SCHEDULE
14A INFORMATION
Proxy
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1934
(Amendment
No. 1)
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OXIS
INTERNATIONAL, INC.
323
Vintage Park Drive, Suite B
Foster
City, California 94404
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held on August 1, 2006
To
the
Stockholders of OXIS International, Inc.:
Please
take notice that the Annual Meeting of Stockholders (the “Annual Meeting”) of
OXIS International, Inc., a Delaware corporation (the “Company”), will be held
on Tuesday, August 1, 2006 at 9:30 a.m. Pacific Daylight Time, at the Company’s
executive offices, 323 Vintage Park Drive, Suite B, Foster City, California
94404, for the following purposes:
1. To
elect
a Board of five (5) directors of the Company, to serve until the 2007 annual
meeting of stockholders or until their successors are duly elected and
qualified;
2. Approval
of an amendment of the Company’s Certificate of Incorporation to increase the
number of authorized shares of common stock from 95,000,000 to
150,000,000;
3. Approval
of an amendment of the Company’s 2003 Stock Incentive Plan (the “Plan”) to
increase the number of shares reserved for issuance under the Plan from
3,600,000 shares to 5,600,000 shares;
4. To
transact such other business as may properly come before the Annual Meeting
or
at any adjournments or postponements thereof.
A
proxy
statement attached to this notice describes these matters in more detail as
well
as additional information about the Company and its officers and directors.
The
Board of Directors has fixed the close of business on June 2, 2006 as the record
date and only holders of record of the Company’s common stock as of the close of
business on June 2, 2006 are entitled to receive this notice and to vote at
this
Annual Meeting and at any adjournments or postponements thereof.
| |
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|
| |
By
Order of the
Board of Directors
|
|
|
|
| |
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/s/ Steven
T. Guillen |
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Steven
T. Guillen |
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President
and Chief Executive Officer
|
Foster
City, California
Date:
June 15, 2006
YOUR
VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. PLEASE
READ
THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE.
OXIS
INTERNATIONAL, INC.
323
Vintage Park Drive, Suite B
Foster
City, CA 94404
PROXY
STATEMENT
Date,
Time and Place of Meeting
The
enclosed proxy is solicited on behalf of the Board of Directors of OXIS
International, Inc. for the Annual Meeting of Stockholders (the “Annual
Meeting”) to be held on Tuesday, August 1, 2006 at 9:30 a.m.
Pacific Daylight Time, at the Company’s executive offices, 323 Vintage Park
Drive, Suite B, Foster City, California 94404 or at any adjournments or
postponements of the Annual Meeting, for the purposes set forth in the notice
attached to this proxy statement. This proxy statement and accompanying proxy
card are first being mailed to you on or about June 15, 2006.
GENERAL
INFORMATION ABOUT VOTING
Record
Date, Outstanding Shares, Quorum and Voting
You
can
vote your shares of common stock if our records show that you owned your shares
on June 2, 2006, the record date. At the close of business on the record date,
42,588,397 shares of common stock, and 96,230 shares of Series C Preferred
Stock were outstanding. Shares of common stock and Series C Preferred Stock
are entitled to vote at the Annual Meeting. Each share of common stock
outstanding as of the record date is entitled to one vote. Each share of
Series C Preferred Stock outstanding as of the record date is entitled to
the number of votes equal to the number of shares of common stock into which
the
Series C Preferred share is convertible, times 1.30, divided by the average
closing bid price of the Company's common stock during the fifteen (15)
consecutive trading days immediately prior to the date such share of
Series C Preferred Stock was purchased. As of the record date, each share
of Series C Preferred Stock is entitled to .2222 votes, resulting in a
total of 21,546 votes for all of the Series C Preferred Stock
outstanding.
You
are
urged to sign, date and promptly return the enclosed proxy card in the enclosed
envelope.
Business
may be transacted at the Annual Meeting if a quorum is present. A quorum is
present at the Annual Meeting if holders of a majority of the shares of common
stock entitled to vote are present in person or by proxy at the Annual Meeting.
If you sign and return your proxy card, your shares will be counted to determine
whether we have a quorum even if you abstain or fail to vote on any of the
proposals listed on the proxy card.
If
your
shares are held in the name of a nominee, and you do not tell the nominee how
to
vote your shares (a “broker non-vote”), the nominee can vote them as it sees fit
only on matters that are determined to be routine, and not on any other
proposal. Broker non-votes will be counted as present to determine if a quorum
exists but will not be counted as present and entitled to vote on any nonroutine
proposal. Proposal 1 is considered a routine proposal. Proposals 2 and 3 are
not
routine proposals and may require the consent of the beneficial holder, as
determined by the nominee.
Directors
will be elected by a plurality of the votes cast by the shares of common stock
present in person or represented by proxy at the Annual Meeting and entitled
to
vote on the election of directors. Proposal 2 will be approved by the
affirmative vote of the majority of all the outstanding shares of common stock
and Series C Preferred Stock. Proposal 3 will be approved by the affirmative
vote of the majority of the shares of common stock and Series C Preferred Stock
present at the Annual Meeting (in person or by proxy) that are voted for or
against the proposal. With respect to Proposal 1, which requires a plurality
vote, and Proposal 3, which requires the affirmative vote of a majority of
our
common stock represented at the meeting and entitled to vote, broker “non-votes”
have no effect and abstentions have the same effect as negative votes, and
with
respect to Proposal 2, which requires the affirmative vote of a majority of
our
outstanding common stock and Series C Preferred Stock entitled to vote,
abstentions and broker “non-votes” have the same effect as negative votes. All
votes will be tabulated by the inspector of elections appointed for the Annual
Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes on each proposal.
It
is
important that your proxy be returned promptly and that your shares be
represented. You are urged to sign, date and promptly return the enclosed proxy
in the enclosed envelope.
Solicitations
and Voting of Proxies
When
proxies are properly dated, executed, and returned, the shares they represent
will be voted at the Annual Annual Meeting in accordance with the instructions
of the stockholders. If not otherwise instructed, the shares represented by
each
valid returned Proxy in the form accompanying this Proxy will be voted in
accordance with the recommendation of the Board of Directors with respect to
each matter submitted to the stockholders for approval, and at the discretion
of
the proxy holders, upon such other business as may properly come before the
Annual Meeting (including any proposal to adjourn the Annual Meeting) and any
adjournment thereof. The matters described in this Proxy Statement are the
only
matters we know will be voted on at the Annual Meeting. If other matters are
properly presented at the Annual Meeting, the proxyholders will vote your shares
in accordance with the recommendations of management.
Please
follow the instructions on the enclosed Proxy card to vote on each proposal
to
be considered at the Annual Meeting. If you sign and date the Proxy card and
mail it back to us in the enclosed envelope, the proxyholders named on the
Proxy
card will vote your shares as you instruct. If you sign and return the Proxy
card but do not vote on a proposal, the proxyholders will vote your shares
“for”
such proposal or, in the case of the election of directors, vote “for” election
to the Board of Directors of all the nominees presented by the Board of
Directors.
Revocability
of Proxies
Any
person signing a Proxy in the form accompanying this Proxy Statement has
the
power to revoke it prior to the Annual Meeting or at the Annual Meeting prior
to
the vote pursuant to the Proxy. A Proxy may be revoked (i) by a writing
delivered to the Secretary of the Company stating that the Proxy is revoked,
(ii) by a subsequent Proxy that is signed by the person who signed the earlier
Proxy and is presented at the Annual Meeting, or (iii) by attendance at the
Annual Meeting and voting in person (although attendance at the Annual Meeting
will not in and of itself constitute a revocation of a Proxy). Please note,
however, that if a stockholder’s shares are held of record by a broker, bank or
other nominee and that stockholder wishes to vote at the Annual Meeting,
the
stockholder must bring to the Annual Meeting a letter from the broker, bank
or
other nominee confirming that stockholder’s beneficial ownership of the
shares. Any
written notice of revocation or subsequent Proxy should be delivered to OXIS
International, Inc., 323 Vintage Park Drive, Suite B, Foster City, California
94404, Attention: Secretary, or hand-delivered to the Secretary of OXIS
International, Inc. at or before the taking of the vote at the Annual Meeting.
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 materials furnished to you. We will reimburse our transfer agent
for its out-of-pocket expenses. We may also reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding voting information to the beneficial owners. We estimate that all
of
the foregoing costs will approximate $50,000. In addition to sending you these
materials, some of our employees may contact you by telephone, by mail, or
in
person. We will not pay our employees additional compensation for contacting
you.
PROPOSAL
NO. 1: ELECTION OF DIRECTORS
The
Board of Directors
The
Company’s business is
managed under the direction of its Board of Directors. The Board of Directors
has designated as nominees for re-election five of the six directors currently
serving on the Board. Timothy C. Rodell, M.D., a current director, has declined
to stand for re-election at the Annual Meeting. See “Nominees for Director”
below for profiles of the nominees. After the election of the directors at
the
Annual Meeting, the Company’s Board will have five directors.
The
Board
believes that re-electing these incumbent directors will promote stability
and
continuity and expects that such directors will continue making substantial
contributions to the Company by virtue of their familiarity with, and insight
into, the Company’s affairs accumulated during their tenure.
All
of
the nominees have indicated a willingness to continue serving as directors
if
elected, but if any of them should decline or be unable to act as a director,
the proxy holders will vote for the election of another person or persons as
the
Board of Directors recommends. The Company has no reason to believe that any
nominee will be unavailable.
Nominees
to the Board
The
director nominees, and their ages as of the date of the Annual Meeting, their
positions at the Company, and the period during which they have served as a
director of the Company are set forth in the following table and
paragraphs:
|
Name
|
Age
|
Principal
Occupation
|
Served
as
Director
Since
|
|
Marvin
S. Hausman, M.D. (2)
|
65
|
Chairman
of the Board
|
2004
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Steven
T. Guillen
|
55
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President
and Chief Executive Officer
|
2005
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|
S.
Colin Neill (1) (3)
|
60
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Secretary,
Director
|
2004
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|
John
E. Repine, M.D. (1)
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61
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Director
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2005
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Gary
M. Post (1)
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58
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Director
|
2006
|
__________________
(1)
Member of the Audit Committee
(2)
Member of the Compensation Committee
(3)
Member of the Nominating Committee
Marvin
S. Hausman, M.D.
Chairman
of the Board.
Dr.
Hausman was appointed to the Board of Directors on August 20, 2004. Previously,
Dr. Hausman served on the Board of Directors from March 2002 to November 2003.
On December 10, 2004, the Board of Directors appointed Marvin S. Hausman, M.D.
to serve as Chairman of the Board, Acting Chief Executive Officer and Acting
Chief Financial Officer of OXIS. On February 28, 2005, Dr. Hausman ceased to
be
the Company’s Chief Executive Officer. Dr. Hausman has served as a director and
as Chairman of the Board of Axonyx since 1997, and had served as President
and
Chief Executive Officer of Axonyx from 1997 until September 2003 and March
2005,
respectively. Dr. Hausman served as our Acting Chief Financial Officer until
January 6, 2006 when Michael D. Centron was appointed as our Chief Financial
Officer. Dr. Hausman currently owns approximately 2.8% of the outstanding common
stock of OXIS, and Axonyx currently owns approximately 33% of the outstanding
common stock of OXIS. Dr. Hausman was a co-founder of Medco Research Inc.,
a
pharmaceutical biotechnology company specializing in adenosine products. He
has
thirty years’ experience in drug development and clinical care. Dr. Hausman
received his medical degree from New York University School of Medicine in
1967
and has done residencies in General Surgery at Mt. Sinai Hospital in New York,
and in Urological Surgery at U.C.L.A. Medical Center in Los Angeles. He also
worked as a Research Associate at the National Institutes of Health, Bethesda,
Maryland. He has been a Lecturer, Clinical Instructor and Attending Surgeon
at
the U.C.L.A. Medical Center Division of Urology and Cedars-Sinai Medical Center,
Los Angeles. He has been a Consultant on Clinical/Pharmaceutical Research to
various pharmaceutical companies, including Bristol-Meyers International,
Mead-Johnson Pharmaceutical Company, Medco Research, Inc., and E.R. Squibb.
Since October 1995, Dr. Hausman has been the President of Northwest Medical
Research Partners, Inc., a medical technology and transfer company. He was
a
member of the Board of Directors of Medco Research, Inc. from inception (1978)
through 1992 and from May 1996 to July 1998. Dr. Hausman was a member of the
Board of Directors of Regent Assisted Living, Inc., a company specializing
in
building assisted living centers including care of senile dementia residents,
from March 1996 to April 2001.
Steven
T. Guillen
President,
Chief Executive Officer and Director.
On
February 28, 2005, Steven T. Guillen was appointed the Company’s President,
Chief Executive Officer and a member of the Company’s Board of Directors. Prior
to joining the Company, from 2001 to 2004, Mr. Guillen served as Vice President,
Sales and Marketing for Amarin Pharmaceuticals, Inc., a neuroscience company
focused on the development and commercialization of drugs for the treatment
of
neurological disorders affecting the central nervous system. From 1996 to 2001,
Mr. Guillen served as the Vice President, Sales and Marketing for Athena
Diagnostics, a company involved with the development and commercialization
of
diagnostic testing for neurological diseases. From 1991 until joining Amarin
Pharmaceuticals, Inc., Mr. Guillen held several senior level sales and marketing
positions with Elan Pharmaceuticals, an affiliate of Elan Corporation, PLC,
including from 1996 to 2001 as Vice President of Sales and Marketing for Athena
Diagnostics (Division of Elan), a reference laboratory dedicated to the
development and commercialization of diagnostic testing for neurological
disorders. Prior to joining Elan Pharmaceuticals, Mr. Guillen spent 17 years
at
Merck & Co., Inc., where he held a number of positions of increasing
responsibility, including responsibility for the training and development of
a
350 member sales management team. Mr. Guillen holds a B.S. in Zoology, with
a
minor in Chemistry, from the University of California, Davis, and MBA from
the
University of California, Riverside.
S.
Colin Neill
Secretary
and Director. Mr.
Neill
was appointed to the Board of Directors in April 2004. Mr. Neill joined Axonyx
in September 2003 as Chief Financial Officer and Treasurer and was named
Secretary in January 2004. From April 2001 to September 2003, Mr. Neill had
been
an independent consultant assisting small development stage companies raise
capital. Previously, Mr. Neill served as Senior Vice President, Chief Financial
Officer, Secretary and Treasurer of ClinTrials Research Inc., a publicly traded
global contract research organization in the drug development business, from
1998 until its sale in April 2001. Prior to that, Mr. Neill served as Vice
President and Chief Financial Officer of Continental Health Affiliates Inc.
and
its majority owned subsidiary Infu-Tech Inc. Mr. Neill’s experience has included
that of Acting Vice President Finance and Chief Financial Officer of Pharmos
Corporation, a biopharmaceutical company in the business of developing novel
drug technologies. Earlier experience was gained as Vice President Finance
and
Chief Financial Officer of BTR Inc., a U.S. subsidiary of BTR plc, a British
diversified manufacturing company, and Vice President Financial Services of
The
BOC Group Inc., a British owned industrial gas company with substantial
operations in the health care field. Mr. Neill served for four years with
American Express Travel Related Services, first as chief internal auditor for
worldwide operations and then as head of business planning and financial
analysis. Mr. Neill began his career in public accounting with Arthur Andersen
LLP in Ireland and later with Price Waterhouse LLP as a senior manager in New
York City. He also served with Price Waterhouse for two years in Paris, France.
Gary
M. Post
Director.
Mr.
Post
has served as a director of OXIS since March 15, 2006. Since 1999 Mr. Post
has
been the Managing Director and Investment Principal of Ambient Advisors, LLC.
Ambient Advisors primarily invests its own and its partners’ capital in private
and public companies with a particular interest in the health care and life
sciences sector and certain other special situations. Ambient Advisors also
actively advises these companies, sometimes taking interim management roles.
In
his capacity as Managing Director at Ambient Advisors, Mr. Post has acted as
an
interim Chief Executive Officer in two private early to mid stage companies
that
Ambient had invested in, Opticon Medical, Inc., a medical device company and
OccMeds Billing Services, Inc., a worker’s compensation pharmacy payment
processing company. Most recently, on May 23, 2006, Mr. Post was appointed
President and CEO of VoIP, Inc., a leading provider of Voice over Internet
Protocol (VoIP) communications solutions for service providers, resellers and
consumers. Mr. Post holds a MBA from the U.C.L.A. Graduate School of Management
and an A.B. in Economics from Stanford University.
John
E. Repine, M.D.
Director.
Dr.
Repine has served as a director of OXIS since October 2005. Since 1996, Dr.
Repine has been the James J. Waring Professor of Medicine and Pediatrics at
the
University of Colorado Health Sciences Center. Since 1993, Dr. Repine has been
the Chief Executive Officer and President of the Webb-Waring Institute for
Cancer, Aging and Antioxidant Research. Dr.
Repine graduated from the School of Medicine and completed training in internal
medicine and pulmonary medicine at the University of Minnesota. Dr. Repine
has received many national awards for his research including an Established
Investigator Award from the American Heart Association, the Alton Ochsner Award
Relating Smoking and Health and the Senior Scholar in Aging Award from the
Ellison Medical Foundation. Dr. Repine was the Principal Investigator for 10
years for one of six National Specialized Centers of Research (SCOR) of the
National Institutes of Health for the Study of Acute Lung Injury. Dr.
Repine is a recognized expert in the study of vascular disorders, inflammation,
oxidants and antioxidants. Dr. Repine has served in various capacities
with a number of biotechnology companies.
There
are
no family relationships among any of the directors or officers of the
Company.
The
holders of Common Stock of the Company are entitled to one vote per share equal
to the number of shares held by such person at the close of business on the
record date and the holders of Series C Preferred Stock of the Company are
entitled to .2222 vote per share equal to the number of shares held by such
person at the close of business on the record date. As there is no cumulative
voting, each stockholder shall cast all of his/her votes for each nominee of
his/her choice or withhold votes from any or all nominees. Unless a stockholder
requests that voting of the proxy be withheld for any one or more of the
nominees for directors by so directing on the proxy card, the shares represented
by the accompanying proxy will be voted FOR election, as directors, of the
above-mentioned five nominees. If any nominee becomes unavailable for any reason
(which event is not anticipated) to serve as a director at the time of the
Annual Meeting, then the shares represented by such proxy may be voted for
such
other person as may be determined by the holders of such proxy. Directors will
be elected at the Annual Meeting by a plurality of the votes cast. Directors
are
to be elected to hold office until the next annual meeting of stockholders
and
until their successors are elected and qualified, or until their earlier
resignation or removal.
OUR
BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” AND SOLICITS
PROXIES IN FAVOR OF THE NOMINEES LISTED ABOVE (ITEM 1 ON THE ENCLOSED PROXY
CARD).
INFORMATION
CONCERNING THE BOARD OF DIRECTORS AND COMMITTEES THEREOF
Committees
and Meetings
The
Board
of Directors held six meetings in 2005. During 2005 no director attended fewer
than 75% of the aggregate of (1) the total number of meetings of the Board
of
Directors held during the period they served on the Board, and (2) the total
number of meetings held by all committees of the Board on which they served
which were held during the periods they served on such committees. We encourage
members of the Board of Directors to attend our annual meetings of
stockholders.
Nominating
Committee
The
Nominating Committee searches out and recommends to the Board of Directors
potential Board members. Members of this Committee during 2005 were S. Colin
Neill and Timothy C. Rodell, M.D. (chairman). During 2005, the Nominating
Committee acted by unanimous written consent one time. Dr. Rodell is
“independent” within the meaning of Rule 4200(a)(15) of the National
Association of Securities Dealers listing standards. Mr. Neill is not
“independent” by that standard. Since Dr. Rodell is not standing for re-election
at this Annual Meeting, our Nominating Committee will consist of only Mr. Neill
after the date of the Annual Meeting. The Nominating Committee operates under
a
written charter setting forth the functions and responsibilities of the
committee, an electronic copy of which is available on the Company’s website at
www.oxis.com.
The
Nominating Committee will consider director candidates recommended by
stockholders of the Company. The procedure that a stockholder should follow
to
submit its director candidate for consideration is set forth below under the
heading “Stockholder Nomination of Director Candidates.” There are no
differences in the manner in which the Nominating Committee evaluates nominees
for director based on whether the nominee is recommended by a stockholder.
The
Company currently does not pay any third party to identify or assist in
identifying or evaluating potential nominees.
In
reviewing potential candidates for the Board of Directors, the Nominating
Committee considers the individual’s experience in the Company’s industry and
related industries, the general business or other experience of the candidate,
the personality of the candidate, the candidate’s interest in the business of
the Company, as well as numerous other subjective criteria. Of greatest
importance is the individual’s integrity, willingness to contribute and ability
to bring to the Company experience and knowledge in areas that are most
beneficial to the Company. The Board of Directors intends to continue to
evaluate candidates for election to the Board of Directors on the basis of
the
foregoing criteria.
Compensation
Committee
The
Compensation Committee reviews and approves the compensation and benefits for
our executive officers, administers our stock plans and performs other duties
as
may from time to time be determined by the Board of Directors. The Compensation
Committee currently consists of Dr. Hausman (chairman) and Dr. Rodell. Dr.
Hausman will continue to serve on the Compensation Committee following the
Annual Meeting. Since Dr. Rodell is not standing for re-election at this Annual
Meeting, the Compensation Committee will consist of only Dr. Hausman after
the
date of the Annual Meeting. The
Compensation Committee met one time in 2005 to approve a compensation package
for Dr. Hausman as Chairman of the Board. Because of the small size of the
Board
of Directors, with only four members during most of 2005 and five members after
the appointment of Dr. Repine in October 2005, executive compensation issues
were discussed and approved during meetings of the Company’s entire Board of
Directors that included the presence of all Compensation Committee members.
All
executive compensation was approved by a majority of outside
directors.
Compensation
Committee Interlocks and Insider Participation
During
2005 the compensation committee consisted of Dr. Hausman and Dr. Rodell. None
of
our executive officers serve as a member of the Board of Directors or
compensation committee of any entity that has one or more executive officers
serving as a member of our Board of Directors or Compensation
Committee.
Audit
Committee
The
Audit
Committee of the Company’s Board of Directors is composed of directors who, in
accordance with the audit committee charter, recommends the firm to be employed
as the Company’s independent public accountants, and oversees the Company’s
audit activities and certain financial matters to protect against improper
and
unsound practices and to furnish adequate protection to all assets and records.
Currently, three directors comprise the Audit Committee: Mr. Neill, Mr. Post
and
Dr. Repine. Mr. Neill serves as Chairman of the Audit Committee. Mr. Post was
appointed to the Audit Committee effective March 15, 2006. The Audit Committee
met four times in 2005.
The
Board
of Directors adopted and approved a charter for the Audit Committee in June
2000, and the charter was amended on April 16, 2003. With the exception of
Mr.
Neill, each of the members of the Audit Committee is an “independent director”
as that term is defined in Rule 4200(a)(15) of the Marketplace Rules of the
National Association of Securities Dealers, Inc. The members of the Audit
Committee also meet the independence requirements of Rule 10A-3(B)(i) of the
Securities Exchange Act of 1934, and each of the criteria set forth in Rule
4350(d)(2)(A) of the NASD Marketplace Rules, except for Mr. Neill. The Board
of
Directors has determined that Mr. Neill qualifies as an “audit committee
financial expert” as defined by the rules of the Securities and Exchange
Commission. Attached hereto as Appendix
A
is a
copy of the Audit Committee Charter, as revised on April 16, 2003.
Policy
on
Pre-Approval by Audit Committee of Services Performed by Independent Registered
Public Accounting Firm
Our
Audit
Committee is to pre-approve all audit and non-audit services provided by the
independent auditors. These services may include audit services, audit-related
services, tax services and other services. Pre-approval is generally provided
for up to one year and any pre-approval is detailed as to particular service
or
category of services and is generally subject to a specific budget. The Audit
Committee has delegated pre-approval authority to its Chairman when expedition
of services is necessary. The independent auditors and management are required
to periodically report to the full Audit Committee regarding the extent of
services provided by the independent auditors in accordance with this
pre-approval, and the fees for the services performed to date.
AUDIT
COMMITTEE REPORT
In
accordance with its written charter adopted by the Board of Directors, the
Audit
Committee oversees the quality and integrity of the Company’s accounting and
financial reporting practices and the audit of the Company’s consolidated
financial statements by its independent registered public accounting firm.
The
Audit
Committee has reviewed and discussed the Company’s audited consolidated
financial statements for the year ended December 31, 2005, with the Company’s
management and its independent registered public accounting firm, Williams
&
Webster, P.S., prior to public release. The Audit Committee has discussed with
Williams & Webster, P.S., the matters required to be discussed by Statement
on Auditing Standards No. 61, “Communication with Audit Committees”, as amended,
which includes, among other items, matters related to the conduct of the audit
of the Company’s consolidated financial statements.
The
Audit
Committee has received the written disclosures and the letter from Williams
& Webster, P.S., required by Independence Standards Board Standard No. 1,
“Independence Discussions with Audit Committees”, and the Audit Committee
discussed with Williams & Webster, P.S., their independence from the
Company.
Based
on
the review and discussions referred to above, the Audit Committee recommended
to
the Company’s Board of Directors and the Board of Directors has approved that
the audited consolidated financial statements for the year ended December 31,
2005, be included in the Company’s Annual Report on Form 10-KSB.
Submitted
by the Audit Committee of the
Board
of
Directors
S.
Colin
Neill, Chairman
Gary
M.
Post
John
E.
Repine, M.D.
We
pay an
annual fee of $4,000 to each non-employee director and an additional $1,000
to
non-employee directors for serving as committee chair. During 2005, while we
did
not make payments under this policy, such expenses were accrued. We do not
pay
meeting fees but directors are reimbursed for their expenses incurred in
attending meetings. Employee directors receive no other compensation as
directors.
Under
our
2003 Stock Incentive Plan, non-employee directors are automatically awarded
options to purchase 30,000 shares of Common Stock upon becoming a director
and
automatically awarded an option to purchase 5,000 shares of Common Stock
annually thereafter.
The
following table represents stock options that were granted during 2005 to
non-employee directors.
|
Name
|
|
Automatic
Options
Issued for
Service on Board
|
|
Discretionary
Options
|
|
Total
Options
Granted
|
|
|
Marvin
S. Hausman, M.D.(5)
|
|
|
5,000
(1
|
)
|
|
608,000
(3
|
)
|
|
613,000
|
|
|
S.
Colin Neill(5)
|
|
|
5,000
(1
|
)
|
|
100,000
(4
|
)
|
|
105,000
|
|
|
Timothy
C. Rodell, M.D.
|
|
|
5,000
(1
|
)
|
|
100,000
(4
|
)
|
|
105,000
|
|
|
John
E. Repine, M.D.
|
|
|
30,000
(2
|
)
|
|
30,000
(4
|
)
|
|
60,000
|
|
|
(1)
|
Dr.
Hausman, Mr. Neill and Dr. Rodell were granted 5,000 options on June
22,
2005 as director compensation for 2005. The exercise price is based
on the
closing price of $0.34 on June 22,
2005.
|
|
(2)
|
Dr.
Repine was granted 30,000 options on October 5, 2005 upon becoming
a
director. The exercise price is based on the closing price of $0.37
on
October 5, 2005.
|
|
(3)
|
Dr.
Hausman was granted 500,000 options on December 28, 2005 for his
services
as Chairman of the Board, and Acting Chief Executive Officer and
Acting
Chief Financial Officer during 2005. These options were issued outside
of
the OXIS 2003 Stock Incentive Plan. Dr. Hausman was also granted
108,000
options pursuant to a Consulting Agreement with NW Medical Research
Partners, Inc. Dr. Hausman is the sole member and manager of NW Medical
Research Partners. The exercise price for the option to purchase
500,000
shares of common stock is based on the closing price of $0.29 on
December
28, 2005 and for the option to purchase 108,000 shares of common
stock is
based on the closing price of $0.37 on October 5,
2005.
|
|
(4)
|
Mr.
Neill and Dr. Rodell were granted 100,000 options and Dr. Repine
was
granted 30,000 options on December 28, 2005 for their services on
the
Board of Directors in 2005. The exercise price is based on the closing
price of $0.29 on December 28,
2005.
|
|
(5)
|
The
Board considered Section 203 of the Delaware General Corporation
law in
making grants to Dr. Hausman and Mr. Neill and determined that such
grants
were in the best interests of the Company and its
stockholders.
|
CORPORATE
GOVERNANCE MATTERS
Corporate
Governance Principles
The
Company has adopted a Code of Conduct and Ethics, which is posted on and can
be
accessed at the Company’s website at www.oxis.com. All financial and senior
managers and directors of the Company including the Chief Executive Officer
and
the Chief Financial Officer, are required to adhere to the code of conduct
and
ethics in discharging their work-related responsibilities. Employees are
required to report any conduct that they believe in good faith to be an actual
or apparent violation of the code of conduct and ethics.
We
have
also established a procedure through which employees may report concerns about
the Company’s business practices. In keeping with the Sarbanes-Oxley Act of
2002, the Audit Committee has established procedures for receipt and handling
of
complaints received by the Company regarding accounting or auditing matters,
and
to allow for the confidential anonymous submission by our employees of concerns
regarding accounting or auditing matters.
Independence
of Directors
The
Board of Directors
has determined that three of its members are currently “independent directors”
as that term is defined in Rule 4200(a)(15) of the Marketplace Rules of the
National Association of Securities Dealers. Our independent directors include:
Dr. Hausman, Dr. Repine and Mr. Post. Although Dr. Hausman is currently an
independent director, under the terms of his consulting agreement with OXIS,
Dr.
Hausman will cease to be so when we have paid him in full under the terms
of his
agreement. In addition, these members of the Board of Directors meet
the
"outside director" requirements of the regulations under Section 162(m) of
the Internal Revenue Code, and the "non-employee director" requirements under
Rule 16b-3 of the Securities Exchange Act of 1934, as
amended.
Director
Qualifications and Nominations
The
Nominating Committee recommends for the Board of Directors’ selection all
director nominees. The
members of the Nominating Committee identify, consider and recommend candidates
for membership on the Board and will consider suggestions from stockholders
for
nominees for election as directors at the 2007 Annual Meeting, provided that
the
recommendations are received on a timely basis and meet the criteria set forth
below. The Nominating Committee and the Board of Directors do not use different
standards to evaluate nominees depending on whether they are proposed by our
directors and management or by our stockholders. While the Nominating Committee
and the Board of Directors have not determined minimum criteria for director
nominees, they seek to achieve a balance of knowledge, experience and capability
on our Board. To this end, the Nominating Committee seeks nominees with high
professional and personal ethics and values, an understanding of our business
lines and industry, diversity of business experience and expertise, broad-based
business acumen, and the ability to think strategically. In addition, the
Nominating Committee considers the level of the candidate’s commitment to active
participation as a director, both at Board and committee meetings and
otherwise.
Stockholder
Nomination of Director Candidates
Any
stockholder of the Company may nominate one or more persons for election as
a
director of the Company at an annual meeting of stockholders if the stockholder
complies with the notice, information and consent provisions contained in our
Restated Bylaws. In addition, the notice must include any other information
required pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended. Our Restated Bylaws specify additional nomination
requirements. In order to include a proposal for such nomination of a director
in our proxy statement for next year’s annual meeting, the written proposal will
be subject to the deadlines and procedures described under “Stockholder
Proposals” and in the bullet points below. The independent directors of the
Board have established the following procedure for stockholders to submit
director nominee recommendations:
| · |
If
you would like to recommend a director candidate for the next annual
meeting, you must submit the recommendations by mail to our Secretary
at
our principal executive offices, no later than the 120th
calendar day before the anniversary date of the previous year’s annual
meeting.
|
| · |
Recommendations
for candidates must be accompanied by personal information of the
candidate, including a list of the candidate’s references, the candidate’s
resume or curriculum vitae and such other information as determined
by our
Secretary and as necessary to satisfy rules and regulations of the
Securities and Exchange Commission and our bylaws, together with
a letter
signed by the proposed candidate consenting to serve on the Board
if
nominated and elected.
|
The
Nominating Committee considers nominees based on the Company’s need to fill
vacancies or to expand the Board, and also considers the Company’s need to fill
particular roles on the Board or committees thereof (e.g. independent director,
audit committee financial expert, etc.) and evaluate candidates in accordance
with its policies regarding director qualifications, qualities and skills.
The
Nominating Committee and the full Board of Directors will consider all
candidates identified through the processes described above, and will evaluate
each of them, including incumbents, based on the same criteria.
Communications
with the Board of Directors
Any
stockholder who desires to contact the Board or specific members of the Board
may do so by writing to: The Board of Directors, OXIS International, Inc.,
323
Vintage Park Drive, Suite B, Foster City, CA 94404.
PROPOSAL
NO. 2: AUTHORIZATION OF AN AMENDMENT OF THE COMPANY’S CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM
95,000,000 TO 150,000,000
The
Board
of Directors of OXIS has adopted a resolution to amend the first paragraph
of
Article FOURTH of the Second Restated Certificate of Incorporation of OXIS
to
increase the number of authorized shares of OXIS Common Stock from 95,000,000
to
150,000,000 shares. Upon adoption of this amendment, the first paragraph of
Article FOURTH of the Second Restated Certificate of Incorporation of OXIS
would
read in its entirety as follows:
FOURTH:
The Company is authorized to issue a total of one hundred fifty million
(150,000,000) shares of Common Stock, each of which shares of Common Stock
has a
par value of one-tenth of one cent ($.001). Dividends may be paid on the Common
Stock as and when declared by the Board of Directors, out of any funds of the
Company legally available for the payment of such dividends, and each share
of
Common Stock will be entitled to one vote on all matters on which such stock
is
entitled to vote. All duly authorized One Dollar ($1.00) and Fifty Cent ($.50)
par value shares outstanding shall be deemed shares having a par value of
one-tenth of one cent ($.001).
The
purpose of such amendment is to increase the number of authorized shares of
OXIS
Common Stock from 95,000,000 to 150,000,000 shares. As of June 2, 2006, OXIS
had
outstanding 42,588,397 shares of Common Stock. Each share of common stock is
entitled to one vote at the Company’s annual meeting of stockholders. The
holders of the Company’s common stock do not have any preemptive
rights.
The
Company’s capitalization as of June 2, 2006 consists of the
following:
| · |
95,000,000
authorized shares of common stock, of which 42,588,397 are issued
and
outstanding;
|
| · |
15,000,000
authorized shares of preferred stock, of which 96,230 shares of Series
C
Preferred Stock are issued and outstanding, which are convertible
into
27,800 shares of common stock at the option of the holders at any
time;
|
| · |
2,930,000
shares of common stock reserved for issuance under the Company’s 2003
Stock Incentive Plan, under which options to purchase an aggregate
of
2,261,730 shares are issued and
outstanding;
|
| · |
2,388,872
shares of common stock reserved for issuance pursuant to the future
exercise of outstanding options granted under the Company’s 1994 Stock
Incentive Plan. This Plan expired on April 30, 2003 and no further
issuances will occur.
|
| · |
1,503,438
shares of common stock reserved for issuance outside of its stock
incentive plans; and
|
| · |
14,825,835
shares of common stock reserved for issuance upon exercise of outstanding
warrants.
|
On
a
fully diluted basis, that is, assuming the conversion of all convertible
securities (options, warrants, preferred stock) into shares of common stock,
there would be 64,264,342 shares of common stock outstanding.
The
OXIS
Board believes that it is desirable for OXIS to have additional authorized
but
unissued shares of OXIS Common Stock to provide flexibility to act promptly
with
respect to acquisitions, public and private financings, stock dividends and
for
other appropriate purposes. Approval of the increase now will eliminate delays
and the expense which otherwise would be incurred if stockholder approval were
required to increase the authorized number of shares of OXIS Common Stock for
possible future transactions involving the issuance of additional shares. OXIS
does
not have any current plans to issue any of the shares that would be authorized
through this Proposal No. 2.
The
additional shares of OXIS Common Stock may be issued by the Company's Board
of
Directors at such times, in such amounts and upon such terms as the OXIS Board
may determine without further approval of the stockholders. Any such issuance
could reduce the current stockholders' proportionate interests in OXIS or dilute
the stock ownership of persons seeking to obtain control of OXIS, depending
on
the number of shares issued and the purpose, terms and conditions of the
issuance. Stockholders have no preemptive rights to subscribe to additional
shares when issued, which means they do not have the right to purchase shares
in
any future issuance of Common Stock in order to maintain their proportionate
equity interests in OXIS. Stockholders also are not entitled to dissenters’
rights with respect to the proposed amendment to the Second Restated Certificate
of Incorporation. .
The
increase in the authorized number of shares of Common Stock and the subsequent
issuance of such shares could have the effect of delaying or preventing a change
of control of OXIS without further action by the stockholders. Shares of
authorized and unissued Common Stock could (within the limits imposed by
applicable law) be issued in one or more transactions that would make a change
of control of OXIS more difficult, and therefore less likely. The additional
authorized shares could be used to discourage persons from attempting to gain
control of OXIS, by diluting the voting power of shares then outstanding or
increasing the voting power of persons who would support the Board of Directors
in a potential takeover scenario.
In
addition, the increased shares authorized by the proposed amendment could permit
the Board of Directors to issue Common Stock to persons supportive of
management’s position. Such persons might then be in a position to vote to
prevent or delay a proposed business combination that is deemed unacceptable
to
the Board of Directors, although perceived to be desirable by some stockholders.
Any such issuance could provide management with a means to block any vote that
might be used to effect a business combination in accordance with the Second
Restated Certificate of Incorporation.
Although
the Board of Directors will authorize the further issuance of Common Stock
only
when it considers such issuance to be in the best interests of OXIS,
stockholders should recognize that any such issuance of additional stock will
have the effect of diluting the earnings per share and book value per share
of
outstanding shares of Common Stock and the equity and voting rights of holders
of shares of Common Stock.
Vote
Required
The
approval of the amendment of OXIS' Second Restated Certificate of Incorporation
to increase the number of authorized Common Stock requires the affirmative
vote
of (1) the holders of the majority of the outstanding shares of OXIS Common
Stock and (2) the holders of a majority of the outstanding shares of all of
the
Series C Preferred Stock. Consequently, abstentions and broker “non-votes” will
have the effect of a vote against the proposed amendment.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT TO OXIS'
SECOND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED COMMON SHARES (ITEM 2 ON THE ENCLOSED PROXY
CARD).
PROPOSAL
NO. 3: AUTHORIZATION OF AN AMENDMENT OF THE COMPANY’S 2003 STOCK INCENTIVE PLAN
TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE PLAN FROM
3,600,000 SHARES TO 5,600,000 SHARES
The
Board
of Directors and the stockholders of the Company have previously approved the
adoption of the Company’s 2003 Stock Incentive Plan (the “Plan”) and the
reservation of 3,000,000 shares of the Company’s Common Stock for issuance
thereunder. Due
to
the provision of the Plan pursuant to which the number of shares reserved for
issuance under the Plan is automatically increased by 300,000 shares on each
January 1, beginning on January 1, 2005, the number of shares reserved for
issuance under the Plan has increased to 3,600,000 shares of common stock.
On
May 12, 2006, the Board of Directors authorized an amendment to the Plan,
subject to stockholder approval, to increase the shares reserved for issuance
thereunder by a total of 2,000,000 shares, bringing the total number of shares
issuable under the Plan to 5,600,000. At the Annual Meeting, the stockholders
are requested to consider and approve the proposed amendment to the Plan to
increase the number of shares issuable under the Plan to 5,600,000. The Board
of
Directors believes that adopting this amendment to the Plan will help ensure
OXIS’ ability to attract and retain the best available individuals to serve as
employees, officers, directors, consultants, independent contractors and
advisors of OXIS.
The
Company has reserved 2,930,000 shares of its common stock at January 1, 2006
for
issuance under the Plan. The Plan, approved by stockholders at the 2003 Annual
Meeting of Stockholders, permits the Company to grant stock options to acquire
shares of the Company’s common stock, award stock bonuses of the Company’s
common stock, and to grant stock appreciation rights. As of June 2, 2006,
668,270 shares of common stock were available for grant under the Plan and
options to purchase 2,261,730 shares of common stock are outstanding under
the
Plan. Directors and officers of the Company hold options to purchase 2,742,332
shares of common stock, awarded under the Plan and outside of the
Plan.
Summary
of the Plan
The
Plan
permits granting stock options to acquire shares of OXIS’ Common Stock
(“Options”), awarding stock bonuses of OXIS’ Common Stock, selling shares of
OXIS’ Common Stock (collectively, the “Awards”). Both incentive stock options
(“ISOs”) within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the “Code”), and nonqualified stock options (“NQSOs”) may be granted
under the Plan.
Awards
under the Plan are made in the discretion of the Board of Directors or its
designated committee(s) and therefore are not determinable, except for certain
automatic awards to directors of OXIS who are not employees of either OXIS
or a
subsidiary of OXIS (the “Non-Employee Directors”). See “Options—Non-Employee
Director Formula Option Grants,” below. Options granted to any optionee in a
single fiscal year may not cover more than 500,000 shares. The Company has
awarded options outside the Plan when that maximum level has been
met.
A
copy of
the Plan, as amended pursuant to this proposal 3, is attached to this Proxy
Statement as Appendix
B.
Purpose
The
purposes of the Plan are to attract, retain and provide equity incentive to
selected persons to promote the financial success of OXIS. The Board of
Directors believes that it is essential to the future of OXIS that OXIS be
in a
position to grant Awards under a stock incentive plan to selected employees,
officers, directors, consultants, independent contractors and advisors in order
for OXIS to remain competitive in attracting and retaining such individuals.
Administration
The
Plan
is administered by the Board’s Compensation Committee (the “Plan Committee”) and
is comprised of at least two “Non-Employee Directors” within the meaning of Rule
16b-3 adopted under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). The Board of Directors may also appoint a secondary committee
of the Board to administer the Plan with respect to awards to employees,
consultants, independent contractors and advisors who are not considered
officers or directors of OXIS under Section 16 of the Exchange Act. The
interpretation and construction of any provision of the Plan or any related
agreement by the Plan Committee is final and binding. With the exception
discussed below in “Options—Non-Employee Director Formula Option Grants,” the
Plan Committee (with Board approval as necessary) selects the persons to whom
Awards will be granted, determines the type of Award, the number of shares
to be
covered by any Options awarded, the exercise price of any such Options, the
period during which any such Options may be exercised and all other terms and
conditions of Awards.
The
Plan
Committee has the power to modify, extend or renew outstanding options and
to
authorize the grant of new options, respectively, in substitution of options
previously granted. Written consent of the option holder is required to any
action that impairs any rights under any option previously granted.
Annual
Increase in Shares
As
of
January 1 of each year, beginning with the year 2005, the aggregate number
of
options and restricted shares that may be awarded under the Plan will
automatically increase by 300,000 shares.
Eligibility
The
Plan
provides that Awards may be granted to employees, officers, directors,
consultants, independent contractors and advisors of OXIS or any parent,
subsidiary or affiliate of OXIS. ISOs may be granted only to employees
(including officers and directors who are also employees) of OXIS or any parent,
subsidiary or affiliate of OXIS. See “Certain United States Federal Income Tax
Information” below for information concerning the tax treatment of ISOs and
NQSOs.
As
of
December 31, 2005, there were seven directors and former directors of OXIS
(six
of whom are or were Non-Employee Directors) and one OXIS officer (who is not
a
director) eligible to participate in the Plan. There are approximately 2
employees of OXIS and its subsidiaries who are not serving as officers who
are
also eligible to participate in the Plan. It is not possible to estimate the
number of consultants, independent contractors and advisors who are or may
become eligible to participate in the Plan.
Options
Grant
of Options
The
date
of grant of an Option is the date on which the Plan Committee makes the
determination to grant the Option unless a different date is specified by the
Plan Committee. Option grants are evidenced by a written stock option grant.
OXIS will receive no consideration for the granting of Options. Subject to
the
express provisions of the Plan, the exercise of an Option will be subject to
such terms, conditions and restrictions as the Plan Committee may impose in
its
sole discretion, including restrictions concerning transferability, repurchase
and forfeiture.
Options
are exercisable on the terms set forth in the stock option grant; provided
that
no ISO will be exercisable after the expiration of ten years from the Option
grant date, and no ISO granted to an employee who is a ten percent stockholder
of OXIS will be exercisable after the expiration of five years from the Option
grant date. The Plan Committee may accelerate the earliest exercise date of
any
Option. Options will expire following the termination of employment or other
service with OXIS on the terms set forth in the stock option grant.
Stock
option grants will impose a $100,000 limit to the aggregate fair market value
(calculated as set forth in “Option Price” below) of stock with respect to which
ISOs, whether granted under the Plan or any other ISO plan of OXIS or its parent
or subsidiary, are exercisable for the first time by an optionee during any
calendar year. The above limitations are driven by provisions of the Code and
are subject to change in the event that the relevant sections of the Code or
regulations promulgated thereunder are amended.
Option
Price
The
exercise price of a NQSO will be not less than eighty-five percent (85%) of
the
fair market value of the shares underlying the Option on the date the Option
is
granted. A stock option grant for an NQSO may specify an exercise price that
varies in accordance with a predetermined formula while the NQSO is outstanding.
The exercise price of an ISO will be no less than one hundred percent (100%)
of
the fair market value of the shares on the date the Option is granted, unless
the person to whom the Option is granted is a ten percent (10%) stockholder
of
OXIS in which case the exercise price will be not less than one hundred ten
percent (110%) of the fair market value of the shares on the date the Option
is
granted. The Plan Committee has the power, within certain limitations, to reduce
the exercise price of outstanding Options.
For
purposes of the Plan, the fair market value of a share of OXIS’ common stock on
a given date will be the closing price in the over the counter market (Bulletin
Board) on the date of grant, as publicly reported, or the prior trading day
if
the market is closed on the date of grant.
The
method of payment for shares issued upon exercise of Options granted under
the
Plan will be determined by the Plan Committee and may consist of cash,
cancellation of indebtedness, other shares of OXIS Common Stock and certain
other methods permitted by law.
Non-Employee
Director Formula Option Grants
Each
member of the Board of Directors who is not an employee of OXIS or of any
parent, subsidiary or affiliate will receive a one-time grant of an NQSO
covering 30,000 shares on the date he or she first joins the Board of Directors.
Such grants will become exercisable in two equal annual installments, with
the
first installment becoming exercisable immediately and the second installment
becoming exercisable on the first anniversary of the date of grant. Non-Employee
Directors also will receive an annual award of an NQSO covering 5,000 shares
upon the conclusion of each OXIS annual stockholders’ meeting held in the year
2004 and thereafter.
Stock
Bonuses
The
Plan
Committee may award shares under the Plan as stock bonuses for no consideration
or for such minimum consideration as may be required by applicable law in an
amount and form as determined by the Plan Committee. An award of a stock bonus
will be subject to such terms, conditions and restrictions as the Plan Committee
may impose in its sole discretion, including restrictions concerning
transferability, repurchase and forfeiture. The recipient of a stock bonus
must
also satisfy any applicable federal, state or local tax withholding
requirements.
Stock
Sales
The
Plan
Committee may issue shares of OXIS Common Stock under the Plan for such amount
(no less than par value) and form of consideration as determined by the Plan
Committee. A stock sale under the Plan will be subject to such terms, conditions
and restrictions as the Plan Committee may impose in its sole discretion,
including restrictions concerning transferability, repurchase or forfeiture.
The
purchaser must also satisfy any applicable federal, state or local tax
withholding requirements.
Adjustment
Upon Changes in Capitalization and Corporate Transactions
In
the
event that the number of outstanding shares of Common Stock of OXIS is increased
or decreased by a change in the capital structure of OXIS without consideration,
such as stock splits or dividends, or, if a substantial portion of the assets
of
OXIS are distributed without consideration to the stockholders of OXIS in a
spin-off or similar transaction, appropriate adjustments will be made in the
number or kind of shares available for Awards under the Plan, the number or
kind
of shares subject to outstanding Options and the exercise price per share of
such Options.
In
the
event of a merger, consolidation, or similar occurrence where OXIS is not the
surviving corporation, or the sale of all or substantially all of the assets
of
OXIS, outstanding Awards will be subject to the agreement of merger and
reorganization. Such an agreement may provide for the continuation, assumption
or substitution of outstanding awards, the acceleration of vesting of
outstanding awards, or settlement of the full value of outstanding awards
followed by cancellation of such awards.
Plan
Amendment and Termination
Except
as
described below, the Board of Directors may amend the Plan at any time or may
terminate the Plan without stockholder approval. The Plan will remain in effect
until terminated by the Board of Directors, provided, however that no ISOs
may
be awarded under the Plan on or after the 10th anniversary of the later of
the
date the Board of Directors adopted the Plan or the date when the Board of
Directors adopted the most recent increase in the number of shares available
for
issuance under the Plan that was approved by the stockholders of OXIS.
Stockholder
approval is required for amendments to the Plan to the extent required by
applicable laws, regulations or rules. Amendments that require stockholder
approval include any amendment that increases the total number of shares for
which Awards may be granted, extends the duration of the Plan, extends the
period during and over which Options may be exercised under the Plan, or changes
the class of persons eligible to receive awards granted under the Plan (except
as may be required to comport with changes in the Code, ERISA or regulations
promulgated thereunder).
Certain
United States Federal Income Tax Information Regarding Options
Options
granted under the Plan may be either ISOs, as defined in Section 422 of the
Code, or NQSOs.
Incentive
Stock Options
If
an
Option granted under the Plan is an ISO, the optionee will recognize no income
as a result of the ISO grant and will incur no income tax liability at the
time
of exercise unless the optionee is subject to the alternative minimum tax.
OXIS
will not be allowed a deduction for federal income tax purposes as a result
of
the exercise of the ISO regardless of the applicability of the alternative
minimum tax. Upon the sale or exchange of the shares at least two years after
the grant of the option and one year after receipt of the shares by the
optionee, any gain will be treated as long-term capital gain. If these holding
periods are not satisfied, the optionee will recognize ordinary income equal
to
the difference between the exercise price and the lower of the fair market
value
of the stock at the date of option exercise or the sale price of the stock.
OXIS
will be entitled to a deduction in the same amount as the ordinary income
recognized by the optionee.
Nonqualified
Stock Options
All
Options that do not qualify as ISOs under the Code are NQSOs. Generally, an
optionee will not recognize any taxable income at the time the optionee is
granted a NQSO. However, upon exercise of the Option, the optionee will
recognize ordinary income for income tax purposes equal to the excess of the
then fair market value of the shares over the exercise price. The income
recognized by an optionee who is also an employee of OXIS will be subject to
tax
withholdings by OXIS by payment in cash or out of the current earnings paid
to
the optionee. OXIS will be allowed a deduction for federal tax purposes in
an
amount equal to the income recognized by the optionee so long as OXIS has met
all applicable withholding requirements and so long as the exercise of the
option by optionee does not cause OXIS to violate the limits on executive
compensation set forth in Section 162(m) of the Code. If the optionee holds
such
shares for more than one year following exercise of the option, any gain
realized upon disposition will be treated as long-term capital gain. If the
shares are sold within one year after the exercise date, any gain realized
upon
disposition will be treated as short-term capital gain. The gain realized upon
disposition will be the excess, if any, of the sales price over the tax basis
of
the shares.
Tax
Summary Only
The
foregoing summary of the effect of federal income taxation upon the optionee
and
OXIS with respect to the purchase of OXIS’ shares under the Plan does not
purport to be complete, and reference should be made to the applicable
provisions of the Code. In addition, the summary does not discuss the provisions
of the income tax laws of any municipality, state, or foreign country.
Options
Received by Certain Persons
Options
granted under the Plan to
certain individuals and groups of individuals since the inception of the Plan
are set forth below:
New
Plan Benefits under 2003 Stock Incentive Plan
|
Name
and Position
|
|
Number of
Common
Shares
Underlying
Grant
|
|
|
Executive
officers included in Summary Compensation Table:
|
|
|
|
|
Steven
T. Guillen
|
|
500,000
|
|
|
Marvin
S. Hausman, M.D.
|
|
174,695
|
|
|
Nominees
for election as directors, excluding Steven Guillen and Marvin
Hausman:
|
|
|
|
|
S.
Colin Neill
|
|
235,000
|
|
|
Gary
M.
Post
|
|
30,000
|
|
|
John
E.
Repine
|
|
60,000
|
|
|
All
current executive officers, as a group
|
|
650,000
|
|
|
All
current directors who are not executive officers, as a
group
|
|
683,730
|
|
|
All
employees, excluding executive officers, as a group
|
|
800,000
|
|
Stockholder
Rights
The
recipient of an Award will have no rights as a stockholder of OXIS with respect
to any shares underlying such Award until the date such recipient is issued
a
stock certificate for such shares of OXIS.
Vote
Required
The
approval of the amendment of the Plan requires the affirmative vote of the
holders of a majority of the shares of Common Stock and Series C Preferred
Stock
present in person or represented by Proxy. Consequently, abstentions will have
the effect of a vote against the proposed amendment.
THE
BOARD, OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THIS
AMENDMENT TO THE COMPANY’S 2003 STOCK INCENTIVE PLAN AS HEREIN DISCUSSED IN
PROPOSAL NO. 3. UNLESS OTHERWISE DIRECTED BY A STOCKHOLDER, PROXIES WILL BE
VOTED “FOR” ADOPTION OF THIS AMENDMENT OF THE 2003 STOCK INCENTIVE
PLAN.
EXECUTIVE
OFFICERS
The
names
of the Company’s executive officers, their ages and positions as of June 2, 2006
are set forth in the following table and paragraphs:
|
Name
|
Age
|
Position
|
|
Steven
T. Guillen
|
55
|
President
and Chief Executive Officer
|
|
Michael
D. Centron
|
51
|
Vice
President and Chief Financial
Officer
|
Steven
T. Guillen
See
“Proposal No. 1, Nominees to the Board” for the biography of Mr. Guillen.
Michael
D. Centron
Michael
Centron has served as Vice President and Chief Financial Officer since January
2006. Prior to joining OXIS, Mr. Centron served in various positions at Large
Scale Biology Corporation from 1988 to 2005 including Vice President of Finance
and Administration, Treasurer and Controller. On
January 9, 2006, Large Scale Biology Corporation filed a voluntary petition
for
protection under Chapter 11 of the United States Bankruptcy Code in the United
States Bankruptcy Court for the Eastern District of California. Mr.
Centron is a certified public accountant and received his B.S. in economics
from
the Wharton School of the University of Pennsylvania and his M.B.A. from the
Haas School of the University of California, Berkeley.
EXECUTIVE
COMPENSATION AND RELATED INFORMATION
Our
compensation and benefits program is designed to attract, retain and motivate
employees to operate and manage our company for the best interests of its
constituents. Executive compensation is designed to provide incentives for
those
senior members of management who bear responsibility for our goals and
achievements. The compensation philosophy is based on a base salary and a stock
option program.
Summary
Compensation Table
The
following table summarizes the compensation earned by our Chief Executive
Officer and our Chief Financial Officer, all acting in such capacities as of
December 31, 2005, (collectively referred to as the “Named Executive Officers”).
No other individuals served in any capacity as executive officers
for us
with salary and bonus in excess of $100,000 during 2005. The aggregate amount
of
perquisites and other personal benefits, securities or properties received
by
each Named Executive Officer was less than either $50,000 or 10% of the total
annual salary and bonus reported for each respective Named Executive Officer
in
each year reported below.
| |
|
|
|
|
|
Long-Term
|
|
|
|
| |
|
|
|
Annual
Compensation
|
|
Compensation
Awards
|
|
|
|
|
Name
and Principal Position
|
|
Year
|
|
Salary
|
|
Other
|
|
Securities
Underlying Options
|
|
|
|
|
Steven
T. Guillen (1)
|
|
|
2005
|
|
$
|
209,000
|
|
$
|
5,000(2
|
)
|
|
1,100,000
|
|
$
|
2,000
(3
|
)
|
|
President,
Chief Executive
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
Officer
and Director
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Marvin S. Hausman (4)
|
|
|
2005
|
|
|
|
)
|
|
15,000(6
|
)
|
|
613,000
(7
|
)
|
|
|
|
|
Chairman
of the Board,
|
|
|
2004
|
|
|
|
)
|
|
|
|
|
50,000
(7
|
)
|
|
|
|
|
Acting
Chief Financial Officer,
|
|
|
2003
|
|
|
|
|
|
|
|
|
16,695
(7
|
)
|
|
|
|
|
former
Acting Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Mr.
Guillen was appointed President, Chief Executive Officer and Director
on
February 28, 2005.
|
|
(2)
|
Includes
$5,000 for car allowance.
|
|
(3)
|
Includes
$2,000 for matching contribution under our 401(k) plan.
|
|
(4)
|
Dr.
Hausman served as Acting Chief Executive Officer from December
8, 2004 to
February 28, 2005 and as Acting Chief Financial Officer from December
8,
2004 until January 6, 2006. Dr. Hausman remains Chairman of the
Board of
Directors.
|
|
(5)
|
Dr.
Hausman did not receive a cash salary for his services as Chairman
and
Acting President, Chief Executive Officer and Chief Financial Officer
in
either 2004 or 2005. See Director Compensation below for Dr. Hausman’s
compensation as a director.
|
|
(6)
|
Dr.
Hausman earned $15,000 pursuant to a consulting agreement with
NW Medical
Research Partners, Inc. Dr. Hausman is the sole member and manager
of NW
Medical Research Partners.
|
|
(7)
|
Includes
stock option grants as a director and
consultant.
|
Stock
Option Grants in 2005
The
following table summarizes information regarding stock options granted to Named
Executive Officers during 2005.
|
Name
|
|
Number
of
Common Shares
Underlying
Options
Granted
|
|
Percent
of Total
Options
Granted
to
Employees
in
2005
(1)
|
|
Exercise
Price
(2)
|
|
Expiration
Date
|
|
|
Steven
T. Guillen
|
|
|
600,000
(3
500,000
(4
|
)
)
|
|
23.0
19.2
|
%
%
|
$
$
|
0.40
0.29
|
|
|
February
28, 2015
December
27, 2015
|
|
|
Marvin
S. Hausman, M.D.
|
|
|
5,000
(5
108,000
(6
500,000
(7
|
)
)
)
|
|
0.2
4.1
19.2
|
%
%
%
|
$
$
$
|
0.34
0.37
0.29
|
|
|
June
21, 2015
October
4, 2015
December
27, 2015
|
|
__________________
|
(1)
|
Based
upon a total of 2,608,000 stock options granted to all employees
in
2005.
|
|
(2)
|
Exercise
prices of granted stock options are equal to the closing price
of our
common stock on the date prior to the date of grant.
|
|
(3)
|
Common
shares numbering 150,000 are exercisable on February 28, 2005 and
150,000
common shares are exercisable annually thereafter.
|
|
(4)
|
Common
shares numbering 200,000 are exercisable on December 28, 2005 and
75,000
common shares are exercisable annually thereafter.
|
|
(5)
|
Common
shares are exercisable on June 22, 2006.
|
|
(6)
|
Common
shares numbering 9,000 are exercisable on October 5, 2005 and 9,000
common
shares are exercisable monthly thereafter.
|
|
(7)
|
Common
shares numbering 300,000 are exercisable on February 27, 2007,
and 100,000
common shares are exercisable on each of December 28, 2007 and
December
28, 2008.
|
Aggregated
Options Exercised during 2005 and Year-End Option Values
The
following table summarizes information regarding stock options exercised by
the
Named Executive Officers in 2005 and the value of unexercised “in-the-money”
options they held at December 31, 2005.
| |
|
Shares
of Common Stock Acquired
|
|
Value
|
|
Number
of Securities Underlying Unexercised Options at
December
31, 2005
|
|
Value
of Unexercised
In-the-Money
Options at
December
31, 2005 (3)
|
|
|
Name
|
|
on
Exercise
|
|
Realized
|
|
Exercisable
|
|
Unexercisable
|
|
Exercisable
|
|
Unexercisable
|
|
|
Steven
T. Guillen
|
|
|
—
|
|
|
—
|
|
|
350,000
|
|
|
750,000
(1
|
)
|
|
—
|
|
|
—
|
|
|
Marvin
S. Hausman, M.D.
|
|
|
—
|
|
|
—
|
|
|
111,195
|
|
|
598,500
(2
|
)
|
$
|
1,200
|
|
|
—
|
|
|
(1)
|
Options
for 150,000 shares of common stock became exercisable on February
28, 2006
and annually for two years thereafter. Options for 75,000 shares
of common
stock become exercisable on December 28, 2006 and annually for
three years
thereafter.
|
|
(2)
|
Options
for 12,500 shares of common stock become exercisable on October
12, 2006.
Options for 5,000 shares of common stock become exercisable on
June 22,
2006. Options for 9,000 shares of common stock became exercisable
on
January 5, 2006 and monthly for 8 months thereafter. Options for
300,000
shares of common stock become exercisable on February 27, 2007.
Options
for 100,000 shares of common stock become exercisable on December
28, 2007
and December 28, 2008.
|
|
(3)
|
In-the-money
options represents unexercised options having a per share exercise
price
below $0.26, the closing price of our common stock at December
31, 2005.
The value of unexercised in-the-money options equals the number
of
in-the-money options multiplied by the excess of $0.26 over the
per-share
exercise prices of the options. The value of unexercised in-the-money
options at December 31, 2005, may never be realized by the option
holders.
|
Employment
Contracts, Termination of Employment Arrangements and Change of Control
Agreements
Marvin
S.
Hausman, M.D. did not enter into an Employment Agreement with OXIS concerning
his services as Acting Chief Executive Officer and Acting Chief Financial
Officer.
On
February 28, 2005, we entered into a Letter Agreement, effective as of February
28, 2005, with Steven T. Guillen. The terms of the Letter Agreement include,
but
are not limited to, the following: (1) Mr. Guillen will serve as our President
and Chief Executive Officer; (2) Mr. Guillen’s initial annual base salary will
be $250,000, subject to annual salary and performance reviews and potential
salary increases at the sole discretion of the Board; (3) Mr. Guillen will
be
eligible for a performance-based bonus determined at the discretion of the
Board, the range of which is expected to be between 25% and 50% of Mr. Guillen’s
annual base salary, depending upon the attainment of certain goals to be
mutually agreed upon between Mr. Guillen and the Board; (4) Mr. Guillen has
received irrevocable stock option grants in the aggregate amount of 600,000
shares of our common stock under the OXIS 2003 Stock Incentive Plan, or the
Plan, and pursuant to a standalone grant outside of the Plan; (5) The options
have an exercise price per share equal to $0.40; (6) Mr. Guillen will be
entitled to full vesting of the then-unvested shares subject to the irrevocable
stock option grants upon a Change of Control (as defined in the Letter
Agreement) to include, (i) a merger, consolidation, or reorganization approved
by our stockholders, unless securities representing more than (50%) of the
total
combined voting power of the voting securities of the successor company are
immediately thereafter beneficially owned, directly or indirectly, and in
substantially the same proportion, by the persons who beneficially owned our
outstanding voting securities immediately prior to such transaction, or (ii)
any
stockholder-approved transfer or any other disposition of all of our assets,
or
(iii) the acquisition, directly or indirectly, by any person or related group
of
persons (other than OXIS or a person that directly or indirectly controls,
is
controlled by, or is under common control of, OXIS), of beneficial ownership
(within the meaning of Rule 13d of the 1934 Act) of securities possessing more
than (50%) of the total combined voting power of our outstanding securities
pursuant to a tender or exchange offer made directly to our stockholders, or
(iv) a change in the composition of the Board such that (a) five or more Board
members resign or are otherwise removed as Board members within any period
of
six consecutive months or less; (b) five or more Board members opt not to stand
for re-election to the Board within any period of six consecutive months or
less; or (c) any combination of the foregoing subsections occur such that five
or more Board member positions are affected by a combination of resignations
or
removals, or the decision not to stand for re-election, within any period of
six
consecutive months or less, or upon Mr. Guillen’s termination of his employment
with our company for “good reason” (as defined in the Letter Agreement); (7) Mr.
Guillen purchased 600,000 fully-vested shares of our common stock, at the
then-current market price of $0.40 per share from the pool of shares reserved
in
the Plan; (8) Mr. Guillen has become a member of the Board; and (9) as further
described and qualified in the Letter Agreement, Mr. Guillen will be entitled
to
receive certain severance benefits, including payments equal to one month of
his
base salary for a period of 12 months, in the event that: (i) OXIS terminates
his employment without “cause” (as defined in the Letter Agreement), (ii) within
twelve months after a Change of Control, Mr. Guillen terminates his employment
with “good reason” (as defined in the Letter Agreement) or (iii) Mr. Guillen’s
employment terminates as a result of his death or disability.
On
January 6, 2006, we and Michael D. Centron signed a Letter Agreement outlining
the basic terms of his employment with OXIS as Vice President and Chief
Financial Officer. Under the terms of the Letter Agreement, Mr. Centron will
receive a base salary of $150,000 per year with eligibility for a twenty percent
performance based annual bonus. In addition, Mr. Centron was granted a ten
year
incentive stock option to purchase 150,000 shares of common stock of OXIS at
an
exercise price of $0.30 per share. The stock option grant will vest as follows:
25% vest immediately, 25% vest on January 6, 2007, 25% vest on January 6, 2008
and 25% vest on January 6, 2009. Mr. Centron will be entitled to receive certain
severance payments and benefits in the event that OXIS terminates his employment
without “cause”, as defined in the Letter Agreement, if Mr. Centron terminates
his employment with “good reason”, as defined in the Letter Agreement, within
twelve months after a change of control (as defined in OXIS’ 2003 Incentive
Stock Plan), or in the event that Mr. Centron’s employment terminates as a
result of his death or disability (any of the foregoing being a “Severance
Termination”). In the event of a Severance Termination, Mr. Centron will receive
a payment equal to three months of his then effective base salary. In addition,
the exercise period for any options vested as the termination date will be
extended until the later of January 6, 2011 or the third anniversary of the
termination date, provided however that no exercise of options will be allowed
after the expiration of their term.
Equity
Compensation Plans Information
The
Company’s equity compensation plans are fully described in our Annual Report on
Form 10-KSB for the year ended December 31, 2005. The Company maintains the
2003
Stock Incentive Plan (the "Plan"), which has been approved by the Company's
stockholders. The Company’s 1994 Stock Incentive Plan (the “1994 Plan”)
permitted the Company to grant stock options to acquire shares of the Company’s
common stock, award stock bonuses of the Company’s common stock, and grant stock
appreciation rights. The 1994 Plan expired on April 30, 2003 and no further
issuances will occur. Information related to our equity compensation plans
as of
December 31, 2005, is set forth below.
|
Plan
Category
|
|
Number
of Securities to
be
Issued Upon Exercise of Outstanding Options,
Warrants
and Rights
(a)
|
|
Weighted-Average
Exercise Price of Outstanding Options, Warrants and
Rights
(b)
|
|
Number
of Securities
Remaining
Available for Future Issuance Under
Equity
Compensation Plans (Excluding Securities Reflected in Column
(a)
(c)
|
|
|
Equity
compensation plans approved
by security holders (1)
|
|
|
4,874,352
|
|
$
|
0.70
|
|
|
493,270
|
|
|
Equity
compensation plans not approved
by security holders (2)
|
|
|
1,503,438
|
|
$
|
0.26
|
|
|
--
|
|
|
Total
|
|
|
6,377,790
|
|
|
|
|
|
493,270
|
|
|
(1)
|
As
of December 31, 2005, we have granted options to purchase 2,136,730
shares
of common stock under our 2003 Stock Incentive Plan and 2,737,622
shares
of common stock under the 1994 Stock Incentive Plan. Our 1994 Stock
Incentive Plan terminated on April 30, 2004 and no additional grants
may
be made under that plan. As approved by stockholders, we may grant
additional options to purchase up to 493,270 shares of common stock
under
our 2003 Stock Incentive Plan. The number of shares reserved for
issuance
pursuant to options under the 2003 Stock Incentive Plan was increased
by
300,000 shares on January 1, 2006 pursuant to an evergreen provision
in
the stock option plan. Those additional share reserves are not included
in
the above numbers.
|
|
(2)
|
We
have granted an aggregate of 1,503,438 options to officers, directors,
consultants and advisors outside of our 1994 Stock Incentive Plan
and our
2003 Stock Incentive Plan on a case by case basis at the discretion
of the
Board of Directors.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information known by us with respect to
the
beneficial ownership of our common stock as of June 2, 2006 by (i) each person
who is known by us to own beneficially more than 5% of common stock, (ii) each
of the our Chief Executive Officer and our Chief Financial Officer, all acting
in such capacities as of December 31, 2005, (iii) each of our directors and
(iv)
all of our current officers and directors as a group. Except as otherwise listed
below, the address of each person is c/o OXIS International, Inc.,
323
Vintage Park Drive, Suite B, Foster City, California 94404.
The
percentage of shares beneficially owned is based on 42,588,397 shares of common
stock outstanding as of June 2, 2006. Shares of common stock subject to stock
options and warrants that are currently exercisable or exercisable within 60
days of June 2, 2006 are deemed to be outstanding for the purpose of computing
the percentage ownership of that person but are not treated as outstanding
for
the purpose of computing the percentage ownership of any other person. Unless
indicated below, the persons and entities named in the table have sole voting
and sole investment power with respect to all shares beneficially owned, subject
to community property laws where applicable.
| |
|
|
|
|
|
|
Name
and, as Appropriate, Address of Beneficial Holder
|
|
Amount and Nature
of Beneficial Ownership
|
|
Percent of
Common
Stock
|
|
|
Axonyx,
Inc.
500
7th
Avenue, 10th
Floor
New
York, NY 10018 (1)
|
|
|
15,139,212
|
|
|
35.5
|
%
|
|
Bristol
Investment Fund, Ltd.
Bristol
Capital Advisors, LLC
10990
Wilshire Blvd., Suite 1410
Los
Angeles, CA 90024 (2)
|
|
|
7,735,850
|
|
|
16.7
|
%
|
|
Silverback
Asset Management, LLC
1414
Raleigh Road, Suite 250
Chapel
Hill, NC 27517 (3)
|
|
|
3,301,888
|
|
|
7.4
|
%
|
|
Silverback
Master Ltd.
c/o
Silverback Asset Management, LLC
1414
Raleigh Road, Suite 250
Chapel
Hill, NC 27517 (4)
|
|
|
2,830,190
|
|
|
6.4
|
%
|
|
Marvin
S. Hausman, M.D. (5)
|
|
|
15,318,407
|
|
|
35.8
|
%
|
|
S.
Colin Neill (6)
|
|
|
14,092,567
|
|
|
33.0
|
%
|
|
Steven
T. Guillen (7)
|
|
|
1,100,000
|
|
|
2.6
|
%
|
|
Timothy
C. Rodell, M.D. (8)
|
|
|
383,737
|
|
|
*
|
|
|
John
E. Repine, M.D. (9)
|
|
|
29,400
|
|
|
*
|
|
|
Gary
M. Post
|
|
|
42,000
|
|
|
*
|
|
|
Executive
officers and directors as a group - 7 persons (11)
|
|
|
16,983,544
|
|
|
38.7
|
%
|
|
(1)
|
Based
on a Schedule 13D/A filed with the SEC on March 5, 2004, filed
on behalf
of Axonyx and Dr. Hausman. Pursuant to the Schedule 13D/A Axonyx
has sole
voting power as to 13,982,567 and (with a correction to the number
of
shares reported in such Schedule 13D/A as being held by Dr. Hausman)
shared voting power as to 15,139,212 shares. In addition, Axonyx
has sole
dispositive power as to 13,982,567 shares and (with a correction
to the
number of shares reported in such Schedule 13D/A as being held
by Dr.
Hausman) shared dispositive power as to 15,139,212 shares. Axonyx
in the
Schedule 13D/A disclaims beneficial ownership of Dr. Hausman’s shares.
|
|
(2)
|
Bristol
Investment Fund, Ltd.’s holdings include 3,867,925 shares of common stock,
warrants to purchase 1,933,963 shares of common stock at a price
of $0.66
per share and warrants to purchase 1,933,962 shares of common stock
at a
purchase price of $1.00 per share. Paul Kessler, manager of Bristol
Capital Advisors, LLC, the investment advisor to Bristol Investment
Fund,
Ltd., has voting and investment control over the securities held
by
Bristol Investment Fund, Ltd. Mr. Kessler disclaims beneficial
ownership
of these securities.
|
|
(3)
|
Silverback
Asset Management, LLC. Based on a Schedule 13G filed with the SEC
on
February 14, 2006 on behalf of Silverback Asset Management, LLC,
Silverback Master Ltd. and Elliott Bossen. OXIS believes that the
holdings
of Silverback Asset Management, LLC include 1,415,095 shares of
common
stock, warrants to purchase 707,548 shares of common stock at a
price of
$0.66 per share and warrants to purchase 707,547 shares of common
stock at
a purchase price of $1.00 per share held by Silverback Master Ltd.
and
include warrants to purchase 235,849 shares of common stock at
a price of
$0.66 per share and warrants to purchase 235,849 shares of common
stock at
a purchase price of $1.00 per share held by Silverback Life Sciences
Master Fund Ltd. OXIS believes that Silverback Asset Management,
LLC has
shared voting power as to 1,415,095 shares of common stock and
1,415,095
shares subject to warrants held by Silverback Master Ltd. and warrants
to
purchase 235,849 shares of common stock at a price of $0.66 per
share and
warrants to purchase 235,849 shares of common stock at a purchase
price of
$1.00 per share held by Silverback Life Sciences Master Fund Ltd.
Silverback Asset Management, LLC (“SAM”) serves as investment manager to
Silverback Master Ltd. and Silverback Life Sciences Master Fund
Ltd. In
that capacity, SAM may be deemed to be the beneficial owner of
securities
held by Silverback Master Ltd. and Silverback Life Sciences Master
Fund
Ltd. SAM disclaims beneficial ownership of the securities held
by
Silverback Master Ltd. and Silverback Life Sciences Master Fund
Ltd.
Elliot Bossen is the sole Managing Member of SAM and is primarily
responsible for the investment decisions of SAM. Elliot Bossen
disclaims
beneficial ownership of the securities held by Silverback Master
Ltd. and
Silverback Life Sciences Master Fund Ltd.
|
|
(4)
|
Silverback
Master Ltd. Based on a Schedule 13G filed with the SEC on February
14,
2006 on behalf of Silverback Asset Management, LLC, Silverback
Master Ltd.
and Elliott Bossen. Pursuant to the Schedule 13G, Silverback Master
Ltd.’s
holdings include 1,415,095 shares of common stock, warrants to
purchase
707,548 shares of common stock at a price of $0.66 per share and
warrants
to purchase 707,547 shares of common stock at a purchase price
of $1.00
per share. Silverback Asset Management, LLC (“SAM”) serves as investment
manager to Silverback Master Ltd. and Silverback Life Sciences
Master Fund
Ltd. In that capacity, SAM may be deemed to be the beneficial owner
of
securities held by Silverback Master Ltd. and Silverback Life Sciences
Master Fund Ltd. SAM disclaims beneficial ownership of the securities
held
by Silverback Master Ltd. and Silverback Life Sciences Master Fund
Ltd.
Elliot Bossen is the sole Managing Member of SAM and is primarily
responsible for the investment decisions of SAM. Elliot Bossen
disclaims
beneficial ownership of the securities held by Silverback Master
Ltd. and
Silverback Life Sciences Master Fund Ltd.
|
|
(5)
|
The
holdings of Marvin S. Hausman, M.D. include 1,156,645 shares of
common
stock and 179,195 shares issuable upon exercise of options that
are
exercisable currently or within 60 days of June 2, 2006 and 13,982,567
shares held by Axonyx Inc. Dr. Hausman has sole dispositive power as to
1,156,645 shares and shared dispositive power as to 15,139,212
shares,
including 13,982,567 shares held by Axonyx Inc. Dr. Hausman is
a director
of Axonyx Inc. Dr. Hausman in the Schedule 13D/A disclaims beneficial
ownership of Axonyx’s shares.
|
|
(6)
|
The
holdings of S. Colin Neill include 110,000 shares issuable upon
exercise
of options that are exercisable currently or within 60 days of
June 2,
2006, and 13,982,567 shares held by Axonyx because of Mr. Neill’s
continuing relationship with Axonyx. Mr. Neill is an executive
officer of
Axonyx. Mr. Neill disclaims beneficial ownership of the shares
owned by
Axonyx, except for his proportional interest therein, if any.
|
|
(7)
|
The
holdings of Steven T. Guillen include 600,000 shares of common
stock and
500,000 shares issuable upon exercise of options that are exercisable
currently or within 60 days of June 2, 2006.
|
|
(8)
|
The
holdings of director Timothy C. Rodell include 1,000 shares of
common
stock and 382,737 shares issuable upon exercise of options that
are
exercisable currently or within 60 days of June 2,
2006.
|
|
(9)
|
The
holdings of director John E. Repine include 29,400 shares issuable
upon
exercise of options that are exercisable currently or within 60
days of
June 2, 2006.
|
|
(10)
|
The
holdings of director Gary M. Post include 15,000 shares issuable
upon
exercise of options and 27,000 shares issuable upon exercise of
a warrant
that are exercisable currently or within 60 days of June 2, 2006.
|
|
(11)
|
The
holdings of the executive officers and directors as a group include
an
aggregate 15,740,212 shares of common stock and 1,216,332 shares
issuable
upon exercise of options and 27,000 shares issuable upon exercise
of a
warrant that are exercisable currently or within 60 days of June
2, 2006.
|
| |
|
Series
C Preferred Stock
The
following table sets forth certain information, as of June 2, 2006, with
respect
to persons known by us to be the beneficial owner of more than five percent
(5%)
of the OXIS Series C Preferred Stock.
| |
|
|
|
|
|
|
Name
and Address
|
|
Amount and Nature
of Beneficial Ownership
|
|
Percent of
Class
(1)
|
|
|
American
Health Care Fund, L.P.
|
|
|
|
|
|
|
|
|
2748
Adeline, Suite A
|
|
|
|
|
|
|
|
|
Berkeley,
CA 94703 (1)
|
|
|
77,000
|
|
|
80
|
%
|
|
Megapolis
BV
|
|
|
|
|
|
|
|
|
Javastraaat
10
|
|
|
|
|
|
|
|
|
2585
The Hague, Netherlands (1)
|
|
|
19,230
|
|
|
20
|
%
|
|
(1)
|
As
required by regulations of the SEC, the number of shares in the
table
includes shares which can be purchased within 60 days, or, shares
with
respect to which a person may obtain voting power or investment
power
within 60 days. Also required by such regulations, each percentage
reported in the table for these individuals is calculated as though
shares
which can be purchased within 60 days have been purchased by the
respective person or group and are outstanding.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Engagement
Letter with Ambient Advisors, Affiliate of a Member of the Board of
Directors
On
May
12, 2006, OXIS entered into an Engagement Letter with Ambient Advisors LLC.
Gary
M. Post, a member of the Board of Directors, is the manager of Ambient Advisors
LLC. Pursuant to the Engagement Letter, Ambient Advisors will provide certain
services pertaining to strategic planning, investor communications and financing
strategies or other projects at the request of the Chief Executive Officer
of
OXIS for a one year period, thereafter on a month to month basis. Ambient
Advisors will receive monthly compensation in the amount of $5,000. As part
of
the compensation under the Engagement Letter, OXIS granted Ambient Advisors
a
ten year common stock purchase warrant to purchase 108,000 shares of OXIS
common
stock at an exercise price of $0.39 per share, with 9,000 warrant shares
becoming exercisable each month over the term of the agreement.
Consulting
Agreement with Chairman of the Board of Directors
On
November 17, 2005, we entered into a Consulting Agreement with NW Medical
Research Partners, Inc. Marvin Hausman, M.D., Chairman of the Board of Directors
of OXIS, is the sole member and manager of NW Medical Research Partners.
Dr.
Hausman has previously been the interim Chief Executive Officer and interim
Chief Financial Officer of OXIS. Dr. Hausman is a member of the Board of
Directors and a former President and Chief Executive Officer of Axonyx Inc.
Axonyx currently holds approximately 33% of the issued and outstanding shares
of
OXIS. Pursuant to the Consulting Agreement Marvin Hausman will provide certain
consulting services pertaining to licensing of intellectual property,
development of potential products and financing activities or other projects
at
the request of the Chief Executive Officer of OXIS for a one year period,
renewable for a second year. Dr. Hausman will receive monthly compensation
in
the amount of $5,000. For any hours Dr. Hausman works in addition to 20 hours
per month up to a limit of 50 hours per month, he will be paid hourly
compensation in the amount of $500 per hour. Dr. Hausman is also compensated
with the grant of a stock option to purchase 108,000 shares of OXIS common
stock
at an exercise price of $0.37 per share, with 9,000 options vesting each
month
over the term of the agreement. Dr. Hausman will be reimbursed for his
healthcare insurance.
Consulting
Agreement with Acting Chief Operating Officer
Manus
O’Donnell, our former Acting Chief Operating Officer received monthly cash
compensation from OXIS under a consulting agreement dated May 28, 2004 with
the
following principal terms: (i) an engagement of Mr. O’Donnell extending 2-3
months subject to change as developments occur, (ii) payments to Mr. O’Donnell
of $25,000 per month, and (iii) termination of the Agreement by either party
on
one week’s notice. Subsequently, on October 14, 2004, a follow on consulting
agreement was entered into with Mr. O’Donnell under which his consulting
services were extended until February 28, 2005 when Steve Guillen was hired
as
Chief Executive Officer, and, in addition to the continued payments of $25,000
per month, Mr. O’Donnell was granted a stock option to purchase 100,000 shares
of common stock at $0.59 per share. Currently, following the hiring of a
full-time Chief Executive Officer, Mr. O’Donnell remains available to provide
services to OXIS when needed.
Letter
Agreement with President and Chief Executive Officer
On
February 28, 2005, we entered into the Letter Agreement with Steven T. Guillen
as described under “Employment Agreements.”
On
March
10, 2006, OXIS entered into a Promissory Note, or Note, with
Steven T. Guillen, the President and Chief Executive Officer of OXIS. Pursuant
to the terms of the Note, Mr. Guillen is lending OXIS $200,000 with interest
to
accrue at annual rate of 7.0%. No payments of interest or principal are required
prior to the maturity date. The maturity date of the Note is the earlier
of
September 10, 2006 or, at the option of Mr. Guillen, the date
OXIS
receives net proceeds in the amount of $500,000 or more from a debt or equity
financing. In addition, if, at any time on or before the maturity date, OXIS
enters into an agreement to incur debt, Mr. Guillen has the right to rollover
this Note into such debt arrangement, on the same terms and conditions offered
to such future lenders. The obligation to pay all unpaid principal and accrued
interest will be accelerated upon an event of default, including the bankruptcy
of OXIS or related events. The purpose of this loan is to provide the
corporation with short term financing as it seeks longer term
financing.
Axonyx
Loan
On
June
1, 2004, we secured a $1,200,000 loan from Axonyx, or Axonyx Loan. To evidence
the Axonyx Loan, we issued to Axonyx a one-year secured promissory note bearing
interest at an annual rate of 7%. Under the terms of the Axonyx Loan, OXIS
promised to pay Axonyx $1.2 million plus accrued interest upon the receipt
by
OXIS of at least $2,000,000 in net proceeds from a debt or equity offering.
The
closing of a transaction where OXIS sold securities in a private placement,
or
the Private Placement Transaction, triggered repayment of its indebtedness
under
the Axonyx Loan. On January 6, 2005 after the closing of the Private Placement
Transaction, OXIS repaid its indebtedness under the Axonyx Loan in full by
paying to Axonyx $1,222,380.82.
COMPLIANCE
UNDER SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
The
members of the Board of Directors, our executive officers and persons who
hold
more than 10% of our outstanding common stock are subject to the reporting
requirements of Section 16(a) of the Securities Exchange Act of 1934, as
amended, which require them to file reports with respect to their ownership
of
our common stock and their transactions in such common stock. Based solely
upon
the review of the Forms 3, 4 and 5 furnished to the Company and certain
representations made to the Company, the Company believes that during 2004,
all
members of the Board of Directors, our executive officers and person(s) who
hold
more than 10% of our outstanding common stock timely filed all reports required
to be filed pursuant to Section 16(a) of the Securities Exchange Act of 1934
with respect to transactions in equity securities of the Company.
INDEPENDENT
PUBLIC ACCOUNTANTS
Williams
& Webster, P.S. has served as the Company’s independent accountants since
2002. On March 29, 2006, the Audit Committee approved the continued appointment
of Williams & Webster, P.S., independent auditors, to audit the accounts of
the Company for the 2006 fiscal year.
The
Audit
Committee intends to meet with Williams & Webster, P.S. in 2006 on a
quarterly or more frequent basis. At such times, the Audit Committee will
review
the services performed by Williams & Webster, P.S., as well as the fees
charged for such services.
A
representative of Williams & Webster, P.S. is not expected to be present at
the Annual Meeting, but is expected to be available by telephone.
Principal
Auditor Fees and Services
Audit
Fees
We
incurred aggregate fees and expenses of $51,000 and $59,000, respectively,
from
our independent registered public accounting firm, Williams & Webster, P.S.
for the fiscal years 2005 and 2004 annual audit and for review of OXIS
consolidated financial statements included in its Forms 10-QSB for the 2005
and
2004 fiscal years. In addition, we incurred fees of $62,000 from Williams
&
Webster, P.S. for the audit and review of our subsidiary, BioCheck, for the
years ended December 31, 2003, 2004 and 2005.
Audit
Related Fees
We
incurred aggregate fees and expenses of approximately $16,000 from Williams
& Webster, P.S. during 2005 related to the filing of SEC Form SB-2 and other
SEC matters.
Tax
Fees
We
incurred aggregate fees and expenses of $6,500 from Williams & Webster, P.S.
during each of the fiscal years 2005 and 2004 for professional services rendered
for tax compliance, tax advice and tax planning.
All
Other Fees
None.
OTHER
MATTERS
Our
Board
of Directors knows of no other business, which will be presented at the Annual
Meeting. If any other business is properly brought before the Annual Meeting,
proxies in the enclosed form will be voted in respect thereof in accordance
with
the recommendations of management.
PROXY
SOLICITATION
The
Company will pay reasonable expenses incurred in forwarding proxy material
to
the beneficial owners of shares and in obtaining the written instructions
of
such beneficial owners. This Proxy Statement and the accompanying materials,
in
addition to being mailed directly to stockholders, will be distributed through
brokers, custodians, nominees and other like parties to beneficial owners
of
shares of Common Stock. The Company will bear the expenses of calling and
holding the Annual Meeting and the soliciting of proxies therefor.
The
Company may consider the engagement of a proxy solicitation firm. Our directors,
officers and employees may also solicit proxies by mail, telephone and personal
contact. They will not receive any additional compensation for these
activities.
STOCKHOLDER
PROPOSALS FOR 2007 ANNUAL MEETING
Deadline
for receipt of stockholder proposals for the 2007 Annual Meeting of Stockholders
Proposals
of our stockholders that are intended to be included in our proxy statement
and
presented by such stockholders at our 2007 Annual Meeting of Stockholders
must
be received no later than April 3, 2007. Stockholders wishing to nominate
directors or propose other business at the 2007 Annual Meeting of Stockholders,
but not intending to include such nomination or proposal in the Company’s proxy
statement for such meeting, must give advance written notice to the Company
pursuant to our bylaws. Our bylaws provide that notice of any such nomination
or
proposal must be received at our principal executive offices not less than
120
days prior to the date of the 2007 Annual Meeting of Stockholders and must
contain the information specified by our bylaws. If this notice is not timely,
then the nomination or proposal will not be brought before the 2007 Annual
Meeting of Stockholders.
ANNUAL
REPORT
A
copy of
our Annual Report on Form 10-KSB, including its financial statements for
the
year ended December 31, 2005, has been mailed concurrently with this Proxy
Statement to all stockholders entitled to notice of and to vote at the Annual
Meeting. The
financial
statements for the year ended December 31, 2005, Item 6 “Management’s Discussion
and Analysis or Plan of Operation,” and Item 8 “Changes in and Disagreements
With Accountants on Accounting and Financial Disclosure” of our Annual Report on
Form 10-KSB are
incorporated into this Proxy Statement.
|
By
Order of the Board of Directors
/s/
S. Colin Neill
|
|
S.
Colin Neill
Secretary
|
June
15,
2006
OXIS
INTERNATIONAL, INC.
Annual
Meeting of Stockholders—August 1, 2006
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned hereby appoints Michael D. Centron and Steven T. Guillen, and
each
of them, as proxies of the undersigned, with full power to appoint substitutes,
and hereby authorizes them to represent and to vote all shares of stock
of OXIS
International, Inc. which the undersigned is entitled to vote, as specified
on
the reverse side of this card at the Annual Meeting of Stockholders of
OXIS
International, Inc. (the "Meeting") to be held on August 1, 2006, at 9:30
a.m.
local time, at the Company’s executive offices, 323 Vintage Park Drive, Suite B,
Foster City, California 94404, and at any adjournment or postponement thereof.
WHEN
THIS PROXY IS PROPERLY EXECUTED, THE SHARES TO WHICH THIS PROXY RELATES
WILL BE
VOTED AS SPECIFIED AND, IF NO SPECIFICATION IS MADE, WILL BE VOTED FOR
ALL
NOMINEES FOR DIRECTORS IN PROPOSAL 1, FOR PROPOSAL 2, FOR PROPOSAL 3 AND
FOR
PROPOSAL 4, AND THIS PROXY AUTHORIZES THE ABOVE DESIGNATED PROXIES TO VOTE
IN
THEIR DISCRETION ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING
OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF TO THE EXTENT AUTHORIZED BY
RULE
14a-4(c) PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
| |
|
|
|
SEE REVERSE SIDE
|
(CONTINUED
AND TO BE SIGNED ON REVERSE
SIDE)
|
SEE REVERSE SIDE
|
| |
|
|
1. ELECTION
OF DIRECTORS:
Nominees:
(01)
Marvin S. Hausman, M.D.
(02)
Steven T. Guillen
(03)
S. Colin
Neill
(04)
John E. Repine, M.D.
(05)
Gary M. Post
o FOR
ALL NOMINEES
o WITHHELD
ALL NOMINEES
o For
all
nominees except as noted below:
____________________________________________________________
|
2.
|
Authorization
of an amendment of the Company’ Certificate of Incorporation to increase
the number of authorized shares of common stock from 95,000,000
t0
150,000,000:
|
FOR
o AGAINST
o ABSTAIN
o
|
3.
|
Authorization
of an amendment of the Company’s 2003 Stock Incentive Plan to increase the
number of shares reserved for issuance under the Plan from 3,600,000
shares to 5,600,000 shares.
|
FOR
o AGAINST
o ABSTAIN
o
| 4. |
To
transact such other business as may properly come before the Annual
Meeting or at any adjournments or postponements
thereof.
|
Mark
here
for address change and note at left o
Mark
here
if you plan to attend the
meeting
o
______________________________________________________________________________
PLEASE
MARK, DATE, SIGN AND MAIL THIS PROXY PROMPTLY
IN THE
RETURN ENVELOPE ENCLOSED.
______________________________________________________________________________
If
stock
is held jointly, signature should include both names. If stock is held by
executors, administrators, trustees, guardians and others signing in a
representative capacity, please give full title. If stock is held by a
corporation, please sign in full corporate name and give name and title of
authorized officer. If stock is held by a partnership, please sign in
partnership name by authorized person.
Signature:
______________________ ___________, 2006
Signature:
______________________ ___________, 2006
Appendix
A
OXIS
INTERNATIONAL, INC.
AUDIT
COMMITTEE CHARTER
Purpose
The
Audit
Committee is appointed by the Board of Directors (the “Board”) of OXIS
International, Inc. (the “Company”) to assist the Board in fulfilling its
responsibility to oversee the quality and integrity of the accounting,
auditing,
and reporting practices of the Company, the Company’s compliance with legal and
regulatory requirements, and any other duty the Board directs.
The
Audit
Committee shall prepare the report required by the rules of the Securities
and
Exchange Commission (the “SEC”) to be included in the Company’s annual proxy
statement.
Upon
adopting written procedures in accordance with applicable SEC rules, the
Audit
Committee shall constitute the Company’s qualified legal compliance committee
(the “QLCC”), as defined in Rule 205.2(k) promulgated under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”).
Audit
Committee Membership
The
Audit
Committee shall consist of at least three members. The Audit Committee
members
shall meet the applicable independence and experience requirements of Section
10A(m)(3) of the Exchange Act and the rules and regulations of the SEC.
The
Company intends, by this Charter, that at least one Committee member be
an
“audit committee financial expert” as that term is defined in the SEC’s
applicable rules. During periods of time when and if the Committee membership
does not comply with this requirement, the Company will disclose that fact
and
explain why no such expert serves on the Committee.
The
Board
will appoint the members of the Audit Committee. Audit Committee members
may be
replaced by the Board.
Audit
Committee Meetings
The
Audit
Committee shall meet as often as it determines, but not less frequently
than
quarterly. The Audit Committee shall meet periodically with management,
the
internal auditors and the independent auditor. The Audit Committee may
request
any Company officer or employee, or the Company’s outside legal counsel or
independent auditor to attend an Audit Committee meeting, or to meet with
any
members of, or consultants to, the Audit Committee.
Audit
Committee Authority and Responsibilities
The
Audit
Committee shall have the sole authority to appoint or replace the independent
auditor (subject, if applicable, to stockholder ratification). The Audit
Committee shall be directly responsible for the compensation and oversight
of
the work of the independent auditor (including resolving disagreements
between
management and the independent auditor regarding financial reporting) for
the
purpose of preparing or issuing an audit report or related work. The independent
auditor shall report directly to the Audit Committee.
The
Audit
Committee shall preapprove all auditing services and permitted non-audit
services (including the fees and terms thereof) to be performed for the
Company
by its independent auditor, subject to the de minimus exceptions for non-audit
services described in Section 10A(i)(I)(B) of the Exchange Act that are
approved
by the Audit Committee before the audit is complete. The Audit Committee
may
form and delegate authority to
A-1
subcommittees
consisting of one or more Audit Committee members when appropriate, including
the authority to grant preapprovals of audit and permitted non-audit services,
provided that decisions of any subcommittee to grant preapprovals shall
be
presented to the full Audit Committee at its next scheduled meeting.
The
Audit
Committee shall have the authority, to the extent it deems necessary or
appropriate, to retain independent legal, accounting or other advisors.
The
Company shall provide for appropriate funding, as determined by the Audit
Committee, to compensate the independent auditor for rendering or issuing
an
audit report and to any advisors employed by the Audit Committee.
The
Audit
Committee shall make regular reports to the Board. The Audit Committee
shall
review and reassess the adequacy of this Audit Committee Charter annually
and
recommend any proposed changes to the Board for approval. The Audit Committee
shall annually review the Audit Committee’s own performance.
The
Audit
Committee, to the extent it deems necessary or appropriate, shall:
Financial
Statement and Disclosure Matters
|
1.
|
|
Review
and discuss with management and the independent auditor (as a
committee,
and not just the Chair) the annual audited financial statements,
including
disclosures made in Management’s Discussion and Analysis, and recommend to
the Board whether the audited financial statements should be
included in
the Company’s Form 10-K.
|
|
2.
|
|
Review
and discuss with management and the independent auditor the Company’s
quarterly financial statements prior to filing its Form 10-Q,
including
the results of the independent auditor’s review of the quarterly financial
statements.
|
|
3.
|
|
Discuss
with management and the independent auditor significant financial
reporting issues and judgments made in connection with preparing
the
Company’s financial statements, including any significant changes in
the
Company’s selection or application of accounting principles, any major
issues as to the adequacy of the Company’s internal controls and any
special steps adopted in light of material control deficiencies.
|
|
4.
|
|
Review
and discuss quarterly reports from the independent auditors on:
|
|
|
(a)
|
|
All
critical accounting policies and practices to be used.
|
|
|
(b)
|
|
All
alternative treatments of financial information within generally
accepted
accounting principles (“GAAP”) that have been discussed with management,
ramifications of using those alternative disclosures and treatments,
and
the treatment preferred by the independent auditor.
|
|
|
(c)
|
|
Other
material written communications between the independent auditor
and
management, such as any management letter or schedule of unadjusted
differences.
|
|
5.
|
|
Discuss
with management the Company’s earnings press releases, including the use
of “pro forma” or “adjusted” non-GAAP information, as well as financial
information and earnings guidance provided to analysts and rating
agencies. Such discussion may be done generally (consisting of
discussing
the types of information to be disclosed and the types of presentations
to
be made).
|
|
6.
|
|
Discuss
with management and the independent auditor the effect of regulatory
and
accounting initiatives as well as off-balance sheet structures
on the
Company’s financial statements.
|
|
7.
|
|
Discuss
with management the Company’s major financial risk exposures and the steps
management has taken to monitor and control those exposures,
including the
Company’s risk assessment and risk management policies.
|
A-2
|
8.
|
|
Discuss
with the independent auditor the matters required to be discussed
by
Statement on Auditing Standards No. 61 relating to the conduct
of the
audit, including any difficulties encountered in the course of
the audit
work, any restrictions on the scope of activities or access to
requested
information, and any significant disagreements with management.
|
|
9.
|
|
Review
disclosures made to the Audit Committee by the Company’s Chief Executive
Officer and Chief Financial Officer during their certification
process for
the Form 10-K and Form 10-Q about any significant deficiencies
in the
design or operation of internal controls or material weaknesses
therein
and any fraud involving management or other employees who have
a
significant role in the Company’s internal controls.
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Oversight
of the Company’s Relationship with the Independent Auditor
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10.
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Obtain
and review a report from the independent auditor at least annually
regarding (a) the independent auditor’s internal quality-control
procedures, (b) any material issues raised by the most recent
internal
quality-control review, or peer review, of the firm, or by any
inquiry or
investigation by governmental or professional authorities within
the
preceding five years respecting one or more independent audits
carried out
by the firm, (c) any steps taken to deal with any such issues,
and (d) all
relationships between the independent auditor and the Company,
consistent
with Independence Standards Board Standard No. 1. Evaluate the
qualifications, performance and independence of the independent
auditor,
including considering whether the auditor’s quality controls are adequate
and the provision of permitted non-audit services is compatible
with
maintaining the auditor’s independence, taking into account the opinions
of management and internal auditors. The Audit Committee shall
present its
conclusions with respect to the independent auditor to the Board.
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11.
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Discuss
with the independent auditor any disclosed relationships or services
that
may impact the objectivity and independence of the auditor, and
take, or
recommend that the full Board take, appropriate action to oversee
the
independence of the independent auditor.
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12.
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Ensure
the rotation of the lead (or coordinating) audit partner having
primary
responsibility for the audit and the audit partner responsible
for
reviewing the audit as required by law. Consider whether, in
order to
assure continuing auditor independence, it is appropriate to
adopt a
policy of rotating the independent auditing firm on a regular
basis.
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13.
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Recommend
to the Board policies for the Company’s hiring of employees or former
employees of the independent auditor who participated in any
capacity in
the audit of the Company.
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14.
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Meet
with the independent auditor prior to the audit to discuss the
planning
and staffing of the audit.
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Oversight
of the Company’s Internal Audit Function
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15.
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Review
the appointment and replacement of the senior internal auditing
executive.
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16.
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Review
the significant reports to management prepared by the internal
auditing
department and management’s responses.
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Compliance
Oversight Responsibilities
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17.
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Obtain
assurance from the independent auditor that Section 10A(b) of
the Exchange
Act has not been triggered.
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18.
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Establish
procedures for receiving, retaining and treating complaints received
by
the Company regarding accounting, internal accounting controls
or auditing
matters, and the confidential, anonymous submission by employees
of
concerns regarding questionable accounting or auditing matters.
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A-3
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19.
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Discuss
with management and the independent auditor any correspondence
with
regulators or governmental agencies and any published reports
that raise
material issues regarding the Company’s financial statements or accounting
policies.
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20.
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Discuss
with the Company’s legal counsel any legal matters that may have a
material impact on the financial statements or the Company’s compliance
policies.
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Limitation
of Audit Committee’s Role
While
the
Audit Committee has the responsibilities and powers set forth in this Audit
Committee Charter, it is not the Audit Committee’s duty to plan or conduct
audits or to determine that the Company’s financial statements and disclosures
are complete and accurate, or are in accordance with GAAP and applicable
rules
and regulations. These are the responsibilities of management and the
independent auditor.
Authority
and Responsibilities of the Audit Committee Acting as the QLCC
The
Audit
Committee, acting in its capacity as QLCC, shall:
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1.
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Adopt
written procedures for the confidential receipt, retention and
consideration of any report of evidence of a material violation
under Rule
205.2(k)(2) of the Exchange Act;
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2.
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Inform
the Company’s chief legal officer and chief executive officer (or the
equivalents thereof) of any report of evidence of a material
violation
except in cases of futility as described in Rule 205.3(b)(4)
of the
Exchange Act;
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3.
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Determine
whether an investigation is necessary regarding any report of
evidence of
a material violation by the Company, its officers, directors,
employees or
agents.
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4.
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If
it determines an investigation is necessary or appropriate, then
it shall:
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(i)
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Initiate
an investigation, which may be conducted either by the chief
legal officer
(or the equivalent thereof) or by outside attorneys; and
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(ii)
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Retain
any additional expert personnel the committee deems necessary;
and
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(iii) At
the conclusion of any such investigation, shall:
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(A)
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Recommend,
by majority vote, that the Company implement an appropriate response
to
evidence of a material violation; and
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(B)
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Inform
the chief legal officer and the chief executive officer (or the
equivalents thereof) and the board of directors of the results
of any such
investigation and the appropriate remedial measures to be adopted;
and
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5.
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Have
the authority and responsibility, acting by majority vote, to
take all
other appropriate action, including the authority to notify the
SEC in the
event that the Company fails in any material respect to implement
an
appropriate response that the Audit Committee, acting in its
capacity as
the QLCC, has recommended the Company take.
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The
original Charter dated June 2000. As revised April 16, 2003.
A-4
Appendix
B
2003
Stock Incentive Plan
(As
amended and restated through May 12, 2006)
SECTION
1. INTRODUCTION.
The
Board
adopted the Plan on April 16, 2003 (to be effective July 1, 2003)
for the
purpose of promoting the long-term success of the Company and the
creation of
stockholder value by (a) encouraging Employees, Outside Directors,
Consultants,
Independent Contractors and Advisors to focus on critical long-range
objectives,
(b) encouraging the attraction and retention of Employees, Outside
Directors,
Consultants, Independent Contractors and Advisors with exceptional
qualifications and (c) linking Employees, Outside Directors, Consultants,
Independent Contractors and Advisors directly to stockholder interests
through
increased stock ownership. The Plan seeks to achieve this purpose
by providing
for Awards in the form of Restricted Shares or Options (which may
constitute
incentive stock options or nonstatutory stock options).
The
Plan
shall be governed by, and construed in accordance with, the laws
of the State of
Delaware (except their choice-of-law provisions).
SECTION
2. ADMINISTRATION.
2.1 Committee
Composition. The
Committee shall administer the Plan. The Committee shall consist
exclusively of
two or more directors of the Company, who shall be appointed by the
Board. In
addition, the composition of the Committee shall satisfy:
(a)
Such
requirements as the Securities and Exchange Commission may establish
for
administrators acting under plans intended to qualify for exemption
under Rule
16b-3 (or its successor) under the Exchange Act; and
(b)
Such
requirements as the Internal Revenue Service may establish for outside
directors
acting under plans intended to qualify for exemption under Section
162(m)(4)(C)
of the Code.
2.2 Committee
Responsibilities. The
Committee shall (a) select the Employees, Outside Directors, Consultants,
Independent Contractors and Advisors who are to receive Awards under
the Plan,
(b) determine the type, number, vesting requirements and other features
and
conditions of such Awards, (c) interpret the Plan and (d) make all
other
decisions relating to the operation of the Plan. The Committee may
adopt such
rules or guidelines as it deems appropriate to implement the Plan.
The
Committee’s determinations under the Plan shall be final and binding on all
persons.
2.3 Committee
for Non-Officer Grants. The
Board may also appoint a secondary committee of the Board, which
shall be
composed of one or more directors of the Company who need not satisfy
the
requirements of Section 2.1. Such secondary committee may administer
the Plan
with respect to Employees, Consultants, Independent Contractors and
Advisors who
are not considered officers or directors of the Company under Section
16 of the
Exchange Act, may grant Awards under the Plan to such Employees,
Consultants,
Independent Contractors and Advisors and may determine all features
and
conditions of such Awards. Within the limitations of this Section
2.3, any
reference in the Plan to the Committee shall include such secondary
committee.
SECTION
3. SHARES AVAILABLE FOR GRANTS.
3.1 Basic
Limitation. Common
Shares issued pursuant to the Plan may be authorized but unissued
shares or
treasury shares. The aggregate number of Options and Restricted Shares
awarded
under the Plan shall not exceed (a) five million1
Common
Shares plus (b) the additional Common Shares described in Sections
3.2 and 3.3.
The limitations of this Section 3.1 and Section 3.2 shall be subject
to
adjustment pursuant to Section 9.
3.2 Annual
Increase in Shares. As
of January 1 of each year, commencing with the year 2005, the aggregate
number
of Options and Restricted Shares that may be awarded under the Plan
shall
automatically increase by 300,000 Common Shares.
3.3 Additional
Shares. If
Options are forfeited or terminate for any other reason before being
exercised,
then the corresponding Common Shares shall again become available
for the grant
of Options or Restricted Shares under the Plan. If Restricted Shares
or Common
Shares issued upon the exercise of Options are forfeited, then such
Common
Shares shall again become available for the grant of NSOs and Restricted
Shares
under the Plan. The aggregate number of Common Shares that may be
issued under
the Plan upon the exercise of ISOs shall not be increased when Restricted
Shares
or other Common Shares are forfeited.
SECTION
4. ELIGIBILITY.
4.1 Nonstatutory
Stock Options and Restricted Shares. Only
Employees, Outside Directors, Consultants, Independent Contractors
and Advisors
shall be eligible for the grant of NSOs and Restricted Shares.
4.2 Incentive
Stock Options. Only
Employees who are common-law employees of the Company, a Parent or
a Subsidiary
shall be eligible for the grant of ISOs. In addition, an Employee
who owns more
than 10% of the total combined voting power of all classes of outstanding
stock
of the Company or any of its Parents or Subsidiaries shall not be
eligible for
the grant of an ISO unless the requirements set forth in Section
422(c)(6) of
the Code are satisfied.
SECTION
5. OPTIONS.
5.1 Stock
Option Agreement. Each
grant of an Option under the Plan shall be evidenced by a Stock Option
Agreement
between the Optionee and the Company. Such Option shall be subject
to all
applicable terms of the Plan and may be subject to any other terms
that are not
inconsistent with the Plan. The provisions of the various Stock Option
Agreements entered into under the Plan need not be identical. Options
may be
granted in consideration of a reduction in the Optionee’s other compensation. A
Stock Option Agreement may provide that a new Option will be granted
automatically to the Optionee when he or she exercises a prior Option
and pays
the Exercise Price in the form described in Section 6.2.
1
On May
12, 2006, the Company’s board of directors approved an amendment to the 2003
Stock Incentive Stock Plan increasing the reserved shares by two
million shares,
subject to approval of the Company’s stockholders at the Annual Meeting to be
held on August 1, 2006.
5.2 Number
of Shares. Each
Stock Option Agreement shall specify the number of Common Shares
subject to the
Option and shall provide for the adjustment of such number in accordance
with
Section 9. Options granted to any Optionee in a single fiscal year
of the
Company shall not cover more than 500,000 Common Shares. The limitation
set
forth in the preceding sentence shall be subject to adjustment in
accordance
with Section 9.
5.3 Exercise
Price. Each
Stock Option Agreement shall specify the Exercise Price; provided
that the
Exercise Price under an ISO shall in no event be less than 100% of
the Fair
Market Value of a Common Share on the date of grant and the Exercise
Price under
an NSO shall in no event be less than 85% of the Fair Market Value
of a Common
Share on the date of grant. In the case of an NSO, a Stock Option
Agreement may
specify an Exercise Price that varies in accordance with a predetermined
formula
while the NSO is outstanding.
5.4 Exercisability
and Term. Each
Stock Option Agreement shall specify the date or event when all or
any
installment of the Option is to become exercisable. The Stock Option
Agreement
shall also specify the term of the Option; provided that the term
of an ISO
shall in no event exceed 10 years from the date of grant. A Stock
Option
Agreement may provide for accelerated exercisability in the event
of the
Optionee’s death, disability or retirement or other events and may provide
for
expiration prior to the end of its term in the event of the termination
of the
Optionee’s Service.
5.5 Effect
of Change in Control. The
Committee may determine, at the time of granting an Option or thereafter,
that
such Option shall become exercisable as to all or part of the Common
Shares
subject to such Option in the event that a Change in Control occurs
with respect
to the Company or in the event that the Optionee is subject to an
Involuntary
Termination after a Change in Control. However, in the case of an
ISO, the
acceleration of exercisability shall not occur without the Optionee’s written
consent. In addition, acceleration of exercisability may be required
under
Section 9.3.
5.6 Modification
or Assumption of Options. Within
the limitations of the Plan, the Committee may modify, extend or
assume
outstanding options or may accept the cancellation of outstanding
options
(whether granted by the Company or by another issuer) in return for
the grant of
new options for the same or a different number of shares and at the
same or a
different exercise price. The foregoing notwithstanding, no modification
of an
Option shall, without the consent of the Optionee, alter or impair
his or her
rights or obligations under such Option.
5.7 Buyout
Provisions. The
Committee may at any time (a) offer to buy out for a payment in cash
or cash
equivalents an Option previously granted or (b) authorize an Optionee
to elect
to cash out an Option previously granted, in either case at such
time and based
upon such terms and conditions as the Committee shall establish.
SECTION
6. PAYMENT FOR OPTION SHARES.
6.1 General
Rule. The
entire Exercise Price of Common Shares issued upon exercise of Options
shall be
payable in cash or cash equivalents at the time when such Common
Shares are
purchased, except as follows:
(a) In
the case of an ISO granted under the Plan, payment shall be made
only pursuant
to the express provisions of the applicable Stock Option Agreement.
The Stock
Option Agreement may specify that payment may be made in any form(s)
described
in this Section 6.
(b) In
the case of an NSO, the Committee may at any time accept payment
in any form(s)
described in this Section 6.
6.2 Surrender
of Stock. To
the extent that this Section 6.2 is applicable, all or any part of
the Exercise
Price may be paid by surrendering, or attesting to the ownership
of, Common
Shares that are already owned by the Optionee. Such Common Shares
shall be
valued at their Fair Market Value on the date when the new Common
Shares are
purchased under the Plan. The Optionee shall not surrender, or attest
to the
ownership of, Common Shares in payment of the Exercise Price if such
action
would cause the Company to recognize compensation expense (or additional
compensation expense) with respect to the Option for financial reporting
purposes.
6.3 Exercise/Sale. To
the extent that this Section 6.3 is applicable, all or any part of
the Exercise
Price and any withholding taxes may be paid by delivering (on a form
prescribed
by the Company) an irrevocable direction to a securities broker approved
by the
Company to sell all or part of the Common Shares being purchased
under the Plan
and to deliver all or part of the sales proceeds to the Company.
6.4 Exercise/Pledge. To
the extent that this Section 6.4 is applicable, all or any part of
the Exercise
Price and any withholding taxes may be paid by delivering (on a form
prescribed
by the Company) an irrevocable direction to pledge all or part of
the Common
Shares being purchased under the Plan to a securities broker or lender
approved
by the Company, as security for a loan, and to deliver all or part
of the loan
proceeds to the Company.
6.5 Promissory
Note. To
the extent that this Section 6.5 is applicable, all or any part of
the Exercise
Price and any withholding taxes may be paid by delivering (on a form
prescribed
by the Company) a full-recourse promissory note. However, the par
value of the
Common Shares being purchased under the Plan, if newly issued, shall
be paid in
cash or cash equivalents.
6.6 Other
Forms of Payment. To
the extent that this Section 6.6 is applicable, all or any part of
the Exercise
Price and any withholding taxes may be paid in any other form that
is consistent
with applicable laws, regulations and rules.
SECTION
7. AUTOMATIC OPTION GRANTS TO OUTSIDE DIRECTORS.
7.1 Initial
Grants. Each
new Outside Director shall receive a one-time grant of an NSO covering
30,000
Common Shares. Such NSO shall be granted on the date when such Outside
Director
first joins the Board and shall become exercisable in two equal annual
installments, with the first installment becoming exercisable immediately
upon
grant and the second installment becoming exercisable on the first
anniversary
of the date of grant. An Outside Director who previously was an Employee
shall
not receive a grant under this Section 7.1.
7.2 Annual
Grants. Upon
the conclusion of each regular annual meeting of the Company’s stockholders held
in the year 2004 or thereafter, each Outside Director who will continue
serving
as a member of the Board thereafter shall receive an NSO covering
5,000 Common
Shares, except that such NSO shall not be granted in the calendar
year in which
the same Outside Director received the NSO described in Section 7.1.
NSOs
granted under this Section 7.2 shall become exercisable in full on
the first
anniversary of the date of grant. An Outside Director who previously
was an
Employee shall be eligible to receive grants under this Section 7.2.
7.3 Accelerated
Exercisability. All
NSOs granted to an Outside Director under this Section 7 shall also
become
exercisable in full in the event that:
(a) Such
Outside Director’s Service terminates because of death, total and permanent
disability or retirement; or
(b) The
Company is subject to a Change in Control before such Outside Director’s Service
terminates.
Section
9.3 may also require acceleration of exercisability.
7.4 Exercise
Price. The
Exercise Price under all NSOs granted to an Outside Director under
this Section
7 shall be equal to 100% of the Fair Market Value of a Common Share
on the date
of grant, payable in one of the forms described in Sections 6.1,
6.2 and 6.3.
7.5 Term. All
NSOs granted to an Outside Director under this Section 7 shall terminate
on the
earliest of (a) the 10th anniversary of the date of grant, (b) the
date six
months after the termination of such Outside Director’s Service for any reason
other than death or total and permanent disability or (c) the date
twelve months
after the termination of such Outside Director’s Service because of death or
total and permanent disability.
SECTION
8. RESTRICTED SHARES.
8.1 Restricted
Stock Agreement. Each
grant of Restricted Shares under the Plan shall be evidenced by a
Restricted
Stock Agreement between the recipient and the Company. Such Restricted
Shares
shall be subject to all applicable terms of the Plan and may be subject
to any
other terms that are not inconsistent with the Plan. The provisions
of the
various Restricted Stock Agreements entered into under the Plan need
not be
identical.
8.2 Payment
for Awards. Subject
to the following sentence, Restricted Shares may be sold or awarded
under the
Plan for such consideration as the Committee may determine, including
(without
limitation) cash, cash equivalents, full-recourse promissory notes,
past
services and future services. To the extent that an Award consists
of newly
issued Restricted Shares, the consideration shall consist exclusively
of cash,
cash equivalents or past services rendered to the Company (or a Parent
or
Subsidiary) or, for the amount in excess of the par value of such
newly issued
Restricted Shares, full-recourse promissory notes, as the Committee
may
determine.
8.3 Vesting
Conditions. Each
Award of Restricted Shares may or may not be subject to vesting.
Vesting shall
occur, in full or in installments, upon satisfaction of the conditions
specified
in the Restricted Stock Agreement. A Restricted Stock Agreement may
provide for
accelerated vesting in the event of the Participant’s death, disability or
retirement or other events. The Committee may determine, at the time
of granting
Restricted Shares or thereafter, that all or part of such Restricted
Shares
shall become vested in the event that a Change in Control occurs
with respect to
the Company or in the event that the Participant is subject to an
Involuntary
Termination after a Change in Control.
8.4 Voting
and Dividend Rights. The
holders of Restricted Shares awarded under the Plan shall have the
same voting,
dividend and other rights as the Company’s other stockholders. A Restricted
Stock Agreement, however, may require that the holders of Restricted
Shares
invest any cash dividends received in additional Restricted Shares.
Such
additional Restricted Shares shall be subject to the same conditions
and
restrictions as the Award with respect to which the dividends were
paid.
SECTION
9. PROTECTION AGAINST DILUTION.
9.1 Adjustments. In
the event of a subdivision of the outstanding Common Shares, a declaration
of a
dividend payable in Common Shares or a combination or consolidation
of the
outstanding Common Shares (by reclassification or otherwise) into
a lesser
number of Common Shares, corresponding adjustments shall automatically
be made
in each of the following:
(a) The
number of Options and Restricted Shares available for future Awards
under
Section 3;
(b) The
limitations set forth in Section 5.2;
(c) The
number of Common Shares covered by each outstanding Option; or
(d) The
Exercise Price under each outstanding Option.
In
the
event of a declaration of an extraordinary dividend payable in a
form other than
Common Shares in an amount that has a material effect on the price
of Common
Shares, a recapitalization, a spin-off or a similar occurrence, the
Committee
shall make such adjustments as it, in its sole discretion, deems
appropriate in
one or more of the foregoing. Except as provided in this Section
9, a
Participant shall have no rights by reason of any issuance by the
Company of
stock of any class or securities convertible into stock of any class,
any
subdivision or consolidation of shares of stock of any class, the
payment of any
stock dividend or any other increase or decrease in the number of
shares of
stock of any class.
9.2 Dissolution
or Liquidation. To
the extent not previously exercised, Options shall terminate immediately
prior
to the dissolution or liquidation of the Company.
9.3 Reorganizations. In
the event that the Company is a party to a merger or other reorganization,
outstanding Options and Restricted Shares shall be subject to the
agreement of
merger or reorganization. Such agreement shall provide for (a) the
continuation
of the outstanding Awards by the Company, if the Company is a surviving
corporation, (b) the assumption of the outstanding Awards by the
surviving
corporation or its parent or subsidiary, (c) the substitution by
the surviving
corporation or its parent or subsidiary of its own awards for the
outstanding
Awards, (d) full exercisability or vesting and accelerated expiration
of the
outstanding Awards or (e) settlement of the full value of the outstanding
Awards in cash or cash equivalents followed by cancellation of such
Awards.
SECTION
10. AWARDS UNDER OTHER PLANS.
The
Company may grant awards under other plans or programs. Such awards
may be
settled in the form of Common Shares issued under this Plan. Such
Common Shares
shall be treated for all purposes under the Plan like Restricted
Shares and
shall, when issued, reduce the number of Common Shares available
under Section
3.
SECTION
11. LIMITATION ON RIGHTS.
11.1 Retention
Rights. Neither
the Plan nor any Award granted under the Plan shall be deemed to
give any
individual a right to remain an Employee, Outside Director or Consultant.
The
Company and its Parents, Subsidiaries and Affiliates reserve the
right to
terminate the Service of any Employee, Outside Director or Consultant
at any
time, with or without cause, subject to applicable laws, the Company’s
certificate of incorporation and by-laws and a written employment
agreement (if
any).
11.2 Stockholders’
Rights. A
Participant shall have no dividend rights, voting rights or other
rights as a
stockholder with respect to any Common Shares covered by his or her
Award prior
to the time when a stock certificate for such Common Shares is issued
or, in the
case of an Option, the time when he or she becomes entitled to receive
such
Common Shares by filing a notice of exercise and paying the Exercise
Price. No
adjustment shall be made for cash dividends or other rights for which
the record
date is prior to such time, except as expressly provided in the Plan.
11.3 Regulatory
Requirements. Any
other provision of the Plan notwithstanding, the obligation of the
Company to
issue Common Shares under the Plan shall be subject to all applicable
laws,
rules and regulations and such approval by any regulatory body as
may be
required. The Company reserves the right to restrict, in whole or
in part, the
delivery of Common Shares pursuant to any Award prior to the satisfaction
of all
legal requirements relating to the issuance of such Common Shares,
to their
registration, qualification or listing or to an exemption from registration,
qualification or listing.
SECTION
12. WITHHOLDING TAXES.
12.1 General. To
the extent required by applicable federal, state, local or foreign
law, a
Participant or his or her successor shall make arrangements satisfactory
to the
Company for the satisfaction of any withholding tax obligations that
arise in
connection with the Plan. The Company shall not be required to issue
any Common
Shares or make any cash payment under the Plan until such obligations
are
satisfied.
12.2 Share
Withholding. To
the extent that applicable law subjects a Participant to tax withholding
obligations, the Committee may permit such Participant to satisfy
all or part of
such obligations by having the Company withhold all or a portion
of any Common
Shares that otherwise would be issued to him or her or by surrendering
all or a
portion of any Common Shares that he or she previously acquired.
Such Common
Shares shall be valued at their Fair Market Value on the date when
they are
withheld or surrendered.
SECTION
13. LIMITATION ON PAYMENTS.
13.1 Scope
of Limitation. This
Section 13 shall apply to an Award only if:
(a) The
independent auditors most recently selected by the Board (the “Auditors”)
determine that the after-tax value of such Award to the Participant,
taking into
account the effect of all federal, state and local income taxes,
employment
taxes and excise taxes applicable to the Participant (including the
excise tax
under Section 4999 of the Code), will be greater after the application
of this
Section 13 than it was before the application of this Section 13;
or
(b) The
Committee, at the time of making an Award under the Plan or at any
time
thereafter, specifies in writing that such Award shall be subject
to this
Section 13 (regardless of the after-tax value of such Award to the
Participant).
If
this
Section 13 applies to an Award, it shall supersede any contrary provision
of the
Plan or of any Award granted under the Plan.
13.2 Basic
Rule. In
the event that the Auditors determine that any payment or transfer
by the
Company under the Plan to or for the benefit of a Participant (a
“Payment”)
would be nondeductible by the Company for federal income tax purposes
because of
the provisions concerning “excess parachute payments” in Section 280G of the
Code, then the aggregate present value of all Payments shall be reduced
(but not
below zero) to the Reduced Amount. For purposes of this Section 13,
the “Reduced
Amount” shall be the amount, expressed as a present value, which maximizes
the
aggregate present value of the Payments without causing any Payment
to be
nondeductible by the Company because of Section 280G of the Code.
13.3 Reduction
of Payments. If
the Auditors determine that any Payment would be nondeductible by
the Company
because of Section 280G of the Code, then the Company shall promptly
give the
Participant notice to that effect and a copy of the detailed calculation
thereof
and of the Reduced Amount, and the Participant may then elect, in
his or her
sole discretion, which and how much of the Payments shall be eliminated
or
reduced (as long as after such election the aggregate present value
of the
Payments equals the Reduced Amount) and shall advise the Company
in writing of
his or her election within 10 days of receipt of notice. If no such
election is
made by the Participant within such 10-day period, then the Company
may elect
which and how much of the Payments shall be eliminated or reduced
(as long as
after such election the aggregate present value of the Payments equals
the
Reduced Amount) and shall notify the Participant promptly of such
election. For
purposes of this Section 13, present value shall be determined in
accordance
with Section 280G(d)(4) of the Code. All determinations made by the
Auditors
under this Section 13 shall be binding upon the Company and the Participant
and
shall be made within 60 days of the date when a Payment becomes payable
or
transferable. As promptly as practicable following such determination
and the
elections hereunder, the Company shall pay or transfer to or for
the benefit of
the Participant such amounts as are then due to him or her under
the Plan and
shall promptly pay or transfer to or for the benefit of the Participant
in the
future such amounts as become due to him or her under the Plan.
13.4 Overpayments
and Underpayments. As
a result of uncertainty in the application of Section 280G of the
Code at the
time of an initial determination by the Auditors hereunder, it is
possible that
Payments will have been made by the Company which should not have
been made (an
“Overpayment”) or that additional Payments which will not have been made by the
Company could have been made (an “Underpayment”), consistent in each case with
the calculation of the Reduced Amount hereunder. In the event that
the Auditors,
based upon the assertion of a deficiency by the Internal Revenue
Service against
the Company or the Participant which the Auditors believe has a high
probability
of success, determine that an Overpayment has been made, such Overpayment
shall
be treated for all purposes as a loan to the Participant which he
or she shall
repay to the Company, together with interest at the applicable federal
rate
provided in Section 7872(f)(2) of the Code; provided, however, that
no amount
shall be payable by the Participant to the Company if and to the
extent that
such payment would not reduce the amount which is subject to taxation
under
Section 4999 of the Code. In the event that the Auditors determine
that an
Underpayment has occurred, such Underpayment shall promptly be paid
or
transferred by the Company to or for the benefit of the Participant,
together
with interest at the applicable federal rate provided in Section
7872(f)(2) of
the Code.
13.5 Related
Corporations. For
purposes of this Section 13, the term “Company” shall include affiliated
corporations to the extent determined by the Auditors in accordance
with Section
280G(d)(5) of the Code.
SECTION
14. FUTURE OF THE PLAN.
14.1 Term
of the Plan. The
Plan, as set forth herein, shall become effective on July 1, 2003.
The Plan
shall remain in effect until it is terminated under Section 14.2,
except that no
ISOs shall be granted on or after the 10th anniversary of the later
of (a) the
date when the Board adopted the Plan or (b) the date when the Board
adopted the
most recent increase in the number of Common Shares available under
Section 3
that was approved by the Company’s stockholders.
14.2 Amendment
or Termination. The
Board may, at any time and for any reason, amend or terminate the
Plan. An
amendment of the Plan shall be subject to the approval of the Company’s
stockholders only to the extent required by applicable laws, regulations
or
rules. No Awards shall be granted under the Plan after the termination
thereof.
The termination of the Plan, or any amendment thereof, shall not
affect any
Award previously granted under the Plan.
SECTION
15. DEFINITIONS.
15.1 “Affiliate”
means
any entity other than a Subsidiary, if the Company and/or one or
more
Subsidiaries own not less than 50% of such entity.
15.2 “Award”
means
any award of an Option or a Restricted Share under the Plan.
15.3 “Board”
means
the Company’s Board of Directors, as constituted from time to time.
15.4 “Cause”
shall
mean (a) the unauthorized use or disclosure of the confidential information
or
trade secrets of the Company, which use or disclosure causes material
harm to
the Company, (b) conviction of, or a plea of “guilty” or “no contest” to, a
felony under the laws of the United States or any State thereof,
(c) gross
negligence, (d) willful misconduct or (e) a failure to perform assigned
duties
that continues after the Participant has received written notice
of such failure
from the Board. The foregoing, however, shall not be deemed an exclusive
list of
all acts or omissions that the Company (or the Parent, Subsidiary
or Affiliate
employing the Participant) may consider as grounds for the discharge
of the
Participant without Cause.
15.5 “Change
in Control”
means:
(a) The
consummation of a merger or consolidation of the Company with or
into another
entity or any other corporate reorganization, if persons who were
not
stockholders of the Company immediately prior to such merger, consolidation
or
other reorganization own immediately after such merger, consolidation
or other
reorganization 50% or more of the voting power of the outstanding
securities of
each of (i) the continuing or surviving entity and (ii) any direct
or indirect
parent corporation of such continuing or surviving entity;
(b) The
sale, transfer or other disposition of all or substantially all of
the Company’s
assets;
(c) A
change in the composition of the Board, as a result of which fewer
than 50% of
the incumbent directors are directors who either (i) had been directors
of the
Company on the date 24 months prior to the date of the event that
may constitute
a Change in Control (the “original directors”) or (ii) were elected, or
nominated for election, to the Board with the affirmative votes of
at least a
majority of the aggregate of the original directors who were still
in office at
the time of the election or nomination and the directors whose election
or
nomination was previously so approved; or
(d) Any
transaction as a result of which any person is the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of
securities of the Company representing at least 40% of the total
voting power
represented by the Company’s then outstanding voting securities. For purposes of
this Section 15.5(d), the term “person” shall have the same meaning as when used
in Sections 13(d) and 14(d) of the Exchange Act but shall exclude
(i) a trustee
or other fiduciary holding securities under an employee benefit plan
of the
Company or of a Parent or Subsidiary and (ii) a corporation owned
directly or
indirectly by the stockholders of the Company in substantially the
same
proportions as their ownership of the common stock of the Company.
A
transaction shall not constitute a Change in Control if its sole
purpose is to
change the state of the Company’s incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons
who held
the Company’s securities immediately before such transaction.
15.6 “Code”
means
the Internal Revenue Code of 1986, as amended.
15.7 “Committee”
means
a
committee of the Board, as described in Section 2.
15.8 “Common
Share”
means
one share of the common stock of the Company.
15.9 “Company”
means
OXIS International, Inc., a Delaware corporation.
15.10 “Consultant”
means
a
consultant or adviser who provides bona fide services to the Company,
a Parent,
a Subsidiary or an Affiliate as an independent contractor. Service
as a
Consultant shall be considered employment for all purposes of the
Plan, except
as provided in Section 4.2.
15.11 “Employee”
means
a
common-law employee of the Company, a Parent, a Subsidiary or an
Affiliate.
15.12 “Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
15.13 “Exercise
Price”
means
the amount for which one Common Share may be purchased upon exercise
of an
Option, as specified in the applicable Stock Option Agreement.
15.14 “Fair
Market Value”
means
the market price of Common Shares, determined by the Committee in
good faith on
such basis as it deems appropriate. Whenever possible, the determination
of Fair
Market Value by the Committee shall be based on the prices reported
in The Wall
Street Journal. Such determination shall be conclusive and binding
on all
persons.
15.15 “Involuntary
Termination”
means
the termination of the Participant’s Service by reason of:
(a) The
involuntary discharge of the Participant by the Company (or the Parent,
Subsidiary or Affiliate employing him or her) for reasons other than
Cause; or
(b)
The
voluntary resignation of the Participant following (i) a material
adverse change
in his or her title, stature, authority or responsibilities with
the Company (or
the Parent, Subsidiary or Affiliate employing him or her), (ii) a
material
reduction in his or her base salary or (iii) receipt of notice that
his or her
principal workplace will be relocated by more than 30 miles.
15.16 “ISO”
means
an incentive stock option described in Section 422(b) of the Code.
15.17 “NSO”
means
a
stock option not described in Sections 422 or 423 of the Code.
15.18 “Option”
means
an ISO or NSO granted under the Plan and entitling the holder to
purchase Common
Shares.
15.19
“Optionee”
means
an individual or estate that holds an Option.
15.20 “Outside
Director”
means
a
member of the Board who is not an Employee. Service as an Outside
Director shall
be considered employment for all purposes of the Plan, except as
provided in
Section 4.2.
15.21 “Parent”
means
any corporation (other than the Company) in an unbroken chain of
corporations
ending with the Company, if each of the corporations other than the
Company owns
stock possessing 50% or more of the total combined voting power of
all classes
of stock in one of the other corporations in such chain. A corporation
that
attains the status of a Parent on a date after the adoption of the
Plan shall be
considered a Parent commencing as of such date.
15.22 “Participant”
means
an individual or estate that holds an Award.
15.23 “Plan”
means
this OXIS International, Inc. 2003 Stock Incentive Plan, as amended
from time to
time.
15.24
“Restricted
Share”
means
a
Common Share awarded under the Plan.
15.25 “Restricted
Stock Agreement”
means
the agreement between the Company and the recipient of a Restricted
Share that
contains the terms, conditions and restrictions pertaining to such
Restricted
Share.
15.26 “Service”
means
service as an Employee, Outside Director or Consultant.
15.27 “Stock
Option Agreement”
means
the agreement between the Company and an Optionee that contains the
terms,
conditions and restrictions pertaining to his or her Option.
15.28 “Subsidiary”
means
any corporation (other than the Company) in an unbroken chain of
corporations
beginning with the Company, if each of the corporations other than
the last
corporation in the unbroken chain owns stock possessing 50% or more
of the total
combined voting power of all classes of stock in one of the other
corporations
in such chain. A corporation that attains the status of a Subsidiary
on a date
after the adoption of the Plan shall be considered a Subsidiary commencing
as of
such date.
SECTION
16. EXECUTION.
To
record
the adoption of the Plan by the Board effective as of May 12, 2006, the
Company has caused its duly authorized officer to execute this document
in the
name of the Company.
By: /s/ STEVEN
T.
GUILLEN
Its:
President and Chief Executive Officer
