PLAN AND AGREEMENT OF TRIANGULAR MERGER BETWEEN HUMAN BIOSYSTEMS, HUMAN BIOSYSTEMS ACQUISITION COMPANY AND SAN WEST, INC

Exhibit 10.01

PLAN AND AGREEMENT OF TRIANGULAR MERGER
BETWEEN
HUMAN BIOSYSTEMS,
HUMAN BIOSYSTEMS ACQUISITION COMPANY
AND
SAN WEST, INC.

HUMAN BIOSYSTEMS, a California corporation (“Human BioSystems”), HUMAN BIOSYSTEMS ACQUISITION COMPANY, a Nevada corporation (the “Subsidiary”), and SAN WEST, INC., a Nevada corporation (“San West”), hereby agree as follows:

WHEREAS, the Subsidiary is a wholly-owned subsidiary of Human BioSystems; and

WHEREAS, San West desires to merge (the “Merger”), subject to the approval of its stocholders (the “San West Stockholders”) with and into the Subsidiary; and

WHEREAS, as a result of the Merger, the San West Stockholders will receive shares of the common stock of Human BioSystems, no par value per share (the “Human BioSystems Common Stock”) in exchange for all of their shares of the common stock of San West, $0.001 par value per share (the “San West Common Stock”);

NOW, THEREFORE, in consideration of the foregoing and the following mutual covenants and agreements, the parties agree as follows:

1.

Plan Adopted .  A plan of merger whereby San West merges with and into the Subsidiary (this “Plan of Merger”), pursuant to the provisions of Chapter 92A of the Nevada Revised Statutes (the “NRS”), and Section 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended, is adopted as follows:

(a)

San West shall be merged with and into the Subsidiary, to exist and be governed by the laws of the State of Nevada.

(b)

The Subsidiary shall be the surviving corporation (the “Surviving Corporation”) and its name shall be changed to San West, Inc.  The Surviving Corporation will continue to be a wholly-owned subsidiary of Human BioSystems.

(c)

When this Plan of Merger shall become effective, the separate existence of San West shall cease and the Surviving Corporation shall succeed, without other transfer, to all the rights and properties of San West and shall be subject to all the debts and liabilities of such corporation in the same manner as if the Surviving Corporation had itself incurred them.  All rights of creditors and all liens upon the property of each constituent entity shall be preserved unimpaired, limited in lien to the property affected by such liens immediately prior to the Merger.

(d)

The Surviving Corporation will be responsible for the payment of all fees and franchise taxes of the constituent entities payable to the States of Nevada and California, if any.

(e)

The Surviving Corporation will carry on business with the assets of San West, as well as the assets of the Subsidiary.

(f)

The Surviving Corporation will be responsible for the payment of the fair value of shares, if any, required under Chapter 92A of the NRS.

(g)

The San West Stockholders will surrender all of their shares of the San West Common Stock in the manner hereinafter set forth.

 

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(h)

In exchange for the shares of the San West Common Stock surrendered by the San West Stockholders, Human BioSystems will issue and transfer to them on the basis hereinafter set forth, shares of the Human BioSystems Common Stock.

(i)

A copy of this Plan of Merger will be furnished by the Surviving Corporation, on request and without cost, to any stockholder of any constituent corporation.

(j)

The authorized capital stock of the Subsidiary is 400,000,000 shares of common stock, par value $0.001 per share (the “Subsidiary Common Stock”), of which one share is issued and outstanding, and 50,000,000 shares of preferred stock, par value $0.001 per share, of which none are issued or outstanding.

(k)

The authorized capital stock of San West is 25,000,000 shares of common stock, par value $0.001 per share, of which 4,136,836 shares are issued and outstanding held by 33 San West Stockholders, all of whom are “accredited investors” as defined in the Securities Act of 1933, as amended (the “Securities Act”).

2.

Effective Date .  The effective date of the Merger (the “Effective Date”) shall be the date of the filing of Articles of Merger for the Subsidiary and San West in the State of Nevada.

3.

Submission to Stockholders .  This Plan of Merger shall be submitted for approval separately to the San West Stockholders and to Human BioSystems, the sole stockholder of the Subsidiary, in the manner provided by the laws of the State of Nevada.

4.

Manner of Exchange .  On the Effective Date, the San West Stockholders shall surrender their stock certificates representing all of the issued and outstanding shares of the San West Common Stock to the Subsidiary in exchange for certificates representing the shares of the Human BioSystems Common Stock to which they are entitled.  In exchange, the Subsidiary shall receive all of the issued and outstanding shares of the San West Common Stock held by the San West Stockholders.  Following the receipt of the shares of the San West Common Stock by the Subsidiary, the shares of the San West Common Stock shall be cancelled.  The one share of the Subsidiary Common Stock shall remain issued and outstanding.

5.

Basis of Exchange .  The San West Stockholders currently own 4,136,836 shares of the San West Common Stock, which shares constitute all of the issued and outstanding shares of the capital stock of San West.  As a result of the Merger, the San West Stockholders shall be entitled to receive, in exchange for all of their San West Common Stock, 13,079,264 shares of the Human BioSystems Common Stock on the basis of 3.16 shares of the Human BioSystems Common Stock for each share of the San West Common Stock held by each of the San West Stockholders.  Any fractional number of shares to be received shall be rounded up to the nearest whole number.  Following the Effective Date, Human BioSystems shall have 16,349,080 shares of the Human BioSystems Common Stock issued and outstanding, owned as follows: (a) 2,452,362 shares owned by the Human BioSystems Stockholders; (b) 13,079,264 shares owned by the San West Stockholders; and (c) 817,454 shares owned by Dutchess Advisors LLC as a finders fee.  Provided, however, notwithstanding anything herein contained to the contrary, if there is any change in the issued and outstanding shares of either Human BioSystems or San West as of the Effective Date, the number of shares to be issued hereunder shall be adjusted accordingly, so that the San West Stockholders will own following the Effective Date at least 80 percent of the issued and outstanding shares of the Human BioSystems Common Stock and the Human BioSystems Stockholders will own approximately 15 percent of the issued and outstanding shares of the Human BioSystems Common Stock following the Effective Date after the payment of the finders fee herein described.  Provided, further, however, between the date of this Agreement and April 17, 2009, Human BioSystems may issue shares of the Human BioSystems Common Stock to raise the $26,000 payment to be made by San West as described in Paragraph 12(b) hereof, and in such event, the issuance of such shares shall be deemed to have occurred after the Effective Date so as to result in a dilution of all stockholders of Human BioSystems following the Effective Date, including, but not limited to the Human BioSystems Stockholders, the San West Stockholders and Dutchess Advisors LLC.  In the event of the issuance of such shares of the Human BioSystems Common Stock as described in this paragraph, the provisions of Paragraph 12(b) shall be deemed null and void.

6.

Restricted Shares .  All shares of the Human BioSystems Common Stock to be received by the San West Stockholders and Dutchess Advisors LLC hereunder shall be restricted in their resale as provided in the Securities Act, and shall contain a legend as required by Rule 144 promulgated under the Securities Act (“Rule 144”) which shall read as follows:

 

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THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SHARES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.

The restricted nature of such shares shall not be taken into account or any quoted price of the shares on the Effective Date.  Upon receipt of the Human BioSystems Common Stock, each San West Stockholder shall execute a Subscription Agreement in the form attached hereto as Attachment A .  In that regard, the San West Stockholders shall acknowledge that Human BioSystems does not have any obligation to register for resale pursuant to the Securities Act, the shares of the Human BioSystems Common Stock to be received by them hereunder.

7.

Directors and Officers of the Surviving Corporation.

(a)

Following the Merger, the present Board of Directors of San West shall serve as the Board of Directors of the Surviving Corporation until the next annual meeting or until such time as their successors have been elected and qualified.

(b)

If a vacancy shall exist on the Board of Directors of the Surviving Corporation on the Effective Date, such vacancy may be filled by the Board of Directors of the Surviving Corporation as provided in the Bylaws of the Surviving Corporation.

(c)

All persons who, on the Effective Date, are executive or administrative officers of San West shall be the officers of the Surviving Corporation until the Board of Directors of the Surviving Corporation shall otherwise determine.  The Board of Directors of the Surviving Corporation may elect or appoint such additional officers as it may deem necessary or appropriate.

8.

Articles of Incorporation .  The Articles of Incorporation of the Subsidiary existing on the Effective Date, as amended to reflect the change of name to San West, Inc., a copy of which is attached hereto as Attachment B shall continue in full force as the Articles of Incorporation of the Surviving Corporation until altered, amended, or repealed as provided therein or as provided by law.

9.

Bylaws .  The Bylaws of the Subsidiary existing on the Effective Date, as amended to reflect the change of name to San West, Inc., a copy of which is attached hereto as Attachment C shall continue in full force as the Bylaws of the Surviving Corporation until altered, amended, or repealed as provided therein or as provided by law.

10.

Directors and Officers of Human BioSystems .  On the Effective Date, persons selected by San West will be elected to the Board of Directors of Human BioSystems, and immediately thereafter, all of the members of the Human BioSystems Board of Directors serving before the Effective Date shall resign.  Further, on the Effective Date, the Board of Directors will elect a person selected by San West as President of Human BioSystems, and all of the other officers of Human BioSystems other than such person selected by San West shall resign on the Effective Date.

11.

Copies of the Plan of Merger .  A copy of this Plan of Merger is on file at 10350 Mission Gorge Road, Santee, California 92069, the principal offices of San West, and at 1127 Harker Avenue, Palo Alto, California 94301, the principal offices of Human BioSystems and the Subsidiary.  A copy of this Plan of Merger will be furnished to any stockholder of San West, Human BioSystems, or the Subsidiary, on written request and without cost.

 

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12.

Additional Consideration for the Merger .  As additional consideration for the Merger:

(a)

San West has paid to Human BioSystems the sum of $25,000, the receipt and sufficiency of which is hereby acknowledged by Human BioSystems.

(b)

On April 17, 2009 or the Effective Date, whichever occurs sooner, San West will pay the sum of $26,000 to Human BioSystems.

(c)

Following the Effective Date, selected creditors of Human BioSystems as of the Effective Date shall receive pro rata an amount equal to 20 percent of the net income of Human BioSystems (as hereinafter defined) and 30 percent of any newly invested capital in Human BioSystems until such creditors have been paid in full the discounted amount agreed to by the selected creditors, pursuant to a Settlement Agreement, as set out in Attachment D hereto.  As for the other creditors of Human BioSystems existing as of the Effective Date, they shall be paid as may be agreed upon by such creditors and Human BioSystems.

(d)

Following the Effective Date, Harry Masuda shall be engaged as a consultant to Human BioSystems to assist Human BioSystems in the raising of additional capital.

(e)

Six months after the Effective Date, Human BioSystems shall sell the properties specified on Attachment E hereto to the parties named in Attachment E for the consideration described therein.  Provided, however, during the six months from the Effective Date, Human BioSystems shall attempt to sell such properties to any non affiliated third party.  If following such six-month period, no such non affiliated third party purchases all or any portion of such properties, the portion of such properties remaining unsold shall be sold in the manner described in Attachment E .

As used herein, the “net income of Human BioSystems” shall mean for any period, gross revenues and other proper income credits, less all proper income charges, including taxes on income, of Human BioSystems for such period, all determined in accordance with GAAP (hereinafter defined), provided that (i) there shall not be included in such revenues (1) any gains resulting from any write-up of assets, (2) any proceeds of any life insurance policy or (3) any gain which is classified as “extraordinary” in accordance with GAAP, and (ii) capital gains may be included in such revenues only to the extent of capital losses.

As used herein, “GAAP” shall mean generally accepted accounting principles as set forth in the opinions, statements and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, the Financial Accounting Standards Board and such other persons who shall be approved by a significant segment of the accounting profession and concurred in by the independent public accountants certifying any financial statements of Human BioSystems.

13.

Representations and Warranties of San West .  Where a representation contained in this Agreement is qualified by the phrase “to the best knowledge of San West” (or words of similar import), such expression means that, after having conducted a due diligence review, San West believes the statement to be true, accurate, and complete in all material respects.  Knowledge shall not be imputed nor shall it include any matters which such person should have known or should have been reasonably expected to have known.  San West represents and warrants to Human BioSystems and the Subsidiary as follows:

(a)

Power and Authority .  San West has full power and authority to execute, deliver, and perform this Agreement and all other agreements, certificates or documents to be delivered in connection herewith, including, without limitation, the other agreements, certificates and documents contemplated hereby (collectively the “Other Agreements”).

(b)

Binding Effect .  Upon execution and delivery by San West, this Agreement and the Other Agreements shall be and constitute the valid, binding and legal obligations of San West, enforceable against San West in accordance with the terms hereof and thereof, except as the enforceability hereof or thereof may be subject to the effect of (i) any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or margin-bottom:10pt; affecting creditors’ rights generally, and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

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(c)

Effect .  Neither the execution and delivery of this Agreement or the Other Agreements nor full performance by San West of its obligations hereunder or thereunder will violate or breach, or otherwise constitute or give rise to a default under, the terms or provisions of the Articles of Incorporation or Bylaws of San West or, subject to obtaining any and all necessary consents, of any contract, commitment or other obligation of San West or necessary for the operation of San West’s business (the “Business”) following the Merger or any other material contract, commitment, or other obligation to which San West is a party, or create or result in the creation of any encumbrance on any of the property of San West.  Except as otherwise disclosed to Human BioSystems before the date of this Agreement and disclosed on Schedule 13(c) attached hereto, San West is not in violation of its Articles of Incorporation, its Bylaws, or of any indebtedness, mortgage, contract, lease, or other agreement or commitment.

(d)

No Consents .  No consent, approval or authorization of, or registration, declaration or filing with any third party, including, but not limited to, any governmental department, agency, commission or other instrumentality, will, except such consents, if any, delivered or obtained on or prior to the Effective Date, be obtained or made by San West prior to the Effective Date to authorize the execution, delivery and performance by San West of this Agreement or the Other Agreements.

(e)

Capitalization .  San West is authorized by its Articles of Incorporation to issue 25,000,000 shares of the San West Common Stock.  As of the date of this Agreement, there are 4,136,836 shares of the San West Common Stock duly and validly issued and outstanding, fully paid, and non-assessable.  Other than as disclosed herein, there are no outstanding options, contracts, commitments, warrants, preemptive rights, agreements or any rights of any character affecting or relating in any manner to the issuance of the San West Common Stock or other securities or entitling anyone to acquire the San West Common Stock or other securities of San West.

(f)

Stock Ownership .  On the Effective Date, San West will have 33 stockholders, all of whom are “accredited investors” as defined in the Securities Act, who will have good, absolute, and marketable title to 4,136,836 shares of the San West Common Stock as described herein, which constitute 100 percent of the issued and outstanding shares of the San West Common Stock.  San West has the complete and unrestricted right, power and authority to cause the Merger pursuant to this Agreement.  The delivery of the San West Common Stock to the Subsidiary as herein contemplated will vest in the Subsidiary good, absolute and marketable title to the shares of the San West Common Stock as described herein, free and clear of all liens, claims, encumbrances, and restrictions of every kind, except those restrictions imposed by applicable securities laws or this Agreement.

(g)

Organization and Standing of San West .  San West is a duly organized and validly existing Nevada corporation in good standing, with all requisite corporate power and authority to carry on the Business as presently conducted in each of the jurisdictions where it is currently doing business.  San West has qualified to do business in the states reflected on Schedule 13(g) attached hereto.

(h)

Employees .  San West has seven employees.

(i)

Financial Statement .  San West has furnished Human BioSystems and the Subsidiary an audited consolidated balance sheet of San West as of December 31, 2008, and the related consolidated statement of income and retained earnings for the period covered thereby (the “Financial Statement”).  The Financial Statement (i) is in accordance with the books and records of San West; (ii) fairly presents the financial condition of San West at such date and the results of its operations for the period therein specified; (iii) was prepared in accordance with generally accepted accounting principles applied upon a basis consistent with prior accounting periods; and (iv) with respect to all contracts and commitments of San West, reflects adequate reserves for all reasonably anticipated losses and costs in excess of anticipated income.  Specifically, but not by way of limitation, the Financial Statement discloses all of the debts, liabilities, and obligations of any nature (whether absolute, accrued, contingent, or otherwise and whether due or to become due) of San West on the dates therein specified (except such debts, liabilities, and obligations as are not required to be reflected therein in accordance with generally accepted accounting principles).

 

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San West Plan and Agreement of Triangular Merger v8.doc

 

(j)

Present Status .  Since the date reflected on the Financial Statement, except as reflected on Schedule 13(j) attached hereto, San West has not (i) incurred any material obligations or material liabilities, absolute, accrued, contingent, or otherwise, except current trade payables; (ii) discharged or satisfied any liens or encumbrances, or paid any obligations or liabilities, except current Financial Statement liabilities and current liabilities incurred since the dates reflected on the Financial Statement, in each case, in the ordinary course of business; (iii) declared or made any stockholder payment or distribution or purchased or redeemed any of its securities or agreed to do so; (iv) mortgaged, pledged, or subjected to lien, encumbrance, or charge any of its assets except as shall be removed prior to or at the Effective Date; (v) canceled any debt or claim; (vi) sold or transferred any assets of a material value except sales from inventory in the ordinary course of business; (vii) suffered any damage, destruction, or loss (whether or not covered by insurance) materially affecting its properties, business, or prospects; (viii) waived any rights of a material value; (ix) entered into any transaction other than in the ordinary course of business.  Further, since the date reflected on the Financial Statement, except as reflected on Schedule 13(k) attached hereto, there has not been any change in or any event or condition (financial or otherwise) affecting the property, assets, liabilities, operations, or prospects of San West, other than changes in the ordinary course of its business, none of which has (either when taken by itself or taken in conjunction with all other such changes) been materially adverse.

(k)

Tax Returns and Audits .  As of the date of this Agreement, except as reflected on Schedule 13(k) attached hereto, San West has duly filed all federal, state, and local tax returns as required to be filed by it (including, but not limited to, all payroll or other employment related tax returns), and has paid all federal, state and local taxes, including, but not limited to all payroll and employment taxes, required to be paid with respect to the periods covered by such returns.  Except as reflected on Schedule 13(k) attached hereto, San West has not been delinquent in the payment of any tax, assessment, or governmental charge, and has not had any tax deficiencies proposed or assessed against it and has not executed any waiver of the statute of limitations on the assessment or collection of any tax.

(l)

Litigation .  Other than as reflected on Schedule 13(l) attached hereto, San West has disclosed all litigation, arbitrations, claims, governmental or other proceedings (formal or informal), or investigations pending, threatened, or in prospect (or any basis therefor known to San West) with respect to San West, or any of its business, properties, or assets prior to the execution of this Agreement.  Except as reflected on Schedule 13(l) attached hereto, San West is not affected by any present or threatened strike or other labor disturbance or, to the best knowledge of San West, is any union attempting to represent any employee of San West as collective bargaining agent.  San West is not in material violation of, or in material default with respect to, any law, rule, regulation, order, judgment, or decree; nor is San West required to take any action in order to avoid such a violation or default.

(m)

Compliance with Laws and Regulations .  Except as otherwise disclosed in Schedule 13(m) attached hereto, to the best knowledge of San West, San West is in material compliance, with all laws, ordinances, codes, restrictions, regulations (environmental and otherwise) and other legal requirements applicable to the conduct of the Business, the noncompliance with which would be likely to have a material adverse effect on the Business; and there are no lawsuits or proceedings pending or, to its best knowledge, threatened with respect to the foregoing.

(n)

No Defaults .  Other than as reflected on Schedule 13(n) attached hereto, to the best knowledge of San West, San West is not in default under any provision, of any lease, contract, commitment, obligation, note, bond, debenture, mortgage, indenture, security agreement, guaranty, or other instrument of indebtedness, and no existing condition exists which, with the giving of notice or the passage of time, or both, would constitute such a default, in either case, which default is or would be likely to have a material adverse effect on the Business.

(o)

Permits and Approvals .  Except as otherwise disclosed on Schedule 13(o) attached hereto, to the best knowledge of San West, San West has all permits and approvals required for the conduct of the Business and is not in material default under any permit, approval or qualification, which default is likely to have a material adverse effect on San West or the Business, nor is there any existing condition which, with the giving of notice or the passage of time, or both, would constitute such a material default; (ii) other than those items listed on Schedule 13(o) attached hereto, no permit, approval or qualification of any government or governmental unit, agency, board, body or instrumentality, whether federal, state or local, is necessary for the conduct of the Business as same has been and is being conducted; and (iii) there is no lawsuit or proceeding pending or threatened with respect to any of the foregoing.

 

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(p)

Properties .  Except as reflected on Schedule 13(p) attached hereto, San West has good and marketable title in fee simple absolute to all real properties and good title to all other properties and assets used in its business or owned by it (except real and other properties and assets as are held pursuant to leases or licenses), free and clear of all liens, mortgages, security interests, pledges, charges, and encumbrances, other than as shown on the Financial Statement, including, but not limited to a tax lien for unpaid real estate taxes.  Moreover:

(i)

No real property owned, leased, licensed, or used by San West lies in an area which is, or to the best knowledge of San West will be, subject to zoning, use, or building code restrictions which would prohibit, and no state of facts relating to the actions or inaction of another person or entity or their ownership, leasing, licensing, or use of that real property in the business in which San West is now engaged or the business in which it contemplates engaging.

(ii)

The real and other properties and assets owned, leased, or licensed by San West constitute all such properties and assets which are necessary to the business of San West as presently conducted or as it contemplates conducting.

(q)

Patents and Trademarks .  Except as reflected on Schedule 13(q) attached hereto, to the best of the best knowledge of San West, San West owns, possesses and has good title to all of the copyrights, trademarks, trademark rights, patents, patent rights, and licenses necessary in the conduct of the Business.  Except as reflected on Schedule 13(q) attached hereto, to the best knowledge of San West, San West is not infringing upon or otherwise acting adversely to the rights of any person, under, or in respect to, any copyrights, trademarks, trademark rights, patents, patent rights, or licenses owned by any person or entity, and there is no claim or pending or threatened action with respect thereto.  San West has the unrestricted right to use (free and clear of any rights or claims of others) all trade secrets, customer lists, manufacturing and other processes incident to the manufacture, use or sale of any and all products presently sold by it.

(r)

Compliance with Environmental Laws .  Except as otherwise disclosed on Schedule 13(r) attached hereto, to the best knowledge of San West, San West has not violated and is not in violation of the Federal Clean Air Act (42 U.S.C. 7401, et seq.), Federal Water Pollution Control Act (33 U.S.C. 1251, et seq.), the Federal Resource Conservation and Recovery Act of 1976 (42 U.S.C. 6901, et seq.), the Federal Comprehensive Environmental Responsibility, Clean Up and Liability Act of 1980 (42 U.S.C. 9601, et seq.), the Federal Toxic Substance Control Act of 1976 (15 U.S.C. 2601, et seq.) or any state or local laws or ordinances regulating the subjects covered by the federal statutes identified above, including rules and regulations thereunder.  Prior to the Effective Date, San West either directed, participated in and/or authorized that studies of the environmental status of San West’s properties and operations of the Business be prepared, which studies are listed or otherwise described in Schedule 13(r) hereto (collectively the “Studies”).  The Studies, as well as those other matters, correspondence, reports and the like disclosed in Schedule 13(r) hereto, have been delivered to Human BioSystems and the counsel for Human BioSystems and environmental consultants and are incorporated herein by reference as though set out herein.

(s)

Absence of Certain Changes or Events .  Except as otherwise disclosed on Schedule 13(s) attached hereto, since December 31, 2008, there has not been any change in or any event or condition (financial or otherwise) affecting the property, assets (including cash and all accounts receivable), liabilities, operations, or prospects of San West, other than changes in the ordinary course of its business, none of which has (either when taken by itself or taken in conjunction with all other such changes) been materially adverse.

(t)

Purchase and Outstanding Bids .  No purchase commitments of San West are in excess of normal, ordinary, and usual requirements of its business, or were made at any price in excess of the then current market price or contained terms and conditions more onerous than those usual and customary in the industry.

(u)

Insurance Policies .  There are in full force all policies of fire, liability, and other forms of insurance pertaining to the properties and assets of San West.  Such policies are in an amount and against such losses and risks as are generally maintained by comparable businesses, copies of which have been delivered to Human BioSystems upon the execution of this Agreement.

 

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(v)

Employment Contracts .  Except as disclosed in Schedule 13(v) hereto, San West has no employment contract, written or otherwise, with any employee or former employee.

(w)

Compliance with Laws and Regulations .  To the best knowledge of San West, San West is in material compliance, with all laws, ordinances, codes, restrictions, regulations and other legal requirements applicable to the conduct of the Business, the noncompliance with which would be likely to have a material adverse effect on the Business; and there are no lawsuits or proceedings pending or, to its knowledge, threatened with respect to the foregoing.

(x)

No Defaults .  To the best knowledge of San West, San West is not in default under any provision, of any lease, contract, commitment, obligation, note, bond, debenture, mortgage, indenture, security agreement, guaranty, or other instrument of indebtedness, and no existing condition exists which, with the giving of notice or the passage of time, or both, would constitute such a default, in either case, which default is or would be likely to have a material adverse effect on the Business.

(y)

Authority to Merge .  San West has all requisite power and authority to execute, deliver, and perform this Agreement.  All necessary corporate proceedings of San West have been duly taken to authorize the execution, delivery, and performance of this Agreement by San West.  This Agreement has been duly authorized, executed and delivered by San West; is the legal, valid, and binding obligation of San West; and is enforceable as to it in accordance with its terms subject to any laws relating to bankruptcy or any other similar laws.

No consent, authorization, approval, order, license, certificate, or permit of or from, or declaration of filing with, any federal, state, local, or other governmental authority or any court or other tribunal is required by San West for the execution, delivery, or performance of this Agreement by San West.  No consent of any party to any contract, agreement, instrument, lease, license, arrangement, or understanding to which San West is a party, or to which any of its properties or assets are subject, is required for the execution, delivery or performance of this Agreement; and the execution, delivery, and performance of this Agreement will not violate, result in a breach of, conflict with, or (with or without the giving of notice or the passage of time or both) entitle any party to terminate or call a default under any contract, agreement, instrument, lease, license, arrangement, or understanding, or violate or result in a breach of any term of the articles of incorporation (or other charter document) or bylaws of San West or violate, result in a breach of, or conflict with any law, rule, regulation, order, judgment, or decree binding on San West or to which any of its operations, business, properties, or assets are subject.

(z)

Records .  The books of account and minute books of San West are complete and correct, and reflect all those transactions involving its business which properly should have been set forth in such books.

(aa)

SEC Filings .  San West has had the opportunity to review and has reviewed all of the filings of Human BioSystems with the SEC (the “SEC Filings”).

(bb)

Representations and Warranties True and Complete .  All representations and warranties of San West in this Agreement and the Other Agreements are true, accurate and complete in all material respects as of the Effective Date.

(cc)

No Knowledge of Default .  San West has no knowledge that any representations and warranties of Human BioSystems or the Subsidiary contained in this Agreement or the Other Agreements are untrue, inaccurate or incomplete or that Human BioSystems or the Subsidiary is in default under any term or provision of this Agreement or the Other Agreements.

(dd)

No Untrue Statements .  No representation or warranty by San West in this Agreement or in any writing furnished or to be furnished pursuant hereto, contains or will contain any untrue statement of a material fact, or omits, or will omit to state any material fact required to make the statements herein or therein contained not misleading.

 

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(ee)

Reliance .  The foregoing representations and warranties are made by San West with the knowledge and expectation that Human BioSystems and the Subsidiary are placing complete reliance thereon.

14.

Representations and Warranties of Human BioSystems and the Subsidiary .  Where a representation contained in this Agreement is qualified by the phrase “to the best knowledge of Human BioSystems or the Subsidiary” (or words of similar import), such expression means that, after having conducted a due diligence review, Human BioSystems and the Subsidiary believe the statement to be true, accurate, and complete in all material respects.  Knowledge shall not be imputed nor shall it include any matters which such person should have known or should have been reasonably expected to have known.  Human BioSystems and the Subsidiary hereby represent and warrant to San West as follows:

(a)

Power and Authority .  Human BioSystems and the Subsidiary have full power and authority to execute, deliver and perform this Agreement and the Other Agreements.

(b)

Authorization .  The execution, delivery and performance of this Agreement and the Other Agreements by Human BioSystems and the Subsidiary have been duly authorized by all requisite corporate action.

(c)

Binding Effect .  Upon execution and delivery by Human BioSystems and the Subsidiary, this Agreement and the Other Agreements shall be and constitute the valid, binding and legal obligations of Human BioSystems and the Subsidiary enforceable against them in accordance with the terms hereof or thereof, except as the enforceability hereof and thereof may be subject to the effect of (i) any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors’ rights generally, and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

(d)

Effect .  Neither the execution and delivery of this Agreement or the Other Agreements nor full performance by Human BioSystems and the Subsidiary of their obligations hereunder or thereunder will violate or breach, or otherwise constitute or give rise to a default under, the terms or provisions of the Articles of Incorporation or Bylaws of Human BioSystems or the Subsidiary or, subject to obtaining any and all necessary consents, of any contract, commitment or other obligation of Human BioSystems or the Subsidiary or necessary for the operation of the business of Human BioSystems or the Subsidiary following the Effective Date or any other material contract, commitment, or other obligation to which Human BioSystems or the Subsidiary is a party, or create or result in the creation of any encumbrance on any of the assets of Human BioSystems or the Subsidiary.

(e)

No Consents .  No consent, approval or authorization of, or registration, declaration or filing with any third party, including, but not limited to, any governmental department, agency, commission or other instrumentality, will, except such consents, if any, delivered or obtained on or prior to the Effective Date, be obtained or made by Human BioSystems and the Subsidiary prior to the Effective Date to authorize the execution, delivery and performance by Human BioSystems and the Subsidiary of this Agreement or the Other Agreements.

(f)

Access to Records .  Human BioSystems and the Subsidiary shall afford San West and its attorneys, accountants, investment bankers and other representatives access, during normal business, to all of its business operations, properties, books, files, and records, and will cooperate in their examination thereof.  No such examination, however, shall constitute a waiver or relinquishment by San West of its right to rely upon covenants, representations, and warranties of Human BioSystems and the Subsidiary made herein or pursuant hereto.  Until the Effective Date or the termination of this Agreement, whichever shall occur first, and after the termination of this Agreement in the event this Agreement does not close, San West will hold in confidence all information so obtained by San West as a result of such examination.

(g)

Exchange Act Status .  Human BioSystems is a fully reporting company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Human BioSystems Common Stock is registered under Section 12(g) of the Exchange Act.  At the Effective Date, Human BioSystems shall be current in all of its SEC Filings as required by the Exchange Act.

(h)

Financial Statement .  Human BioSystems has furnished San West by means of the SEC Edgar web site containing the SEC Filings of Human BioSystems an audited consolidated balance sheet of Human BioSystems as of December 31, 2007, and the related consolidated statement of income and retained earnings for the period covered thereby (the “Human BioSystems Financial Statement”).  The Human BioSystems Financial Statement (i) is in accordance with the books and records of Human BioSystems; (ii) fairly presents the financial condition of Human BioSystems at such date and the results of its operations for the period therein specified; (iii) was prepared in accordance with generally accepted accounting principles applied upon a basis consistent with prior accounting periods; and (iv) with respect to all contracts and commitments of Human BioSystems, reflects adequate reserves for all reasonably anticipated losses and costs in excess of anticipated income.  Specifically, but not by way of limitation, the Human BioSystems Financial Statement discloses all of the debts, liabilities, and obligations of any nature (whether absolute, accrued, contingent, or otherwise and whether due or to become due) of Human BioSystems on the dates therein specified (except such debts, liabilities, and obligations as are not required to be reflected therein in accordance with generally accepted accounting principles).

 

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(i)

Litigation .  Other than as reflected on the SEC Edgar web site containing the SEC Filings of Human BioSystems, Human BioSystems has disclosed all litigation, arbitrations, claims, governmental or other proceedings (formal or informal), or investigations pending, threatened, or in prospect (or any basis therefor known to Human BioSystems) with respect to Human BioSystems, or any of its business, properties, or assets prior to the execution of this Agreement.  Except as reflected on the SEC Edgar web site containing the SEC Filings of Human BioSystems, Human BioSystems is not affected by any present or threatened strike or other labor disturbance or, to the best knowledge of Human BioSystems, is any union attempting to represent any employee of Human BioSystems as collective bargaining agent.  Human BioSystems is not in material violation of, or in material default with respect to, any law, rule, regulation, order, judgment, or decree; nor is Human BioSystems required to take any action in order to avoid such a violation or default.

(j)

Compliance with Laws and Regulations .  Except as otherwise disclosed on the SEC Edgar web site containing the SEC Filings of Human BioSystems, to the best knowledge of Human BioSystems, Human BioSystems is in material compliance, with all laws, ordinances, codes, restrictions, regulations (environmental and otherwise) and other legal requirements applicable to the conduct of its business, the noncompliance with which would be likely to have a material adverse effect on its business; and there are no lawsuits or proceedings pending or, to its best knowledge, threatened with respect to the foregoing.

(k)

Absence of Certain Changes or Events .  Except as otherwise disclosed on the SEC Edgar web site containing the SEC Filings of Human BioSystems, since December 31, 2007, there has not been any change in or any event or condition (financial or otherwise) affecting the property, assets (including cash and all accounts receivable), liabilities, operations, or prospects of Human BioSystems, other than changes in the ordinary course of its business, none of which has (either when taken by itself or taken in conjunction with all other such changes) been materially adverse.

(l)

No Disputes with Auditors .  As of the date of this Agreement, neither Human BioSystems nor the Subsidiary has had any disputes with its auditors.

(m)

Tax Returns and Audits .  As of the date of this Agreement, Human BioSystems and the Subsidiary have duly filed all federal, state, and local tax returns as required to be filed by them (including, but not limited to, all payroll or other employment related tax returns), and have paid all federal, state and local taxes, including, but not limited to all payroll and employment taxes, required to be paid with respect to the periods covered by such returns.  Human BioSystems and the Subsidiary have not been delinquent in the payment of any tax, assessment, or governmental charge, and have not had any tax deficiencies proposed or assessed against them and have not executed any waiver of the statute of limitations on the assessment or collection of any tax.  Human BioSystems has delivered to San West all tax returns of Human BioSystems and the Subsidiary for the last five years.

(n)

Organization and Standing of Human BioSystems .  Human BioSystems is a duly organized and validly existing California corporation in good standing, with all requisite corporate power and authority to carry on its business as presently conducted.  Human BioSystems has not qualified to do business in any other state.

 

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(o)

Subsidiaries .  Human BioSystems has two subsidiaries, namely, the Subsidiary, which is a duly organized and validly existing Nevada corporation in good standing, with all requisite corporate power and authority to carry on its business as presently conducted, and HBS BioEnergy, a California corporation, neither of which are qualified to do business in any other state.

(p)

Capitalization of Human BioSystems .  Human BioSystems is authorized by its Articles of Incorporation to issue 300,000,000 shares of the Human BioSystems Common Stock of which 2,452,362 shares will be duly and validly issued and outstanding, fully paid, and non-assessable as of the Effective Date, and 10,000,000 shares of preferred stock, no par value per share, none of which are issued or outstanding.  Other than as disclosed herein, there are no outstanding options, contracts, commitments, warrants, preemptive rights, agreements or any rights of any character affecting or relating in any manner to the issuance of the Human BioSystems Common Stock or other securities or entitling anyone to acquire the Human BioSystems Common Stock or other securities of Human BioSystems.

(q)

Capitalization of the Subsidiary .  The Subsidiary is authorized by its Articles of Incorporation to issue 400,000,000 shares of the Subsidiary Common Stock, one share of which will be duly and validly issued and outstanding, fully paid, and non-assessable as of the Effective Date, and 50,000,000 shares of preferred stock, par value $0.001 per share, none of which are issued or outstanding.  Other than as disclosed herein, there are no outstanding options, contracts, commitments, warrants, preemptive rights, agreements or any rights of any character affecting or relating in any manner to the issuance of the Subsidiary Common Stock or other securities or entitling anyone to acquire the Subsidiary Common Stock or other securities of the Subsidiary.

(r)

Effect of the Transaction .  Following the Effective Date and all of the transactions described herein, the San West Stockholders will own 13,079,264 shares of the Human BioSystems Common Stock, which will represent approximately 80 percent of the issued and outstanding shares of the Human BioSystems Common Stock.  Following the Effective Date and all of the transactions described herein, Human BioSystems shall have 16,349,080 shares of the Human BioSystems Common Stock issued and outstanding, owned as follows: (a) 2,452,362 shares owned by the Human BioSystems Stockholders; (b) 13,079,264 shares owned by the San West Stockholders; and (c) 817,454 shares owned by Dutchess Advisors LLC as a finders fee.  Provided, however, notwithstanding anything herein contained to the contrary, if there is any change in the issued and outstanding shares of either Human BioSystems or San West as of the Effective Date, the number of shares to be issued hereunder shall be adjusted accordingly, so that the San West Stockholders will own following the Effective Date at least 80 percent of the issued and outstanding shares of the Human BioSystems Common Stock and the Human BioSystems Stockholders will own approximately 15 percent of the issued and outstanding shares of the Human BioSystems Common Stock following the Effective Date after the payment of the finders fee herein described.

(s)

No Employees .  Human BioSystems and the Subsidiary do not now have and will not have at the Effective Date any employees.

(t)

No Employment Contracts .  Human BioSystems and the Subsidiary, as of the Effective Date, shall have no employment contracts or agreements with any of its officers, directors, or with any consultants, employees or other parties, and shall have terminated all outstanding and unexercised warrants and options to purchase shares of the Human BioSystems Common Stock.

(u)

No Benefit Plans .  Human BioSystems and the Subsidiary have no insurance or employee benefit plans whatsoever.

(v)

No Powers of Attorney .  Human BioSystems and the Subsidiary have no outstanding powers or attorney and no obligations concerning its performance hereunder.

(w)

Compliance .  Human BioSystems shall cause Human BioSystems and the Subsidiary and their officers and employees to comply with all applicable provisions of this Agreement.

 

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(x)

Representations and Warranties of True and Complete .  All representations and warranties of Human BioSystems and the Subsidiary in this Agreement and the Other Agreements are true, accurate and complete in all material respects as of the Effective Date.

(y)

No Knowledge of Default .  Human BioSystems and the Subsidiary have no knowledge that any of the representations and warranties of San West contained in this Agreement or the Other Agreements are untrue, inaccurate or incomplete in any respect or that San West are in default under any term or provision of this Agreement or the Other Agreements.

(z)

No Untrue Statements .  No representation or warranty by Human BioSystems and the Subsidiary in this Agreement or in any writing furnished or to be furnished pursuant hereto, contains or will contain any untrue statement of a material fact, or omits, or will omit to state any material fact required to make the statements herein or therein contained not misleading.

(aa)

Reliance .  The foregoing representations and warranties are made by Human BioSystems and the Subsidiary with the knowledge and expectation that San West is placing complete reliance thereon.

15.

Conditions Precedent to Obligations of Human BioSystems and the Subsidiary .  All obligations of Human BioSystems and the Subsidiary under this Agreement are subject to the fulfillment, prior to or at the Effective Date, of the following conditions:

(a)

Representations and Warranties True at the Effective Date .  The representations and warranties of San West herein shall be deemed to have been made again as of the Effective Date, and then be true and correct, subject to any changes contemplated by this Agreement.  San West shall have performed all of the obligations to be performed by it hereunder on or prior to the Effective Date.

(b)

Proof of Authority .  The counsel for Human BioSystems shall have received evidence reasonably sufficient to such counsel that San West has all requisite authorizations necessary for consummation by San West of the transactions contemplated hereby, and there has not been issued, and there is not in effect, any injunction or similar legal order prohibiting or restraining consummation of any of the transactions herein contemplated, and no legal or governmental action, proceeding or investigation which might reasonably be expected to result in any such injunction or order is pending.

(c)

No Orders .  There has not been issued, and there is not in effect, any injunction or similar legal order prohibiting or restraining consummation of any of the transactions herein contemplated, and no legal or governmental action, proceeding or investigation which might reasonably be expected to result in any such injunction or order is pending.

(d)

Directors and Officers Insurance .  Following the Effective Date, the currently existing directors and officers insurance with respect to the directors and officers of Human BioSystems shall be maintained in full force and effect for a minimum period of three years from the Effective Date, keeping intact all prior acts of Human BioSystems, as well acts occurring after the Effective Date.

(e)

Deliveries at the Effective Date .  San West shall have delivered to Human BioSystems and the Subsidiary at the Effective Date all of the documents required to be delivered hereunder.

(f)

Certificates of Good Standing .  San West shall have delivered to Human BioSystems certificates or telegrams issued by appropriate governmental authorities evidencing the good standing of San West as of a date not more than 10 days prior to the Effective Date, in the State of Nevada and in each state where San West is qualified to do business.

(g)

Opinion of Counsel .  San West shall have delivered at the Effective Date to Human BioSystems an opinion of its counsel dated as of date of the Effective Date in form and substance reasonably satisfactory to Human BioSystems and its counsel, to the effect that (i) San West is a duly and validly organized and existing corporation in good standing under the laws of the State of Nevada, and in each state where San West may be qualified as a foreign corporation, with full corporate power to carry on the business in which it is engaged; (ii) the performance of this Agreement and the consummation of the transactions contemplated herein will not result in any breach or violation of any terms or provisions of or cause a default under the Articles of Incorporation or Bylaws of San West or, to San West’s said counsel best knowledge and belief any order, rule, or regulation of any court, governmental agency or body having jurisdiction over San West, or any of its activities, properties, any statute, indenture, mortgage, deed of trust, lease, loan agreement, security agreement, or other agreement or instrument known to said counsel, to which San West is a party or by which it is bound or to which any of its property is subject; (iii) no provision of the Articles of Incorporation, Bylaws, minutes or share certificates of San West or, to San West’s said counsel’s best knowledge and belief, any contract to which San West is a party or otherwise bound or affected, prevents the San West Stockholders from delivering good, absolute, and marketable title to the San West Common Stock to Human BioSystems as contemplated by this Agreement; (iv) San West is authorized by its Articles of Incorporation to issue 25,000,000 shares of the San West Common Stock; (v) that as of the date of this Agreement, there were 4,136,836 shares of the San West Common Stock duly and validly issued and outstanding, fully paid, and non-assessable; (vi) as of the Effective Date, all shares of the San West Common Stock were held by 33 San West Stockholders all of whom are “accredited investors” as defined in the Securities Act, and subject to the terms of the Merger as of the Effective Date; (vii) to the best knowledge and belief of such counsel the issuance and sale of the San West Preferred Stock and the San West Common Stock did not violate the Securities Act, or the rules and regulations of the SEC thereunder, or applicable state securities or Blue Sky Laws, and that San West has no other authorized or outstanding series or class of capital stock or other securities; and (viii) such counsel has no knowledge of any litigation, proceeding, or governmental investigation or labor dispute pending or threatened against or relating to San West, its properties or businesses, except as set forth herein or in said opinion.

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(h)

Resolutions .  The counsel for Human BioSystems shall have received certified resolutions of a meeting of the Board of Directors of San West and the San West Stockholders pursuant to which this Agreement and the transactions contemplated hereby were duly and validly approved, adopted and ratified by the Board of Directors of San West and the San West Stockholders, all in form and content satisfactory to such counsel, authorizing (i) the execution, delivery and performance of this Agreement, (ii) such other documents and instruments as shall be necessary to consummate the transactions contemplated hereby and thereby, and (iii) all actions to be taken by San West hereunder.

(i)

Certification .  San West shall have delivered to Human BioSystems at the Effective Date a certificate dated as of the Effective Date, executed by San West, certifying that the conditions specified in this Paragraph 15 have been fulfilled.

(j)

Other Matters .  All corporate and other proceedings and actions taken in connection with the transactions contemplated hereby and all certificates, opinions, agreements, instruments and documents mentioned herein or incident to any such transaction shall be satisfactory in form and substance to Human BioSystems and the Subsidiary and their counsel, whose approval shall not be unreasonably withheld.

16.

Conditions Precedent to Obligations of San West .  All obligations of San West under this Agreement are subject to the fulfillment, prior to or at the Effective Date, of the following conditions:

(a)

Representations and Warranties True at Effective Date .  The representations and warranties of Human BioSystems and the Subsidiary herein shall be deemed to have been made again at the Effective Date, and then be true and correct, subject to any changes contemplated by this Agreement.  Human BioSystems and the Subsidiary shall have performed all of the obligations to be performed by Human BioSystems and the Subsidiary hereunder on or prior to the Effective Date.

(b)

Proof of Authority .  The counsel for San West shall have received evidence reasonably sufficient to such counsel that Human BioSystems and the Subsidiary have all requisite authorizations necessary for consummation by Human BioSystems and the Subsidiary of the transactions contemplated hereby, and there has not been issued, and there is not in effect, any injunction or similar legal order prohibiting or restraining consummation of any of the transactions herein contemplated, and no legal or governmental action, proceeding or investigation that might reasonably be expected to result in any such injunction or order is pending.

 

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(c)

SEC Filings .  Human BioSystems shall be current in all of the SEC Filings as of the Effective Date.

(d)

No Disputes with Auditors .  As of the Effective Date, neither Human BioSystems nor the Subsidiary shall have had any disputes with its auditors.

(e)

Proof of Election of and Resignations .  On the Effective Date, Human BioSystems shall deliver proof of the election of the persons selected by San West to the Board of Directors of Human BioSystems and as President of Human BioSystems, as well as the resignations of all of those persons who were the officers and directors of Human BioSystems before the Effective Date and following the election of the persons selected by San West as described herein.

(f)

Opinion of Counsel .  Human BioSystems and the Subsidiary shall have delivered at the Effective Date to San West an opinion of their counsel dated as of date of the Effective Date in form and substance reasonably satisfactory to San West and its counsel, to the effect that (i) each of Human BioSystems and the Subsidiary is a duly and validly organized and existing corporation in good standing under the laws of the state of its organization, with full corporate power to carry on the business in which it is engaged; (ii) the performance of this Agreement and the consummation of the transactions contemplated herein will not result in any breach or violation of any terms or provisions of or cause a default under the Articles of Incorporation, as amended, or Bylaws, as amended, of Human BioSystems or the Subsidiary or to said counsel’s knowledge and belief, any order, rule, or regulation of any court, governmental agency or body having jurisdiction over Human BioSystems or the Subsidiary or any of their activities, properties, any statute, indenture, mortgage, deed of trust, lease, loan agreement, security agreement, or other agreement or instrument known to said counsel, to which they are a party or by which they are bound or to which any of their property is subject; and (iii) no provision of the Articles of Incorporation, as amended, Bylaws, as amended, minutes or share certificates of Human BioSystems or the Subsidiary or, to their said counsel’s knowledge and belief, any contract to which either Human BioSystems or the Subsidiary is a party or otherwise bound or affected, prevents Human BioSystems and the Subsidiary from performing their obligations as contemplated by this Agreement.

(g)

No Orders .  There has not been issued, and there is not in effect, any injunction or similar legal order prohibiting or restraining consummation of any of the transactions herein contemplated, and no legal or governmental action, proceeding or investigation which might reasonably be expected to result in any such injunction or order is pending.

(h)

Deliveries at the Effective Date .  Human BioSystems and the Subsidiary shall have delivered to San West at the Effective Date all of the documents required to be delivered hereunder.

(i)

Certificates of Good Standing .  Human BioSystems and the Subsidiary shall have delivered to San West certificates or telegrams issued by appropriate governmental authorities evidencing the good standing of Human BioSystems and the Subsidiary as of a date not more than 10 days prior to the Effective Date, in the States of California and Nevada, respectively and in each state where Human BioSystems and the Subsidiary are qualified to do business.

(j)

Resolutions .  The counsel for San W