All obligations under Sections 3.4, 5.2, 5.3, 6.1, 6.2, 10.3 and -------- Articles 7 and 9 shall continue notwithstanding any termination or expiration of this Agreement. ARTICLE 11 NOTICES ------- All notices or other communications provided for in this Agreement shall be in writing and shall be considered delivered upon the latest of actual receipt, or personal or courier delivery, or sending by facsimile with confirmation of receipt in good order requested and received, or on the third business day after -- they are deposited in the United States mail, certified first class postage prepaid, addressed to the respective parties as follows: (a) If to Synbiotics: Synbiotics Corporation 11011 Via Frontera San Diego, CA 92127 Attention: Chief Executive Officer Facsimile Number: (619) 451-5719 with a copy to: Brobeck, Phleger & Harrison 550 West C Street, Suite 1300 San Diego, CA 92101 Attention: Hayden J. Trubitt, Esq. Facsimile Number: (619) 234-3848 (b) If to Contractor: Engene Biotechnologies, Inc. 16236 San Dieguito Road Suite 4-21 Rancho Santa Fe, CA 92067 Attention: J. Kevin Steele Facsimile Number: (619) 759-9434 with a copy to: Huth, Lynett and Scudi 5440 Morehouse Drive, Suite 4400 San Diego, CA 92121 Attention: Morgan Scudi, Esq. Facsimile Number: (619) 558-1122 The parties may, at any time, change their addresses or other information in this Article by written notice delivered under this Article. 10 ARTICLE 12 ASSIGNMENT ---------- Neither party shall assign this Agreement nor delegate any of its duties hereunder to another without the prior written consent of the other party; provided, however, that either party may (even without such consent) assign this - -------- Agreement to a successor in ownership of all or substantially all of its business assets to which this Agreement pertains whether by sale of assets, merger, consolidation or otherwise; provided further, that consent to assignment ---------------- to or delegation to a party's Affiliate shall not be unreasonably withheld; and provided further, that the party assigning its rights or delegating its - ---------------- obligations hereunder shall remain primarily liable for its obligations hereunder. Any other purported assignment shall be void. This Agreement shall be a binding obligation of the successors and permitted assigns of each party hereto. ARTICLE 13 SEVERABILITY ------------ All provisions contained herein are severable and in the event that any of them shall be held to be to any extent invalid or otherwise unenforceable by any court of competent jurisdiction, such provision shall be construed as if it were written so as to effectuate to the greatest possible extent the parties' expressed intent; and in every case the remainder of this Agreement shall not be affected thereby and shall remain valid and enforceable, as if such affected provision were not contained herein. ARTICLE 14 HEADINGS -------- The Article, Section and paragraph headings herein are for convenience only and shall not affect the construction or interpretation of this Agreement. ARTICLE 15 RELATIONSHIP OF PARTIES ----------------------- The relationship of the parties to this Agreement is that of independent contractors. The parties are not, by virtue of this Agreement or otherwise, in an employer-employee, principal-agent, joint venture or partnership relationship with each other. Each party agrees not to represent to any other person, or to assert in any form or forum, that the parties' relationship is an employer- employee, principal-agent, joint venture or partnership relationship. Each party acknowledges that it has no authority to make representations on behalf of or to bind or commit the other party, and each party covenants and agrees not to purport to make any representation on behalf of the other party or to purport to bind or commit the other party in any way. Each party acknowledges that it is responsible for its own tax withholding and other obligations with regard to its own employees, and that the other party has no responsibility whatsoever for withholding tax and other employment obligations of the first party. ARTICLE 16 LAW GOVERNING AND DISPUTE RESOLUTION ------------------------------------ 16.1 Law Governing. This Agreement shall be governed by and construed in ------------- accordance with the internal laws of the State of California. 11 16.2 Equitable Remedies. Each party acknowledges and agrees that the legal ------------------ remedies available to the other party in the event the first party violates the covenants and agreements made in this Agreement would be inadequate and that the other party shall be entitled, without posting any bond or other security, to temporary, preliminary and permanent injunctive relief, specific performance and other equitable remedies in the event of such a violation, in addition to any other remedies which the other party may have at law or in equity. ARTICLE 17 ENTIRE AGREEMENT, MODIFICATION, ETC. ------------------------------------ 17.1 Entire Agreement. This instrument, including the Project Master Schedule, ---------------- contains the entire and only agreement between the parties respecting the subject matter hereof and supersedes all prior or contemporaneous negotiations, understandings or agreements (provided that the Research Agreement, the License Agreement and any and all written agreements regarding secrecy, confidentiality, nondisclosure and non-use shall not be superseded and shall remain in full force and effect); and, any representation, promise or condition in connection therewith not incorporated herein shall not be binding on either party. 17.2 Modification. No alteration, amendment, modification, renewal or extension ------------ of this Agreement shall be valid unless made in writing and signed by a duly authorized representative of Synbiotics and Contractor. 17.3 Waiver. No waiver of any provision of this Agreement shall be binding ------ unless and until set forth expressly in writing and signed by duly authorized officer of the waiving party. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach of the same or any other term or provision, or a waiver of any contemporaneous breach of any other term or provision, or a continuing waiver of the same or any other term or provision. No failure or delay by a party in exercising any right, power, or privilege hereunder or other conduct by a party shall operate as a waiver thereof, in the particular case or in any past or future case, and no single or partial exercise thereof shall preclude the full exercise or further exercise of any right, power, or privilege. No action taken pursuant to this Agreement shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants or agreements contained herein. 17.4 No Third Party Rights. This Agreement is for the benefit of the parties --------------------- hereto and is not intended to, and shall not be construed as benefitting or creating rights in any person or entity other than the signatories hereto. 17.5 Interpretation. Each party has cooperated in the drafting and preparation -------------- of this Agreement and therefore, in any construction hereof, this Agreement shall not be construed against any party as the draftsman thereof. 17.6 Further Assurances. Each of the parties hereto shall execute and deliver ------------------ all additional documents and instruments and shall do any and all acts and things reasonably requested or otherwise necessary (a) in connection with the performance of the obligations undertaken in the Agreement, (b) to perfect and evidence the transactions contemplated by this Agreement, and/or (c) otherwise to effectuate in good faith the intent of the parties. 17.7 Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original, and all of which counterparts, taken together, shall constitute one and the same instrument. [Remainder of This Page Intentionally Left Blank] 12 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date. SYNBIOTICS CORPORATION By: /s/ Robert L. Widerkehr ----------------------- Its: President and CEO Date: March 6, 1996 ENGENE BIOTECHNOLOGIES, INC. By: /s/ J. Kevin Steele ---------------------- Its: President Date: March 6, 1996 I hereby agree to be bound by Sections 3.5 and 7.2 hereinabove, as if the word "Contractor" therein referred to me personally. /s/ J. Kevin Steele ----------------------- /s/ David Telford ----------------------- [SIGNATURE PAGE TO RESEARCH AND DEVELOPMENT AGREEMENT] EXHIBIT A --------- INVESTMENT REPRESENTATION Synbiotics Corporation, a California corporation Engene Biotechnologies, Inc., a California corporation ("Engene") is acquiring the number of shares of common stock of Synbiotics Corporation, a California corporation, indicated below (the "Securities") in its own name and for its own account (or for a trust account if it is a trustee), and no other person has any interest in or right with respect to the Securities, nor has Engene agreed to give any person any such interest or right in the future. Engene is acquiring the Securities for investment and not with a view to or for sale in connection with any distribution of the Securities. Engene recognizes that the Securities have not been registered under the Federal Securities Act of 1933 or qualified under the California Corporate Securities Law of 1968, or the securities laws of any other state, that any disposition of the Securities is subject to restrictions imposed by federal and state law, and that the certificates representing the Securities will bear a restrictive legend. Engene also recognizes that it cannot dispose of the Securities absent registration and qualification, or an available exemption from registration and qualification, and that no undertaking has been made with regard to registering or qualifying the Securities in the future. Engene understands that the availability of any exemption in the future will depend in part on circumstances outside its control and that Engene may be required to hold the Securities for a substantial period. Engene recognizes that no public market exists with respect to the Securities and no representation has been made to me that such a public market will exist at a future date. Engene understands that neither the California Commissioner of Corporations nor any other state commissioner of corporations has made any finding or determination relating to the fairness for investment of the Securities offered by Synbiotics Corporation and that no commissioner of corporations of any state has or will recommend or endorse the Securities. ENGENE BIOTECHNOLOGIES, INC. By: /s/ J. Kevin Steele ------------------- Title: President ###-##-#### - -------------------------- Taxpayer Identification or Social Security Number Address: 16236 San Dieguito Road Suite 4-21 Rancho Santa Fe, CA 92067 Date: March 6, 1995 Number of Shares purchased: [*] A-1 EXHIBIT B --------- EXISTING PRODUCTS [*] B-1 EX-10.56 5 SCIENTIFIC ADVISOR AGREEMENT SCIENTIFIC ADVISOR AGREEMENT EXHIBIT 10.56 ---------------------------- ------------- (Scientific Advisory Board) THIS SCIENTIFIC ADVISOR AGREEMENT ("Agreement") is entered into as of March 6, 1996, by and between J. Kevin Steele ("Advisor") and Synbiotics Corporation, a California corporation ("Synbiotics"). Advisor and Synbiotics agree as follows: 1. Description of Services. Synbiotics hereby retains Advisor and Advisor ----------------------- hereby agrees to serve during the term of this Agreement as a member of Synbiotics' Scientific Advisory Board. As such, Advisor shall advise Synbiotics from time to time on scientific aspects of research, development, manufacturing, marketing and legal issues affecting the Company and its business. 2. Compensation. ------------ A. Consulting Fee. Synbiotics shall grant to Advisor, under its 1995 -------------- Stock Option/Stock Issuance Plan, a non-statutory stock option to purchase [*] shares of Synbiotics Common Stock at then fair market value upon the completion of each year of service on Synbiotics' Scientific Advisory Board. B. Travel Expenses. Synbiotics shall reimburse Advisor for all out-of- --------------- pocket expenses (round trip tourist or coach class transportation, hotel, meals) reasonably incurred by Advisor in connection with any trip made by Advisor at the specific request of and with prior written approval of Synbiotics. C. Other Expenses. Synbiotics shall reimburse Advisor for all other -------------- reasonable expenses actually incurred which are incidental to the services performed hereunder and which have been approved in writing in advance by Synbiotics. D. Invoices. Advisor shall provide Synbiotics with monthly invoices -------- detailing the expenses and reimbursements which Advisor believes are due under this Agreement. Invoices should specify the period for which compensation is claimed. Travel costs and other expenses claimed must be itemized. All invoices must be substantiated by receipts for transportation and lodging and all other items for expenses amounting to more than $20.00 where receipts are normally issued. The invoices should be submitted to Synbiotics Corporation, 11011 Via Frontera, San Diego, CA 92127. Synbiotics agrees to pay approved invoices within 45 days of receipt. 3. Independent Contractor. Advisor's relationship with Synbiotics shall be ---------------------- that of an independent contractor and nothing in this Agreement shall be construed to create an employer-employee relationship between Synbiotics and Advisor. Synbiotics agrees that during the term of this Agreement, or any extension or renewal thereof, Advisor may be employed by other persons, firms or corporations engaged in a business similar to (but not directly competitive in the sale of animal health diagnostic products) that of Synbiotics, provided, however, that the provisions of this ___________________ [*] Certain confidential portions of this exhibit have been omitted by means of blacking out the text (the "Mark"). This exhibit has been filed separately with the Secretary of the Commission without the Mark pursuant to the Company's Application Requesting Confidential Treatment under Rule 24b-2 under the Securities Exchange Act of 1934, as amended. 1 Agreement shall be strictly observed by Advisor with respect to such other persons, firms, or corporations. Since Advisor will not be an employee of Synbiotics, it is understood that Advisor will not be entitled to any of the benefits under Synbiotics' retirement or group insurance plans or any other employee benefits. Advisor is solely responsible for all taxes, withholdings, and other similar statutory obligations, including, but not limited to, Workers Compensation Insurance, Social Security, federal, state, or any other employee payroll taxes; and Advisor agrees to defend, indemnify and hold Synbiotics harmless from any and all claims made by any entity on account of an alleged failure by Advisor to satisfy any such tax or withholding obligations. In the performance of all services hereunder, Advisor shall comply with all applicable laws and regulations. 4. No Conflict with Existing Agreements. Synbiotics hereby states that ------------------------------------ Synbiotics does not desire to acquire from Advisor any secret or confidential know-how or information which Advisor may have acquired from others. Accordingly, Advisor represents and warrants that Advisor is free to divulge to Synbiotics, without any obligation to, or violation of any right of others, any and all information, practice or techniques which Advisor will describe, demonstrate, divulge or in any other manner make known to Synbiotics during Advisor's performance of services hereunder. Advisor shall defend, indemnify and hold harmless Synbiotics from and against any and all liability, loss, cost, expense, damage, claims or demands for actual or alleged violation of the rights of others in any trade secret, know-how or other confidential information by reason of Synbiotics' receipt or use of the services or information described above, or otherwise in connection therewith. 5. Advisor Inventions. Advisor warrants that Advisor shall promptly and fully ------------------ disclose and assign to Synbiotics all Inventions made by Advisor (in whole or in part, either alone or jointly with others) resulting from or arising out of Advisor's acquisition of Synbiotics confidential information that Advisor is made aware of as a result of Advisor's services hereunder and will, if Synbiotics shall so request, assist in every proper way (at the expense of Synbiotics) to obtain for the benefit of Synbiotics patents on such Inventions in any and all countries; all such Inventions to be and remain the sole property of Synbiotics whether or not disclosed, assigned or patented. Advisor represents and warrants that, Advisor has no contractual or other obligations to any third party which preclude or in any way encumber the right to assign to Synbiotics the full and exclusive right, title and interest in and to any and all Inventions made by Advisor resulting from or arising out of Advisor's services hereunder. The decision to file (or not to file) a patent application or applications on any such Inventions shall be in Synbiotics' sole discretion. Synbiotics shall compensate Advisor at a reasonable rate for time actually spent at Synbiotics' request on such assistance. As used in this Agreement, the term "Inventions" means any and all inventions, discoveries, designs, formulas, works of authorship, strains, cell lines, compositions, ideas, technology, improvements, trade secrets, processes, techniques and know-how, of any kind or nature, whether or not patentable, but only if related to Synbiotics' business, which are invented, conceived, discovered, developed or reduced to practice by Advisor, either alone or jointly with others, and result from or arise out of Advisor's acquisition of Synbiotics confidential information that Advisor is made aware of as a result of Advisor's services hereunder. 6. Non-Disclosure and Non-Use. The parties hereto acknowledge that during the -------------------------- course of Advisor's services to Synbiotics pursuant to this Agreement it will become necessary or desirable for Synbiotics to disclose to Advisor a substantial amount of Synbiotics Proprietary Information. "Proprietary Information" is information that was or will be developed, created, or discovered by or on behalf of Synbiotics, or which becomes or will become known by Synbiotics, or was or is conveyed to Synbiotics, which has commercial value in Synbiotics' business. "Proprietary Information" includes, but is not limited to, information about operations and maintenance, trade secrets, cell lines, strains, designs, technology, ideas, know-how, processes, formulas, compositions, data, techniques, improvements, inventions (whether patentable or not), works of authorship, business and product development plans, customers and other information concerning Synbiotics' actual or anticipated business, research or development, or which is received in confidence by or for Synbiotics from any other person. "Proprietary Information" does not include information that Advisor demonstrates to Synbiotics' satisfaction, by written evidence, is in the public domain by reason of prior publication not directly or indirectly resulting from any act or omission of Advisor. Advisor fully understands that the maintenance of such Proprietary Information in strict confidence and the confinement of its use to Synbiotics is of vital importance to Synbiotics. Advisor agrees that the Proprietary Information divulged to Advisor by Synbiotics 2 or which Advisor acquires in connection with or as a result of Advisor's services hereunder shall be regarded by Advisor as confidential. Advisor shall not use, nor shall Advisor disclose, any Proprietary Information to any person either during or after the period of this Agreement, except to those employees of Advisor or Synbiotics as may be necessary in the regular course of Advisor's duties hereunder, or except as otherwise authorized in writing by the President of Synbiotics. 7. Synbiotics Materials. Advisor recognizes that all Synbiotics Materials -------------------- made or received by Advisor during the period of this Agreement are and shall be the exclusive property of Synbiotics, and Advisor shall keep the same at all times in Advisor's custody and subject to Advisor's control, and shall surrender the same to Synbiotics immediately upon request of Synbiotics. "Synbiotics Materials" are documents or other media or tangible items that contain or embody Proprietary Information or any other information concerning the business, operations, or plans of Synbiotics, whether such documents have been prepared by Advisor or by others. "Synbiotics Materials" include, but are not limited to, blueprints, drawings, photographs, charts, graphs, notebooks, customer lists, computer disks, tapes or printouts, sound recordings and other printed, typewritten, or handwritten documents, as well as samples, prototypes, models, products and the like. 8. Exoneration. Advisor shall exonerate and hold harmless Synbiotics, its ----------- officers, agents and employees from and against any and all liability, loss, cost, damage, claims, demands or expenses of every kind on account of injuries (including death) to Advisor or loss of or damage to Advisor's property arising out of or resulting in any manner from or occurring in connection with Advisor's performance of services hereunder unless caused by the sole negligence of Synbiotics or its employees. 9. Termination. Advisor and Synbiotics agree that this Agreement will expire ----------- upon the later of (i) three (3) years from the date of this Agreement or (ii) the expiration or earlier termination of the Research and Development Agreement between Synbiotics and Engene Biotechnologies, Inc., of even date herewith. This Agreement shall terminate automatically in the event of Advisor's inability for any reason to perform Advisor's services. Upon termination of this Agreement, Synbiotics' obligation to pay any compensation, except for full-year services or expenses already incurred, shall forthwith cease and terminate. Termination of this Agreement for any reason shall not affect Advisor's obligations under paragraphs 4, 5, 6, 7 and 8. 10. Remedies. Advisor acknowledges and agrees that a breach of this Agreement -------- will result in immediate, irreparable and continuing damage to Synbiotics for which there will be no adequate remedy at law; and agrees that in the event of any such breach or violation or any threatened or intended breach or violation of this Agreement, Synbiotics and its successors and assigns shall be entitled to temporary, preliminary and permanent injunctive relief and/or restraining orders enjoining and restraining such breach or violation or such threatened or intended breach or violation and/or other equitable relief (without needing to post any bond or other security) in addition to such other and further relief as may be proper. 11. Amendments and Waivers. This Agreement may be modified, amended or ---------------------- supplemented only by a written instrument duly executed by Advisor and Synbiotics. No term or condition or the breach thereof shall be deemed waived, unless it is waived in writing and signed by the party against whom the waiver is claimed. Any waiver or breach of any term or condition shall not be deemed to be a waiver of any preceding or succeeding breach of the same or any other term or condition. The failure of any party to insist upon strict performance of any term or condition hereunder shall not constitute a waiver of such party's right to demand strict compliance therewith in the future. 12. Notices. All payments, notices, requests, demands and other communications ------- required or permitted hereunder shall be in writing and shall be delivered personally (which shall include delivery by courier or overnight delivery service) or sent by first class mail, postage prepaid, or sent by telecopier or other similar facsimile transmission to the parties at their respective address set forth below or at such other address as shall be given in writing by a party to the other parties. Items delivered personally or by telecopier or facsimile shall be deemed delivered on the date of actual delivery; items sent by first class mail shall be deemed delivered three (3) days after mailing. 3 If to Synbiotics: Synbiotics Corporation 11011 Via Frontera San Diego, CA 92127 Attention: Chief Executive Officer Telecopier: (619) 451-5719 If to Advisor: J. Kevin Steele 16236 San Dieguito Road Suite 4-21 Rancho Santa Fe, CA 92067 Telecopier: (619) 759-9434 13. Governing Law; Jurisdiction and Venue. This Agreement shall be governed by ------------------------------------- and construed in accordance with the laws of the State of California, without regard to principles of conflicts of law. The parties agree that any dispute regarding the interpretation or validity of this Agreement shall be subject to the exclusive jurisdiction of the state and federal courts in and for the County of San Diego, California, and each party hereby agrees to submit to the personal and exclusive jurisdiction and venue of such courts. 14. Attorneys' Fees. If any action at law or in equity is necessary to enforce --------------- or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and disbursements, in addition to any other relief to which such party may be entitled. 15. Counterparts. This Agreement may be executed in multiple copies, each of ------------ which shall be deemed an original and all of which shall constitute a single agreement binding on all parties. 16. Entire Agreement. This Agreement constitutes the entire agreement between ---------------- the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings and negotiations (including those relating to a "professional services agreement"). The parties agree that Synbiotics' and Advisor's obligations under the License Agreement and the Research and Development Agreement dated today are not superseded. Each party to this Agreement acknowledges that no representations, inducements, promises or agreements have been made by any party, or any one acting on behalf of any party, that are not embodied in this Agreement with respect to the subject matter hereof. 17. Representation. By executing this Agreement, Advisor acknowledges that he -------------- understands and agrees that Brobeck, Phleger & Harrison LLP represents the interests of Synbiotics solely and that he has had the opportunity to consult with his own attorney in connection with this Agreement. 4 IN WITNESS WHEREOF, the parties hereto have executed this Scientific Advisor Agreement as of the day and year first above written. ADVISOR SYNBIOTICS CORPORATION /s/ J. Kevin Steele By: /s/ Robert L. Widerkehr - -------------------- --------------------- Title: President and CEO Date: March 6, 1996 Date: March 6, 1996 [SIGNATURE PAGE TO SCIENTIFIC ADVISOR AGREEMENT] 5 EX-10.57 6 INDUCEMENT AGREEMENT INDUCEMENT AGREEMENT EXHIBIT 10.57 -------------------- ------------- THIS INDUCEMENT AGREEMENT ("Agreement") is entered into as of March 6, 1996, by and between Engene Biotechnologies, Inc., a California corporation ("Engene") and Synbiotics Corporation, a California corporation ("Synbiotics"). Engene and Synbiotics agree as follows: 1. Inducement Services. Engene hereby agrees to cause Dr. J. Kevin Steele ------------------- ("Steele") to enter into a certain License Agreement between Engene and Synbiotics, a certain Research and Development Agreement between Engene and Synbiotics and a certain Scientific Advisor Agreement between Steele and Synbiotics, all of even date herewith. 2. Obligations of Synbiotics. In consideration therefor, Synbiotics shall ------------------------- issue [*] shares of Synbiotics Common Stock, no par value, to Engene. Synbiotics shall cause Engene to be provided with a stock certificate therefor within thirty (30) days following the execution of the Investment Representation, a copy of which is attached hereto as Exhibit A, by Engene. --------- Engene acknowledges that such stock is not registered under the Securities Act and that Engene is acquiring such stock for investment rather than for distribution. 3. Relationship of Parties. The relationship of the parties to this Agreement ----------------------- is that of independent contractors. The parties are not, by virtue of this Agreement or otherwise, in an employer-employee, principal-agent, joint venture or partnership relationship with each other. Each party agrees not to represent to any other person, or to assert in any form or forum, that the parties' relationship is an employer-employee, principal-agent, joint venture or partnership relationship. Each party acknowledges that it has no authority to make representations on behalf of or to bind or commit the other party, and each party covenants and agrees not to purport to make any representation on behalf of the other party or to purport to bind or commit the other party in any way. Each party acknowledges that it is responsible for its own tax withholding and other obligations with regard to its own employees, and that the other party has no responsibility whatsoever for withholding tax and other employment obligations of the first party. 4. Indemnification. Engene agrees to and shall defend, indemnify and hold --------------- Synbiotics, its officers, directors, employees, agents and shareholders harmless (including attorneys fees to defend, and any damages, penalties, settlements, costs or expenses awarded or incurred) from and against any claim, liability, suit or proceeding initiated by or on behalf of a third party arising from or occurring as a result of Engene's performance of services hereunder. 5. Amendments and Waivers. This Agreement may be modified, amended or ---------------------- supplemented only by a written instrument duly executed by Engene and Synbiotics. No term or condition or the breach thereof shall be deemed waived, unless it is waived in writing and signed by the party against whom the waiver is claimed. Any waiver or breach of any term or condition shall not be deemed to be a waiver of any preceding or succeeding breach of the same or any other term or condition. The failure of any party to insist upon strict performance of any term or condition hereunder shall not constitute a waiver of such party's right to demand strict compliance therewith in the future. _____________________ [*] Certain confidential portions of this exhibit have been omitted by means of blacking out the text (the "Mark"). This exhibit has been filed separately with the Secretary of the Commission without the Mark pursuant to the Company's Application Requesting Confidential Treatment under Rule 24b-2 under the Securities Exchange Act of 1934, as amended. 1 6. Attorneys' Fees. If any action at law or in equity is necessary to enforce --------------- or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and disbursements, in addition to any other relief to which such party may be entitled. 7. Counterparts. This Agreement may be executed in multiple copies, each of ------------ which shall be deemed an original and all of which shall constitute a single agreement binding on the parties. 8. Entire Agreement. This Agreement constitutes the entire agreement between ---------------- the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings. The parties agree that the License Agreement, the Research and Development Agreement and the Scientific Advisor Agreement are not superseded. Each party to this Agreement acknowledges that no representations, inducements, promises or agreements have been made by any party, or any one acting on behalf of any party, that are not embodied in this Agreement with respect to the subject matter hereof. 9. Representation. By executing this Agreement, Engene acknowledges that it -------------- understands and agrees that Brobeck, Phleger & Harrison LLP represents the interests of Synbiotics solely and that it has had the opportunity to consult with its own attorney in connection with this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. ENGENE BIOTECHNOLOGIES, INC. SYNBIOTICS CORPORATION By: /s/ J. Kevin Steele By: Robert L. Widerkehr ------------------- -------------------- Title: President Title: President and CEO Date: March 6, 1996 Date: March 6, 1996 2 EXHIBIT A INVESTMENT REPRESENTATION Synbiotics Corporation, a California corporation Engene Biotechnologies, Inc., a California corporation ("Engene") is acquiring the number of shares of common stock of Synbiotics Corporation, a California corporation, indicated below (the "Securities") in its own name and for its own account, and no other person has any interest in or right with respect to the Securities, nor has Engene agreed to give any person any such interest or right in the future. Engene is acquiring the Securities for investment and not with a view to or for sale in connection with any distribution of the Securities. Engene recognizes that the Securities have not been registered under the Federal Securities Act of 1933 or qualified under the California Corporate Securities Law of 1968, or the securities laws of any other state, that any disposition of the Securities is subject to restrictions imposed by federal and state law, and that the certificates representing the Securities will bear a restrictive legend. Engene also recognizes that it cannot dispose of the Securities absent registration and qualification, or an available exemption from registration and qualification, and that no undertaking has been made with regard to registering or qualifying the Securities in the future. Engene understands that the availability of any exemption in the future will depend in part on circumstances outside its control and that Engene may be required to hold the Securities for a substantial period. Engene recognizes that no public market exists with respect to the Securities and no representation has been made to it that such a public market will exist at a future date. Engene understands that neither the California Commissioner of Corporations nor any other state commissioner of corporations has made any finding or determination relating to the fairness for investment of the Securities offered by Synbiotics Corporation and that no commissioner of corporations of any state has recommended or endorsed or will recommend or endorse the Securities. ENGENE BIOTECHNOLOGIES, INC. By: /s/ J. Kevin Steele ------------------- Title: President ###-##-#### - --------------------------- Taxpayer Identification or Social Security Number Address: 16236 San Dieguito Road Suite 4-21 Rancho Santa Fe, CA 92067 Date: March 6, 1996 Number of Shares purchased: [*] A-1 EX-11.1 7 COMPUTATION OF EARNINGS PER SHARE SYNBIOTICS CORPORATION EXHIBIT 11.1 ------------ COMPUTATION OF EARNINGS PER SHARE ______________________________________________________________________________
Three Months Ended March 31, ---------------------------- 1996 1995 ------------- ------------ PRIMARY EARNINGS PER SHARE: Net income per statement of operations $1,651,000 $ 754,000 ========== =========== Weighted average number of shares outstanding 5,911,000 5,803,000 ========== =========== Primary earnings per share $ .28 $ .13 ========== =========== FULLY DILUTED EARNINGS PER SHARE: Net income per statement of operations $1,651,000 $ 754,000 ========== =========== Reconciliation of weighted average number of shares per primary computation above, to amount used for fully diluted computation: Weighted average number of shares outstanding, per primary computation 5,911,000 5,803,000 Add-effect of outstanding options (as determined by the application of the treasury method) 13,000 3,000 ---------- ----------- Weighted average number of shares, as adjusted 5,924,000 5,806,000 ========== =========== Fully diluted earnings per share $ .28 $ .13 ========== ===========
1 EX-27 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED BALANCE SHEET AS OF MARCH 31, 1996 AND THE RELATED CONDENSED STATEMENTS OF OPERATIONS AND OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 1996 INCLUDED ELSEWHERE IN THIS FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 1,620 715 3,618 46 4,082 10,546 4,402 3,637 16,036 2,749 0 0 0 29,748 (16,461) 16,036 5,750 5,932 2,779 4,609 0 0 0 1,708 57 1,651 0 0 0 1,651 .28 .28
-----END PRIVACY-ENHANCED MESSAGE-----