Exhibit 2.8
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EXCHANGE AGREEMENT
This Exchange Agreement (the "Agreement") is entered into as of this
12th day of January, 2000, (the "Effective Date") between Synbiotics
Corporation, a California corporation ("Synbiotics"), and the individual members
(the "Members") of W3 Commerce LLC, a Delaware limited liability company
("W3C"), listed in the signature page hereto.
R E C I T A L S
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Whereas, the Board of Directors of Synbiotics and the Members and
Managers of W3C believe it is in the best interests of their respective
companies to consummate the exchange transactions provided for herein in which
the Members of W3C, subject to the terms and conditions set forth herein, will
exchange their percentage member interests in W3C (the "W3C Units") solely for
convertible promissory notes of Synbiotics in the form attached hereto as
Exhibit A (the "Synbiotics Notes") and, if and when certain contingencies are
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satisfied, shares of common stock ("Synbiotics Common Stock") of Synbiotics (the
"Contingent Shares"); and
Whereas, each of the Members hereby agrees to exchange his or her W3C
Units for Synbiotics Notes and the expectancy of Contingent Shares (the
"Exchange") on the terms and conditions set forth herein;
Whereas, the parties desire to make certain representations,
warranties and agreements in connection with the transactions provided for
herein.
Now, Therefore, in consideration of the representations, warranties
and agreements set forth herein, and for other good and valuable consideration,
the parties agree as follows:
ARTICLE I
THE EXCHANGE
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1.1 The Exchange. At the closing of the Exchange (the
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"Closing") and subject to the terms and conditions of this Agreement, the
outstanding W3C Units shall be exchanged by the Members for Synbiotics Notes and
the expectancy of Contingent Shares pursuant to the terms of this Agreement.
1.2 Closing. The Closing shall take place at 4:00 p.m. on
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January 12, 2000, or one or more subsequent dates as the parties hereto shall
agree (the "Closing Date"). The Closing shall take place at the offices of
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ "▇" ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, or such other place as the parties shall agree.
1.3 Notes. At the Closing, Synbiotics shall execute and
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deliver to each Member a Synbiotics Note with an original principal amount equal
to $2,812,500 times the
Member's Quotient. The "Quotient" of a Member shall be the quotient of (a) the
percentage number of W3C Units exchanged by such Member under this Agreement,
divided by (b) the percentage number of all W3C Units exchanged by all the
Members under this Agreement. Upon the Exchange, such Member shall have no
further rights in respect of any W3C Units other than the right to receive
Synbiotics Notes and the expectancy of Contingent Shares as provided herein.
1.4 Contingent Shares. Assuming the Closing occurs, Synbiotics
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shall deliver to each Member, if and within 30 days after the First Contingency
is satisfied, a number of shares of unregistered Synbiotics Common Stock
(Contingent Shares) equal to 400,000 times the Member's Quotient. Assuming the
Closing occurs, Synbiotics shall deliver to each Member, if and within 30 days
after the Second Contingency is satisfied, a number of shares of unregistered
Synbiotics Common Stock (Contingent Shares) equal to 400,000 times the Member's
Quotient. The "First Contingency" is that before January 12, 2003 the mean
average of the closing sale prices of Synbiotics Common Stock on the Nasdaq
National Market for any period of 90 consecutive calendar days equals or exceeds
$12.50 or that before January 12, 2003 Synbiotics has been acquired for cash
consideration of at least $12.50 per share of Synbiotics Common Stock. The
"Second Contingency" is that before January 12, 2003 the mean average of the
closing sale prices of Synbiotics Common Stock on the Nasdaq National Market for
any period of 90 consecutive calendar days equals or exceeds $25.00 or that
before January 12, 2003 Synbiotics has been acquired for cash consideration of
at least $25.00 per share of Synbiotics Common Stock. If before January 12, 2003
Synbiotics is acquired for cash at an amount less than either of the prices
associated with the First Contingency or Second Contingency, a proportionate
number of Contingent Shares shall be delivered to each Member. Such proportion
shall be determined by dividing the price paid for each share of Synbiotics
stock in such acquisition by each of $12.50 and $25.00, respectively, and then
multiplying the result of each such calculation by 400,000. The resulting
numbers, when added together, shall represent the total number of Contingent
Shares to be delivered by Synbiotics to each Member. In no event, however, shall
the number of shares to be delivered to each Member exceed 800,000 shares. If
before January 12, 2003 Synbiotics is acquired for stock, the fair market value
of the number of shares issued in the acquisition for one share of Synbiotics
Common Stock shall continue to be "tracked," as if it were the closing sale
price of one share of Synbiotics Common Stock, until January 12, 2003 for the
purpose of determining whether the First Contingency and/or the Second
Contingency is satisfied.
Pursuant to Article 7.3 of this Agreement, the effect of this Article
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1.4 shall be binding upon and shall inure to the benefit of the parties hereto
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and their respective successors and assigns, with all obligations of this
Article 1.4 being assumed by such successors and assigns. This explicit
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reference to the binding nature of this Article 1.4 shall in no way limit the
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effect of Article 7.3 on the other provisions of this Agreement.
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1.5 Contribution of Assets. Before the Closing, the Members
----------------------
shall contribute to W3C all rights, assets and property of any person currently
or previously used in the business now being conducted, and presently proposed
to be conducted, by or in the name of W3C (the "Business") or necessary for W3C
to operate and conduct the Business ("Contributed Assets"), by instruments of
transfer satisfactory to Synbiotics. All Contributed Assets shall be transferred
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to W3C in fee simple free and clear of all adverse claims, restrictions,
security interests, liens and encumbrances.
1.6 Private Placement.
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(a) The issuance of Synbiotics Notes, the issuance of
shares of Synbiotics Common Stock upon conversion of the Synbiotics Notes, and
the issuance of Contingent Shares (if any) are intended to be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to the private placement exemption provided by
Section 4(2) of the Securities Act, and of applicable state securities laws.
Each Member hereby agrees to take all actions and execute all documents
reasonably requested by Synbiotics to qualify the issuance of such securities
for such exemptions.
(b) Any evidence of ownership of the Synbiotics Notes, the
shares of Synbiotics Common Stock issuable upon conversion thereof, and the
Contingent Shares (if any) (collectively, the "Securities") shall bear the
following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE
REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED
SATISFACTORY EVIDENCE THAT SUCH REGISTRATION IS NOT REQUIRED."
The Securities shall not be transferable in the absence of an effective
registration statement under the Securities Act or an exemption therefrom.
Synbiotics shall be entitled to give stop transfer instructions to its transfer
agent with respect to the Securities in order to enforce the foregoing
restrictions.
1.7 Closing Deliveries.
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(a) At the Closing, Synbiotics shall deliver to each Member
the Synbiotics Notes issuable in exchange for such Member's W3C Units and each
Member shall deliver to Synbiotics a Limited Liability Company Interest
Certificate, accompanied by a duly executed transfer instrument.
(b) At the Closing, Members ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇-▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ shall each execute and deliver to Synbiotics non-
competition agreements in substantially the form attached hereto as Exhibit B
(the "Non-Competition Agreements"). Also at the Closing, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇ shall execute and deliver to Synbiotics employment agreements
substantially in the form attached hereto as Exhibit C (the "▇▇▇▇ and ▇▇▇▇▇
Employment Agreements"). Within thirty (30) days of the Closing, ▇▇▇▇▇▇ ▇▇▇▇▇▇-
▇▇▇▇▇ shall enter into an employment agreement (the "▇▇▇▇▇ Employment
Agreement") in the United Kingdom having terms that are substantially equivalent
to those contained in the ▇▇▇▇ and ▇▇▇▇▇ Employment Agreements, subject to such
changes or additions
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required to conform the ▇▇▇▇▇ Employment Agreement to local laws and practices.
Also at the Closing, W3C shall deliver to Synbiotics Proprietary Information and
Inventions Agreements, pursuant to Section 3.23 hereof, executed by each
employee and consultant of W3C.
1.8 Stock Splits, etc. All figures in this Article I are based
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on there being no change in the W3C Units or the Synbiotics Common Stock by way
of stock split, stock dividend, reverse stock split, or other increase or
decrease (without consideration) in the number of outstanding securities. In the
event of any such changes, the numbers in this Article I shall be appropriately
adjusted to prevent the enlargement or diminution of benefits to anyone.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SYNBIOTICS
--------------------------------------------
Synbiotics hereby represents and warrants to each Member that, except
as set forth on a Synbiotics Disclosure Letter (the "Disclosure Letter")
previously delivered by Synbiotics to ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ as the representative of
the Members (the "Representative"):
2.1 Organization and Authority of Synbiotics. Synbiotics is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all necessary corporate power and authority
to enter into this Agreement, to carry out its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement by Synbiotics, the performance by
Synbiotics of its obligations hereunder and thereunder and the consummation by
Synbiotics of the transactions contemplated hereby and thereby have been duly
authorized by all requisite action on the part of Synbiotics. This Agreement has
been duly executed and delivered by Synbiotics, and (assuming due authorization,
execution and delivery by each Member) this Agreement constitutes a legal, valid
and binding obligation of Synbiotics, enforceable against Synbiotics in
accordance with its terms.
2.2 Capital Structure. The authorized capital stock of
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Synbiotics consists of 24,800,000 shares of Common Stock, of which there are
9,197,132 shares issued and outstanding as of the date hereof and 25,000,000
shares of preferred stock, of which there are no shares issued and outstanding
as of the date hereof. There are no other outstanding shares of capital stock or
voting securities and no outstanding commitments to issue any shares of capital
stock or voting securities, except as disclosed in Synbiotics' SEC reports and
subsequent stock option grants in the ordinary course of business. When and if
issued, the Securities will be duly authorized, validly issued, fully paid and
non-assessable and free of any liens or encumbrances created by, or resulting
from the actions of, Synbiotics, and will not be subject to preemptive rights or
rights of first refusal created by statute, the Articles of Incorporation or
Bylaws of Synbiotics or any agreement to which Synbiotics is a party or by which
it is bound.
2.3 Authorization. All and any corporate action on the part of
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Synbiotics, its officers, directors and shareholders necessary for the
authorization, execution, delivery and performance by Synbiotics of all its
obligations under this Agreement and for the authorization, issuance, sale and
delivery of the Securities has been taken, and this Agreement, once executed
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by Synbiotics and the Members, will constitute a legally binding and valid
obligation of Synbiotics enforceable in accordance with its terms, such
enforceability being subject only to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies. Except for
rights, if any, which have been duly waived, the issuance and sale of the
Securities will not give rise to any preemptive rights or rights of first
refusal on behalf of any person in existence on the date hereof.
2.4 Validity of Shares. The Securities, when issued, sold and
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delivered in accordance with the terms and for the consideration expressed in
this Agreement, shall be duly and validly issued (including, without limitation,
compliance with applicable federal and state securities laws), fully paid and
nonassessable.
2.5 No Conflict. The execution and delivery of this Agreement
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do not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse in time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to a loss of a material
benefit under, any provision of the Articles of Incorporation or Bylaws of
Synbiotics. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default (with or without notice or lapse in time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to a loss of a material benefit under, any
provision of any mortgage, indenture, lease or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Synbiotics, its properties or
assets, the effect of which could have a material adverse effect on Synbiotics
or materially impair or restrict its power to perform its obligations as
contemplated hereby.
2.6 Accuracy of Reports. Synbiotics' annual report on Form
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10-KSB for the year ended December 31, 1998 filed with the SEC, Synbiotics'
amended quarterly report on Form 10-QSB/A for the quarter ended September 30,
1999 filed with the SEC (the "Quarterly Report"), and all reports required to be
filed by Synbiotics thereafter to the date of this Agreement under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (together, the
"SEC Reports"), have been duly filed, were complete and correct in all material
respects as of the dates at which the information was furnished, and contained
(as of such dates) no untrue statement of a material fact nor omitted to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances in which they were made, not misleading.
2.7 Changes. Except as otherwise disclosed herein or in the SEC
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Reports, between September 30, 1999 and the date of this Agreement there has not
been:
(a) any change in the assets, liabilities, financial
condition, prospects or operations of Synbiotics from that reflected in the
Quarterly Report, except changes in the ordinary course of business which have
not been, either in any individual case or in the aggregate, materially adverse;
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(b) any material change in the contingent obligations of
Synbiotics, whether by way of guaranty, endorsement, indemnity, warranty or
otherwise;
(c) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the properties or
business of Synbiotics;
(d) any declaration or payment of any dividend or other
distribution of the assets of Synbiotics;
(e) any labor organization activity; or
(f) to the best of Synbiotics' knowledge, any other event
or condition of any character which has materially and adversely affected
Synbiotics' assets, liabilities, financial condition, prospects or operations.
2.8 Government Consent, etc. No consent, approval or
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authorization of or designation, declaration or filing with any governmental
authority on the part of Synbiotics is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Securities, or the consummation of any other transaction contemplated hereby,
except the filing of a Registration Statement and related activities pursuant to
Article V hereof.
2.9 Full Disclosure. The representations and warranties of
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Synbiotics contained in this Agreement, when read together with the Synbiotics
Disclosure Letter and the SEC Reports, do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements contained herein, in light of the circumstances under which they were
made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE MEMBERS
---------------------------------------------
Each Member hereby jointly and severally represents and warrants to
Synbiotics that, except as set forth on a Members Disclosure Letter previously
delivered by the Representative, on behalf of the Members, to Synbiotics, , and
except as set forth on the Schedule of Exceptions attached hereto as Exhibit D
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("Schedule of Exceptions"):
3.1 Investment Risk. Each Member is aware that the Securities
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have not been and upon issuance will not be registered under the Securities Act
or any applicable state securities laws, and agrees that the Securities will not
be offered or sold in the absence of registration under the Securities Act and
any applicable state securities laws or an exemption from the registration
requirements of the Securities Act and any applicable state securities laws.
Such Member will not transfer the Securities in violation of the provisions of
any applicable federal or state securities laws. In this connection, such Member
represents that he or she is familiar with Rule 144 promulgated pursuant to the
Securities Act ("Rule 144"), as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act. Such Member understands
that the offering and exchange of the Securities are intended to be exempt from
registration under the Securities Act, by virtue of Section 4(2) of the
Securities Act, based,
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in part, upon the representations, warranties and agreements contained in this
Agreement and further understands that Synbiotics is relying on such
representations, warranties and agreements in connection therewith. Such Member
is acquiring the Synbiotics Notes and would obtain the other Securities for his
or her own account and for investment, and not with a view to the distribution
thereof or with any present intention of distributing or selling any of the
Securities except in compliance with the Securities Act. Such Member represents
that by reason of his or her business and financial experience, and the business
and financial experience of those persons, if any, retained by him or her to
advise him or her with respect to his or her investment in the Securities, such
Member together with such advisors has knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the merits
and risk of the prospective investment. Such Member's financial condition and
investments are such that he or she is in a financial position to hold the
Securities for an indefinite period of time and to bear the economic risk of,
and withstand a complete loss of, his or her investment in the Securities.
3.2 Organization; Good Standing; Qualification. W3C is a
------------------------------------------
limited liability company duly organized, validly existing, and in good standing
under the laws of the State of Delaware. W3C's Company Agreement (the "Company
Agreement") is as dated July 16, 1998. W3C has all requisite power and authority
to own and operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted. W3C is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure so to
qualify would have a material adverse effect on its business, properties,
prospects or financial condition.
3.3 Authorization. This Agreement and any other agreement to
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which any Member is to be a party and the execution and delivery of which is
contemplated hereby (the "Ancillary Agreements") constitute valid and legally
binding obligations of the Members, enforceable in accordance with their
respective terms except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.
3.4 Governmental Consents. No consent, approval, qualification,
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order or authorization of, or filing with, any local, state, or federal
governmental authority is required on the part of W3C or the Members in
connection with the Members' valid execution, delivery, or performance of this
Agreement or any Ancillary Agreement.
3.5 Capitalization. The authorized equity securities of W3C
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consist of percentage ownership interests, all one hundred percent (100%) of
which are issued and outstanding. The outstanding W3C Units are owned by the
persons and in the percentages following (in each case of record, beneficially,
in fee simple and free of any legends, restrictions, adverse claims, liens and
encumbrances):
▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ 63.0%
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▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ 15.0%
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▇▇▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇ 12.0%
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▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ 3.0%
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▇▇▇▇▇▇ ▇▇▇▇▇▇ 2.0%
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▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇ 1.5%
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▇▇▇ ▇▇▇▇ 1.0%
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▇▇▇▇▇▇ ▇▇▇▇▇ 1.0%
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▇▇▇▇ ▇▇▇▇▇ 1.0%
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▇▇▇▇▇▇▇▇▇ ▇▇▇▇ 0.5%
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The outstanding W3C Units have been issued pursuant to valid exemptions from the
registration or qualification provisions of the Securities Act and any relevant
state securities laws. There are not outstanding any options, warrants, rights
(including conversion or preemptive rights and rights of first refusal) or
agreements for the purchase or acquisition from W3C or from any Member of any
W3C member interests or securities exercisable or exchangeable for or
convertible into any W3C member interests.
3.6 Subsidiaries. Except as set forth in the Schedule of
------------
Exceptions, W3C does not own or control, directly or indirectly, any interest in
any other corporation, association, or other business entity. W3C is not a
participant in any joint venture, partnership, or similar arrangement.
3.7 Contracts and Other Commitments. Except as set forth on
-------------------------------
the Schedule of Exceptions, W3C does not have any contract, agreement, lease,
commitment or proposed transaction, written or oral, absolute or contingent,
other than (i) contracts for the purchase of supplies and services that were
entered into in the ordinary course of business and that do not involve more
than $5,000, and do not extend for more than one (1) year beyond the date
hereof, and (ii) contracts terminable at will by W3C on no more than thirty (30)
days' notice without cost or liability to W3C and that do not involve any
employment or consulting arrangement and are not material to the conduct of
W3C's business. For the purpose of this paragraph, employment and consulting
contracts, and license agreements and any other agreements relating to the
acquisition or disposition of W3C's technology, shall not be considered to be
contracts entered into in the ordinary course of business. Each contract,
agreement or other arrangement disclosed in the Members Disclosure Letter or in
the Schedule of Exceptions is in full force and effect and constitutes a legal,
valid and binding agreement, enforceable in accordance with its terms. W3C has
performed all of its required material obligations under, and is not materially
in violation or breach of or default under, any such contract, agreement or
arrangement. The other parties to any such contract, agreement or arrangement
are not in violation or breach of or default under any such contract, agreement
or arrangement.
3.8 Related-Party Transactions. Except as set forth in the
--------------------------
Schedule of Exceptions, no employee, Member (shareholder), manager, officer, or
director of W3C or member of his or her immediate family thereof is indebted to
W3C, nor is W3C indebted (or committed to make loans or extend or guarantee
credit) to any of them. None of such persons
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has any direct or indirect ownership interest in any firm or corporation with
which W3C is affiliated or with which W3C has a business relationship, or any
firm or corporation that competes with W3C, except that employees, officers or
directors of W3C and members of their immediate families may own stock in
publicly traded companies that may compete with W3C. No manager, officer or
director or any member of their immediate families is, directly or indirectly,
interested in any material contract with W3C. Additionally, none of such persons
(i) has engaged in any business dealings with W3C, (ii) owns directly or
indirectly, in whole or in part, any material tangible or intangible property
that W3C uses or (iii) has made any payment or commitment to pay any commission,
fee or other amount to, or purchase or obtain or otherwise contract to purchase
or obtain any goods or services from, any person of which any Member, manager,
officer, or director of W3C is a partner or stockholder (except for stock
holdings in publicly traded companies).
3.9 Certain Business Practices. No employee, Member
--------------------------
(shareholder), manager, officer, or director of W3C (in their capacities as
such) has (i) used any funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to foreign
or domestic political parties or campaigns or violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, (iii) consummated any
transaction, made any payment, entered into any agreement or arrangement or
taken any other action in violation of Section 1128B(b) of the Social Security
Act, as amended, or (iv) made any other unlawful payment.
3.10 Permits. W3C has all franchises, permits, licenses, and
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any similar authority necessary for the conduct of the Business. W3C is not in
default in any material respect under any of such franchises, permits, licenses
or other similar authority.
3.11 Compliance with Law and Other Instruments. Neither any of
-----------------------------------------
the Members nor W3C is in violation or default in any material respect of any
provision of W3C's Company Agreement or in any material respect of any provision
of any agreement, instrument or contract to which W3C or any Member is a party
or by which W3C or any Member is bound or of any federal or state judgment,
order, writ, decree, statute, rule or regulation applicable to W3C or any
Member. The execution, delivery and performance by the Members of this Agreement
and any Ancillary Agreement, and the consummation of the transactions
contemplated hereby and thereby will not (assuming the absence of any consent
that has not actually been obtained) result in any such violation or be in
material conflict with or constitute, with or without the passage of time or
giving of notice, either a material default under any such provision or an event
that results in the creation of any material lien, charge or encumbrance upon
any assets of W3C or the suspension, revocation, impairment, forfeiture, or
nonrenewal of any material public or private license, permit, authorization, or
approval applicable to W3C, its business or operations, or any of its assets or
properties.
3.12 Litigation. There is no action, suit, proceeding or
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investigation pending or currently threatened against W3C or any Member that
questions the validity of this Agreement or any Ancillary Agreement or the right
of the Members to enter into such agreements, or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or in
the aggregate, in any material adverse change in the assets, business
properties,
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prospects or financial condition of W3C, or in any material change in the
current equity ownership of W3C; and there is no basis for any such action. The
foregoing includes, without limitation, any action, suit, proceeding, or
investigation pending or currently threatened involving the prior employment of
any of W3C's employees, their use in connection with W3C's business of any
information or techniques allegedly proprietary to any of their former
employers, their obligations under any agreements with prior employers, or
negotiations by W3C with potential backers of, or investors in, W3C or its
proposed business. Neither any of the Members nor W3C is a party to or named in
any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality. There is no action, suit or proceeding by or against
W3C currently pending or that W3C currently intends to initiate.
3.13 Business Plan. The Business Plan dated October 15, 1999,
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previously delivered to Synbiotics (the "Business Plan") was prepared in good
faith by W3C and does not, to the best of the Members' knowledge after
reasonable investigation, contain any untrue statement of a material fact nor
does it omit to state a material fact necessary to make the statements therein
not misleading, except that with respect to projections and expressions of
opinion or predictions contained in the Business Plan, the Members represent
that such projections and expressions of opinion and predictions were made in
good faith and that W3C believes there is a reasonable basis therefor.
3.14 Title to Property and Assets; Leases. W3C is in possession
------------------------------------
of and has good and marketable title to, or has valid leasehold interests in or
valid rights under written agreements to use, all tangible real or personal
property, equipment, plants, buildings, structures, facilities and all other
rights, assets and properties used in or reasonably necessary for the conduct of
the Business, including all the Contributed Assets and tangible personal
property reflected on the Financial Statements and any tangible personal
property acquired since that date other than property disposed of since such
date in the ordinary course of business. Except (a) for liens for current taxes
not yet delinquent, (b) for liens imposed by law and incurred in the ordinary
course of business for obligations not past due to carriers, warehousemen,
laborers, materialmen and the like, or (c) for liens in respect of pledges or
deposits under workers' compensation laws or similar legislation, or W3C owns
its property and assets free and clear of all mortgages, liens, claims and
encumbrances. Each real property lease is a legal, valid and binding agreement
of W3C subsisting in full force and effect enforceable in accordance with its
terms, and there is no, and W3C has not received notice of any, default (or any
condition or event which, after notice or lapse of time or both, would
constitute a default) thereunder. With respect to any property and assets it
leases, W3C is in compliance with such leases and, to the best of its knowledge,
holds a valid leasehold interest free of any liens, claims or encumbrances,
subject to clauses (a)-(c) above.
3.15 Liabilities. W3C has no liability or obligation, absolute
-----------
or contingent, except (i) obligations and liabilities incurred in the ordinary
course of business that are not material, individually or in the aggregate, and
(ii) obligations under contracts made in the ordinary course of business that
would not be required to be reflected in financial statements prepared in
accordance with generally accepted accounting principles. W3C has no
indebtedness for borrowed money that W3C has directly or indirectly created,
incurred, assumed, or guaranteed, or with respect to which W3C has otherwise
become directly or indirectly liable.
-10-
3.16 Books and Records. The minute books and other LLC records of W3C as
-----------------
made available to Synbiotics contain a true and complete record, in all material
respects, of all actions taken at all meetings and by all written consents in
lieu of meetings of the Members, the board of directors (managers) and
committees of the board of directors (managers) of W3C. The stock transfer
ledgers and other similar records of W3C accurately reflect all issuances and
record transfers of the equity interests of W3C. The other financial and
business books and records of W3C are true, correct and complete.
3.17 Financial Statements. The Members have previously delivered to
--------------------
Synbiotics the balance sheet of W3C as of December 15, 1999 and the statement of
income for the eleven and one-half (11 1/2)-month period then ended (the
"Financial Statements"). Such Financial Statements (i) are true, correct and
complete, (ii) are in accordance with the books and records of W3C, (iii) have
been prepared in conformity with GAAP, and (iv) fairly present the financial
condition and results of operations of W3C as of the date thereof and for the
period covered thereby; provided that the Financial Statements are subject to
normal year-end adjustments and lack footnotes and certain other presentations.
3.18 Absence of Changes. Since the end of the period covered by the
------------------
Financial Statements, there has not been any event or condition of any type that
has (individually or in the aggregate) materially and adversely affected (or
could reasonably be expected to materially and adversely affect) the business,
properties, prospects or financial condition of W3C.
3.19 Absence of Certain Developments. Since December 15, 1999, W3C has
-------------------------------
not;
(a) issued any securities or any right, option or warrants with
respect thereto;
(b) borrowed any amount, obtained any letters of credit or
incurred or become subject to any Liabilities except accounts payable or
liabilities in excess of $25,000 in the aggregate;
(c) discharged or satisfied any lien or encumbrance or paid any
obligation or liability, other than current liabilities paid in the ordinary
course of business;
(d) mortgaged or pledged any of its rights, assets or
properties, or subjected them to any lien, charge or any other encumbrance;
(e) sold, leased, subleased, assigned or transferred any of its
rights, assets or properties, except in the ordinary course of business, or
cancelled any debts or claims;
(f) made any changes in any employee compensation, severance or
termination agreement, commitment or offer of employment to any individuals;
(g) entered into any material transaction, or modified any
existing transaction;
-11-
(h) suffered any damage, destruction or casualty loss, whether
or not covered by insurance ;
(i) made any capital expenditures, additions or improvements or
commitments for the same, except those made in the ordinary course of business
which in the aggregate do not exceed $25,000;
(j) entered into any transaction or operated the Business, not
in the ordinary course of business;
(k) made any change in its accounting methods or practices or
ceased making accruals for taxes, obsolete inventory, vacation and other
customary accruals;
(l) ceased from reserving cash to pay taxes, principal and
interest on borrowed funds, and other customary expenses and payments;
(m) caused to be made any reevaluation of any of its rights,
assets or properties;
(n) caused to be entered into any amendment or termination of
any lease, customer or supplier contract or other material contract or agreement
to which it is a party;
(o) made any material change in any of its business policies,
including, without limitation, advertising, distributing, marketing, pricing,
purchasing, personnel, sales, returns, budget or product acquisition or sale
policies;
(p) terminated or failed to renew, or received any written
threat (that was not subsequently withdrawn) to terminate or fail to renew, any
contract or other agreement that is or was material to the Business or its
financial condition;
(q) permitted to occur or be made any other event or condition
of any character which has had a material adverse effect on it;
(r) waived any rights material to its financial or business
condition;
(s) made any illegal payment or rebates;
(t) made or changed any material tax election;
(u) paid or declared any dividends or distributions;
(v) repurchased or redeemed any securities; or
(w) entered into any agreement to do any of the foregoing.
3.20 Patents, Copyrights, and Trademarks. W3C owns or possesses
-----------------------------------
sufficient legal rights to all patents, trademarks, servicemarks, trade names,
copyrights, trade secrets, licenses, domain names, information, proprietary
rights and processes necessary or desirable in order to conduct the Business
without any conflict with or infringement of the rights of others.
-12-
All of these are listed on the Members Disclosure Letter. There are no
outstanding options, licenses, or agreements of any kind relating to the
foregoing, nor is W3C bound by or a party to any options, licenses or agreements
of any kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, domain names, information, proprietary
rights and processes of any other person or entity. W3C has not received any
communications alleging that W3C has violated or, by conducting its business as
proposed, would violate any of the patents, trademarks, service marks, trade
names, copyrights, trade secrets or other proprietary rights of any other person
or entity. None of W3C's consultants or employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of such consultant's or
employee's best efforts to promote the interests of W3C or that would conflict
with W3C's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement, nor the carrying on of W3C's business by the
employees of W3C, nor the conduct of W3C's business as proposed, will conflict
with or result in a breach of the terms, conditions or provisions of, or
constitute a default under, any contract, covenant or instrument under which any
of such consultants or employees is now obligated. W3C does not need to use any
inventions of any of its employees (or persons it currently intends to hire)
made prior to their employment by W3C. To the extent that any work, invention,
or material has been developed or created by a third party for W3C, W3C has a
written agreement with such third party with respect thereto and W3C thereby has
obtained ownership of, and is the exclusive owner of, all intellectual property
in such work, material or invention by operation of law or by valid assignment
or by agreement, as the case may be.
3.21 Marketing Rights. W3C has not granted rights to license, market, or
----------------
sell its products and services to any other person and is not bound by any
agreement that affects W3C's exclusive right to develop, distribute, license,
market, or sell its products and services.
3.22 Employees; Employee Compensation. There is no strike, or labor
--------------------------------
dispute or union organization activities pending or threatened between W3C and
its employees. None of W3C's employees belongs to any union or collective
bargaining unit. W3C has complied in all material respects with all applicable
state and federal equal employment opportunity and other laws related to
employment. No employee of W3C is or will be in violation of any judgment,
decree or order, or any term of any employment contract, noncompetition
agreement, nondisclosure agreement or other contract or agreement relating to
the relationship of any such employee with W3C or any other party because of the
nature of the business conducted or to be conducted by W3C or to the utilization
by the employee of his best efforts with respect to such business. No W3C
employee or consultant has employed or proposes to employ any trade secret or
any information or documentation proprietary to any former employer or has
violated any confidential relationship which such person may have had with any
third party, in connection with the Business, and W3C has no reason to believe
there will be any such employment or violation. W3C is not party to or bound by
any currently effective employment contract, deferred compensation agreement,
bonus plan, incentive plan, profit sharing plan, retirement agreement, or other
employee compensation agreement or benefit plan (including any ERISA plan). No
officer or key employee, or any group of key employees, intends to terminate
their employment with W3C, nor does W3C have a present intention to terminate
the employment of any of the foregoing. Subject to general principles related to
wrongful termination of employees, the employment of each officer and employee
of W3C is terminable at the will of W3C.
-13-
3.23 Proprietary Information and Inventions Agreements. Each employee
-------------------------------------------------
consultant of W3C has executed a Proprietary Information and Inventions
Agreement substantially in the form that has been delivered to Synbiotics.
3.24 Tax Returns, Payments. W3C has filed all tax returns and reports as
---------------------
required by law. These returns and reports are true and correct in all material
respects. W3C has paid all taxes and other assessments due, except those
contested by it in good faith. W3C has made adequate provisions on its books of
account for all taxes, assessments and governmental charges with respect to its
business, properties and operations for such period. W3C has withheld or
collected from each payment made to each of its employees, the amount of all
taxes (including, but not limited to, federal income taxes, Federal Insurance
Contribution Act taxes and Federal Unemployment Tax Act taxes) required to be
withheld or collected therefrom, and has paid the same to the proper tax
receiving officers or authorized depositaries.
3.25 Insurance. W3C and/or its Members has or have in full force and
---------
effect fire and casualty insurance policies, with extended coverage, sufficient
in amount (subject to reasonable deductibles) to allow it to replace any of its
properties that might be damaged or destroyed. W3C and/or its Members has or
have in full force and effect comprehensive general liability insurance and
products liability insurance in amounts customary for companies similarly
situated.
3.26 Environmental and Safety Laws. W3C is not in violation of any
-----------------------------
applicable statute, law, or regulation relating to the environment or
occupational health and safety, and no material expenditures are or will be
required in order to comply with any such existing statute, law, or regulation.
3.27 Contributed Assets. The Members have contributed to W3C, in
------------------
compliance with Section 1.5, all assets, properties and rights which should be
Contributed Assets.
3.28 Bank Accounts. The Members Disclosure Letter contains a complete and
-------------
accurate list of each deposit account or asset maintained by or on behalf of W3C
with any bank, brokerage house or other financial institution, specifying with
respect to each the name and address of the institution, the name under which
the account is maintained, the account number, and the name and title or
capacity of each person authorized to have access thereto.
3.29 Disclosure. The Members have provided Synbiotics with all the
----------
information reasonably available to them that Synbiotics has requested for
deciding whether to purchase the W3C Units and all information which the Members
believe is reasonably necessary to enable Synbiotics to make such decision.
Neither this Agreement nor any other written or oral statements made or
delivered in connection herewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.
-14-
ARTICLE IV
POST-CLOSING COVENANTS
----------------------
4.1 Registration of Shares.
----------------------
(a) Synbiotics shall, within 45 days after the earlier of
satisfaction of the First Contingency or conversion of Synbiotics Notes with an
aggregate principal balance of at least $1,000,000, prepare and file with the
SEC a registration statement on Form S-3 under the Securities Act covering the
resale of the Synbiotics Common Stock within the Securities (the "Shares") by
the Members (the "Registration Statement"), and corresponding applications for
registration under the blue sky laws of any states for which the Members
reasonably request in writing to Synbiotics that Synbiotics obtain such blue-sky
registration (it being understood that in the vast majority of states no such
registration is legally required, due to Synbiotics' Nasdaq National Market
listing or other reasons). Synbiotics shall use its reasonable diligent efforts
to obtain effectiveness of the Registration Statement and such blue sky
registrations as soon thereafter as practicable, and in any event within 90 days
after the initial filing of the Registration Statement with the SEC, and shall
use its best efforts to keep the Registration Statement and such blue sky
registrations effective after that. Notwithstanding the foregoing, Synbiotics
will only be required to maintain the effectiveness of the Registration
Statement and such blue sky registrations until the earlier of (a) such time as
all of the Shares have been disposed of by the Members, or (b) such date on
which each of the Members may legally dispose of all of the Shares held by him
in one transaction in the open market pursuant to Rule 144(k) under the
Securities Act. Synbiotics shall also cause the Shares, when and if issued, to
be listed on the Nasdaq National Market and on any stock exchange on which the
Synbiotics Common Stock may from time to time be listed. Synbiotics shall pay
all fees and expenses incurred by Synbiotics in connection with preparing,
filing, prosecuting and updating the Registration Statement, such blue sky
applications and registrations, and such listing, including all registration and
filing fees, listing fees, printing expenses, and fees and disbursements of
Synbiotics' counsel and accountants.
(b) The Members shall cooperate fully with Synbiotics in the
preparation of such Registration Statement and blue sky applications and shall
provide to Synbiotics all information and materials (including updated
information and materials) regarding themselves and their respective proposed
methods of disposition of the Shares and take all actions reasonably requested
by Synbiotics to permit Synbiotics to comply with applicable requirements of the
SEC, to comply with applicable requirements of the relevant blue sky laws, and
to obtain the desired acceleration of the effective date of such Registration
Statement.
(c) Subject to Section 4.1(d) hereof, Synbiotics shall promptly
prepare and file with the SEC and any relevant blue sky authorities such
amendments and supplements to the Registration Statement and the prospectus used
in connection therewith as may be necessary to keep such Registration Statement
effective and to comply with (and enable the Members to comply with) the
provisions of the Securities Act and Rule 415 thereunder with respect to the
disposition of all the Shares.
-15-
(d) During the effectiveness of the Registration Statement,
Synbiotics shall promptly notify the Members of the happening of any event or
other circumstance as the result of which, in Synbiotics' judgment, (i) the
prospectus included in the Registration Statement, as then in effect, would
include an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing, or (ii) the offer or
resale of the Shares would otherwise have a material and adverse effect on any
proposed or pending acquisition, merger, business combination or other material
transaction involving Synbiotics; and, upon receipt of such notice and until the
earlier of (i) the date Synbiotics makes available to the Members a supplemented
or amended prospectus meeting the requirements of the Securities Act and
relevant blue sky laws, or (ii) the date Synbiotics notifies the Members that
the Members may resume offers and sales using the prior prospectus, the Members
shall not offer or sell any Shares pursuant to the Registration Statement (and
shall return all copies of such prior prospectus to Synbiotics if requested to
do so by it). Notwithstanding Section 4.1(c), Synbiotics may continue such
"blackout" period or periods for such period of time as Synbiotics considers
reasonably necessary and in its best interest due to circumstances then
existing, or simply due to the fact that amendments/supplements of a
Registration Statement/ prospectus cannot be prepared instantly; but in no event
---
may Synbiotics impose "blackouts" on the Members for any period of 30 or more
consecutive business days or totaling more than 100 days in any 12 month period.
(e) Synbiotics shall not be required to apply for or obtain blue
sky registration in any state if in connection therewith or as a condition
thereto it must (i) qualify to do business in such state where it would not
otherwise be required to qualify, (ii) subject itself to general taxation in
such state, (iii) file a general consent to service of process in such state, or
(iv) make any change in its Articles of Incorporation or Bylaws, which
Synbiotics' Board of Directors determines to be contrary to the best interests
of Synbiotics and its shareholders.
4.2 Indemnification.
---------------
(a) Synbiotics will indemnify the Members against all claims,
losses, expenses, damages and liabilities (or actions in respect thereto)
arising out of or based on (A) any untrue statements (or alleged untrue
statement) of a material fact contained in any prospectus contained in any
registration statement covering the Shares for resale, or based on any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (B) any
misrepresentation or breach of any representation or warranty given or made by
Synbiotics in this Agreement, and will reimburse the Members for any reasonable
legal and any other expenses incurred in connection with investigating,
defending or settling any such claim, loss, damage, liability or action,
provided that Synbiotics will not be liable in any such case to the extent that
any such claim, loss, damage or liability is caused by any untrue statement or
omission based upon written information furnished to Synbiotics by the Members
specifically for use therein.
(b) The Members will indemnify Synbiotics, each of its directors
and officers, and each person who controls Synbiotics within the meaning of the
Securities Act, against all claims, losses, expenses, damages and liabilities
(or actions in respect thereof) arising out of or based on (A) any untrue
statement (or alleged untrue statement) of a material fact
-16-
contained in any such prospectus, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (B) any sale of Shares which violates (or
allegedly violates) the Securities Act because of violation of the prospectus
delivery requirement or because more or less than the information in such
prospectus is given (or alleged to be given) in connection with the sale, or (C)
any misrepresentation or breach of any representation or warranty given or made
by the Members in this Agreement, and will reimburse Synbiotics, and such
directors, officers, or controlling persons, for any reasonable legal or any
other expenses incurred in connection with investigating, defending or settling
any such claim, loss, damage, liability or action, but in the case of subsection
(b)(A) to the extent, and only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
prospectus in reliance upon and in conformity with written information furnished
to Synbiotics by the Members specifically for use therein.
(c) Each party entitled to indemnification under this Section
4.2 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such indemnified party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at the
Indemnified Party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations hereunder, unless such failure resulted in
actual detriment to the Indemnifying Party. The Indemnified Party shall provide
all cooperation reasonably requested for the defense of the claim or litigation.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation. An
Indemnified Party shall not decline any settlement complying with the foregoing
if it requires nothing of the Indemnified Party other than the payment of money
(which is in fact paid by the Indemnifying Party) and does not include an
admission of liability.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which any person or
entity entitled to indemnification under Section 4.2 makes a claim for
indemnification pursuant to this Section 4.2 but it is judicially determined (by
entry of a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case notwithstanding the fact
that this Section 4.2 provides for indemnification in such case; then, and in
such case, the party that would otherwise be required to indemnify under Section
4.2 will contribute to the aggregate losses, claims, damages or liabilities to
which the other parties may be subject (after contribution from others) in such
proportion as is appropriate to reflect the relative fault of the parties in
connection with the losses suffered, as well as any other relevant equitable
considerations.
-17-
4.3 Deliverables Upon Effectiveness. When and if the SEC declares the
-------------------------------
Registration Statement effective, Synbiotics shall promptly deliver to the
Members:
(a) A certificate signed by the President of Synbiotics that the
Registration Statement is effective and, to his knowledge, no stop order with
respect to the Registration Statement has been issued and no proceedings
therefor have been instituted.
(b) Such number of copies of the Registration Statement and
(from time to time) of each amendment and supplement thereto, such number of
copies of the prospectus (including (from time to time) any supplemental or
amended prospectus) included in such Registration Statement, and such other
related documents as the Members may reasonably request in writing in order to
facilitate the disposition of the Shares by the Members.
4.4 Current Public Information. As long as the Members own any Shares
--------------------------
and Synbiotics remains a public company, Synbiotics shall use its best efforts
to properly file all SEC Reports, or otherwise make available "adequate current
public information" about itself, within the meaning of Rule 144(c) under the
Securities Act, to potentially make available to the Members the benefits of
certain rules and regulations of the SEC which may permit the sale of the Shares
without registration.
4.5 Taking of Necessary Action; Further Action If, at any time after the
------------------------------------------
Closing, any further action is necessary or desirable to carry out the purposes
of this Agreement, the managers, officers and directors of W3C and Synbiotics
are fully authorized in the name of their respective companies or otherwise to
take, and they and the Members will take, all such lawful and necessary action
to do so, so long as such action is not inconsistent with this Agreement.
4.6 Board Seat. Upon the Closing, Synbiotics' Board of Directors shall
----------
elect ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ to the Synbiotics Board of Directors to serve until the
next annual meeting of shareholders.
4.7 Confidential Information and Non-Disclosure.
-------------------------------------------
(a) Definition of Confidential Information. Each of the Members
--------------------------------------
hereby acknowledges that the assets of the Business, which give value to the W3C
Units, include the confidential and proprietary information of and regarding the
Business in existence prior to Effective Date (collectively, "Confidential
Information"), which Confidential Information shall include, without limitation,
all of the following materials and information (whether or not reduced to
writing and whether or not patentable or protected by copyright): (i) any and
all trade secrets concerning the business and affairs of W3C and/or the
Business, product specifications, data, know-how, formulae, compositions,
processes, designs, sketches, photographs, graphs, drawings, samples, inventions
and ideas, past, current and planned research and development, current and
planned manufacturing and distribution methods and processes, customer lists,
current and anticipated customer requirements, price lists, market studies,
business plans, computer software and programs (including object code and source
code), computer software and database technologies, systems, structures and
architectures (and related processes, formulae, compositions, improvements,
derivatives, devices, know-how, inventions, discoveries, concepts,
-18-
ideas, designs, methods and information) and any other information, however
documented, of W3C or of any other person which has entrusted its confidential
and proprietary information to W3C that is a trade secret within the meaning of
any and all applicable state and federal trade secret laws; (ii) any and all
information concerning the business and affairs of W3C or of any other person
which has entrusted its confidential and proprietary information to W3C (which
includes historical financial statements, financial projections and budgets,
historical and projected sales, capital spending budgets and plans, the names
and backgrounds of key personnel and personnel training and techniques and
materials), however documented; and (iii) any and all notes, analysis,
reflections, derivatives, compilations, studies, summaries, and other material
prepared by or for W3C containing or based, in whole or in part, on any
information included in the foregoing. The parties hereto agree that the failure
of any Confidential Information to be marked or otherwise labeled as
confidential or proprietary information shall not affect its status as
Confidential Information. Notwithstanding the foregoing, Confidential
Information shall not include (1) any information which is generally known to
the public or to companies in businesses similar to the Business, (2) any
information which later, through no act of any Member, becomes generally known
or (3) to the limited extent of compliance with such requirements, any
information required to be disclosed by a Member pursuant to a subpoena or court
order, or pursuant to a requirement of a governmental agency or law of the
United States of America or a state thereof, provided that (a) the Member will
provide Synbiotics with prior written notice of such disclosure in order that
Synbiotics may attempt to obtain a limitation of the required disclosure, a
protective order or the assurance of confidential treatment and (b) the Member
will cooperate with Synbiotics in attempting to obtain such limitation, order or
assurance.
(b) Non-Use and Non-Disclosure. Commencing on the date hereof
--------------------------
and at all times thereafter, each of the Members shall hold in the strictest
confidence (except as previously approved by Synbiotics in writing), and shall
not, directly or indirectly, disclose, divulge, reveal, report, publish,
transfer or otherwise communicate, or use for its benefit or the benefit of any
other person, partnership, firm, corporation or other entity, or use to the
detriment of Synbiotics or W3C, or misuse in any way, any Confidential
Information. Each of the Members acknowledges that he will in no way infringe
upon any W3C copyrights, trademarks or servicemarks and will in no way use,
copy, appropriate or redistribute any part of the Confidential Information,
whether obtained directly or indirectly from Synbiotics or W3C or not, without a
specific written license agreement with Synbiotics. It is agreed that any
derivative, modification or elaboration of any Confidential Information by any
third party remains, so far as each of the Members is concerned, Confidential
Information for purposes of this Agreement. Synbiotics and each of the Members
each hereby stipulates that, as between them, all Confidential Information
acquired by Synbiotics via its purchase of the W3C Units constitutes important,
material and confidential and/or proprietary information of Synbiotics and the
Business, constitutes unique and valuable information, and affects the
successful conduct of the Business and Synbiotics' goodwill, and that
Synbiotics/W3C shall be entitled to recover its damages, in addition to any
injunctive remedy that may be available, for any breach of this Section 4.7.
-----------
(c) Trade Secrets. All trade secrets of Synbiotics (including
-------------
W3C) and the Business will be entitled to all of the protection and benefits
under all applicable federal and state trade secrets law. If any information
that Synbiotics deems to be a trade secret is found by a court of competent
jurisdiction not to be a trade secret, such information will, nevertheless,
-19-
be considered Confidential Information for purposes of this Agreement unless it
is excluded by the last sentence of Section 4.7(a).
--------------
4.8 Ownership. Each of the Members hereby acknowledges and agrees that
---------
all right, title and interest in and to any Confidential Information shall be
the exclusive property of Synbiotics and/or W3C. Without limiting the foregoing,
each of the Members shall assign to Synbiotics any and all right, title or
interest which he may have in all Confidential Information made, developed or
conceived of in whole or in part by him or any employee or consultant of W3C who
conceived in whole or in part such Confidential Information. Each of the Members
further agrees to execute and deliver any and all instruments, and to do all
other things reasonably requested by Synbiotics in order to vest more fully in
Synbiotics and/or W3C all ownership rights in such Confidential Information. All
equipment, notebooks, documents, memoranda, reports, files, samples, books,
correspondence, lists, other written and graphic records, and the like, in any
way relating to any Confidential Information or the Business, which W3C or its
employees, Members or consultants prepared, used, constructed, observed,
processed, or controlled (collectively, "Materials") shall be Synbiotics'/W3C's
exclusive property, and each of the Members hereby agrees to deliver all
Materials, together with any and all copies thereof, promptly to Synbiotics at
Synbiotics' request.
ARTICLE V
---------
CONDITIONS OF THE MEMBERS' OBLIGATIONS AT CLOSING.
-------------------------------------------------
The obligations of the Members under Section 1 of this Agreement are
subject to the fulfillment at or before the Closing of each of the following
conditions, any of which may be waived in writing by the Representative on
behalf of the Members:
5.1 Bringdown. Synbiotics' representations and warranties in Article II
---------
shall be true in all material respects, as if made on and as of the date of the
Closing. Synbiotics shall have performed or fulfilled in all material respects
all agreements, obligations and conditions contained herein required to be
performed or fulfilled by Synbiotics before such Closing.
5.2 Blue Sky Compliance. Synbiotics shall be exempt from or have
-------------------
complied with the registration/qualification requirements of and be effective
under all blue sky laws applicable to the offer and sale of the Securities to
the Members.
5.3 No Order Pending. There shall not then be in effect any order
----------------
enjoining or restraining the transactions contemplated by this Agreement.
5.4 Compliance Certificate. Synbiotics shall have delivered to the
----------------------
Representative a certificate dated as of the date of the Closing signed by the
Chief Executive Officer or President of Synbiotics certifying that, to his
knowledge, the conditions set forth in Sections 5.1, 5.2, and 5.3 have been
satisfied.
-20-
ARTICLE VI
CONDITIONS OF SYNBIOTICS' OBLIGATIONS AT CLOSING
------------------------------------------------
The obligations of Synbiotics under Section 1 of this Agreement are
subject to the fulfillment at or before the Closing of each of the following
conditions, any of which may be waived in writing by Synbiotics:
6.1 Bringdown. The Members' representations and warranties in Article
---------
III shall be true in all material respects, as if made on and as of the date of
the Closing. The Members and W3C shall have performed or fulfilled in all
material respects all agreements, obligations and conditions contained herein
required to be performed or fulfilled by the Members and/or W3C before such
Closing.
6.2 No Order Pending. There shall not then be in effect any order
----------------
enjoining or restraining the transactions contemplated by this Agreement.
6.3 Legal Opinion. Synbiotics shall have received an opinion of counsel
-------------
to the Members to the effect that the Members own, and the W3C Units being
exchanged by the Members constitute, all of the member interests in W3C.
6.4 Instruments of Transfer. Synbiotics shall have received the Limited
-----------------------
Liability Company Interest Certificates representing all of the W3C Units and
duly executed transfer instruments.
6.5 Non-Competition and Employment Agreements. Synbiotics shall have
-----------------------------------------
received executed originals of the Non-Competition Agreements, the Proprietary
Information and Inventions Agreements, the ▇▇▇▇ and ▇▇▇▇▇ Employment Agreements
and be reassured that the ▇▇▇▇▇ Employment Agreement will be executed and
delivered within thirty (30) days.
6.6 Compliance Certificate. The Representative shall have delivered to
----------------------
Synbiotics a certificate dated as of the date of the Closing signed by the
Representative certifying that, to his knowledge, the conditions set forth in
Sections 6.1 and 6.2 have been satisfied.
ARTICLE VII
GENERAL PROVISIONS
------------------
7.1 Representations, Warranties and Agreements. Each party agrees that,
------------------------------------------
except for the representations and warranties contained in this Agreement or as
otherwise set forth in the Disclosure Letter, no party hereto has made any other
representations and warranties, and each party hereby disclaims any other
representations and warranties made by itself or any of its officers, directors,
employees, agents, financial and legal advisors or other representatives, with
respect to execution and delivery of this Agreement or the transactions
contemplated herein, notwithstanding the delivery or disclosure to any other
party or any party's representatives of any documentation or other information
with respect to any one or more of the foregoing. The warranties,
representations and covenants of Synbiotics and the Members contained in or
made
-21-
pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein.
Synbiotics' investigation does not adversely affect Synbiotics' right to rely on
the Members' representations and warranties.
7.2 Governing Law. This agreement shall be governed by, and construed
-------------
and enforced in accordance with, the laws of the State of California.
7.3 Assignment; Binding Effect; Benefit. This Agreement shall be binding
-----------------------------------
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Notwithstanding anything contained in this Agreement to
the contrary, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective
successors and assigns any rights or remedies under or by reason of this
Agreement.
7.4 Entire Agreement; Amendment; Waiver. This Agreement constitutes the
-----------------------------------
entire agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings among the parties with
respect thereto. No amendment to or modification or waiver of any provision of
this Agreement shall be binding upon any party hereto unless made in writing and
signed by Synbiotics and a majority in interest of the Members. Any amendment or
waiver effected in accordance with this Section 7.4 shall be binding upon each
Member, each future holder of any Securities, and Synbiotics.
7.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
7.6 Headings. The headings of the Sections and Articles of this
--------
Agreement are for convenience and shall not determine the interpretation of this
Agreement.
7.7 Notices. Any notice required or permitted hereunder shall be given
-------
in writing and shall be conclusively deemed effectively given upon personal
delivery, or, if made by registered or certified United States mail, postage
prepaid, four business days after mailing, or if made by overnight carrier, one
business day after sending, in all instances addressed (i) if to Synbiotics, as
set forth below Synbiotics' name on the signature page of this Agreement, and
(ii) if to the Members, to the Representative, as representative of the Members,
as set forth below ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇'▇ name on the signature page to this
Agreement, or at such other address as Synbiotics or the Members may designate
by ten days' advance written notice to the Representative or Synbiotics,
respectively.
7.8 Fees and Expenses. Synbiotics and the Members will each bear their
-----------------
own fees and expenses in connection with the transactions contemplated by this
Agreement.
7.9 Finder's Fees. Each party represents that it neither is nor will be
-------------
obligated for any finders' fee or commission in connection with this
transaction.
The Members jointly and severally agree to indemnify and to hold harmless
Synbiotics from any liability for any commission or compensation in the nature
of a finders' fee
-22-
(and the costs and expenses of defending against such liability or asserted
liability) for which W3C or any of the Members is responsible.
Synbiotics agrees to indemnify and hold harmless the Members from any
liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which Synbiotics is responsible.
7.10 Publicity. The Members shall make no public announcement of
---------
this Agreement or of the transactions contemplated hereby. Synbiotics shall
control the timing and content of any public announcements.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-23-
IN WITNESS WHEREOF, the parties have executed this Exchange Agreement
as of the date first written above.
SYNBIOTICS CORPORATION,
a California corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------
President and CEO
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------
Secretary
Address: ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
MEMBERS OF W3 COMMERCE LLC
Signature: /s/ ▇▇▇▇▇ ▇▇▇▇▇ -▇▇▇▇
---------------------
Print Name: ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Address: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Signature: /s/ ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
--------------------
Print Name: ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Signature: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇
-----------------------
Print Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇
Signature: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------
Print Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Signature: /s/ ▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇
---------------------
Print Name: ▇▇▇▇ ▇▇▇▇▇▇-▇▇▇▇▇
[SIGNATURE PAGE TO EXCHANGE AGREEMENT BETWEEN SYNBIOTICS
CORPORATION AND W3 COMMERCE, LLC]
Signature: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------
Print Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Signature: /s/ ▇▇▇ ▇▇▇▇
------------
Print Name: ▇▇▇ ▇▇▇▇
Signature: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
----------------
Print Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Signature: /s/ ▇▇▇▇ ▇▇▇▇▇
--------------
Print Name: ▇▇▇▇ ▇▇▇▇▇
Signature: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
------------------
Print Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
[SIGNATURE PAGE TO EXCHANGE AGREEMENT BETWEEN SYNBIOTICS
CORPORATION AND W3 COMMERCE, LLC]
EXHIBIT A
CONVERTIBLE PROMISSORY NOTE
A-1
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE REGISTRATION THEREOF
UNDER SUCH ACT OR COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT, OR UNLESS
THE COMPANY HAS RECEIVED SATISFACTORY EVIDENCE THAT SUCH REGISTRATION IS NOT
REQUIRED.
CONVERTIBLE PROMISSORY NOTE
---------------------------
$ January 12, ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
Synbiotics Corporation, a California corporation ("Maker"), for value
received, hereby promises to pay to ______________ ("Payee"), in lawful money of
the United States, at ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, the
principal sum of _________________ ($_____________), together with simple
interest on the unpaid principal at the rate of 6.21 percent (6.21%) per annum,
interest to accrue on the basis of a 365 day year for the number of days
actually elapsed. All principal together with all accrued interest shall be due
and payable in one lump sum on January 12, 2006.
At any time after the earlier of (a) immediately before an acquisition
of Maker, or (b) January 12, 2002, but not previously, Payee may, at his option,
convert some or all of the principal balance of this Note into shares of the
Common Stock of the Maker, at the rate of $2.8125 per share (as subsequently
adjusted for any stock splits, stock dividends and reverse stock splits).
Accrued interest associated with converted principal shall not be reflected in
the conversion quotient, and shall be deemed forgiven. To convert, Payee must
deliver this Note to Maker together with a written notice of conversion. In the
event of any partial conversion, Maker shall deliver to Payee a new Note, of
like tenor, for the remaining principal amount.
Reference is made to that certain Employment Agreement ("Employment
Agreement") between W3 Commerce LLC and Maker, to which Payee is a third party
beneficiary, executed and delivered in connection with that certain Exchange
Agreement, dated as of January 12, 2000 (the "Exchange Agreement") between
Maker, Payee and others. If, pursuant to the terms of the Employment Agreement,
Payee ceases to be an employee of Maker prior to January 12, 2001, for any
reason other than termination by Maker without Cause (as such term is defined in
the Employment Agreement) (such separation from employment is herein referred to
as "Employment Separation"), the rate at which the principal balance of this
Note may be converted into shares of Common Stock of Maker shall be determined
as follows: if Employment Separation occurs prior to April 12, 2000, the
principal balance of this Note shall be convertible into shares of the Common
Stock of Maker, when such conversion is allowed under the terms of this Note, at
the rate of $4.69 per share (as subsequently adjusted for any stock splits,
stock dividends and reverse stock splits). If Employment Separation occurs after
April 12, 2000, but prior to July 12, 2000, the principal balance of this Note
shall be convertible into shares of the Common Stock of Maker, when such
conversion is allowed under the terms of this Note, at the rate of $4.02 per
share (as subsequently adjusted for any stock splits, stock dividends and
reverse stock splits). If Employment Separation occurs after July 12, 2000, but
prior to October 12, 2000, the principal balance of this Note shall be
convertible into shares of the Common Stock of Maker, when such conversion is
allowed under the terms of this Note, at
A-2
the rate of $3.52 per share (as subsequently adjusted for any stock splits,
stock dividends and reverse stock splits). If Employment Separation occurs after
October 12, 2000 but prior to January 12, 2001, the principal balance of this
Note shall be convertible into shares of the Common Stock of Maker, when such
conversion is allowed under the terms of this Note, at the rate of $3.125 per
share (as subsequently adjusted for any stock splits, stock dividends and
reverse stock splits).
If Payee ceases at any time to be an employee of Maker due to
termination without Cause, Payee shall be entitled to the full value of this
Note, without regard to any of the calculations set forth in the immediately
preceding paragraph.
If Maker is acquired (except in a reincorporation), this Note shall no
longer be convertible.
This Note may be prepaid, in whole or in part, without premium or
penalty, at any time, after December 30, 2003, on 20 business days' prior
written notice to Payee.
Upon payment in full of all principal and interest payable hereunder,
this Note shall be surrendered to Maker for cancellation.
Maker waives presentment, demand for performance, notice of
nonperformance, protest, notice of protest, and notice of dishonor. No delay on
the part of Payee in exercising any right hereunder shall operate as a waiver of
such right under this Note. This Note is being delivered in and shall be
construed in accordance with the laws of the State of California.
If Maker defaults and the indebtedness represented by this Note or any
part thereof is collected through legal action or other judicial proceedings,
Maker agrees to pay, in addition to the principal and interest payable hereon,
reasonable attorneys' fees and costs incurred by Payee.
This Note, and any Common Stock issued upon conversion hereof, are
subject to an Exchange Agreement dated January 12, 2000 among Maker, Payee, and
the other members of W3 Commerce LLC. Neither this Note, nor any right or
interest in it, may be sold, assigned or transferred.
Subordination Provisions
------------------------
(a) Except for the issuance of shares of Common Stock of Maker upon
conversion in accordance with the terms of this Note, it is agreed that, in the
event of any insolvency, bankruptcy, receivership, assignment for the benefit of
creditors, reorganization, or arrangement with creditors of Maker, whether or
not pursuant to bankruptcy laws, or any dissolution, liquidation, or other
marshalling of the assets and liabilities of Maker, all Senior Debt (defined as
indebtedness to any bank or institutional lender) shall be paid in full before
any payment or distribution of any character, whether in cash, securities (other
than those issued in accordance with the conversion provisions above), or other
property, which would otherwise, but for the subordination provisions applicable
to the obligations under this Note, be payable or distributable for or on
account of any obligations under this Note shall first be paid or distributed
directly to the holders of the Senior Debt, until all Senior Debt shall have
been paid in full.
A-3
(b) Except for the issuance of shares of Common Stock of Maker upon
conversion in accordance with the terms of this Note, it is agreed that, if any
Senior Debt is accelerated, all such accelerated Senior Debt shall be paid in
full before any payment or distribution of any character, whether in cash,
securities, or other property, shall be made for or on account of any
obligations under this Note. In any such event, any payment or distribution of
any character, whether in cash, securities (other than those issued in
accordance with the conversion provisions above), or other property, which would
otherwise, but for the subordination provisions applicable to the obligations
under this Note, be payable or distributable for or on account of any
obligations under this Note shall first be paid or distributed directly to the
holders of the Senior Debt, until all such accelerated Senior Debt shall have
been paid in full.
(c) Upon the occurrence of any event of default by Maker with respect
to any Senior Debt under circumstances when the subordination provisions
described in the preceding paragraphs are not applicable and the delivery by the
holder of Senior Debt of written notice of such default to Maker, then, unless
and until the holder of Senior Debt shall have notified Maker that such default
shall have been cured or waived or shall have ceased to exist, no payment or
distribution of any character, whether in cash, securities (other than those
issued in accordance with the conversion provisions above), or other property,
shall be made for or on account of any obligations under this Note.
(d) If Maker makes any payment on account of any obligations under
this Note in contravention of the subordination provisions described in this
"Subordination Provisions" section, such payment shall be held by the Payee of
the obligations under this Note for the benefit of, and shall be paid forthwith
over and delivered to, Maker for application to the payment of all Senior Debt
remaining unpaid to the extent necessary to pay all Senior Debt in full in
accordance with the terms of such Senior Debt.
(e) Payee, by acceptance of this Note, is deemed to accept, agree to,
and be bound by this "Subordination Provisions" section.
SYNBIOTICS CORPORATION
______________________________________
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
A-4
EXHIBIT B
NON-COMPETITION AGREEMENT
NON-COMPETITION AGREEMENT
This NON-COMPETITION AGREEMENT (this "Agreement") is made as of January 12,
2000 by and between Synbiotics Corporation, a California corporation
("Synbiotics"), and _____________________ ("Member").
RECITALS
--------
WHEREAS, Synbiotics, Member and the other members of W3 Commerce LLC, a
Delaware limited liability company ("W3C") have entered into that certain
Exchange Agreement, dated as of January 12, 2000 (the "Exchange Agreement")
pursuant to which Synbiotics is acquiring all the member interests in W3C from
the Members (capitalized terms used herein and not otherwise defined herein
shall have the meanings given such terms in the Exchange Agreement);
WHEREAS, the going concern value of the W3C Units being sold by the Members
to Synbiotics would be diminished substantially if Member were to compete with
Synbiotics in the Business;
WHEREAS, W3C currently conducts the Business in every nation, state and
county in the world;
WHEREAS, the Exchange Agreement requires that Member enter into this
Agreement as a condition to the obligation of Synbiotics to acquire the W3C
Units and to consummate the transactions contemplated by the Exchange Agreement.
NOW, THEREFORE, in consideration of the mutual covenants set forth in this
Agreement, and in connection with the Closing under the Exchange Agreement and
the acquisition of the W3C Units in connection therewith, the parties hereto
agree as follows:
1. Non-Competition. As an inducement for Synbiotics to enter into
---------------
the Exchange Agreement and to pay the purchase price, and in consideration of
Member's exposure to confidential information of the Business, Member hereby
covenants as follows:
a. In General. The term of this Agreement (the "Term") shall
----------
continue for the longer of: (i) three (3) years from the Effective Date (as such
term is defined in the Exchange Agreement) or (ii) two (2) years after Member
ceases to be in the employ of Synbiotics pursuant to the terms of a certain
Employment Agreement between Maker and Synbiotics executed and delivered in
connection herewith. During the Term, Member shall not, directly or indirectly,
own, manage, engage in, operate or conduct, prepare to or plan to conduct or
assist any person or entity to conduct any business, or have any interest in any
business, person, firm, corporation or other entity (as a principal, owner,
agent, employee, shareholder, officer, director, joint venturer, partner,
security holder (except for the ownership of publicly-traded securities
constituting not more than five percent (5%) of the outstanding securities of
the issuer thereof), creditor (except for trade credit extended in the ordinary
course of business), consultant or in any other capacity that engages, directly
or indirectly, in any business which is the same as, similar to or competitive
with the Business anywhere in the world. The covenants
B-1
set forth in this Section 1 shall be construed as a series of separate covenants
---------
covering their subject matter in each of the separate nations, states and
counties where Synbiotics (for the purpose of this Agreement, the term
"Synbiotics," as used here and hereafter in this Agreement, shall include both
Synbiotics and its present and future affiliates, including W3C) conducts the
Business, and except for geographic coverage, each such separate covenant shall
be deemed identical in terms to the covenants set forth in this Section 1. To
----------
the extent that any such covenant shall be judicially unenforceable in any one
or more of such nations, states and counties, such covenant shall not be
affected with respect to each of the other nations, states and counties. Each
covenant with respect to such nation, state and county shall be construed as
severable and independent.
b. No Diversion of Others. During the Term, Member shall not,
----------------------
either for himself or for any other person, firm, corporation or other entity,
directly or indirectly, or by action in concert with others:
(i) induce or influence, or seek to induce or influence,
any person who is engaged by Synbiotics (as an agent, employee, consultant, or
in any other capacity) or any successor thereto with the purpose of engaging
such person for himself or for a business competitive with Synbiotics or the
Business; or
(ii) divert or take away or attempt to divert or take away,
or solicit or attempt to solicit, any existing or potential customer or supplier
of Synbiotics (whether or not such customer or supplier is actually a customer
or supplier of Synbiotics as of the Effective Date, including without limitation
any customer or supplier solicited by Member or which became known by Member
prior to the Effective Date) with the purpose of obtaining such person as a
customer or supplier for a business competitive with Synbiotics or the Business
or persuading such person to reduce, or to not increase, the level of business
it does with Synbiotics.
c. Organizing Competitive Business. Without limiting any of
-------------------------------
the other provisions contained in this Section 1, during the Term, Member shall
---------
not plan to compete, prepare to compete or discuss Synbiotics' business or the
Business with any third party planning or preparing to compete with the
Business, or conspire with agents, employees, consultants, other representatives
of Synbiotics or any other third party for the purpose of organizing any
business activity competitive with Synbiotics or the Business.
2. Reasonableness of Restrictions. MEMBER HAS CAREFULLY READ AND
------------------------------
CONSIDERED THE PROVISIONS OF SECTION 1 HEREOF AND, HAVING DONE SO, HEREBY AGREES
THAT THE RESTRICTIONS SET FORTH IN SUCH SECTIONS ARE FAIR AND REASONABLE AND ARE
REASONABLY REQUIRED FOR THE PROTECTION OF THE INTERESTS OF SYNBIOTICS AND THE
BUSINESS.
3. Injunctive Relief.
-----------------
a. In General. Member acknowledges and agrees that Synbiotics
----------
shall suffer irreparable harm in the event that Member breaches any of his
obligations under Section 1 hereof, and that monetary damages shall be
---------
inadequate to compensate Synbiotics for
B-2
any such breach. Member agrees that in the event of any breach or threatened
breach by Member of any of the provisions of Section 1 hereof, Synbiotics shall
---------
be entitled to a temporary restraining order, preliminary injunction and
permanent injunction in order to prevent or restrain any such breach or
threatened breach by Member, or by any or all of Member's agents,
representatives or other persons directly or indirectly acting for, on behalf of
or with Member. Member hereby waives any requirement that Synbiotics submit
proof of the economic value of any trade secret or post a bond or other
security.
b. No Limitation of Remedies. Notwithstanding the provisions
-------------------------
set forth in Section 3(a), above, or any other provision contained in this
------------
Agreement, the parties hereby agree that no remedy conferred by any of the
specific provisions of this Agreement, including, without limitation, this
Section 3, is intended to be exclusive of any other remedy, and each and every
---------
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
4. Miscellaneous.
a. Notices. All notices, requests and other communications
-------
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission with answer back confirmation
or mailed (first class, postage prepaid) or by overnight courier to the parties
at the following addresses or facsimile numbers:
If to Member, to:
If to Synbiotics, to:
Synbiotics Corporation
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Executive Officer and President
with copies to:
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ "▇" ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
All such notices, requests and other communications will (i) if delivered
personally or by overnight courier to the address as provided in this Section
-------
4(a), be deemed given upon delivery,
----
B-3
(ii) if delivered by facsimile transmission to the facsimile number as provided
in this Section 4(a), be deemed given upon sending, and (iii) if delivered by
------------
mail in the manner described above to the address as provided in this Section
-------
4(a), be deemed given two business days after mailing (in each case regardless
----
of whether such notice, request or other communication is received by any other
person to whom a copy of such notice, request or other communication is to be
delivered pursuant to this Section). Any party from time to time may change its
address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other parties hereto.
b. Entire Agreement. This Agreement, the Exchange Agreement (and
----------------
all related exhibits and schedules) and all other documents delivered in
connection here with supersede all prior discussions and agreements among the
parties with respect to the subject matter hereof and thereof and contains the
sole and entire agreement among the parties hereto with respect thereto;
provided, however, that any provisions of any prior agreement pertaining to
nondisclosure/nonuse are not superseded and remain in effect.
c. Waiver. Any term or condition of this Agreement may be waived
------
at any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the party waiving such term or condition. No waiver by any
party hereto of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion. All remedies,
either under this Agreement or by law or otherwise afforded, will be cumulative
and not alternative.
d. Amendment. This Agreement may be amended, supplemented or
---------
modified only by a written instrument duly executed by or on behalf of each
party hereto.
e. Third Parties. The terms and provisions of this Agreement
-------------
are intended solely for the benefit of Member, Synbiotics and Synbiotics'
successors or assigns, and it is not the intention of the parties to confer
third-party beneficiary rights upon any other person.
f. Headings. The headings used in this Agreement have been
--------
inserted for convenience of reference only and do not define or limit the
provisions hereof.
g. 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 excised from this Agreement; provided, however, that if the reason for
such invalidity or unenforceability is that the affected provision calls for an
excessive amount of time or money or area or an excessive breadth or scope of
coverage or otherwise requires an excessive degree of any thing or imposes any
excessively onerous restriction or requirement, the affected provision shall not
be excised but instead shall be construed as if it were written so as to call
only for the amount of money, time, area, breadth, scope and/or other thing,
restriction or requirement (but nonetheless for the maximum possible amount of
money, time, area, breadth, scope and/or other thing, restriction or
requirement) which would render such provision valid and enforceable, all so as
to effectuate to the greatest possible extent the parties' expressed intent; and
in every case the remainder of this
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Agreement shall not be affected thereby and shall remain valid and enforceable,
as if such excised or affected provision were not contained herein.
h. Governing Law, Consent to Jurisdiction and Forum Selection. This
----------------------------------------------------------
Agreement shall be governed by and construed in accordance with the laws of the
State of California applicable to contracts executed and performed in such
State, without giving effect to conflicts of laws principles. The parties hereto
agree that all actions or proceedings arising in connection with this Agreement
shall be initiated and tried exclusively in the State and Federal courts located
in the County of San Diego, State of California. The aforementioned choice of
venue is intended by the parties to be mandatory and not permissive in nature,
thereby precluding the possibility of litigation between the parties with
respect to or arising out of this Agreement in any jurisdiction other than that
specified in this Section 4(h). Each party hereby waives any right it may have
------------
to assert the doctrine of forum non conveniens or similar doctrine or to object
to venue with respect to any proceeding brought in accordance with this
paragraph, and stipulates that the State and Federal courts located in the
County of San Diego, State of California shall have in personam jurisdiction and
venue over each of them for the purposes of litigating any dispute, controversy
or proceeding arising out of or related to this Agreement. Each party hereby
authorizes and accepts service of process sufficient for personal jurisdiction
in any action against it as contemplated by this Section 4(h) by registered or
------------
certified mail, return receipt requested, postage prepaid, to its address for
the giving of notices as set forth in this Agreement, or in the manner set forth
in Section 4(a) of this Agreement for the giving of notice. Any final judgment
------------
rendered against a party in any action or proceeding shall be conclusive as to
the subject of such final judgment and may be enforced in other jurisdictions in
any manner provided by law
i. Construction. No provision of this Agreement shall be construed
------------
in favor of or against any party on the ground that such party or its counsel
drafted the provision. This Agreement shall at all times be construed so as to
carry out the purposes stated herein.
j. Counterparts. This Agreement may be executed in counterparts
------------
and by facsimile, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first above written.
SYNBIOTICS CORPORATION,
a California corporation
By: _____________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President and Chief Executive Officer
_____________________________________
________________, an individual
EXHIBIT C
FORM OF EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made by and between W3 Commerce LLC, a Delaware
limited liability company ("EMPLOYER"), and __________________ ("EMPLOYEE") as
of January 12, 2000.
R E C I T A L S:
- - - - - - - -
WHEREAS, EMPLOYER and EMPLOYEE wish to set forth in this Agreement the
terms and conditions under which EMPLOYEE is to be employed by EMPLOYER.
NOW, THEREFORE, EMPLOYER and EMPLOYEE, in consideration of the mutual
promises set forth herein, agree as follows:
ARTICLE 1
---------
TERM OF AGREEMENT
-----------------
1.1 Term. The term of this Agreement shall commence on the date first
----
written above and shall continue until terminated pursuant to Article 6.
ARTICLE 2
---------
EMPLOYMENT DUTIES
-----------------
2.1 Title/Responsibilities. EMPLOYEE shall serve as an employee of
----------------------
EMPLOYER and hold the position of ___________________________________________ of
EMPLOYER, having the powers and responsibilities consistent with such position
and reporting to EMPLOYER's ________________________, all subject to ultimate
direction and management of EMPLOYER's Board of Directors. EMPLOYEE shall also
perform all duties which from time to time are assigned to EMPLOYEE by
EMPLOYER's _______________________ and/or Board of Directors, and shall provide
the _______________________ and/or Board with
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periodic reports upon request. EMPLOYEE's job location shall be at the San
Diego, California location of EMPLOYER.
2.2 Full Time Attention. EMPLOYEE shall perform his duties hereunder in a
-------------------
diligent and professional manner and devote substantially all of his business
time and attention, best efforts, energy and skills to EMPLOYER during the time
he is employed hereunder as __________________ ________________ of EMPLOYER.
During the term of this Agreement EMPLOYEE shall not without the express consent
of EMPLOYER's Board of Directors serve or act as a shareholder (except passive
holdings of less than 1% of the stock), employee, agent, consultant, officer,
director, partner, representative or owner of any other business entity, nor (if
it would require more than an insubstantial amount of business time or
attention) of any non-profit entity.
2.3 Compliance with Rules. EMPLOYEE shall comply with all applicable
---------------------
governmental laws, rules and regulations and with all of EMPLOYER's policies,
rules and/or regulations applicable to all employees of EMPLOYER.
ARTICLE 3
---------
COMPENSATION
------------
3.1 Base Salary. EMPLOYER shall pay semi-monthly to EMPLOYEE a salary
-----------
of $________ per annum until such time or times as it may discretionarily be
raised (but not lowered) upon annual performance/salary review by EMPLOYER's
Chief Executive Officer (upon recommendation of its Compensation Committee).
3.2 Bonus. In addition to the salary provided in Section 3.1, EMPLOYEE
-----
shall participate in any executive incentive bonus plan which EMPLOYER may in
its discretion establish for 2000 and future years.
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ARTICLE 4
---------
OTHER BENEFITS
--------------
4.1 Fringe Benefits. EMPLOYEE shall be entitled during the term of his
---------------
employment under this Agreement to all other fringe benefits made available from
time to time by EMPLOYER to its executives generally and/or its employees
generally, including without limitation participation in EMPLOYER's 401(k) plan
and group health insurance plan.
4.2 Expenses. EMPLOYER shall reimburse EMPLOYEE, not less often than
--------
monthly, for reasonable out-of-pocket business expenses incurred by EMPLOYEE in
the course of his duties, upon submission by EMPLOYEE of appropriate expense
account reports and substantiating receipts.
4.3 Vacation. EMPLOYEE shall be entitled to three weeks paid vacation per
--------
full year of service, in accordance with and subject to EMPLOYER's vacation
accrual plan and policies. EMPLOYEE acknowledges the "cap" on vacation accruals
set forth in such plan and policies.
ARTICLE 5
---------
FORMER EMPLOYMENT
-----------------
5.1 No Conflict. EMPLOYEE represents and warrants that the execution
-----------
and delivery by him of this Agreement, his employment by EMPLOYER and his
performance of duties under this Agreement will not conflict with and will not
be constrained by any prior employment or consulting agreement or relationship,
or any other contractual obligation.
5.2 No Use of Prior Confidential Information. EMPLOYEE will not
----------------------------------------
intentionally disclose to EMPLOYER or use on its behalf any confidential
information belonging to any of his former employers, but during his employment
by EMPLOYER he will use in the performance of
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his duties all information (but only such information) which is generally known
and used by persons with training and experience comparable to his own or is
common knowledge in the industry or otherwise legally in the public domain.
ARTICLE 6
---------
TERMINATION
-----------
6.1 Term. This Agreement (including EMPLOYEE'S employment) shall
----
continue until terminated by either EMPLOYER or EMPLOYEE. Such termination
(including termination of EMPLOYEE's employment) shall be effected by written
notification and may be effected at any time, with or without Cause, for any
reason or no reason.
6.2 Severance. If this Agreement and/or EMPLOYEE's employment is
---------
terminated as a result of Cause, EMPLOYEE shall be entitled to no severance pay.
If this Agreement and/or EMPLOYEE's employment is terminated other than for
Cause, EMPLOYEE shall be entitled to severance pay as follows: six months'
salary at EMPLOYEE's then base salary rate.
Furthermore, if EMPLOYEE is terminated (other than for Cause) in
connection with an acquisition of EMPLOYER, EMPLOYEE shall be entitled to
additional severance pay of six months' salary at EMPLOYEE's then base salary
rate (as well as the severance pay described in the previous paragraph).
"Cause" shall be defined to mean:
(a) Death;
(b) Voluntary resignation (other than because of a material breach by
EMPLOYER of its obligations under this Agreement);
(c) EMPLOYEE's repudiation of this Agreement;
(d) permanent disability (defined as EMPLOYEE's inability to perform,
with or without reasonable accommodation, the essential functions of his
position for any 50 business
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days - exclusive of vacation days taken - within any continuous period of 200
days by reason of physical or mental illness or incapacity);
(e) EMPLOYEE being formally charged with the commission of a felony,
or being convicted of a misdemeanor involving moral turpitude;
(f) EMPLOYEE's demonstrable fraud or dishonesty;
(g) EMPLOYEE's use of alcohol, drugs or any illegal substance in such
a manner as to interfere with the performance of his duties under this
Agreement;
(h) EMPLOYEE's intentional, reckless or grossly negligent action
materially detrimental to the best interest of the EMPLOYER, including any
misappropriation or unauthorized use of EMPLOYER's property or improper use or
disclosure of confidential information (but excluding any good faith exercise of
business judgment);
(i) EMPLOYEE's intentional failure to perform material duties under
this Agreement if such failure has continued for 15 days after EMPLOYEE has been
notified in writing by EMPLOYER of the nature of EMPLOYEE's failure to perform;
(j) EMPLOYEE's chronic absence from work for reasons other than
illness or permitted vacation; or
(k) EMPLOYEE's violation of policies in EMPLOYER's official Employee
Handbook, as it may be amended from time to time.
Termination for Cause shall be without prejudice to any other right or
remedy to which EMPLOYER may be entitled at law, in equity, or under this
Agreement.
ARTICLE 7
---------
ARBITRATION
-----------
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7.1 Final and Binding Arbitration. Any controversy, claim or dispute
-----------------------------
between (a) a party to this Agreement, on the one hand, and (b) the other party
to this Agreement and/or such second party's parents, subsidiaries or affiliates
and/or any of their directors, officers, employees, agents, successors, assigns,
heirs, executors, administrators, or legal representatives, on the other hand,
arising out of, in connection with, or in relation to (t) the interpretation,
validity, performance or breach of this Agreement, (u) EMPLOYEE's equity
ownership, (w) any termination of such employment, (x) any actions during or
with respect to EMPLOYEE's work for EMPLOYER, (y) any claims for breach of
contract, tort, or breach of the covenant of good faith and fair dealing, or (z)
any claims of discrimination or other claims under any federal, state or local
law or regulation now in existence or hereinafter enacted and as amended from
time to time concerning in any way the subject of EMPLOYEE's employment with
EMPLOYER or its termination, shall, at the request of either party, be resolved
to the exclusion of a court of law by binding arbitration in San Diego,
California, in accordance with Exhibit A hereto. Each of EMPLOYEE and EMPLOYER
understands and agrees that the arbitration shall be instead of any civil
litigation and that the arbitrator's decision shall be final and binding to the
fullest extent permitted by law and enforceable by any court having jurisdiction
thereof. The only claims not covered by this Section 7.1 are claims for
benefits under the workers' compensation laws, claims for unemployment insurance
benefits, and matters within the jurisdiction of the California Labor
Commissioner, which will be resolved pursuant to those laws.
ARTICLE 8
---------
GENERAL PROVISIONS
------------------
8.1 Governing Law. This Agreement and the rights of the parties
-------------
thereunder shall be governed by and interpreted under California law.
C-6
8.2 Assignment. EMPLOYEE may not delegate, assign, pledge or encumber his
----------
rights or obligations under this Agreement or any part thereof.
8.3 Notice. Any notice required or permitted to be given under this
------
Agreement shall be sufficient if it is in writing and is sent by registered or
certified mail, postage prepaid, or personally delivered, to the following
addresses, or to such other addresses as either party shall specify by giving
notice under this section:
TO EMPLOYER: _______________________
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
TO EMPLOYEE: _____________________
_____________________
_____________________
8.4 Amendment. This Agreement may be waived, amended or supplemented only
---------
by an express writing signed by Synbiotics Corporation, a California corporation
("Synbiotics"), a third party beneficiary to this Agreement. To be valid, such a
writing must be signed by a person specially authorized by Synbiotics' Board of
Directors to sign such particular document.
8.5 Waiver. No waiver of any provision of this Agreement shall be binding
------
unless and until set forth expressly in writing and signed by the waiving party.
To be valid, EMPLOYER's signature must be by a person specially authorized by
EMPLOYER's Board of Directors to sign such particular document. The waiver by
either party 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
C-7
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.
8.6 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.
8.7 Headings. Article and section headings are inserted herein for
--------
convenience of reference only and in no way are to be construed to define, limit
or affect the construction or interpretation of the terms of this Agreement.
8.8 Drafting Party. The provisions of this Agreement have been prepared,
--------------
examined, negotiated and revised by each party hereto, and no implication shall
be drawn and no provision shall be construed against either party by virtue of
the purported identity of the drafter of this Agreement, or any portion thereof.
8.9 No Outside Representations. No representation, warranty, condition,
--------------------------
promise, understanding or agreement of any kind with respect to the subject
matter hereof has been made by either party, nor shall any such be relied upon
by either party, except those contained herein.
C-8
There were no inducements to enter into this Agreement, except for what is
expressly set forth in this Agreement.
8.10 Entire Agreement. This Agreement, together with EMPLOYER's standard
----------------
Proprietary Information and Inventions Agreement, constitutes the entire
agreement between 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 he
or it has not relied on any 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
C-9
IN WITNESS WHEREOF, the parties have executed and delivered this
Employment Agreement in San Diego, California as of the date first written
above.
W3 COMMERCE LLC
By:________________________________
▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, President
___________________________________
[EMPLOYEE]
We guarantee the obligations of W3 Commerce LLC under the foregoing Agreement.
SYNBIOTICS CORPORATION
__________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President and CEO
Attachment: Exhibit A (Arbitration Procedures)
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT]
EXHIBIT A
---------
ARBITRATION PROCEDURES
----------------------
1. Agreement to Arbitrate
In the event that there is any dispute relating to, regarding or
arising in connection with EMPLOYEE's employment with EMPLOYER which cannot be
resolved through direct discussion or mediation, regardless of the kind or type
of dispute (excluding claims for workers' compensation, unemployment insurance
or any matters within the jurisdiction of the California Labor Commissioner),
all such disputes shall be submitted exclusively to final and binding
arbitration pursuant to the provisions of the Federal Arbitration Act or, if
inapplicable, the Uniform Arbitration Act (California Code of Civil Procedure
(S) 1280 et seq.), upon request submitted in writing to the President within one
year from the date the dispute first arose, or within one year of the date of
termination of employment, whichever occurs first. This procedure shall be the
exclusive method for resolving all claims relating to the termination of
EMPLOYEE's employment, including but not limited to any alleged violations of
federal, state and/or local statutes; all claims based upon any purported breach
of duty arising in contract or tort, including but not limited to breach of
contract, breach of the covenant of good faith and fair dealing, or violation of
public policy; and any other alleged violation of an employee's statutory,
contractual or common law rights.
Any failure to request arbitration in accordance with the foregoing
provisions shall constitute a waiver of all rights to raise or present any
claims in any form, in any forum, arising out of any dispute that was subject to
arbitration.
2. Selection of Arbitrator
All disputes subject to arbitration will be resolved by a single
arbitrator selected from a list provided by the California Mediation and
Conciliation Service from its Employment Arbitration Panel. The parties shall
select the arbitrator by alternately striking names from the list, and the last
name remaining on the list shall be the arbitrator selected to resolve the
dispute. The arbitrator must be selected within thirty (30) days of receipt of
the written request for arbitration. The arbitration hearing shall be held in
San Diego, California, at a neutral location selected by the parties or, in the
event the parties are unable to agree, at a location designated by the
arbitrator.
3. Authority of Arbitrator
The arbitrator shall only be authorized to exercise the powers
specifically enumerated by this procedure and to decide the dispute in
accordance with governing principles of law and equity. The arbitrator shall
have no authority to modify the powers granted by the terms of this procedure or
to modify the terms of the employee handbook, except as required by law. The
arbitrator shall have the authority to rule on motions by the parties, to issue
protective orders upon motion of any party or third party, and to determine only
the disputes submitted by the parties based upon the grounds presented. Any
dispute or argument not presented by the parties is outside the scope of the
arbitrator's jurisdiction and any award invoking such disputes
or arguments is subject to a motion to vacate; provided, however, the arbitrator
shall have exclusive authority to resolve any dispute relating to the validity,
interpretation and enforcement of these arbitration procedures.
4. Discovery
The arbitrator shall have the power, in addition to determining the
merits of the dispute submitted, to permit discovery regarding the subject
matter of arbitration and to enforce the rights, remedies, procedures, duties,
liabilities and obligations of discovery by the imposition of the same terms,
conditions, consequences, liabilities, sanctions and penalties as may be imposed
in like circumstances by a Superior Court under the California Code of Civil
Procedure. All discovery must be completed thirty (30) days prior to the date
set for the arbitration hearing.
5. Hearing Procedure
The issue(s) submitted to the arbitrator must be set forth in the
request for arbitration. The arbitrator shall have no authority to frame the
statement of the issue(s). Unless otherwise agreed by the parties, the
arbitration hearing shall be governed by the formal rules of evidence contained
in the California Evidence Code. The parties shall mutually agree on the number
of days required for hearing. The hearing shall be recorded and transcribed
verbatim by a certified shorthand reporter. Each party shall bear its own costs
with respect to a copy of the transcript of the hearing; however, the parties
shall each be responsible for one-half the cost of the court reporter's fee and
the arbitrator's copy of the hearing transcript.
6. Post-Hearing Procedure
Each party shall have the right to present closing argument at the
conclusion of all sworn testimony and, in addition to or in lieu of closing
argument, either party shall have the right to submit post-hearing briefs. The
due date and procedure for exchanging post-hearing briefs shall be mutually
agreed upon by the parties or as directed by the arbitrator.
7. Opinion and Award
The arbitrator shall issue a written opinion and award within sixty
(60) days of closing arguments or the receipt of post-hearing briefs, whichever
is later. The arbitration award and opinion shall be signed and dated by the
arbitrator and shall decide all issues submitted and set forth the legal
principles supporting each aspect of the opinion and award. The arbitrator
shall only be permitted to award those remedies in law or equity which are
requested by the parties and which are supported by the credible, relevant
evidence. The arbitrator shall have no authority to award punitive or exemplary
damages under any circumstances or for any reason.
8. Fees and Costs
Each party shall be responsible for its own attorney's fees, except as
provided by law, and for all costs associated with discovery unless otherwise
ordered by the arbitrator. Each party shall also be responsible for one-half of
the arbitrator's fee and one-half of any costs associated with the facilities
for the arbitration hearing.
9. Severability
In the event that any provision of this procedure is determined by the
arbitrator or by a court of competent jurisdiction to be illegal, invalid, or
unenforceable to any extent, such term or provision shall be enforced to the
extent permissible under law and all remaining terms and provisions hereof shall
continue in full force and effect.
EXHIBIT D
SCHEDULE OF EXCEPTIONS
Section 3.6
-----------
W3C has a wholly owned subsidiary, W3 Commerce Limited, located in the
United Kingdom.
Section 3.7
-----------
W3C has negotiated for a license to use certain software in the
operation of its business. The cost of such license will not exceed $10,000.
Section 3.8
-----------
W3C is indebted to ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ in the amount of $64,355. The
parties acknowledge that this liability will be assumed by Synbiotics.