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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
HYPERBARIC SYSTEMS
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party: N/A
4) Date Filed: N/A
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HYPERBARIC SYSTEMS
1127 Harker Avenue
Palo Alto, California 94301
September __, 2002
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Stockholders (the
"Annual Meeting") of HyperBaric Systems, which will be held at the Westin Santa
Clara Hotel, 5150 Great America Parkway, Santa Clara, California 95054, on
October 18, 2002, at 3:00 p.m.
Details of the business to be conducted at the Annual Meeting are given in
the attached Notice of Annual Meeting and Proxy Statement.
If you do not plan to attend the Annual Meeting, please complete, sign,
date and return the enclosed proxy promptly in the accompanying reply envelope.
If you decide to attend the Annual Meeting and wish to change your proxy vote,
you may do so automatically by voting at the Annual Meeting.
We look forward to seeing you at the Annual Meeting.
/s/ Harry Masuda
Chief Executive Officer
Palo Alto, California
********************************************************************************
YOUR VOTE IS IMPORTANT
In order to assure your representation at the meeting, you are requested
to complete, sign, and date the enclosed proxy as promptly as possible and
return it in the enclosed envelope (to which no postage need be affixed if
mailed in the United States).
********************************************************************************
2
HYPERBARIC SYSTEMS
1127 Harker Avenue
Palo Alto, California 94301
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held October 18, 2002
The Annual Meeting of Shareholders (the "Annual Meeting") of HyperBaric
Systems, a California corporation, will be held at the Westin Santa Clara Hotel,
5150 Great America Parkway, Santa Clara, California 95054, on October 18, 2002,
at 3:00 p.m. for the following purposes:
1. To elect three members of our Board of Directors for the term set
forth in the accompanying Proxy Statement and until their successors have been
elected and qualified;
2. To approve our 2001 Stock Option Plan;
3. To approve an amendment to our Articles of Incorporation authorizing
up to 5,000,000 shares of blank check preferred stock;
4. To approve an amendment to our Articles of Incorporation changing our
name to "Human BioSystems";
5. To approve an amendment to our Bylaws allowing the Board of Directors
to choose the date for future annual meetings of shareholders;
6. To ratify the selection of L.L. Bradford & Company, LLC as our
independent auditors for the year ending December 31, 2002; and
7. To transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements.
The items of business set forth above are more fully described in the Proxy
Statement accompanying this Notice. Pursuant to our Bylaws, we have fixed the
time and date for the determination of shareholders entitled to notice of and to
vote at the Annual Meeting as the close of business on September 10, 2002.
Accordingly, only shareholders of record on such date and at such time will be
entitled to vote at the Annual Meeting, notwithstanding any transfer of stock on
our books thereafter.
Whether or not you expect to attend the Annual Meeting, please complete,
sign, date and return the enclosed proxy promptly in the accompanying reply
envelope. If you decide to attend the Annual Meeting and wish to change your
proxy vote, you may do so automatically by voting in person at the Annual
Meeting.
BY ORDER OF THE BOARD OF
DIRECTORS
/s/ Paul Okimoto
Chairman of the Board of Directors
/s/ Harry Masuda
Chief Executive Officer
Palo Alto, California
September __, 2002
3
HYPERBARIC SYSTEMS
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
These proxy materials are furnished in connection with the solicitation of
proxies by the Board of Directors of HyperBaric Systems, a California
corporation, for the Annual Meeting of Shareholders (the "Annual Meeting") to be
held at the Westin Santa Clara Hotel, 5150 Great America Parkway, Santa Clara,
California 95054, on October 18, 2002, at 3:00 p.m. and any adjournments
or postponements thereof. This Proxy Statement, our Annual Report for the year
ended December 31, 2001, and the accompanying proxy card were first mailed to
shareholders on or about September __, 2002.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Shareholders. Each proposal is described in more detail in this Proxy Statement.
VOTING RIGHTS AND SOLICITATION
Voting
Our common stock is the only type of security entitled to vote at the
Annual Meeting. On September 10, 2002, the record date for determination of
shareholders entitled to vote at the Annual Meeting, there were
19,198,685 shares of our common stock outstanding. Each shareholder of
record on the record date is entitled to one vote for each share of common stock
held by such shareholder on that date.
A majority of the outstanding shares of common stock entitled to vote must
be present or represented by proxy at the Annual Meeting in order to have a
quorum. Abstentions and broker non-votes are counted as present for the purpose
of determining the presence of a quorum for the transaction of business.
In the election of directors at the annual meeting, the three candidates
receiving the highest number of votes at the annual meeting will be elected.
Our shareholders have cumulative voting rights when voting on the election
of directors. Cumulative voting rights entitle each shareholder to the number
of votes he or she would otherwise have in absence of cumulative voting rights,
multiplied by the number of directors to be elected. Each shareholder may cast
all of the resulting votes for a single director, or may distribute them among
the directors to be elected at the shareholder's discretion. In order to
determine how many votes a shareholder is entitled to cast as a consequence of
cumulative voting rights, the shareholder multiplies the total number of shares
of our common stock owned by the number of directors being elected-in this case,
three. The total that results is the number of votes the shareholder may cast
in the election of directors. The three nominees receiving the most votes will
be elected. The proxies solicited by the Board of Directors confer
discretionary authority on the proxy holders to cummulate votes to elect the
nominees listed in this Proxy Statement. The proxy holder may cumulate votes
to elect one or several directors as may be necessary to elect the maximum
number of nominees.
Proposals 2 through 10 each require the approval of the affirmative vote
of a majority of the outstanding voting shares present or represented and
entitled to vote at the Annual Meeting.
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Proxies
Whether or not you are able to attend the Annual Meeting, you are urged to
vote your proxy, which is solicited by our Board of Directors and which will be
voted as you direct on your proxy when properly completed. In the event no
directions are specified, such proxies will be voted FOR the nominees of the
Board of Directors (Proposal 1), FOR Proposals 2 though 7 and, in the discretion
of the proxy holders, as to other matters that may properly come before the
Annual Meeting. You may revoke or change your proxy at any time before the
Annual Meeting. To do this, send a written notice of revocation or another
signed proxy with a later date to the Secretary at our principal executive
offices, located at 1127 Harker Avenue, Palo Alto, California 94103, before the
beginning of the Annual Meeting. You may also revoke your proxy by attending the
Annual Meeting and voting in person.
Solicitation of Proxies
We will bear the entire cost of solicitation, including the preparation,
assembly, printing, and mailing of this Proxy Statement, the proxy, and any
additional solicitation material furnished to stockholders. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
so that, they may forward this solicitation material to such beneficial owners.
The original solicitation of proxies by mail may be supplemented by a
solicitation by telephone, telegram, or other means by our directors, officers,
or employees. Except as described above, we do not presently intend to solicit
proxies other than by mail.
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________________________________________________________________________________
PROPOSAL NO. 1
ELECTION OF DIRECTORS
________________________________________________________________________________
General
The names of the three persons who are nominees for director and their
positions with us are set forth in the table below.
Our Articles of Incorporation, as amended, and Bylaws provide that the
number of directors shall be no less than three, and no more than five, the
precise number to be determined from time to time by the Board of Directors. The
Board of Directors is currently comprised of three members. The directors to be
elected at the Annual Meeting are to be elected to hold office until the next
Annual Meeting of Shareholders or until the election of their respective
successors. All proxies received by the Board of Directors will be voted for the
election, as directors, of the nominees listed below if no direction to the
contrary is given. In the event that any nominee is unable or declines to serve,
an event that is not anticipated, the proxies will be voted for the election of
any nominee who may be designated by the Board of Directors.
The information set forth below is submitted with respect to the nominees
to the Board of Directors for whom it is intended that proxies will be voted.
NAME AGE POSITION(S)
- -------------- --- ------------------------------------
Paul Okimoto 67 Chairman of the Board of Directors
and Executive Vice President
Harry Masuda 58 Chief Executive Officer and Director
George Tsukuda 58 Director
Biographical Information With Respect to Director Nominees
PAUL OKIMOTO joined us in February 1998 as Executive Vice President and a
Director. Mr. Okimoto served as President of Sanhill Systems from 1991 to
January 1998.
HARRY MASUDA joined us in February 1998 as our Chief Executive Officer,
President, and a Director. Mr. Masuda is the former president of several high
tech companies including Piiceon, Inc., a manufacturer of computer peripheral
products for microcomputers. Mr. Masuda also founded HK Microwave; a
manufacturer of high frequency phase locked oscillators used in cellular
telephone base stations, later acquired by Dynatech Corporation. Mr. Masuda
received his BSEE and MSEE from San Jose State University. From October 1997 to
February 1998, Mr. Masuda was a business consultant, and he served as President
of International Web Exchange from July 1995 to October 1997. Mr. Masuda
recently became the subject of securities fraud charges - see "PROPOSAL NO. 1
- - Indemnification".
GEORGE TSUKUDA became a member of our Board of Directors in February 1998.
Mr. Tsukuda was self-employed as a psychotherapist from 1987 to September 1996,
working primarily with children doing play therapy. After terminating his
practice, he worked full-time on completing his doctoral dissertation in
clinical social work through Smith College School of Social Work in
Northhampton, Massachusetts. Mr. Tsukuda received his Ph.D. in August of 1998.
Mr. Tsukuda has also been a freelance writer since August 1998.
6
Board Meetings and Committees
The Board of Directors did not meet during in 2001, but acted by
unanimous written consent 14 times.
Committees of the Board of Directors
We do not currently have an Audit Committee, Compensation Committee or any
other committee of the Board of Directors.
Directors' Compensation
In the past, directors who are also our employees have received no
additional compensation for serving on the Board. In August 2002, however, we
granted options to purchase 50,000 shares of our common stock to each of our
directors at an exercise price of $0.34 per share (the fair market price of a
share of our common stock on the date of the grant). We reimburse non-employee
directors for all travel and other expenses incurred in connection with
attending meetings of the Board of Directors.
Compensation Committee Interlocks and Insider Participation
We did not have a Compensation Committee or any other committee of the
Board of Directors performing similar functions during the year ended December
31, 2001. Mr. Harry Masuda, our Chief Executive Officer, participated in
deliberations of the Board of Directors relating to his compensation.
Section 16(a) Beneficial Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our officers and directors, and persons who own more than ten percent of a class
of our capital stock, to file reports of ownership and changes in their
ownership with the Securities and Exchange Commission. These persons are
required to furnish us with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms received by us, we
believe that during the year ended December 31, 2001, Messrs. Masuda, Omar,
Strom and Tsukuda did not timely file a Form 3, and Mr. Masuda did not timely
file certain form 4s. All such Forms were subsequently filed.
Indemnification
We have entered into indemnification agreements with our directors and
executive officers. These agreements provide, in general, that we will indemnify
and hold harmless such directors and executive officers against all expenses and
liabilities, including attorneys' fees, reasonably incurred by or imposed
on them in connection with any proceeding to which they are made a party as a
result of their having been such directors or executive officers.
On August 7, 2002, the United States Attorney for the Eastern District of
New York and the Securities and Exchange Commission announced that they were
bringing securities fraud charges against Harry Masuda, our Chief Executive
Officer, and us for allegedly paying an unregistered broker an undisclosed
commission in a 1999-2000 private placement. The allegations generally
charge Mr. Masuda and us with the failure to adequately disclose to investors in
this private placement a commission agreement with Larry Bryant, an unlicensed
broker-dealer. Remedies sought in these proceedings include criminal penalties
and Mr. Masuda's bar from service as an officer or director of a publicly-
traded company. Although we believe that the charges are unwarranted, and
that the issues involved in this matter were resolved over two years
ago to the full satisfaction of all investors, there can be no assurance that
Mr. Masuda will be able to continue to serve as our Chief Executive Officer in
the event that the Securities and Exchange Commission receives the remedies
that it seeks. In addition, we anticipate that Mr. Masuda may request
indemnification from us in these matters; however, no such request has been
made to date.
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Other than the foregoing matter, at the present time there is no pending
litigation or proceeding involving a director, officer, employee or other agent
of ours in which indemnification could be required or permitted, and we are not
aware of any threatened litigation or proceeding which may result in a claim for
indemnification by us.
Shareholder Approval
The three director nominees that receive the highest number of affirmative
votes shall be elected to our Board of Directors.
Recommendation of the Board of Directors
The Board of Directors recommends a vote FOR all three nominees listed
herein. We will vote your shares as you specify on the enclosed proxy. If you
do not specify how you want your shares voted, we will vote them FOR the
election of all the nominees listed above. If unforeseen circumstances (such as
death or disability) make it necessary for the Board of Directors to substitute
another person for any of the nominees, we will vote your shares FOR that other
person. The Board of Directors does not presently anticipate that any nominee
will be unable to serve.
Other Executive Officers
Set forth below are the names of, and certain information regarding, our
executive officers who are not directors. The executive officers serve at the
pleasure of the Board of Directors.
LUIS TOLEDO, M.D., PhD. became our Chief Medical Officer in March 2000. Dr.
Toledo is an internationally recognized authority on organ transplantation and
preservation. He has authored 10 books on transplantation and related subjects,
authored or co-authored 500 scientific publications, and contributed to chapters
of 77 books. Dr. Toledo has held many medical staff positions including: Co-
Chief, Transplantation and Director, Surgical Research at the Henry Ford
Hospital and Chief, Transplantation and Director, Research at Mount Carmel Mercy
Hospital. He is also currently the Director of Research at the Borgess Medical
Center and is Director of the Michigan Transplant Institute. He also serves as
Professor of Surgery and Director, Experimental Research Program at Michigan
State University.
8
ROCKY UMAR joined us in May 1998 as Vice President of Marketing; in March
2001 he became our Vice President, Strategic Planning. Mr. Umar was an
Information Systems Consultant from 1993 to April 1998. Prior to consulting,
Mr. Umar served as Senior Executive for Product Management, Marketing and Sales
at Cogar Corporation, and was responsible for acquisitions, marketing and sales,
and planning for Singer Company, Business Machines Division. Mr. Umar was also
CEO of Witek, Inc. a wireless technology company.
ROBERT STROM joined us in March 2001 as Vice President of Marketing and
Sales. Mr. Strom started a newspaper, The Prince George Progress, in 1963 at
the age of 20. After selling his publishing business seven years later,
he became a partner in ACI, Inc., a New York-based cosmetics company, where
he managed all sales and marketing activities. Mr. Strom subsequently
founded Cosmania, an international cosmetics company that he sold to
American International, Inc. in 1996.
DAVID LUCAS, Ph.D. joined us in January 1999 as Scientific Director and
became our Chief Operating Officer in August 2002. Dr. Lucas obtained BA and
Ph.D. degrees in Microbiology and Immunology from Duke University and did
postdoctoral work at Harvard Medical Center. He served as a faculty member at
the University of Arizona for 16 years, where he taught medical students
and graduate students. Previous industry positions were as Director of
Research for American Qualex, an immunochemical company; Vice President of
Protein Technology, where he developed veterinary biologic products; Vice
President for Research and Technology Transfer at Children's Hospital
Oakland; and President of PediaPharm Corporation, a development stage
pharmaceutical products company. Dr. Lucas was President of PediaPharm from
1994 to October 1998.
LEONID BABAK joined us in February 1998 as Branch Chief of Russian
Operations. Mr. Babak graduated with a degree in physics and mathematics from
Krasnoyarsk State University in Russia. He has held various positions within
the University and the Geophysics department for the Metallurgy Ministry. Mr.
Babak also served as President of Sibina TK, a trading company, from 1997 to
February 1998, and was President of Krasnoyarsk Marketing from 1992 to 1997.
VLADIMIR SEREBRENNIKOV joined us in February 1998 as our Director, Research
and Development of Preservation Systems. He received a degree in physics from
Krasnoyarsk State University in Russia and a doctoral degree in physics from the
same university, specializing in high hydrostatic pressure research. He taught
physics at Krasnoyarsk State University for a number of years and published
numerous scientific papers related to high-pressure research phenomena. Dr.
Serebrennikov has received a number of patents related to high-pressure storage
of biological material at low temperatures.
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________________________________________________________________________________
PROPOSAL NO. 2
ADOPTION OF THE 2001 STOCK OPTION PLAN
________________________________________________________________________________
The Board of Directors proposes that shareholders adopt the 2001 Stock
Option Plan (the "Plan"), which was adopted by the Board of Directors effective
August 4, 2001.
We believe that our long-term success depends upon our ability to attract
and retain qualified directors, officers, employees and consultants and to
motivate their best efforts on our behalf. Thus, we believe that the Plan will
be an important part of our compensation of directors, officers, employees and
consultants.
The Plan is set forth in full as Exhibit "A" to this Proxy Statement. The
principal features of the Plan are summarized below, but the summary is
qualified in its entirety by the full text of the Plan.
Description of the Plan
The purpose of the Plan is to enhance our profitability and shareholder
value by enabling us to offer stock-based incentives to employees, directors,
consultants and affiliates. The Plan authorizes the grant of options to purchase
shares of common stock to our employees, directors and consultants and our
affiliates. Under the Plan, we may grant incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986 and non-qualified
stock options. Incentive stock options may only be granted to our employees.
There are 1,585,500 shares of common stock available for issuance upon
exercise of options to be granted under the Plan. As of September 10, 2002, we
had granted options under the Plan to purchase an aggregate of 620,000 shares
of common stock.
The Plan will be administered by our Board of Directors. Subject to the
provisions of the Plan, the Board has the authority to determine which of our
employees, directors and consultants will be awarded options and the terms of
such awards, including the number of shares subject to such options, the fair
market value of the common stock subject to options, the exercise price per
share and other terms.
10
Incentive stock options must have an exercise price equal to at least 100%
of the fair market value of a share on the date of the award unless the grant is
to a shareholder holding more than 10% of our voting stock, in which case the
exercise price must be 110% of the fair market value on the date of grant.
Generally, the options may not have a duration of more than ten years, or five
years if the grant is to a shareholder holding more than 5% of our voting stock.
Terms and conditions of awards are set forth in written agreements between the
respective option holders and us. Awards under the Plan may not be made after
the tenth anniversary of the date of its adoption but awards granted before that
date may extend beyond that date.
Under the Plan, if the employment of the holder of an incentive stock
option is terminated for any reason other than as a result of the holder's death
or disability or for "cause" as defined in the Plan, the holder may exercise the
option, to the extent exercisable on the date of termination of employment,
until the earlier of the option's specified expiration date and 90 days after
the date of termination. If an option holder dies or becomes disabled, both
incentive and non-qualified stock options may generally be exercised, to the
extent exercisable on the date of death or disability, by the option holder or
the option holder's survivors until the earlier of the option's specified
termination date and one year after the date of death or disability.
As of September 10, 2002, no shares had been issued as the result of the
exercise of options granted under the Plan. The exercise price and vesting
schedules of options granted under the Plan will vary over time pursuant to
various option agreements that we have entered into or will enter into with the
grantees of such options.
We have not registered the Plan or the shares subject to issuance
thereunder, under the Securities Act of 1933. Absent registration, such shares,
when issued upon exercise of options, would be "restricted securities" as that
term is defined in Rule 144 under the Securities Act of 1933. We intend to
register the Plan and the shares subject to issuance thereunder in the future.
Optionees have no rights as shareholders with respect to shares subject to
options prior to the issuance of shares pursuant to the exercise thereof.
Options issued to employees under the Plan, as amended, shall expire no later
than ten years after the date of grant. An option becomes exercisable at such
time and for such amounts as determined at the discretion of the Board of
Directors at the time of the grant of the option. An optionee may exercise a
part of the option from the date that part first becomes exercisable until the
option expires. The purchase price for shares to be issued to an employee upon
his or her exercise of an option is determined by the Board of Directors on the
date the option is granted. The purchase price is payable in full in cash, by
promissory note, by net exercise or by delivery of mature shares of our common
stock when the option is exercised.
11
The Plan provides for adjustment as to the number and kinds of shares
covered by the outstanding options and the option price therefor to give effect
to any stock dividend, stock split, stock combination or other reorganization of
or by us.
Federal Income Tax Consequences of Options Granted under the Plan
Options granted under the Plan may be either incentive stock options, which
satisfy the requirements of Section 422 of the Internal Revenue Code or non-
qualified options, which are not intended to meet such requirements. The
federal income tax treatment for the two types of options differs as follows:
Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and generally no taxable income is recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise made the
subject of a taxable disposition. For federal tax purposes, dispositions are
divided into two categories: (i) qualifying and (ii) disqualifying. A qualifying
disposition occurs if the sale or other disposition is made more than two years
from the date of grant and more than one year from the date of exercise. If
either of these two holding periods is not satisfied, then a disqualifying
disposition will result.
Upon a qualifying disposition of the shares, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition of the purchased shares over (ii)
the exercise price paid for those shares. If there is a disqualifying
disposition of the shares, then the excess of (i) the fair market value of the
shares on the exercise date (or the fair market date on the expiration date, if
less) over (ii) the exercise price paid for those shares will be taxable as
ordinary income to the optionee. Any additional gain or loss recognized upon the
disposition will be taxable as a capital gain or loss.
If the optionee makes a disqualifying disposition of the purchased shares,
then we will be entitled to an income tax deduction, for the taxable year in
which such disposition occurs, equal to the excess of (i) the fair market value
of such shares on the option exercise date (or the fair market value on the
expiration date, if less) over (ii) the exercise price paid for the shares. In
no other instance will we be allowed a deduction with respect to the optionee's
disposition of the purchased shares.
Non-Qualified Options. No taxable income is recognized by an optionee upon
the grant of a non-qualified option which does not have a readily ascertainable
fair market value and is not transferable. Options granted under the Plan do
not have a readily ascertainable fair market value and are not transferable.
The optionee will in general recognize ordinary income, in the year in which the
option is exercised, equal to the excess of the fair market value of the
purchased shares on the exercise date over the exercise price paid for the
shares, and the optionee will be required to satisfy the tax withholding
requirements applicable to such income.
12
If the shares acquired upon exercise of the non-qualified option are
unvested and subject to repurchase by us in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee may
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when our repurchase right lapses, an amount equal to
the excess of (i) the fair market value of the shares on the date the repurchase
right lapses over (ii) the exercise price paid for the shares. The optionee may,
however, elect under Section 83(b) of the Internal Revenue Code to include as
ordinary income in the year of exercise of the option an amount equal to the
excess of (i) the fair market value of the purchased shares on the exercise date
over (ii) the exercise price paid for such shares. If the Section 83(b) election
is made, the optionee will not recognize any additional income as and when the
purchase right lapses.
We will be entitled to an income tax deduction equal to the amount of
ordinary income recognized by the optionee with respect to the exercised non-
qualified option. The deduction will in general be allowed for the taxable year
in which such ordinary income is recognized by the optionee.
Deductibility of Executive Compensation
We anticipate that any compensation deemed paid by us in connection with
disqualifying dispositions of incentive stock option shares or exercises of non-
statutory options will qualify as performance-based compensation for purposes of
Internal Revenue Code Section 162(m) and will not have to be taken into account
for purposes of the $1 million limitation per covered individual on the
deductibility of the compensation paid to certain executive officers.
Accordingly, all compensation deemed paid with respect to those options will
remain deductible by us without limitation under Code Section 162(m).
Stockholder Approval
The affirmative vote of a majority of our outstanding voting shares present
or represented and entitled to vote at the Annual Meeting is required for
approval of this Proposal. Should shareholder approval not be obtained, the
Plan will not be effective and the Board of Directors will consider alternative
methods of issuing the options outside of the Plan.
Recommendation of the Board of Directors
The Board of Directors recommends that shareholders vote FOR adoption of
the 2001 Stock Option Plan. Each of our directors has received options to
purchase 50,000 shares of our common stock under the Plan. We will vote your
shares as you specify on the enclosed proxy card. If you do not specify how
you want your shares voted, we will vote them FOR approval of the 2001 Stock
Option Plan.
13
________________________________________________________________________________
PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION AUTHORIZING 5,000,000 SHARES
OF BLANK CHECK PREFERRED STOCK.
________________________________________________________________________________
General
Our Board of Directors has unanimously approved a resolution to amend
our Articles of Incorporation to authorize 5,000,000 shares of "blank check"
preferred stock. The creation and authorization of the preferred stock will
become effective upon the filing with the California Secretary of State of
Amended and Restated Articles of Incorporation in the form of Exhibit "B" to
this Proxy Statement.
The term "blank check" refers to preferred stock, the creation and issuance
of which is authorized in advance by shareholders and the terms, preferences,
privileges, rights and other features of which are determined by the Board of
Directors upon issuance. The authorization of such blank check preferred stock
would permit our Board of Directors to authorize and issue preferred stock from
time to time in one or more series.
Subject to the provisions of our Articles of Incorporation and the
limitations prescribed by law, our Board of Directors would be expressly
authorized, at its discretion, to adopt resolutions to issue shares, to fix the
number of shares and to change the number of shares constituting any series and
to provide for or change the voting powers, designations, preferences and
relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof, including dividend rights (including
whether the dividends are cumulative), dividend rates, terms of redemption
(including sinking fund provisions), redemption prices, conversion rights and
liquidation preferences of the shares constituting any series of the preferred
stock, in each case without any further action or vote by the shareholders. The
Board of Directors would be required to make any determination to issue shares
of preferred stock based on its judgment as to the best interests of our
shareholders and us. The amendment to our Articles of Incorporation would give
our Board of Directors the flexibility, without further shareholder action, to
issue preferred stock on such terms and conditions as the Board deems to be in
the best interests of our shareholders and us.
Reasons for Authorization of Preferred Stock
The amendment to create and authorize preferred stock will provide us
with more flexibility in negotiating and structuring transactions with potential
investors, as it will allow preferred stock to be available for issuance from
time to time and with such features as determined by our Board of Directors for
any proper corporate purpose. It is anticipated that such purposes may include
exchanging preferred stock for common stock and, without limitation, may include
the issuance of preferred stock for cash as a means of obtaining capital for use
by us, or issuance as part or all of the consideration that we may be required
to pay for acquisitions of other businesses or assets. At this time, however,
the Board of Directors has no specific plan to issue shares of preferred stock
to any particular person or for any particular purpose.
14
Any issuance of preferred stock with voting rights could, under certain
circumstances, have the effect of delaying or preventing a change in control of
us by increasing the number of outstanding shares entitled to vote and by
increasing the number of votes required to approve a change in control. Shares
of voting or convertible preferred stock could be issued, or rights to purchase
such shares could be issued, to render more difficult or discourage an attempt
to obtain control of us by means of a tender offer, proxy contest, merger or
otherwise. The ability of our Board of Directors to issue such additional
shares of preferred stock, with the rights and preferences it deems advisable,
could discourage an attempt by a party to acquire control of us by tender offer
or other means. Such issuances could therefore deprive shareholders of benefits
that could result from such an attempt, such as the realization of a premium
over the market price. Moreover, the issuance of such additional shares of
preferred stock to persons friendly to the Board of Directors could make it more
difficult to remove incumbent management and directors from office even if such
change were to be favorable to shareholders generally.
While the amendment may have anti-takeover ramifications, the Board of
Directors believes that the financial flexibility offered by the amendment
outweighs any disadvantages. To the extent that the amendment may have anti-
takeover effects, it may encourage persons seeking to acquire us to negotiate
directly with the Board of Directors, thus enabling the Board to consider the
proposed transaction in a manner that best serves the interest of shareholders.
Recommendation and Vote
The affirmative vote of a majority of our outstanding voting shares present
or represented and entitled to vote at the Annual Meeting is required for
approval of this proposal. Should shareholder approval not be obtained, the
Board of Director will consider other means of raising capital.
The Board recommends that the shareholders vote FOR approval of an
amendment to the Articles of Incorporation which authorizes 5,000,000 shares of
blank check preferred stock.
15
________________________________________________________________________________
PROPOSAL NO. 4
APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION CHANGING THE NAME OF THE
COMPANY TO "HUMAN BIOSYSTEMS"
________________________________________________________________________________
General
The Board of Directors believes that our current name, "HyperBaric
Systems", does not reflect the current scope of our business. While we are
involved in the research and development of hyperbaric technology, our principal
business objective is to develop and provide economical, non-toxic methods of
extending the shelf life and improving the quality of blood platelets and other
human biological material. We believe that changing our name to "Human
BioSystems" will more accurately reflect our focus on the goal of preservation
of this biological material.
Our Board of Directors has unanimously approved a resolution to amend our
Articles of Incorporation to change our name to "Human BioSystems". The name
change will become effective upon the filing with the California Secretary of
State of Amended and Restated Articles of Incorporation in the form of Exhibit B
to this Proxy Statement.
Shareholder Approval
The affirmative vote of a majority of our outstanding voting shares present
or represented and entitled to vote at the Annual Meeting is required for
approval of this Proposal. Should shareholder approval not be obtained, we will
be unable to amend the Articles of Incorporation to change our name, and it will
remain "HyperBaric Systems".
Recommendation of the Board of Directors
The Board of Directors recommends that shareholders vote FOR approval of
the amendment to the Articles of Incorporation changing our name to "Human
BioSystems". We will vote your shares as you specify on the enclosed proxy
card. If you do not specify how you want your shares voted, we will vote them
FOR approval of the amendment to the Articles of Incorporation changing our name
to "Human BioSystems".
16
________________________________________________________________________________
PROPOSAL NO. 5
AMENDMENT TO THE BYLAWS PERMITTING THE BOARD OF DIRECTORS TO DETERMINE THE DATE
OF EACH ANNUAL MEETING OF SHAREHOLDERS
________________________________________________________________________________
General
As adopted, our Bylaws require the annual meeting of shareholders to take
place on February 26th of each year. This early date, which falls one month
prior to the deadline for filing our Annual Report on Form 10-KSB, does not
permit enough time for our accountants to prepare audited financial statements
or for us to prepare and circulate the Form 10-KSB prior to the annual meeting.
For this reason, we believe that it would be more beneficial to our shareholders
and us if the Board of Directors determined the date of the annual shareholder
meeting.
Shareholder Approval
The affirmative vote of a majority of our outstanding voting shares present
or represented and entitled to vote at the Annual Meeting is required for
approval of this Proposal. Should shareholder approval not be obtained, we will
be unable to amend the Bylaws and the date of our annual meeting of shareholders
will remain February 26th.
Recommendation of the Board of Directors
The Board of Directors recommends that shareholders vote FOR approval of
the amendment to the Bylaws allowing the Board of Directors to determine the
date of each annual meeting of shareholders. We will vote your shares as you
specify on the enclosed proxy card. If you do not specify how you want your
shares voted, we will vote them FOR approval of the amendment to the Bylaws
allowing the Board of Directors to determine the date of each annual meeting of
shareholders.
________________________________________________________________________________
PROPOSAL NO. 6
RATIFICATION OF SELECTION OF AUDITOR, L.L. BRADFORD & COMPANY, LLC
________________________________________________________________________________
The Board of Directors, has appointed L.L. Bradford & Company, LLC to serve
as our independent auditors for the year ending December 31, 2002, subject to
the approval of our shareholders. Representatives of L.L. Bradford & Company,
LLC will be present at the Annual Meeting to answer questions. They will also
have the opportunity to make a statement if they desire to do so.
17
Audit Fees
The aggregate fees billed for professional services rendered for the audit
of our annual financial statements for the year ended December 31, 2001, and for
the reviews of the financial statements included in our Quarterly Reports on
Form 10-QSB for that fiscal year, were $42,500.
Financial Information Systems Design and Implementation Fees
L.L. Bradford & Company, LLC did not render professional services relating
to financial information systems design and implementation for the fiscal year
ended December 31, 2001.
All Other Fees
There were no other fees billed by L.L. Bradford & Company, LLC for
services rendered to us, other than the services described above, for the
year ended December 31, 2001. We have been advised by L.L. Bradford &
Company, LLC that neither the firm nor any member of the firm has any financial
interest, direct or indirect, in any capacity in HyperBaric Systems.
Changes In Registrant's Certifying Accountant
On January 31, 2001, we were notified by BDO Seidman, LLP of San
Jose, California ("BDO") that as of that date, BDO resigned as our
independent accountant. Effective February 1, 2001, we engaged L.L. Bradford &
Company, LLC as our new independent accountant.
The BDO reports on our financial statements for the year ended
December 31, 1999 and for the period from February 26, 1998 (date of inception)
to December 31, 1998, did not contain an adverse opinion or disclaimer of
opinion, nor were such reports qualified or modified as to uncertainty, audit
scope or accounting principles, with the exception of a going concern
uncertainty qualification with respect to the year ended December 31, 1999 and
the period from February 26, 1998 (date of inception) to December 31, 1998.
During the past two fiscal years and the subsequent interim period
through January 31, 2001, we did not have any disagreement with BDO on any
matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure, which disagreement, if not resolved to the
satisfaction of BDO, would have caused it to make reference to the subject
matter of the disagreement in connection with their report and the financial
statements for such years. During such period, there were no "reportable
events" within the meaning of Item 304(a) (1)(v) of Regulation S-K.
We requested that BDO furnish a letter addressed to the Securities and
Exchange Commission stating whether BDO agrees with the above statements. A copy
of such letter dated February 2, 2001 was attached as an exhibit to our Current
Report on Form 8-K filed February 5, 2001.
During the two fiscal years ended December 31, 2000 and through January
31, 2001, we did not consult with L.L. Bradford & Company, LLC concerning
our financial statements, including the following items: the application
of accounting principles to a specified transaction, either completed or
proposed;
or the type of audit opinion that might be rendered on our financial
statements; or any matter that was either the subject of a disagreement, as
that term is defined in Item 304(a)(1)(iv) of Regulation S-K, or a reportable
event, as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
Shareholder Approval
The affirmative vote of a majority of our outstanding voting shares present
or represented and entitled to vote at the Annual Meeting is required for
approval of this Proposal. Should shareholder approval not be obtained, the
Board of Directors will reconsider the selection of L.L. Bradford & Company,
LLC.
Recommendation of Board of Directors
The Board of Directors unanimously recommends that shareholders vote FOR
the ratification of the selection of L.L. Bradford & Company, LLC as
our independent auditors for 2002. We will vote your shares as you specify on
the enclosed proxy card. If you do not specify how you want your shares voted,
we will vote them FOR the ratification of the selection of L.L. Bradford &
Company, LLC.
18
Audit Committee Report
This section of our proxy statement will not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent that we specifically
incorporate this information by reference and will not otherwise be deemed filed
under
such Acts.
We have never had an audit committee or an audit committee written
charter. The functions of an audit committee are carried out by our Board of
Directors, comprised of Paul Okimoto (who also serves as Chairman of the
Board), Harry Masuda and George Tsukuda. Messrs. Okimoto and Masuda are
also officers of HBS, and so are not "independent", as that term is defined in
the listing standards of the American Stock Exchange. Our Board has followed
the substance of the procedures recommended in the report of the Blue Ribbon
Committee on Improving the Effectiveness of Corporate Audit Committees,
sponsored by the major securities markets, issued in February 1999, and the
Board has also been advised by independent legal counsel in its role of
overseeing financial
reporting and internal control matters.
Management has the primary responsibility for the financial reporting
process, including the system of internal controls. Our independent auditors are
responsible for performing an independent audit of our consolidated financial
statements in accordance with generally accepted auditing standards and to issue
a report thereon. The Board's responsibility is to monitor and oversee these
processes.
Our Board of Directors appoints our independent auditors.
The Board has reviewed with our financial managers the selection of our
independent auditors, overall audit scopes and plans, the results of audit
examinations, evaluations by the independent auditors of our internal controls
and the quality of our financial reporting. Management has reviewed the
audited consolidated financial statements in our Annual Report on Form 10-KSB
with the Board, including a discussion of the quality (not just the
acceptability) of the accounting principles utilized, the reasonableness of
significant judgments, and the clarity of disclosures in the financial
statements.
The Board also discussed with the independent auditors other matters
required to be discussed by the auditors with an audit committee under Statement
of Auditing Standards No. 61 (communication with audit committees). Our
independent auditors also provided to the Board the written disclosures required
by Independence Standards Board Standard No. 1 (Independence Discussions with
Audit
Committees), and the Board discussed with the independent auditors that firm's
independence.
In performing all of these functions, the Board acts only in an
oversight capacity. In its audit oversight role, the Board relies on the work
and assurances of our management, which has the primary responsibility for
financial statements and reports, and of the independent auditors, who in their
report expressed an opinion on the conformity of our annual financial statements
with generally accepted accounting principles.
Based upon the Board's discussion with management and the independent
auditors and the Board's review of the representations of management and the
report of the independent auditors to the Board, the Board recommended that the
audited consolidated financial statements be included in our Annual Report on
Form 10-KSB for the year ended December 31, 2001, filed with the Securities and
Exchange Commission.
By the Board of Directors
/s/ Paul Okimoto
/s/ Harry Masuda
/s/ George Tsukuda
19
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of September 10, 2002, (i) by each director of
HBS; (ii) by each person known by us to own beneficially more than five percent
of our common stock; (iii) by the executive officers named in the Summary
Compensation Table set forth in "Executive Compensation" and (iv) by all
directors and executive officers of HBS as a group.
Unless otherwise indicated in the footnotes to the table, the following
individuals have sole vesting and sole investment control with respect to the
shares they beneficially own. Unless otherwise indicated, the address of all
persons listed below is c/o HyperBaric Systems 1127 Harker Avenue, Palo Alto,
California 94103.
The number of shares beneficially owned by each shareholder is determined
under rules promulgated by the Securities and Exchange Commission, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rules, beneficial ownership includes any shares as to which
the individual has sole or shared voting or investment power and also any shares
which the individual has the right to acquire within 60 days after September 10,
2002. The inclusion herein of such shares, however, does not constitute an
admission that the named shareholder is a direct or indirect beneficial owner of
such shares. Unless otherwise indicated, each person named in the table has sole
voting and investment power (or shares such power with his or her spouse) with
respect to all shares of common stock listed as owned by such person. The total
number of outstanding shares of common stock at September 10, 2002 is
19,198,685.
- -----------------------------|------------------------|------------|
Name And Address Of | Amount And Nature Of | Percent |
Beneficial Owner | Beneficial Ownership | Of Class |
- -----------------------------|------------------------|------------|
Harry Masuda | 1,281,800 | 6.6 % |
| | |
- -----------------------------|------------------------|------------|
Paul Okimoto | | |
669 35th Street | 1,030,611 | 5.3 % |
Richmond, CA 94805 | | |
- -----------------------------|------------------------|------------|
George Tsukuda | 369,967 | 1.9 % |
- -----------------------------|------------------------|------------|
Meiswinkel Investment | | |
Group, LP | 1,883,003 | 9.8 % |
2080 Newcomb Street | | |
San Francisco, CA 94124 | | |
- -----------------------------|------------------------|----------- |
Leonid Babak | 877,500 | 4.6 % |
31 Apt. 16 | | |
Novaja Zarja St. | | |
Krasnoyarsk, Russia | | |
66028 | | |
- -----------------------------|------------------------|------------|
Vladimir Serebrennikov | 877,500 | 4.6 % |
1A Apt 53 Academgorodok | | |
Krasnoyarsk, Russia | | |
66036 | | |
- -----------------------------|------------------------|------------|
All Officers and | | |
Directors as a Group | 5,875,151 | 28.4 % |
(nine persons) | | |
- -----------------------------|------------------------|------------|
20
The shares listed as owned by Harry Masuda include 310,000 shares of
common stock issuable to him pursuant to warrants and options exercisable on or
within 60 days of September 10, 2002.
The shares listed as owned by Paul Okimoto include 161,111 shares of
common stock issuable to him pursuant exercisable on or within 60 days of
September 10, 2002.
The shares listed as owned by George Tskuda include 109,667 shares of
common stock issuable to him pursuant to warrants and options exercisable on
or within 60 days of September 10, 2002.
The shares listed as owned by all executive officers and directors include
an aggregate of 1,521,000 shares of common stock issuable to them pursuant to
warrants and options exercisable on or within 60 days of September 10, 2002.
EXECUTIVE COMPENSATION
The following table provides compensation information for the period
indicated with respect to the person who served as our Chief Executive Officer
for the years ended December 31, 2001, 2000 and 1999 (the "Named Executive
Officer"). No executive officer of HBS received total salary and bonus in
excess of $100,000 during the years ended December 31, 2001, 2000 or 1999.
Summary Compensation Table
- ---------------------------------------------------------------------------
| ANNUAL COMPENSATION | LONG TERM |
| | COMPENSATION |
- ---------------------------------------------------------------------------
NAME AND | YEAR | SALARY | BONUS | RESTRICTED | NUMBER OF SECURITIES |
PRINCIPAL | | ($) | ($) | STOCK | UNDERLYING WARRANTS/ |
POSITION | | | | AWARDS($) | OPTIONS (#) |
- ---------------------------------------------------------------------------
Harry | 2001 | 66,000 | - | - | - |
Masuda, | 2000 | 52,000 | - | - | - |
Chief | 1999 | 66,000 | - | - | - |
Executive | | | | | |
Officer | | | | | |
- ---------------------------------------------------------------------------
21
Employment Agreements
In May 1998, we entered into an employment agreement with Rocky Umar,
employing him as our Vice President of Marketing for a minimum term of one year
for a salary ranging from $2,000 per month to $10,000 per month, depending upon
performance. This agreement also includes the payment of a commission equal to
one percent of our sales in excess of $1,500,000 over a consecutive six-month
period, not to exceed a $100,000 commission per 12-month period. Mr. Umar was
also granted an option to purchase 200,000 shares of restricted common stock at
$.025 per share pursuant to our Statutory Incentive Stock Option Plan. Mr. Umar
is also eligible for a bonus of up to $5,000 after the first year of employment,
for the sole purpose of exercising the stock options.
In January 2000, we entered into an employment agreement with Leonid Babak,
providing for his employment as the Branch Chief of Russian Operations for a
minimum one-year term. The agreement provides for a salary of $500 per month,
which salary may be adjusted, and $700 per month in additional benefits.
In January 2000, we entered into an employment agreement with Vladimir
Serebrennikov, employing him as the Technical Director of Preservation Systems
for a minimum one-year term. The agreement provides for the payment to Mr.
Serebrennikov of $500 per month, which salary may be adjusted, with a bonus of
$25,000 upon the successful completion of project milestones set forth in the
employment agreement.
In March 2000, we entered into an employment agreement with Dr. Luis
Toledo, employing him as our Chief Medical Officer for a minimum term of one
year. The agreement provides for a base salary of $6,000 per month, which may
be adjusted based on our ability to raise defined amounts of capital. In
addition, we granted to Dr. Toledo an option to purchase 75,000 shares of our
common stock at an exercise price of $1.50 per share, and continued in effect
options granted pursuant to a consulting agreement that we entered into in May
1998 with Dr. Toledo.
In March 2001, we entered into an employment agreement with Robert E. Strom
to serve as our Vice President of Sales and Marketing for a minimum term of one
year. Mr. Strom receives a base salary of $10,000 per month, which may be
increased based on our ability to raise defined amounts of capital or earn
defined revenues during any 12-month period. Mr. Strom is also eligible for a
bonus based on performance milestones. In addition, he was granted an option to
purchase 150,000 shares of our common stock at an exercise price of $0.23 per
share pursuant to our Statutory Incentive Stock Option Plan, and an option to
purchase 150,000 shares of our common stock at an exercise price of $0.10 per
share pursuant to our Non-Statutory Incentive Stock Option Plan.
22
Fiscal Year Option Grants
We did not grant any options to purchase common stock to the Named
Executive Officer during the year ended December 31, 2001. During that same
year, we granted other officers, employees and consultants options to purchase
an aggregate of 600,000 shares of our common stock.
Fiscal Year Option Exercises and Fiscal Year-End Option Values
During the year ended December 31, 2001, the Named Executive Officer
exercised no stock options to purchase shares of our common stock. As of
December 31, 2001, the Named Executive Officer held no unexercised options to
purchase shares of our common stock.
Certain Relationships and Related Transactions
The following describes transactions to which we were or are a party and in
which any of our directors, officers, or significant shareholders, or members of
the immediate family of any of the foregoing persons, had or has a direct or
indirect material interest, in addition to the employment agreements discussed
above under "Executive Compensation".
In May 1998, we granted Rocky Umar, our Vice President of Marketing, an
option to purchase 200,000 shares of restricted common stock at $.025 per share
pursuant to our Statutory Incentive Stock Option Plan.
In June 1998, we entered into an Agreement of Assignment of Patent and
Technology with Vladimir Serebrennikov, our Technical Director of Preservation
Systems, wherein Mr. Serebrennikov assigned to us the entire worldwide right,
title and interest in and to his technology for preserving and transporting
biologic and non-biologic material and in and to all of his discoveries,
concepts and ideas, whether patentable or not. Pursuant to this agreement, Mr.
Serebrennikov received 877,500 shares valued at $0.0025 per share of our
restricted common stock.
In June 1998, we entered into an Agreement of Assignment of Patent and
Technology with Leonid Babak, our Branch Chief of Russian Operations. Mr. Babak
assigned to us the entire worldwide right, title and interest in and to his
technology for preserving and transporting biologic and non-biologic material
and in and to all of his discoveries, concepts and ideas, whether patentable or
not. Pursuant to this agreement, Mr. Babak received 877,500 shares, valued at
$0.0025 per share, of our restricted common stock.
23
On May 28, 1998, we entered into a Consultant Agreement with Dr. Luis
Toledo, whereby Dr. Toledo was appointed to our advisory board for a minimum
term of one year. The agreement also provides for a payment to Dr. Toledo of a
commission equal to five percent of all sales within the organ transplant market
for a five-year period from the date of the agreement, so long as Dr. Toledo
remains a consultant and advisory board member. This commission is limited to a
total of $1,000,000. Dr. Toledo was also granted options to purchase 200,000
shares of restricted common stock at $.025 per share pursuant to our Non-
Statutory Incentive Stock Option Plan, and is eligible for a bonus of up to
$5,000 after the first year as a consultant and advisory board member up to the
expiration of the stock options for the sole purpose of exercising the stock
options.
On June 24, 1998, we invited Eric Slayton, President of Global
Healthcare, to be a member of our advisory board. We granted to Mr. Slayton an
option to purchase 40,000 shares of restricted common stock at $.025 per share
pursuant to our Non-Statutory Incentive Stock Option Plan.
We purchased the patents for Phemtest from Paul Okimoto, an officer and
director, on September 1, 1998. The patent "VAGINAL TESTING APPLICATOR AND
METHOD", Patent Number 4,784,158, was issued November 15, 1988, and the patent
"BODY CAVITY SPECIMEN COLLECTING AND TESTING APPARATUS", Patent Number
4,945,921, was issued August 7, 1990. Pursuant to the purchase agreement for
the patents, we paid $1,375 to the law firm of Flehr, Hohbach, Test and Herbert
as a patent maintenance fee to assure that the patents would remain in force.
We also agreed to pay Mr. Okimoto a royalty payment of 5% of gross sales of
Phemtest for the next five years. The first $16,000 in royalty payments are to
be paid to a law firm to be designated by Mr. Okimoto, the next $75,000 in
royalties are to be paid to Mr. Okimoto in shares of our common stock, valued at
$2.00 per share, and the remaining royalties to be paid to Mr. Okimoto, if any,
are to be paid in cash. To date, no royalties have been earned or paid under
this agreement.
24
SHAREHOLDER PROPOSALS FOR THE
2002 ANNUAL MEETING
We welcome comments and suggestions from our shareholders. Here are the
ways a shareholder may present a proposal for consideration by the other
shareholders at our 2003 Annual Meeting:
In our Proxy Statement: If a shareholder wants to submit a proposal for
inclusion in our proxy statement and form of proxy under Rule 14a-8 under the
Securities Exchange Act of 1934 (the "Exchange Act") for the 2003 Annual Meeting
of Shareholders, we must receive the proposal in writing on or before 5 p.m.,
Pacific Standard Time, May 24, 2003.
At the Annual Meeting: If a shareholder wishes to nominate a director or
bring other business before the shareholders at the 2003 Annual Meeting, we must
receive the shareholder's written notice not less than 60 days nor more than 90
days prior to the date of the annual meeting, unless we give our shareholders
less than 70 days' notice of the date of our 2003 Annual Meeting. If we provide
less than 70 days' notice, then we must receive the shareholder's written notice
by the close of business on the 10th day after we provide notice of the date of
the 2003 Annual Meeting. The notice must contain the specific information
required in our Bylaws. A copy of our Bylaws may be obtained by writing to our
Secretary. If we receive a shareholder's proposal within the time periods
required under our Bylaws, we may choose, but are not required, to include it in
our proxy statement. If we do, we may tell the other shareholders what we think
of the proposal, and how we intend to use our discretionary authority to vote on
the proposal.
Delivering a Separate Proxy Statement: We will not use our discretionary
voting authority if a shareholder submits a proposal within the time period
required under our Bylaws, and also provides us with a written statement that
the shareholder intends to deliver his or her own proxy statement and form of
proxy to our shareholders. Persons who wish to deliver their own proxy statement
and form of proxy should consult the rules and regulations of the SEC.
All proposals should be made in writing and sent via registered, certified
or express mail, to our executive offices, 1127 Harker Avenue, Palo Alto,
California 94301, Attention: Secretary.
VOTING
Shareholders are urged immediately to complete, date and sign the enclosed
proxy card and return it in the envelope provided, to which no postage need be
affixed if mailed in the United States.
OTHER MATTERS
The Board of Directors knows of no other matters to be presented for
shareholder action at the Annual Meeting. However, if other matters do properly
come before the Annual Meeting or any adjournments or postponements thereof, the
Board of Directors intends that the persons named in the proxies will vote upon
such matters in accordance with their best judgment.
BY THE BOARD OF DIRECTORS
/s/ Paul Okimoto
Chairman of the Board
/s/ Harry Masuda
Chief Executive Officer, Director
25
- --------------------------------------------------------------------------------
EXHIBIT A
2001 STOCK OPTION PLAN
HYPERBARIC SYSTEMS, INC.
2001 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
1. PURPOSES OF THE PLAN
The purposes of this Stock Option Plan (the "Plan") of HyperBaric Systems,
Inc. a California corporation (the "Company") are to:
(i) Encourage selected officers and key employees to accept or
continue employment with the Company or its Affiliates; and
(ii) Increase the interest of selected officers, directors, key
employees and consultants in the Company's welfare through participation in the
growth in value of the common stock of the Company ("Common Stock").
Options granted under this Plan ("Options") may be "incentive stock
options" ("ISOs") intended to satisfy the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or "nonqualified
options" ("NQOs").
2. ELIGIBLE PERSONS
Every person who at the date of grant of an Option is a key employee of the
Company or of any Affiliate (as defined below) (including employees who are also
officers or directors of the Company or of any Affiliate) is eligible to receive
NQOs or ISOs under this Plan. The term "Affiliate" as used in the Plan means a
parent or subsidiary corporation as defined in the applicable provisions
(currently Sections 424(e) and (f), respectively) of the Code. Every person who
is a director of or consultant to the Company or any Affiliate at the date of
grant of an Option is eligible to receive NQOs under this Plan.
26
3. STOCK SUBJECT TO THIS PLAN
Subject to the provisions of Section 6.1.1 of the Plan, the maximum
aggregate number of shares of stock that may be granted pursuant to this Plan is
One Million Five Hundred Eighty Five Thousand Five Hundred (1,585,500) shares of
Common Stock. The shares unexercised shall become available again for grants
under the Plan.
4. ADMINISTRATION
4.1 Board of Directors. This Plan shall be administered by the
Board of Directors of the Company (the "Board"). No member of the Board of
Directors shall be liable for any decision, action, or omission respecting the
Plan, any options, or any option shares.
4.2 Disinterested Administration. From and after such time as
the Company registers a class of equity securities under Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), this Plan
shall be administered in accordance with the disinterested administrative
requirements of Rule 16b-3 promulgated by the Securities and Exchange Commission
("Rule 16b-3"), or any successor rule thereto.
4.3 Authority of the Board of Directors. Subject to the other
provisions of this Plan, the Board shall have the authority, in its discretion:
(i) to grant Options; (ii) to determine the fair market of the Common Stock
subject to Options; (iii) to determine the exercise price of Options granted;
(iv) to determine the persons to whom, and the time or times at which, Options
shall be granted, and the number of shares subject to each Option; (v) to
interpret this Plan; (vi) to prescribe, amend, and rescind rules and regulations
relating to this Plan; (vii) to determine the terms and provisions of each
Option granted (which need not be identical), including but not limited to, the
time or times at which Options shall be exercisable; (viii) with the consent of
the optionee, to modify or amend any Option; (ix) to defer (with the consent of
the optionee) or accelerate the exercise date or vesting of any Option; (x) to
authorize any person to execute on behalf of the Company any instrument
evidencing the grant of an Option; and (xi) to make all other determinations
deemed necessary or advisable for the administration of this Plan. The Board may
delegate nondiscretionary administrative duties to such employees of the Company
as it deems proper.
27
4.4 Determinations Final. All questions of interpretation,
implementation, and application of this Plan shall be determined by the Board.
Such determinations shall be final and binding on all persons.
5. GRANTING OF OPTIONS: OPTION AGREEMENT
5.1 Ten Year Term. No Options shall be granted under this Plan
after ten (10) years from the date of adoption of this Plan by the Board.
5.2 Option Agreement. Each Option shall be evidenced by a
written stock option agreement, in form satisfactory to the Company, executed by
the Company and the person to whom such Option is granted; provided, however,
that the failure by the Company, the optionee, or both to execute such an
agreement shall not invalidate the granting of any Option.
5.3 Designation as ISO or NQO. The agreement shall specify
whether each Option it evidences is a NQO or an ISO. Notwithstanding
designation of any Option as an ISO or a NQO, if the aggregate fair market value
of the shares under Options designated as ISOs which would become exercisable
for the first time by any Optionee at a rate in excess of one hundred thousand
dollars ($100,000) in any calendar year (under all plans of the Company), then
unless otherwise provided in the stock option agreement or by the Compensation
Committee, such Options shall be NQOs to the extent of the excess above one
hundred thousand ($100,000). For purposes of this Section 5.3, Options shall be
taken into account in the order in which they were granted, and the fair market
value of the shares shall be determined as of the time the Option, with respect
to such shares, is granted.
5.4 Grant to Prospective Employees. The Compensation Committee
or the Committee Chairman may approve the grant of Options under this Plan to
persons who are expected to become employees of the Company, but who are not
employees at the date of approval. In such cases, the Option shall be deemed
granted, without further approval, on the date the optionee is first treated as
an employee for payroll purposes.
6. TERMS AND CONDITIONS OF OPTIONS
Each Option granted under this Plan shall be designated as a NQO or an ISO.
Each Option shall be subject to the terms and conditions set forth in Section
6.1. NQOs shall be also subject to the terms and conditions set forth in
Section 6.2, but not those set forth in Section 6.3. ISOs shall also be subject
to the terms and conditions set forth in Section 6.3, but not those set forth in
Section 6.2.
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6.1 Terms and Conditions to Which Options Are Subject. Options
granted under this Plan shall, as provided in Section 6, be subject to the
following terms and conditions:
6.1.1 Changes in Capital Structure. The existence of outstanding
Options shall not affect the Company's right to effect adjustments,
recapitalizations, reorganizations, or other changes in its or any other
corporation's capital structure or business, any merger or consolidation, any
issuance of bonds, debentures, preferred, or prior preference stock ahead of or
affecting Common Stock, the dissolution or liquidation of the Company's or any
other corporation's assets or business or any other corporate act whether
similar to the events described above or otherwise. Subject to Section 6.1.2,
if the stock of the Company is changed by reason of a stock split, reverse stock
split, stock dividend, recapitalization, or other event, or converted into or
exchanged for other securities as a result of a merger, consolidation,
reorganization, or other event, appropriate adjustments shall be made in (i) the
number and class of shares of stock subject to this Plan and each outstanding
Option; provided, however, that the Company shall not be required to issue
fractional shares as a result to any such adjustments. Each such adjustment
shall be subject to approval by the Compensation Committee in its sole
discretion, and may be made without regard to any resulting tax consequence to
the optionee.
6.1.2 Corporate Transactions. In connection with (i) any merger,
consolidation, acquisition, separation, or reorganization in which more than
fifty percent (50%) of the shares of the Company outstanding immediately before
such event are converted into cash or into another security, (ii) any
dissolution or liquidation of the Company or any partial liquidation involving
fifty percent (50%) or more of the assets of the Company, (iii) any sale of more
than fifty percent (50%) of the Company's assets, or (iv) any like occurrence in
which the Company is involved, the Compensation Committee may, in its absolute
discretion, do one or more of the following upon ten days' prior written notice
to all optionees; (a) accelerate any vesting schedule to which an Option is
subject; (b) cancel Options upon payment to each optionee in cash, with respect
to each Option to the extent then exercisable, of any amount which, in the
absolute discretion of the Compensation Committee, is determined to be
equivalent to any excess of the market value (at the effective time of such
event) of the consideration that such optionee would have received if the Option
had been exercised before the effective time over the exercise price of the
Option; (c) shorten the period during which such Options are exercisable
(provided they remain exercisable, to the extent otherwise exercisable, for at
least ten days after the date the notice is given); or (d) arrange that new
option rights be substituted for the option rights granted under this Plan, or
that the Company's obligations as to Options outstanding under this Plan be
assumed, by an employer corporation other than the Company or by a parent or
subsidiary of such employer corporation. The actions described in this Section
6.1.2 may be taken without regard to any resulting tax consequence to the
optionee.
29
6.1.3 Time of Option Exercise. Except as necessary to satisfy the
requirements of Section 422 of the Code and subject to Section 5, Options
granted under this Plan shall be exercisable at such times as are specified in
the written stock option agreement relating to such Option: provided, however,
that so long as the optionee is a director or officer, as those terms are used
in Section 16 of the Exchange Act, such Option may not be exercisable, in whole
or in part, at any time prior to the six (6) month anniversary of the date of
the Option grant, unless the Compensation Committee determines that the
foregoing provision is not necessary to comply with the provisions of Rule 16b-3
or that Rule 16b-3 is not applicable to the Plan. No Option shall be
exercisable, however, until a written stock option agreement in form
satisfactory to the Company is executed by the Company and the optionee. The
Compensation Committee, in its absolute discretion, may later waive any
limitations respecting the time at which an Option or any portion of an Option
first becomes exercisable.
6.1.4 Option Grant Date. Except as provided in Section 5.4 or as
otherwise specified by the Compensation Committee, the date of grant of an
Option under this Plan shall be the date as of which the Compensation Committee
approves the grant.
6.1.5 Nonassignability of Option Rights. No Option granted under
this Plan shall be assignable or otherwise transferable by the optionee except
by will, by the laws of descent and distribution, or pursuant to a qualified
domestic relations order (limited in the case of an ISO, to a qualified domestic
relations order that effects a transfer of an ISO that is community property as
part of a division of community property). During the life of the optionee, an
Option shall be exercisable only by the optionee.
6.1.6 Payment. Except as provided below, payment in full shall
be made for all stock purchased at the time written notice of exercise of an
Option is given to the Company, and proceeds of any payment shall constitute
general funds of the Company. Payment may be made in cash, by promissory note,
by delivery to the Company of shares of Common Stock owned by the optionee
(duly endorsed in favor of the Company or accompanied by a duly endorsed stock
power), or by any other form of consideration and method of payment to the
extent permitted under applicable law. Any shares delivered shall be valued as
of the date of exercise of the Option in the manner set forth in Section
6.1.12. Optionees may not exercise Options by delivery of shares more frequently
than at six (6) month intervals.
30
6.1.7 Termination of Employment. Unless determined otherwise by
the Compensation Committee in its absolute discretion to the extent not already
expired or exercised, every Option granted under this Plan shall terminate at
the earlier of (a) the Expiration Date (as defined in Section 6.1.12) or (b)
immediately upon termination of employment with the Company or any Affiliate.
Employee shall have ninety (90) days to exercise all or any options that have
vested under the Employee's option agreement previous to such termination to the
extent they are exercisable on the date of termination. However, where
termination of employment is due to the optionee's "disability" (as determined
in accordance with Section 22(e)(3) of the Code), the optionee, or the
optionee's personal representative, may at any time within six (6) months after
the termination of employment (or such lesser period as is specified in the
option agreement but in no event after the Expiration Date of the Option),
exercise the option to the extent it was exercisable at the date of termination;
and provided further that if termination of employment is due to the Optionee's
death, the Optionee's estate or a legal representative thereof, may at any time
within and including six (6) months after the date of death of Optionee (or such
lesser period as is specified in the option agreement but in no event after the
Expiration Date of the Option), exercise the option to the extent it was
exercisable at the date of termination. Transfer of an optionee from the
Company to an Affiliate or vice versa, or from one Affiliate to another, or a
leave of absence due to sickness, military service, or other cause duly approved
by the Company, shall not be deemed a termination of employment for purposes of
this Plan. For the purpose of this Section 6.1.7, "employment" means engagement
with the Company or any Affiliate of the Company either as an employee, as a
director, or as a consultant.
6.1.8 Repurchase of Stock. In addition to the right of first
refusal set forth in Section 6.1.9 below, at the time it grants Options under
this Plan, the Company may retain, for itself or others, rights to purchase the
shares acquired under the Option or impose other restrictions on the transfer of
such shares. The terms and conditions of any such rights or other restrictions
shall be set forth in the option agreement evidencing the Option.
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6.1.9 Company's Right of First Refusal.
(i) Company's Right; Notice. Stock delivered pursuant to
the exercise of any option granted under this Plan shall be subject to a right
of first refusal by the Company in the event that the holder of such shares
proposes to sell, pledge, or otherwise transfer such shares or any interest in
such shares to any person or entity. Any holder of shares purchased under this
Plan desiring to transfer such shares or any interest in such shares shall give
a written notice (the "Offer Notice") to the Company describing the proposed
transfer, including the number of shares proposed to be transferred, the
proposed transfer price and terms, and the name and address of the proposed
transferee. The Company's rights under this Section 6.1.9 shall be freely
assignable.
(ii) Exercise. Except as provided under any repurchase
right imposed under Section 6.1.8, if the Company fails to exercise its right of
first refusal within twenty (20) days from the date on which the Company
receives the Offer Notice, the shareholder may, within the next ninety (90)
days, conclude a transfer to the proposed transferee of the exact number of
shares covered by that notice on terms not more favorable to the transferee than
those described in the notice. Any subsequent proposed transfer shall again be
subject to the Company's right of first refusal. If the Company exercises its
right of first refusal, the shareholder shall endorse and deliver to the Company
the stock certificates representing the shares being repurchased. The Company
shall pay the shareholder the total repurchase price for the shares no later
than the later of (a) sixty (60) days after receipt of the Offer Notice and (b)
the end of such period for payment offered by the bona fide third-party
transferor. The holder of the shares being repurchased shall cease to have any
rights with respect to such shares immediately upon receipt of the repurchase
price.
(iii) Exceptions. Notwithstanding the foregoing provisions
of this Section 6.1.9, no notice of a proposed transfer shall be required and no
right of first refusal shall exist with respect to transfers, including sales,
to an optionee's children, grandchildren, or parents or to trusts, estates, or
custodianships of or for the account of an optionee or an optionee's children,
grandchildren, or parents; provided, however, that the transferee shall take
such shares subject to the provisions of Sections 6.1.8. and 6.1.9.
(iv) Termination of Company's Right. The right of first
refusal set forth in this Section 6.1.9 shall terminate upon the earlier of the
consummation of an underwritten public offering of the Company's Common Stock
registered under the Securities Act of 1933 or the date on which the Common
Stock is registered under Section 12 of the Exchange Act.
(v) No Limitation. Nothing in this Section 6.1.9 shall
limit the rights of the Company under any repurchase right imposed under Section
6.1.8.
33
(vi) Conflict. In the event that the terms of this
paragraph 6.1.9 conflict or are inconsistent with any provision in the Bylaws of
the Company, the terms of the Bylaws shall control.
6.1.10 Withholding and Employment Taxes. At the time of exercise
of an Option (or at such later time(s) as the Company may prescribe), the
optionee shall remit to the Company in cash all applicable (as determined by the
Company in its sole discretion) federal and state withholding taxes. The
Compensation Committee may, in the exercise of its sole discretion, permit an
optionee to pay some or all of such taxes by means of a promissory note on such
terms as the Compensation Committee deems appropriate. If authorized by the
Compensation Committee in its sole discretion, and if the Option has been held
for six (6) months or more, an optionee may elect to have shares of Common Stock
which are acquired upon exercise of the Option withheld by the Company or to
tender to the Company other shares of Common Stock or other securities of the
Company owned by the optionee on the date of determination of the amount of tax
to be withheld as a result of the exercise of such Option (the "Tax Date") to
pay the amount of tax that is required by law to be withheld by the Company as a
result of the exercise of such Option, provided that the election satisfies the
following requirements:
(i) the election shall be irrevocable, shall be made at
least six (6) months before the Option exercise, and shall be subject to the
disapproval of the Compensation Committee at any time before consummation of the
Option exercise; or
(ii) the election shall be made in advance to take effect
in a subsequent "window period" (as defined below) in which the Option is
exercised, and the Compensation Committee shall approve the election when it is
made or at any time thereafter up to consummation of the Option exercise; or
(iii) the election shall be made in a window period and the
approval of the Compensation Committee shall be given after the election is made
and within the same window period, and the Option exercise shall be consummated
within such window period; or
(iv) shares or other previously owned securities shall be
tendered (but stock shall not be withheld) at any time up to the consummation of
the Option exercise (in which event, neither a prior irrevocable election nor
window period timing shall be required).
34
Notwithstanding the foregoing, clauses (ii) and (iii) shall not be
available until the Company has been subject to the reporting requirements of
the Securities Exchange Act of 1934 for at least one (1) year.
A "window period" is the period beginning on the third business day
following the date of release for publication of quarterly or annual summary
statements of sales and earnings and ending on the 12th business day following
such date. Any securities so withheld or tendered shall be valued by the
Company as of the Tax Date.
6.1.11 Other Provisions. Each Option granted under this Plan may
contain such other terms, provisions, and conditions not consistent with this
Plan as may be determined by the Compensation Committee, and each ISO granted
under this Plan shall include such provisions and conditions as are necessary to
qualify the Option as an "incentive stock option" within the meaning of Section
422 of the Code.
6.1.12 Determination of Value. For purposes of the Plan, the
value of Common Stock or other securities of the Company shall be determined as
follows:
(i) If the stock of the Company is listed on any
established stock exchange or a national market system, including without
limitation the National Market System of the National Association of Securities
Dealers Automated Quotation System, its fair market value shall be the closing
sales price for such stock or the closing bid if no sale was reported, as quoted
on such system or exchange (or the largest such exchange) for the date the value
is to be determined (or if there is no sale for such date, then for the last
preceding business day on which there was at least one sale), as reported in the
Wall Street Journal.
(ii) If the stock of the Company is regularly quoted by a
recognized securities dealer but selling prices are not reported, its fair
market value shall be the mean between the high bid and low asked prices for the
stock on the date the value is to be determined (or if there is no quoted price
for the date of grant, then for the last preceding business day on which there
was a quoted price).
35
(iii) If the stock of the Company is as described in Section
6.1.12(i) or (ii), but is restricted by law, contract, market conditions, or
otherwise as to salability or transferability, its fair market value shall be as
set forth in Section 6.1.12(i) or (ii), as appropriate, less, as determined by
the Compensation Committee, an appropriate discount, based on the nature and
terms of the restrictions.
(iv) In the absence of an established market for the stock,
the fair market value thereof shall be determined by the Compensation Committee,
with reference to the Company's net worth, prospective earning power, dividend-
paying capacity, and other relevant factors, including the goodwill of the
Company, the economic outlook in the Company's industry, the Company's position
in the industry and its management, and the values of stock of other
corporations in the same or a similar line of business.
6.1.13 Option Term. No Option shall be exercisable more than ten
years after the date of grant, or such lesser period of time as set forth in the
option agreement (the end of the maximum exercise period stated in the option
agreement is referred to in this Plan as the "Expiration Date"). No ISO granted
to any person who owns, directly or by attribution, stock possessing more than
ten percent of the total combined voting power of all classes of stock of the
Company of any Affiliate (a "Ten Percent Stockholder") shall be exercisable more
than five (5) years after the date of grant.
6.1.14 Exercise Price. The exercise price of any Option granted
to any Ten Percent Stockholder shall in no event be less than one hundred and
ten percent (110%) of the fair market value (determined in accordance with
Section 6.1.12) of the stock covered by the Option at the time the Option is
granted.
6.1.15 Compliance with Securities Laws. The Company shall not be
obligated to offer or sell any shares upon exercise of an Option unless the
shares are at that time effectively registered or exempt from registration under
the federal securities laws and the offer and sale of the shares are otherwise
in compliance with all applicable state and local securities laws. The Company
shall have no obligation to register the shares under the federal securities
laws or take whatever other steps may be necessary to enable the shares to be
offered and sold under federal or other securities laws. Upon exercising all or
any portion of an Option, an optionee may be required to furnish representations
or undertakings deemed appropriate by the Company to enable the offer and sale
of the Option shares or subsequent transfers of any interest in the shares to
comply with applicable securities laws. Stock certificates evidencing shares
acquired upon exercise of options shall bear any legend required by, or useful
for purposes of compliance with, applicable securities laws, this Plan, or the
option agreement evidencing the Option.
36
6.2 Terms and Conditions to Which Only NQOs Are Subject.
Options granted under this Plan which are designated as NQOs shall be subject to
the following additional terms and conditions:
6.2.1 Exercise Price. Except as set forth in Section 6.1.14,
the exercise price of a NQO shall not be less than eighty five percent (85%) of
the fair market value (determined in accordance with Section 6.1.12) of the
stock subject to the Option on the date of grant.
6.3 Terms and Conditions to Which Only ISOs Are Subject.
Options granted under this Plan which are designated as ISOs shall be subject to
the following additional terms and conditions:
6.3.1 Exercise Price. Except as set forth in Section 6.1.14,
the exercise price of an ISO shall be determined in accordance with the
applicable provisions of the Code and shall in no event be less than the fair
market value (determined in accordance with Section 6.1.12) of the stock covered
by the Option at the time the Option is granted.
6.3.2 Disqualifying Dispositions. If stock acquired upon
exercise of an ISO is disposed of in a "disqualifying disposition" within the
meaning of Section 422 of the Code, the holder of the stock immediately before
the disposition shall notify the Company in writing of the date and terms of the
disposition and comply with any other requirements imposed by the Company in
order to enable the Company to secure any related income tax deduction to which
it is entitled.
7. MANNER OF EXERCISE
7.1 Notice of Exercise. An optionee wishing to exercise an
Option shall give written notice to the Company at its principal executive
office, to the attention of the officer of the Company designated by the
Compensation Committee, accompanied by payment of the exercise price as provided
in Section 6.1.6. The date the Company receives written notice of an exercise
hereunder accompanied by payment of the exercise price and, if required, by
payment of any federal or state withholding or employment taxes required to be
withheld by virtue of exercise of the Option will be considered as the date such
Option was exercised.
37
7.2 Issuance of Certificates. Promptly after receipt of
written notice of exercise of an Option, the Company shall, without stock issue
or transfer taxes to the optionee or other person entitled to exercise the
Option, deliver to the optionee or such other person a certificate or
certificates for the requisite number of shares of stock. Unless the Company
specifies otherwise, an optionee or transferee of an optionee shall not have any
privileges as a shareholder with respect to any stock covered by the Option
until the date of issuance of a stock certificate. Subject to Section 6.1.1
hereof, no adjustment shall be made for dividends or other rights for which the
record date is prior to the date the certificates are delivered.
8. EMPLOYMENT RELATIONSHIP
Nothing in this Plan or any Option granted hereunder shall interfere with
or limit in any way the right of the Company or of any of its Affiliates to
terminate any optionee's employment at any time, nor confer upon any optionee
any right to continue in the employ of the Company or any of its Affiliates.
9. AMENDMENTS TO PLAN
The Board may amend this Plan at any time. Without the consent of an
optionee, no amendment may affect outstanding Options except to conform this
Plan and ISOs granted under this Plan to federal or other tax laws relating to
incentive stock options. No amendment shall require shareholder approval unless
shareholder approval is required to preserve incentive stock option treatment
for tax purposes or the Board otherwise concludes that shareholder approval is
advisable.
10. SHAREHOLDER APPROVAL: TERM
The Board of Directors of the Company adopted this Plan as of August 4,
2001 and the Company's shareholders approved this Plan as of __________, 2002.
This Plan shall terminate ten (10) years after initial adoption by the Board
unless terminated earlier by the Board. The Board may terminate this Plan
without shareholder approval. No Options shall be granted after termination of
this Plan, but termination shall not affect rights and obligations under then-
outstanding Options.
38
EXHIBIT B
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF HYPERBARIC SYSTEMS,
A CALIFORNIA CORPORATION
The undersigned, Harry Masuda and ______________, hereby certify
that:
1. They are the duly elected and acting President and
Secretary respectfully of Hyperbaric Systems, a California corporation (the
"Corporation");
2. The Articles of Incorporation of this Corporation are
amended and restated to read in full as follows:
ARTICLE I
The name of the corporation is Human BioSystems.
ARTICLE II
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
This Corporation is authorized to issue two classes of shares to be
designated respectively common stock ("Common Stock") and preferred stock
("Preferred Stock"). The total number of shares of capital stock which the
Corporation shall have authority to issue is fifty million (50,000,000) shares,
of which forty-five million (45,000,000) shares shall be Common Stock, and five
million (5,000,000) shares shall be Preferred Stock. The Board of Directors of
the corporation is hereby authorized to provide for the issue of all or any
of the shares of the Preferred Stock in one or more series, and to fix the
number of shares and to determine or alter, for each such series, such powers,
designations, preferences and relative participating, optional or other
rights and such qualifications, limitations or restrictions thereof, as shall
be stated and expressed in the resolution or resolutions adopted by the Board
of Directors providing for the issue of such series and as may be permitted by
the General Corporation Law of the State of California.
39
ARTICLE IV
(A) The liability of the directors of this Corporation for
monetary damages shall be eliminated to the fullest
extent permissible under California law.
(B) This Corporation is authorized to indemnify agents of
this Corporation, including without limitation,
directors and officers, whether by bylaw, agreement or
otherwise, to the fullest extent permissible under
California Law, and in excess of that expressly
permitted by Section 317 of the California Corporation
Law.
3. The foregoing amendment has been approved by the Board of
Directors of this Corporation.
4. The foregoing amendment was approved by the holders of the
requisite number of shares of this Corporation in accordance with sections 902
and 903 of the California General Corporation Law. The total number of
outstanding shares of each class entitled to vote with respect to the
foregoing amendment was _____________ shares of Common Stock. The number of
shares voting in favor of the foregoing amendment equal or exceeded the vote
required, such required vote being a majority of the outstanding shares of
Common Stock.
IN WITNESS WHEREOF, the undersigned has executed this certificate on
____________, 2002.
______________________ _________________________
Harry Masuda, President , Secretary
Each of the undersigned certifies under penalty of perjury that he has
read the foregoing Amended and Restated Articles of Incorporation and knows the
contents thereof, and that the statements therein are true.
Executed at Palo Alto, California ___________, 2002.
______________________ _________________________
Harry Masuda, President , Secretary
40
ANNUAL MEETING OF STOCKHOLDERS
of
HYPERBARIC SYSTEMS
October 18, 2002
------------------------------
PROXY VOTING INSTRUCTIONS
------------------------------
VOTING BY MAIL
-------------------------
Please complete your voting selection, date, sign and mail your proxy card
in the envelope provided as soon as possible. You are encouraged to specify
your choices by marking the appropriate boxes, but you need not mark any box if
you wish to vote in accordance with the Board of Directors' recommendations.
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
[X] Please mark your votes as in the example to the left using dark ink only.
FOR AGAINST ABSTAIN
1. Election of Directors
Nominees:
[_] [_] [_] Paul Okimoto
[_] [_] [_] Harry Masuda
[_] [_] [_] George Tsukuda
2. Proposal to ratify the 2001 Stock Option Plan:
[_] [_] [_]
3. Proposal to amend HBS' Articles of Incorporation to authorize 5,000,000
shares of preferred stock:
[_] [_] [_]
4. Proposal to amend HBS' Articles of Incorporation to change its name to
"Human BioSystems":
[_] [_] [_]
5. Proposal to amend HBS' Bylaws to allow the Board of Directors to choose
the date for future annual meetings of shareholders:
[_] [_] [_]
6. Proposal to ratify the selection of L.L. Bradford & Company, LLC as HBS'
independent auditors for the year ending December 31, 2002:
[_] [_] [_]
SIGNATURE(S)__________________________________ DATE:________________
PRINT NAME(S)_________________________________
Note: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, partnership or other entity, please
sign in full entity name by authorized person.