HUMASCAN INC.
C/O CHRISTOPHER J.M. BLAXLAND
509 COUNTY LINE ROAD
RADNOR, PENNSYLVANIA 19807
--------------------------------
INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF
THE SECURITIES EXCHANGE ACT OF 1934 AND SEC RULE 14F-1
NOTICE OF CHANGE IN THE MAJORITY
OF THE BOARD OF DIRECTORS
JULY 27, 1999
--------------------------------
This Information Statement is being furnished to all holders of record at
the close of business on July 27, 1999 of the common stock, par value $.01 per
share ("Common Stock"), of HumaScan Inc., a Delaware corporation ("Company"), in
accordance with the requirements of Section 14(f) of the Securities Exchange Act
of 1934 ("Exchange Act") and Securities and Exchange Commission ("SEC") Rule
14f-1.
NO VOTE OR OTHER ACTION BY THE COMPANY'S STOCKHOLDERS IS REQUIRED IN
RESPONSE TO THIS INFORMATION STATEMENT. PROXIES ARE NOT BEING SOLICITED.
INTRODUCTION
The Company anticipates that on or about August 6, 1999, the transactions
contemplated by the Agreement and Plan of Reorganization ("Reorganization
Agreement") discussed below will be completed and the Board of Directors of the
Company ("Board") will be reconstituted and fixed at six directors. Effective as
of the closing of the transactions, it is anticipated that Elizabeth E. Tallett,
Jack L. Rivkin, John F. Sasen, Sr. and Udi Toledano will resign as directors of
the Company, and that Marta C. Kollman, Justin Strauss, Donald P. Hateley,
Donald M. Anderson and Gerald L. Olson will be appointed as new directors to
fill the vacancies created by the resignations. Christopher J.M. Blaxland, a
current director of the Company, will remain a director after the closing. The
closing will not occur, and the new directors will not begin their term, until
after the expiration of the ten-day period beginning on the later of the date of
the filing of this Information Statement with the SEC pursuant to Rule 14f-1 or
the date of mailing of this Information Statement to the Company's stockholders.
Because of the change in the composition of the Board, there will be a
change in control of the Company on the date the new directors referred to above
take office.
As of June 30, 1999, the Company had issued and outstanding 8,139,070
shares of Common Stock, the Company's only class of voting securities that would
be entitled to vote for directors at a stockholders meeting if one were to be
held, each share being entitled to one vote.
Please read this Information Statement carefully. It describes the terms of
the Reorganization Agreement and contains certain biographical and other
information concerning the executive officers
<PAGE>
and directors after the closing of the transactions contemplated by the
Reorganization Agreement. Additional information about the Company is contained
in the Company's Report on Form 8-K which is expected to be filed with the SEC
on or about the date this Information Statement is filed with the SEC. The Form
8-K and the accompanying exhibits may be inspected without charge at the public
reference section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549. Copies of this material also may be obtained from the SEC
at prescribed rates. The SEC also maintains a website that contains reports,
proxy and information statements and other information regarding public
companies that file reports with the SEC. Copies of the Form 8-K may be obtained
from the SEC's website at http://www.sec.gov after it is filed.
AGREEMENT AND PLAN OF REORGANIZATION
On July 16, 1999, the Company, together with The New Algae Company, Inc.
("New Algae") and The New Earth Company, Inc. ("New Earth"), who do business
under the name "Cell Tech," and Marta C. Kollman and Daryl J. Kollman, the
shareholders of New Algae and New Earth, entered into an agreement
("Reorganization Agreement") pursuant to which the shareholders of New Algae and
New Earth will exchange 100% of their common stock of New Algae and New Earth
for shares of the Company's Common Stock and the Company's Series B Convertible
Preferred Stock ("Preferred Stock") in the aggregate equal to 94,228,726 shares
of Common Stock. New Algae and New Earth will continue as wholly owned
subsidiaries of the Company.
The Company is presently authorized to issue 25,000,000 shares of Common
Stock, of which 8,139,070 shares are presently outstanding. Because the number
of shares that are to be issued to the Kollmans is to be the equivalent of
94,228,726 shares of Common Stock, at the closing of the transactions
contemplated by the Reorganization Agreement, the Kollmans will be issued a
combination of shares of Common Stock and shares of Preferred Stock that will be
equivalent to the 94,228,726 shares of Common Stock upon conversion of the
Preferred Stock. The Reorganization Agreement contemplates that, after the
closing, the Company will effectuate a reverse stock split in the ratio of
1:10.8520933, at which time the Preferred Stock will be automatically converted.
All references in this Information Statement to numbers of shares of Common
Stock do not take such reverse split into account.
The Reorganization Agreement contemplates that all but one of the current
directors of the Company will resign and that new directors, designated by the
Kollmans, will be appointed by the continuing director of the Company to take
office upon the effective date of such resignations to serve until their
respective successors are elected and qualify.
CHANGE OF CONTROL
As a result of the actions described above under the captions
"Introduction" and "Agreement and Plan of Reorganization," designees of the
Kollmans will constitute a majority of the Board and will control the Company.
Pursuant to the transactions contemplated by the Reorganization Agreement, the
Kollmans may be deemed to beneficially own the equivalent of 94,228,726 shares
of Common Stock, or 92.05% of the shares of the Common Stock to be outstanding
following the closing of the transactions contemplated by the Reorganization
Agreement.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of Common Stock
beneficially owned (a) as of the date of this Information Statement and (b)
after the closing of the transactions contemplated by the Reorganization
Agreement by (1) those persons or groups known to the Company who will
beneficially own more than 5% of the Company's Common Stock, (2) each director
and director nominee, (3) each executive officer whose compensation exceeded
$100,000 in the year ended December 31, 1998, (4) each executive officer of the
Company to assume office after the closing and (5) all directors and executive
officers as a group. The information is determined in accordance with Rule 13d-3
promulgated under the Exchange Act based upon information furnished by the
persons listed or contained in filings made by them with the Securities and
Exchange Commission. Except as indicated below, the stockholders listed possess
sole voting and investment power with respect to their shares.
<TABLE>
<CAPTION>
Current Holdings(1) After Closing(2)
-------------------------------- -----------------------------------
Amount and Amount and Nature
Nature of of
Beneficial Beneficial Percent of
Name of Beneficial Owner Ownership Percent of Class Ownership Class
------------------------ ---------- ----------------- ------------------ --------------
<S> <C> <C> <C> <C>
Christopher J.M. Blaxland 30,000(3) * 30,000(3) *
509 County Line Road
Radnor, PA 19087
- ---------------------------------------------------------------------------------------------------------------------
Kenneth S. Hollander 42,750(4) * 42,750(4) *
16 Fieldstone Road
Califon, NJ 07830
- ---------------------------------------------------------------------------------------------------------------------
Donald B. Brounstein 189,000(5) 2.3% 189,000(5) *
129 Hillcrest Avenue
Summit, NJ 07901
- ---------------------------------------------------------------------------------------------------------------------
Jack L. Rivkin 0 * 0 *
388 Greenwich Street
New York, NY 10013
- ---------------------------------------------------------------------------------------------------------------------
John F. Sasen, Sr. 220,834(6) 2.7% 220,834(6) *
4345 Southpoint Boulevard
Jacksonville, FL 32216
- ---------------------------------------------------------------------------------------------------------------------
Elizabeth E. Tallett 168,000(7) 2.2% 168,000(7) *
48 Federal Twist Road
Stockton, NJ 08559
- ---------------------------------------------------------------------------------------------------------------------
Udi Toledano 184,370(8) 2.2% 1,269,579(8)(9) 1.1%
545 Madison Avenue, Suite 800
New York, NY 10022
- ---------------------------------------------------------------------------------------------------------------------
Travelers Group, Inc. 2,133,854(10) 24.9% 2,133,854(10) 2.0%
388 Greenwich Street
New York, NY 10013
- ----------------------------------------------------------------------------------------------------------------------
Scantek Medical, Inc. 1,451,688(11) 17.0% 1,451,688(11) 1.3%
26 Merry Lane
East Hanover, NJ 07936
- ----------------------------------------------------------------------------------------------------------------------
Daryl J. Kollman and Marta C. Kollman 0 * 94,228,726(12) 86.8%
1300 Main Street
Klamath Falls, OR 97603
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
Current Holdings(1) After Closing(2)
------------------------------- -----------------------------------
Amount and Amount and Nature
Nature of of
Beneficial Beneficial Percent of
Name of Beneficial Owner Ownership Percent of Class Ownership Class
------------------------ ---------- ---------------- ------------------ --------------
<S> <C> <C> <C> <C>
John S. Neubauer(13) 0 * 0 *
- --------------------------------------------------------------------------------------------------------------------
Robert Longo(13) 0 * 0 *
- --------------------------------------------------------------------------------------------------------------------
Justin Strauss(13) 0 * 0 *
- --------------------------------------------------------------------------------------------------------------------
Donald P. Hateley 0 * 3,255,629(14) 3.0%
c/o Hateley & Hampton, P.C.
1800 Century Park East, 6th Floor
Los Angeles, CA 90067-1501
- --------------------------------------------------------------------------------------------------------------------
Donald M. Anderson(13) 0 * 0 *
- --------------------------------------------------------------------------------------------------------------------
Gerald L. Olson(13) 0 * 0 *
- --------------------------------------------------------------------------------------------------------------------
All directors and officers as
a group (7 persons before 789,954(15) 9.1% 97,514,355(16) 87.2%
closing, 8 persons after closing)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
o Less than 1%.
(1) Based on 8,139,070 shares of Common Stock actually outstanding as of the
date of this Information Statement.
(2) Based on 108,520,933 shares of Common Stock potentially outstanding after
the closing, which includes 81,228,726 shares of Common Stock issuable upon
conversion of the Preferred Stock. See "Agreement and Plan of
Reorganization."
(3) Includes 30,000 shares of Common Stock issuable upon exercise of currently
exercisable options held by Mr. Blaxland.
(4) Includes 41,250 shares of Common Stock issuable upon exercise of currently
exercisable options held by Mr. Hollander.
(5) Includes 17,000 shares of Common Stock held by Mr. Brounstein's wife and
son and 72,000 shares issuable upon the exercise of currently exercisable
options and warrants held by Mr. Brounstein.
(6) Includes 28,333 shares of Common Stock issuable upon exercise of currently
exercisable options held by Mr. Sasen. Also includes 56,250 shares held by
Physician Sales & Service, Inc. ("PSS") and 136,250 shares issuable upon
exercise of immediately exercisable warrants held by PSS. Does not include
6,666 shares issuable upon exercise of options held by Mr. Sasen that are
not currently exercisable. Mr. Sasen disclaims beneficial ownership of the
securities held by PSS.
(7) Includes 115,000 shares of Common Stock issuable upon exercise of currently
exercisable options and warrants.
(8) Includes 52,018 shares issuable upon exercise of currently exercisable
options and warrants held by Mr. Toledano. Also includes 50,000 shares of
Common Stock held by Mr. Toledano's wife and 50,477 shares issuable upon
exercise of immediately exercisable warrants held by Mr. Toledano's wife
and a certain trust for the benefit of their minor children ("Toledano
Trust"). Does not include 6,666 shares issuable upon exercise of options
held by Mr. Toledano that are not currently exercisable.
(9) Includes 1,085,209 shares of Common Stock issuable upon exercise of
immediately exercisable options to be issued to designees of Andromeda
Enterprises, Inc. upon the closing. Udi Toledano is the president and,
together with his wife, owns 100% of Andromeda Enterprises, Inc. The
options will be issued as follows: 379,824 to Udi Toledano, 434,078 to Mr.
Toledano's wife, 135,652 to the Toledano Trust and 27,131 to each of
Stephanie Bier Toledano, Gideon Toledano, Judith Green, Robert Lax and
Sandra Evans. Mr. Toledano disclaims beneficial ownership of the shares
underlying the options to be issued to Stephanie Bier Toledano, Gideon
Toledano, Ms. Green, Mr. Lax and Ms. Evans.
(10) Includes 1,440,000 shares of Common Stock held by Travelers Insurance
Company ("TIC"), 343,156 shares issuable upon exercise of immediately
exercisable options and warrants held by TIC, 219,875 shares held by Smith
Barney Worldwide Special Fund, N.V. ("Smith Barney Fund"), 44,135 shares
issuable upon exercise of immediately exercisable warrants held by Smith
Barney Fund, 41,125 shares held by Smith Barney Worldwide Securities, Ltd.
("Smith Barney Securities"), 8,063 shares issuable upon exercise of
immediately exercisable warrants held by Smith Barney Securities and 37,500
shares issuable upon exercise of immediately exercisable warrants held by
Smith Barney Inc. Does not include 6,666 shares issuable upon exercise of
options held by TIC that are not currently exercisable. Smith Barney Inc.
and TIC are both subsidiaries of Travelers Group Inc., and Smith Barney
Securities and Smith Barney Fund are investment funds domiciled outside the
United States for which Smith Barney Inc. acts as sponsor and adviser. None
of Travelers Group Inc., TIC, Smith Barney Inc. or their respective
affiliates has assumed or has any responsibility for the management,
business or operations of the Company or for the statements contained in
this Notice (other than the limited information regarding the stock
ownership of such entities under the caption "Principal Stockholders").
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<PAGE>
(11) Includes 406,000 shares of Common Stock issuable upon exercise of
immediately exercisable warrants held by Scantek Medical, Inc. ("Scantek"),
213,750 shares of Common Stock owned by Zsigmond L. Sagi ("Dr. Sagi"), the
Chairman of the Board and a principal stockholder of Scantek, and 750
shares issuable upon exercise of immediately exercisable options owned by
Dr. Sagi. Does not include 375 shares issuable upon exercise of options
held by Dr. Sagi that are not immediately exercisable. Does not include
200,000 shares of Common Stock and warrants to purchase 30,000 shares of
Common Stock held by Zigmed, Inc. Dr. Sagi's son, Zsigmond G. Sagi, is the
President of Zigmed, Inc.
(12) Includes 81,228,726 shares of Common Stock issuable upon conversion of
Preferred Stock.
(13) The address of the named individual is c/o Cell Tech, 1300 Main Street,
Klamath Falls, OR 97601.
(14) Includes an aggregate of 3,255,629 shares of Common Stock underlying
warrants held by Hateley & Hampton, P.C.
(15) Includes 525,328 shares of Common Stock issuable upon exercise of
immediately exercisable options and warrants held by directors and
executive officers of the Company.
(16) Includes 30,000 shares issuable upon exercise of currently exercisable
options held by Mr. Blaxland, 81,228,726 shares issuable upon conversion of
Preferred Stock held by the Kollmans and 3,255,629 shares underlying
warrants held by Hateley & Hampton, P.C.
DIRECTORS AND EXECUTIVE OFFICERS
The Reorganization Agreement provides that, effective as of the closing of
the transactions contemplated thereby, the Board will be reconstituted and fixed
at six directors. Effective as of the closing, it is anticipated that Elizabeth
E. Tallett, Jack L. Rivkin, John F. Sasen, Sr. and Udi Toledano will resign as
directors of the Company, and that Marta C. Kollman, Justin Strauss, Donald P.
Hateley, Donald M. Anderson and Gerald L. Olson will be appointed as new
directors to fill the vacancies created by the resignations. Christopher J.M.
Blaxland, a current director of the Company, will remain a director after the
closing but will resign as its Chief Executive Officer. The following table sets
forth information regarding the Company's current executive officers and
directors and the proposed executive officers and directors of the Company after
the closing. If any proposed director listed in the table below should become
unavailable for any reason, which is not anticipated by any of the parties to
the Reorganization Agreement, the directors of the Board will vote for any
substitute nominee or nominees who may be selected by the Kollmans prior to the
closing.
CURRENT EXECUTIVE OFFICERS AND DIRECTORS
NAME AGE POSITIONS
---- --- ---------
Elizabeth E. Tallett 50 Chairman of the Board
Christopher J.M. Blaxland 57 President and Chief Executive Officer
Jack L. Rivkin 58 Director
John F. Sasen, Jr. 56 Director
Udi Toledano 49 Director
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<PAGE>
PROPOSED EXECUTIVE OFFICERS AND DIRECTORS AFTER THE CLOSING
NAME AGE POSITIONS
---- --- ---------
Marta C. Kollman 52 President and Chief Executive Officer
and Director
John S. Neubauer 57 Chief Operating Officer
Robert Longo 45 Chief Financial Officer
Justin Strauss 27 Vice President of Marketing, Secretary
and Director
Donald P. Hateley 41 Chairman of the Board
Donald M. Anderson 60 Director
Gerald L. Olson 50 Director
Christopher J.M. Blaxland 57 Director
Elizabeth E. Tallett has been a director of the Company since March 1998
and Chairman of the Board since May 19, 1998, and was President and Chief
Executive Officer of the Company from May 19, 1998 to August 31, 1998. She has
served as President and Chief Executive Officer of Dioscor, Inc., a
biotechnology management company, since March 1996, and President and Chief
Executive Officer of Ellard Pharmaceuticals Inc., a pharmaceutical company
involved in the anti- ulcer field, since July 1997. From 1992 to March 1996 Ms.
Tallett was President and Chief Executive Officer of Transcell Technologies
Inc., a company focused on carbohydrate chemistry. From 1987 to 1992 she was
President of Centocor Pharmaceuticals, a biotechnolgy company focused on
monoclonal antibody-based pharmaceuticals. From 1984 to 1987 she was Director of
Marketing Operations of Parke-Davis, the pharmaceutical division of
Warner-Lambert Company, and a member of the Parke-Davis Executive Committee, and
from 1973 to 1987 she was Director of Worldwide Strategic Planning for
Warner-Lambert Company. Ms. Tallett also serves on the Board of Directors of
Principal Life Insurance Company, Varian Associates Inc., Coventry Health Care
Inc., Integramed America Inc. and Prosperity New Jersey Inc., a not-for-profit
corporation, and is a founding member of the Biotechnology Council of New
Jersey.
Christopher J.M. Blaxland has been President and a director of the Company
since September 1, 1998. He was the President of Cell Pathways, Inc., a company
involved in the development and commercialization of products to prevent and
treat cancer, from September 1993 to December 1997. From February 1992 to August
1993, he was general manager of the Pharmaceutical Division of Greenwich
Pharmaceuticals, Inc. From 1970 to February 1992, he held various positions with
SmithKline Beecham, most recently serving as Vice President, Gastrointestinal
Products.
Jack L. Rivkin has been a director of the Company since May 1996. Mr.
Rivkin has been a Senior Vice President of Travelers Group Inc., the parent
company of TIC and Smith Barney, Inc., since January 1, 1996. He is currently
responsible for the management of venture capital and public
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<PAGE>
equity partnerships for several independent insurance subsidiaries of Travelers
Group Inc. He also is a director and member of the Investment Committee of
Greenwich Street Capital Partners, Inc., a merchant banking fund affiliated with
Travelers Group Inc. From May 1993 to October 1995, he was Vice Chairman and
Director of Global Research at Smith Barney Inc. From August 1992 to May 1993,
he was an independent consultant. From 1990 to August 1992, Mr. Rivkin was
Director of the Equities Division and Director of Research of Lehman Brothers.
From 1987 to 1990, he was Director of Research at Shearson Lehman Brothers. From
1984 to 1987, Mr. Rivkin was President of PaineWebber Capital, Inc., the
merchant banking arm of PaineWebber Group, and Chairman of Mitchell Hutchins
Asset Management. He is the co-author of a book on the venture capital industry,
"Risk and Reward, Venture Capital and the Making of America's Great Industries,"
published by Random House. He also is a guest lecturer on venture capital at
Columbia University.
John F. Sasen, Sr. has been a director of the Company since May 1996. Mr.
Sasen has been Executive Vice President of PSS/World Medical Inc. since April
1998. From March 1997 to April 1998 he was Chief Executive Officer of Physician
Sales and Service, Inc. ("PSS"). He was President of PSS from August 1995 to
March 1997 and Chief Operating Officer of PSS from December 1993 to August 1995,
and has been a director of PSS since July 1993. Mr. Sasen also was Executive
Vice President of PSS from August 1993 to August 1995. From August 1990 to
December 1992, he was Vice President--Sales and Marketing of PSS, and from
January 1993 to July 1993 he was Regional Vice President of PSS. Prior to
joining PSS, Mr. Sasen was Vice President--Sales, Marketing and Distributor
Relations of Becton, Dickinson & Co., a manufacturer of health care products.
Mr. Sasen was employed by Becton, Dickinson & Co. for over 20 years.
Udi Toledano has been a director of the Company since May 1996. Mr.
Toledano has been the President of Andromeda Enterprises, Inc., a private
investment company, since December 1993. Prior to that, he was the President of
CR Capital Inc., a private investment company, for more than five years. He has
also been an advisor to various public and private corporations, none of which
is affiliated with or competes with the Company. Mr. Toledano is a director of
Global Pharmaceutical Corporation, a generic pharmaceuticals manufacturer, and
Universal Stainless & Alloy Products, Inc., a specialty steel producer, each of
which is a public company.
Marta C. Kollman joined New Earth in 1988 and New Algae in 1990 and has
served as their co-founder, Director and President and of related entities since
that time. Prior to joining the Cell Tech Companies, Ms. Kollman also
researched, harvested and marketed algae to consumers. Ms. Kollman was a
business manager and small business owner for several years before co-founding
the Cell Tech Companies. Ms. Kollman has been a member of the Board of Directors
of the Dan O'Brien Foundation since 1995 and has served as its secretary and
treasurer since 1997. In 1997, she also received the Soroptimist International
Award for her outstanding work with women. Ms. Kollman attended the Kathryn
Gibbs Business School in Boston and is the spouse of Daryl Kollman and mother of
Justin Strauss. Ms. Kollman is intended to be nominated as the President and
Chief Executive Officer and a director of the Company.
John S. Neubauer joined the Cell Tech Companies in 1998 as the Chief
Operating Officer. From 1993 to 1997, Mr. Neubauer was a Senior Vice President
of Starlight International, Inc., a diet product distributor in the Network
Marketing industry. Prior to Starlight International, Mr. Neubauer served as
President of J.S. Neubauer & Associates, Inc., a consulting firm specializing in
providing consulting services to Network Marketing companies. Prior to founding
J.S. Neubauer
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<PAGE>
& Associates, Mr. Neubauer was Director of Corporate Finance of the national
accounting firm of Deloitte & Touche, LLP (formerly Deloitte, Haskins & Sells)
for eight years and served as Chief Operating Officer of Herbalife
International, Inc. for two years. Mr. Neubauer has an MBA from Pepperdine
University, a Diploma from the University of Madrid, Madrid, Spain, and a BA
from Ripon College, Ripon, Wisconsin. Mr. Neubauer will be Chief Operating
Officer of the Company.
Robert B. Longo joined the Cell Tech Companies in 1995 and has served as
Chief Financial Officer since that time. Prior thereto, Mr. Longo was associated
with American Cyanamid Company in various financial capacities from 1980 to
1995. Mr. Longo is a Certified Public Accountant and Certified Management
Accountant with eighteen years of diverse financial experience with Fortune
100-size companies. Mr. Longo has a B.S. from Montclair State University and an
MBA from Seton Hall University. Mr. Longo will be Chief Financial Officer of the
Company.
Justin Strauss joined the Cell Tech Companies in 1984 as a Harvest Site
employee where he participated in the design, construction and preparation of
the Cell Tech Companies Harvest Site. In 1989, Mr. Strauss was promoted to
Supervisor of Harvest Site Production and later became the Screening Supervisor
of Production. In 1991, Mr. Strauss became the assistant to the Chief Executive
Officer and from 1992 to 1994 worked in the Marketing department as a Project
Coordinator. In May 1994, he became the Vice President of Sales and was
primarily responsible for the Order Operators and Distributor Services. In
January 1998, Mr. Strauss became the Vice President of Sales and Marketing and
has served in that capacity since that time. Mr. Strauss graduated from the
University of Arizona with a Bachelor of Arts degree in Communications in 1994.
Mr. Strauss is the son of Marta Kollman. Mr. Strauss is intended to be nominated
as the Vice President and Secretary and a director of the Company.
Donald P. Hateley has, since 1994, been the Chief Executive Officer of
InterCap Partners, Incorporated, a boutique investment banking firm located in
Los Angeles, California that specializes in corporate finance and mergers and
acquisitions for middle market companies. Since 1996, Mr. Hateley has also been
the Managing Partner of Hateley & Hampton, a Los Angeles based law firm that
specializes in representing clients on corporate, tax, real estate and
securities issues. Before founding InterCap Partners, Mr. Hateley held positions
with various wall street investment banking firms including Senior Vice
President and Managing Director of Corporate Finance for Beverly Hills-based
J.B. Oxford & Co., Inc. and Santa Monica-based Aeternus Capital Corporation as
well as positions with Bear, Stearns & Co., Inc. and Paine Webber Incorporated.
From 1983 until 1989, Mr. Hateley was the President of The Cambridge Group,
Inc., an NASD broker dealer with offices in Los Angeles, Denver and New York.
Before founding The Cambridge Group, Inc., Mr. Hateley was a senior accountant
with Peat, Marwick, Mitchell & Co., predecessor to KPMG Peat Marwick, in its Los
Angeles office where he worked in the audit and tax departments. Mr. Hateley is
a California licensed attorney, real estate broker and Certified Public
Accountant. Mr. Hateley is intended to be nominated as the Chairman of the Board
of the Company.
Gerald L. Olson has, since 1997, been a Senior Vice President of Colle &
McVoy, a Minneapolis based public relations firm specializing in assisting
corporate clients elevate their issues to federal policymaking levels through
strategic relationships with policymakers, regulators and other influences. From
1993 to 1997, Mr. Olson was President of The Rowland Company, a St. Paul based
public affairs company that specializes in public affairs strategies that
capitalize on corporate product and service innovations as well as corporate
crises resolution without litigation. Mr. Olson
8
<PAGE>
was appointed by President Bush to serve as Assistant Secretary for Legislation
for the U.S. Department of Health and Human Services in Washington, D.C. from
1989 to 1990. In this capacity, Mr. Olson was the liaison for the Department's
issues debated by Congress, including catastrophic health insurance and
Medicare/Medicaid reform. Mr. Olson also served as the Secretary's liaison to
directors of all key Department agencies, including the National Institutes of
Health, Centers for Disease Control, Food and Drug Administration and Social
Security Administration. Mr. Olson is intended to be nominated as a director of
the Company.
Donald Anderson, Ph.D. is the Senior Scientist at the Woods Hole
Oceanographic Institute in Massachusetts and has served in that capacity since
1991. From 1978 to 1991, Dr. Anderson has held various positions with Wood Hole
Oceanographic Institution including Associate Scientist and Postdoctoral
Investigator. Prior to joining Woods Hole Dr. Anderson was an Instructor at
Massachusetts Institute of Technology in its Civil Engineering Department. Dr.
Anderson has been a scientific advisor to the U.S. Delegation to the IOC/FAO
Intergovernmental Panel on Harmful Algal Blooms since 1992 and the Director of
the U.S. National Office on Marine Biotoxins and Harmful Algal Blooms since
1993. Among his many other distinctions, Dr. Anderson was the Director of the
NATO Advanced Study Institute on the Physiological Ecology of Harmful Algal
Blooms and Chairman of SCOR Working Group on Harmful Algal Blooms. In 1993, Dr.
Anderson was the recipient of the Stanley W. Watson Chair for Excellence in
Oceanography. Dr. Anderson is the author of several publications regarding algae
and is the recipient of many other distinguished awards. Dr. Anderson has
received a B.S. in Mechanical Engineering, an M.S. in Civil Engineering and a
Ph.D. in Aquatic Sciences from Massachusetts Institute of Technology. Dr.
Anderson is intended to be nominated as a director of the Company.
During the year ended December 31, 1998, the Board held 18 meetings. The
Board has standing audit and compensation committees but does not have a
nominating committee. The audit committee presently consists of Messrs. Rivkin,
Toledano and Sasen. The audit committee met once during the year ended December
31, 1998. The functions of the audit committee are: (1) to recommend annually to
the Board the appointment of the independent accountants of the Company, (2) to
review with the independent accountants the accounting practices and policies of
the Company, (3) to review with the internal and independent accountants the
overall accounting and financial controls of the Company, (4) to be available to
independent accountants during the year for consultation, and (5) to review
related party transactions by the Company on an ongoing basis and review
potential conflict of interest situations where appropriate. The compensation
committee, consisting of Messrs. Toledano and Rivkin and Ms. Tallett, met one
time during the year ended December 31, 1998. All of the directors attended at
least 75% of the meetings of the Board and meetings of the committees of the
Board on which they served.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities ("ten-percent
stockholders") to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and The Nasdaq Stock Market, Inc. Officers,
directors and ten-percent stockholders also are required to furnish the Company
with copies of all Section 16(a) forms they file. To the Company's knowledge,
based solely on its review of the copies of such forms furnished to it, the
Company believes that all Section 16(a) reporting
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<PAGE>
requirements were complied with by the Company's officers and directors during
the year ended December 31, 1998, except for one report on Form 3 that was
inadvertently filed late by Mr. Blaxland and one report on Form 3 that was
inadvertently filed late by Ms. Tallett.
EXECUTIVE COMPENSATION
The following table shows the cash compensation paid by the Company, as
well as certain other compensation paid or accrued, during the fiscal years
ended December 31, 1998, 1997 and 1996 to the Chief Executive Officers of the
Company and the other executive officers of the Company whose compensation was
$100,000 or greater during the fiscal year ending December 31, 1998 ("Named
Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------------------------
Other Annual
Name and Principal Position Year Salary($) Bonus($) Compensation($) Options(#)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Christopher J.M. Blaxland 1998 $137,019 $ 6,000 (1) 150,000
President and Chief Executive Officer 1997 N/A N/A N/A N/A
(Beginning September 1, 1998) 1996 N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Elizabeth E. Tallett 1998 $35,769 $15,000 (1) 65,000
President and Chief Executive Officer 1997 N/A N/A N/A N/A
(May 19, 1998 through August 31, 1998) 1996 N/A N/A N/A N/A
- --------------------------------------------------------------------------------------------------------------------------
Kenneth S. Hollander 1998 $144,577 $18,375 (1) 10,000
Chief Financial Officer 1997 $94,414 $17,325 (1) 0
1996 $51,923 0 (1) 56,250
- --------------------------------------------------------------------------------------------------------------------------
Donald B. Brounstein 1998 $91,915 0 (1) 0
President and Chief Executive Officer 1997 $152,574 $14,980 (1) 0
(Through May 19, 1998) 1996 $145,000 0 (1) 37,500
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The named individual routinely received or receives other benefits from the
Company, the amounts of which are customary in the industry. The Company
has concluded, after reasonable inquiry, that the aggregate amounts of such
benefits during the year did not exceed the lesser of $50,000 or 10% of the
compensation set forth above as to the named individual.
10
<PAGE>
The following table summarizes the number of shares and the terms of stock
options granted to the Named Executive Officers in the year ended December 31,
1998:
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS DURING YEAR ENDED DECEMBER 31, 1998
----------------------------------------------------------
Individual Grants Potential Realized
--------------------------------- Value at Assumed
Number of % of Total Annual Rates of Stock
Securities Options/SARs Price Appreciation for
Underlying Granted to Exercise or Option Term
Options/SARs Employees in Base Price ----------------------
Name Granted Fiscal Year ($/Share) Expiration Date 5% 10%
- ---- ------------ ------------- ----------- --------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Christopher J.M. Blaxland 150,000 39.8% $0.91 (1) N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Elizabeth E. Tallett 15,000 4.0% $9.09 3/13/08 $ 85,750 $217,307
50,000 13.3% $3.28 5/19/08 $103,139 $261,374
- ------------------------------------------------------------------------------------------------------------------------------------
Kenneth S. Hollander 10,000 2.7% $0.44 (1) N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
Donald B. Brounstein 0 0 0 0 0 0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------
(1) These options terminated in March 1999 as a result of termination of
employment.
The following table sets forth information concerning the number and value
of unexercised options held by each of the Named Executive Officers as of
December 31, 1998.
<TABLE>
<CAPTION>
AGGREGATE YEAR-END OPTION VALUES
(DECEMBER 31, 1998)
- ------------------------------------------------------------------------------------------------------------------
Number of securities underlying Value of unexercised in-the-money
unexercised options at fiscal year-end (#) options at fiscal year-end ($)(1)
------------------------------------------- ----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ---------------- ---------------- ------------- --------------------
<S> <C> <C> <C> <C>
Christopher J.M. Blaxland 30,000(2) 120,000(2) 0 0
- ------------------------------------------------------------------------------------------------------------------
Elizabeth E. Tallett 65,000 0 0 0
- ------------------------------------------------------------------------------------------------------------------
Kenneth S. Hollander 47,750(3) 8,500 0 0
- ------------------------------------------------------------------------------------------------------------------
Donald B. Brounstein 37,500 0 0 0
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------
(1) Represents the difference between the aggregate market value at December
31, 1998 of the Common Stock (based on a last sale price of $0.0625 on that
date) and the options' aggregate exercise price.
(2) These options terminated in March 1999 as a result of termination of
employment.
(3) Options for 45,000 shares terminated in March 1999 as a result of
termination of employment.
EMPLOYMENT AGREEMENTS
The Company terminated its employment agreement with Mr. Blaxland effective
December 22, 1999. See discussion of the employment agreement in the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.
The Company terminated its employment agreement with Kenneth S. Hollander
effective December 22, 1999.
11
<PAGE>
STOCK OPTIONS
1996 Plan. The Company's 1996 Stock Incentive Plan ("1996 Plan") was
adopted by the Company's Board of Directors in June 1996 for the purpose of
securing for the Company and its stockholders the benefits arising from the
ownership of restricted shares of Common Stock ("Restricted Stock"), stock
appreciation rights ("SARs") and options to purchase Common Stock ("Options") by
directors who are not employees ("Eligible Directors") (Messrs. Rivkin, Sasen
and Toledano are currently Eligible Directors), officers, other key employees
and consultants ("Key Employees") of the Company (and any subsidiary companies)
who are expected to contribute to the Company's future growth and success. No
shares of Restricted Stock or SARs have been granted under the 1996 Plan.
Options for 296,200 shares have been issued under the 1996 Plan as of March 23,
1998. No award may be granted under the 1996 Plan after June 2006.
Under the 1996 Plan, the maximum number of shares with respect to which
Options or SARs may be granted or which may be awarded as restricted stock is
700,000 shares of Common Stock. The Company may in its sole discretion grant
shares of Restricted Stock, SARs and Options to Key Employees and shall grant
Options to the Company's Eligible Directors subject to specified terms and
conditions and in accordance with a specified formula ("Formula") as discussed
below. The 1996 Plan is administered by the Board of Directors, which, subject
to the terms of the 1996 Plan, determines the Key Employees who will receive
grants of Options, SARs or Restricted Stock, the number of shares of Common
Stock subject to each Option or SAR or awarded as Restricted Stock, the grant
date, the expiration date, and other terms and conditions.
Under the Formula, each Eligible Director was granted in June 1996 Options
to purchase 15,000 shares of Common Stock at an exercise price equal to the
initial public offering price per share, all of which vested immediately upon
grant ("Initial Director Options"). On the first business day following the
Annual Meeting, and thereafter on the first business day following each
successive annual meeting of stockholders, so long as Options remain available
to grant to Eligible Directors, each person who is elected as a director after
that meeting and is an Eligible Director, and each person who continues to serve
as a director after that meeting and is an Eligible Director, shall be granted
10,000 Options ("Director Options") in recognition of service as a director,
subject to vesting, for the year ending on the day prior to the next annual
meeting of stockholders of the Company to elect directors. Director Options
expire ten years from the date of grant and vest as follows (except for the
Initial Director Options, which vest immediately upon grant): 33-1/3% upon the
grant of such Options, 66-2/3% one year after the date of grant and 100% two
years after the date of grant, in each case assuming the recipient continuously
serves as a director during that time.
Other Options. The Company has issued options outside of the 1996 Plan to
certain officers, directors, employees and consultants to purchase a total of
157,500 shares of Common Stock. Options for 131,250 shares were granted on
February 9, 1996 and have a five-year term and an exercise price of $5.33 per
share. All of such options were fully vested on the date of grant. Options for
11,250 shares were granted as of June 3, 1996, have an exercise price of $5.33
per share and vested in full on April 30, 1997. Options for 15,000 shares were
granted on March 13, 1998, have a ten year term and an exercise price of $8.44
per share and were vested in full on the date of grant.
Five former directors of the Company each were granted 1,500 options
outside the 1996 Plan in September 1996 in replacement of options granted under
the Company's former Nonemployee
12
<PAGE>
Director Stock Incentive Plan which expired as a consequence of such directors'
resignation from the Board in connection with the Company's initial public
offering.
DIRECTOR COMPENSATION
Non-employee members of the Board of Directors are paid $500 (plus
reasonable expenses) for each attended meeting of the Board of Directors or
committee thereof. Non-employee members of the Board of Directors of the Company
also are eligible for the grant of Options under the 1996 Plan which currently
provides for each Eligible Director (currently Messrs. Rivkin, Sasen and
Toledano and Ms. Tallett) to receive the Director Options. Mr. Rivkin is a
nominee of TIC. Mr. Rivkin has waived the $500 fee for attendance at meetings of
the Board of Directors or committees thereof and the Initial Director Options,
the 1997 Director Options and the 1998 Director Options. In lieu thereof, the
Board of Directors in June 1996 granted TIC options outside the 1996 Plan to
purchase 15,000 shares of Common Stock at an exercise price equal to the initial
public offering price and in each of June 1997 and June 1998 granted TIC options
outside the 1996 Plan to purchase 10,000 shares. The Board granted 15,000
options outside the 1996 Plan to Elizabeth E. Tallett in March 1998 in
connection with her election as a director of the Company. All of such options
have a ten year term, an exercise price of $8.44 per share and were vested in
full on the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Elizabeth E. Tallett, who served as President and Chief Executive Officer
from May 19, 1998 through August 31, 1998, is a member of the compensation
committee of the Board of Directors.
REPORT ON EXECUTIVE COMPENSATION
INTRODUCTION
The Compensation Committee of the Board of Directors (the "Committee") is
composed of Messrs. Toledano and Rivkin and Ms. Tallett. The Committee is
responsible for the establishment and oversight of the Company's executive
compensation programs. The following report of the Committee discusses generally
the Company's executive compensation objectives and policies and their
relationship to the Company's performance in 1998.
EXECUTIVE COMPENSATION PHILOSOPHY AND OBJECTIVES
The Company's executive compensation programs were designed to attract,
retain and motivate highly effective executives and to reward sustained
corporate and individual performance with an appropriate base annual salary and
incentive compensation. Until it suspended business operations, the Company
sought to increase management ownership of the Company and to link executive
compensation with stockholder value, achievement of business objectives and
corporate profitability.
The Company's compensation philosophy was to compensate its executive
officers at market-competitive levels for achieving planned performance. Market
comparisons included general industry norms, medical device manufacturers and a
selected group of capital-
13
<PAGE>
intensive companies that were approximately the same size as the Company. More
emphasis was placed on general industry than the medical device industry norms.
COMPENSATION PROGRAM COMPONENTS
Consistent with the Company's executive compensation objectives, the
Company's compensation for its senior management, including the Chief Executive
Officers, consisted of three components: an annual base salary, annual cash
incentive awards and long-term incentive awards. During the year ended December
31, 1998, the Company's compensation of its senior executives consisted of
annual base salary and ownership of the Company's Common Stock.
Annual Base Salary. Base salaries for executive officers were determined
with reference to a salary range for each position. Salary ranges were
determined by evaluating a particular employee's position and comparing it with
what were believed to be representative prevailing norms for similar positions
in similarly sized companies. Within this salary range, an executive's initial
salary level was determined largely through Committee judgment, based on the
experience of its members. Salaries were set at a level to attract, retain and
motivate superior executives.
Annual Incentive Awards. The executive officers were eligible to receive an
annual bonus that was intended to provide additional compensation for
significant and outstanding achievement during the past year.
Long-Term Incentive Awards. Long-term incentive compensation was provided
by the grant of options to purchase shares of Common Stock of the Company under
the 1996 Plan. In considering the awards, the Committee took into account such
factors as prevailing norms for the ratio of options outstanding to total shares
outstanding, the effect on maximizing long-term stockholder value, and vesting
and expiration dates of each executive's outstanding options.
The Compensation Committee
Udi Toledano
Jack L. Rivkin
Elizabeth E. Tallett
PERFORMANCE MEASUREMENT COMPARISON*
The rules and regulations of the SEC require the presentation of a line
graph since the Common Stock has been registered under Section 12 of the
Exchange Act comparing the yearly percentage change in the Company's cumulative
stockholder return to (i) the cumulative total return of a broad market equity
index and (ii) the cumulative return of either a published industry index
- --------------
* The material in the graph is not "solicitation material", is not deemed
filed with the SEC, and is not incorporated by reference in any filing of
the Company under the Securities Act or the Exchange Act, whether made
before or after the date hereof and irrespective of any general
incorporation language in any filing. The information in the graph
has been provided by Research Data Group, Inc.
14
<PAGE>
or a self-constructed group of peer issuers that the Company believes is
relevant to a comparative understanding of its performance.
The Company has used the Standard & Poors' Health Care (Medical Products &
Supplies) Index, which consists of manufacturers of medical, surgical and
diagnostic devices--including hospital supplies, implantable devices, pacemakers
and heart valves.
COMPARISON OF 28 MONTH CUMULATIVE TOTAL RETURN*
AMONG HUMASCAN INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
ANT THE S & P HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) INDEX
[graph appears here]
- -----------
* $100 INVESTED ON 8/12/96 IN STOCK OR ON 7/31/96 IN INDEX -- INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
Cumulative Total Return
8/12/96 12/96 12/97 12/98
- --------------------------------------------------------------------------------
HumaScan Inc. 100 94 142 1
- --------------------------------------------------------------------------------
S&P Health Care (Medical
Products & Supplies) 100 121 151 218
- --------------------------------------------------------------------------------
Nasdaq Market 100 119 146 206
- --------------------------------------------------------------------------------
15
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1999, to settle claims by Scantek Medical, Inc. ("Scantek") and
Zigmed Inc. ("Zigmed") relating to the Company's failure to pay Scantek license
fees, royalties and other sums totaling $750,000 and indebtedness of the Company
to Zigmed of $315,000, the Company entered into a Settlement Agreement with
Scantek pursuant to which the Company's license from Scantek was terminated,
certain assets were assigned to Scantek, Scantek was issued 150,000 shares of
Common Stock, Zigmed was issued 200,000 shares of Common Stock and Zigmed was
paid $105,000. In return, the Company received $340,000 from Scantek (of which
$105,000 was paid directly to Zigmed by Scantek on behalf of the Company) and
its obligations to Scantek and Zigmed were deemed to be fully satisfied. The
parties exchanged general releases, excepting only their respective obligations
under the Settlement Agreement. The Company had previously ceased the operation
of its business, which was based on a license from Scantek, and has since been
inactive.
Andromeda Enterprises, Inc., of which Udi Toledano, a director of the
Company, is President, will receive, at the closing, warrants to purchase an
aggregate of 1,085,209 shares of Common Stock and cash compensation of $25,000,
in consideration for introducing the Company to New Earth and New Algae. The
warrants will be immediately exercisable upon the contemplated reverse stock
split or an amendment of the Company's Certificate of Incorporation to increase
the authorized number of shares to allow for the exercise of the warrants and
the conversion of the Preferred Stock. The warrants are exercisable at an
exercise price of $0.1229 per share and will expire on the fifth anniversary of
the closing. The warrants contain certain demand and "piggyback" registration
rights for the warrants and the underlying Common Stock.
Hateley & Hampton, a Professional Law Corporation of which Donald P.
Hateley is a President, co-founder and a shareholder, will receive, at the
closing, warrants to purchase an aggregate of 3,255,629 shares of Common Stock
in consideration for providing legal and consulting advice to New Earth and New
Algae. The warrants will be identical to those to be issued to Andromeda
Enterprises, Inc., except that they will be exercisable at $0.0069 per share.
Klamath Cold Storage, Inc., which is owned by the Kollmans, has provided
New Algae and New Earth with freezer storage space for its freeze dried algae at
rates the management of New Algae and New Earth believe to be below or
comparable with prevailing market conditions.
In June 1999, New Algae and New Earth entered into a Loan and Security
Agreement (the "Coast Loan") with Coast Business Credit, a division of Southern
Pacific Bank ("Coast"), in which Coast agreed to lend New Algae and New Earth up
to $15,000,000, subject to the occurrence of the closing. The total loan amount
consists of a loan against the Company's receivables, an advance against the New
Algae's monthly net collections, an inventory loan of up to $3,000,000, a term
loan of up to $2,400,000 and an equipment acquisition loan of up to $2,000,000.
The interest rate on the receivable loans, advances and the inventory loan is at
a rate equal to the prime rate plus 2.5% per annum. The interest rate on the
term loans and the Equipment Acquisition Loans will be a rate equal to the Prime
Rate plus 2.75% per annum. The Coast Loan is secured by substantially all of the
assets of New Algae and New Earth and the personal guarantees of Daryl and Marta
Kollman. The net proceeds of the loan will be used to pay a previously declared
dividend of $7,600,000 to the Kollmans and for working capital.
16
