EXHIBIT 4.1
AMENDED AND RESTATED
HUMAN BIOSYSTEMS
2001 STOCK OPTION PLAN
A. On August 22, 2002, Human BioSystems (the "Company"), formerly
"Hyperbaric Systems," adopted the Hyperbaric Systems 2001 Stock Option Plan (the
"Original Plan") reserving One Million Five Hundred Eighty-Five Thousand Five
Hundred (585,500) shares of its common stock for issuance upon the exercise of
options granted under the Original Plan; and
B. The Company's Board of Directors acting by unanimous written consent
dated August 1, 2003 authorized an increase of the number of shares of Common
Stock reserved for issuance upon exercise of options granted under the Original
Plan to Five Million (5,000,000); and
C. The Company's shareholders voted at the Company's September 26, 2003
annual meeting in favor of amending the Plan to increase the number of shares of
Common Stock reserved for issuance upon exercise of options granted under the
Original Plan to Five Million (5,000,000)
1. PURPOSES OF THE PLAN
The purposes of this Amended and Restated Stock Option Plan (the "Plan") of
Human BioSystems, 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.
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 Five
Million (5,000,000) 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.
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.
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.
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.
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.
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.
(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).
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).
(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.
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.
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 Amended and Restated Plan as
of August 1, 2003 and the Company's shareholders approved this Amended and
Restated Plan as of September 26, 2003. This Amended and Restated Plan shall
terminate ten (10) years after initial adoption of the Original Plan 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.