SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant |X|
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|_| Preliminary Proxy Statement |_| Confidential, for Use of
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permitted by Rule 14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant toss.240.14a-12
CALYPTE BIOMEDICAL CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
================================================================================
[CALYPTE BIOMEDICAL CORPORATION LOGO]
1265 Harbor Bay Parkway
Alameda, California 94502
May 3, 2004
Dear Stockholder:
You are cordially invited to attend Calypte Biomedical Corporation's
Annual Meeting of Stockholders on Thursday, June 22, 2004. The meeting will
begin promptly at 10:00 a.m. local time, at Signature Center, 5000 Hopyard Road,
4th Floor, Pleasanton, CA 94588.
The official Notice of Annual Meeting of Stockholders, Proxy Statement,
form of proxy and 2003 Annual Report to Stockholders are included with this
letter. The matters listed in the Notice of Annual Meeting of Stockholders are
described in detail in the Proxy Statement.
Your vote is important. Whether or not you plan to attend the annual
meeting, I urge you to complete, sign and date the enclosed proxy card and
return it in the accompanying envelope or vote by telephone or on-line as soon
as possible so that your stock may be represented at the meeting.
Sincerely,
/s/ Anthony J. Cataldo
Anthony J. Cataldo
Executive Chairman
[CALYPTE BIOMEDICAL CORPORATION LOGO]
1265 Harbor Bay Parkway
Alameda, California 94502
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 22, 2004
May 3, 2004
The 2004 Annual Meeting of Stockholders of Calypte Biomedical Corporation
(the "Company") will be held at Signature Center located at 5000 Hopyard Road,
4th Floor, Pleasanton, California, 94588, on Thursday, June 22, 2004, at 10:00
a.m. local time, for the following purposes:
1. To elect six directors of the Company to hold office until the next
Annual Meeting of Stockholders or until their successors are elected
and have been qualified;
2. To vote on the proposed adoption of the 2004 Incentive Plan
(Appendix D hereto) and to authorize 30,000,000 shares of Common
Stock to be issued thereunder;
3 To ratify the appointment by the Audit Committee of the Board of
Directors of Odenberg Ullakko Muranishi & Co. LLP as independent
auditors for the fiscal year ending December 31, 2004; and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Stockholders of record on May 3, 2004 will be eligible to vote at this
meeting. Only stockholders of record at the close of business on that date will
be entitled to notice of and to vote at the meeting. To ensure your
representation at the meeting, you are urged to mark, sign, date and return the
enclosed proxy as promptly as possible in the envelope provided or to vote via
the internet or by telephone. If you attend the meeting, you may vote in person
even if you return a proxy.
By order of the Board of Directors,
/s/ J. Richard George
J. Richard George
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE AND
RETURN THE PROXY CARD IN THE ENVELOPE PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
[CALYPTE BIOMEDICAL CORPORATION LOGO]
1265 Harbor Bay Parkway
Alameda, California 94502
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors (the "Board") of Calypte Biomedical
Corporation ("Calypte" or the "Company") for the Annual Meeting of Stockholders
(the "Annual Meeting"), and any postponements or adjournments thereof, to be
held at Signature Center located at 5000 Hopyard Road, 4th Floor, Pleasanton,
California 94588, on Thursday, June 22, 2004, at 10:00 a.m. local time. The
telephone number at that address is (925) 847-0900. Every stockholder shall have
the right to vote whether in person or by one or more agents authorized by a
written proxy signed by the stockholder and filed with the secretary of the
Company. The shares represented by the proxies received, properly dated and
executed, and not revoked will be voted at the Annual Meeting. A proxy may be
revoked at any time before it is exercised by delivering to the Company a
written notice of revocation or a duly executed proxy bearing a later date or by
attending the Annual Meeting and voting in person.
INFORMATION CONCERNING SOLICITATION AND VOTING
The close of business on May 3, 2004 has been fixed as the record date
(the "Record Date") for determining the holders of shares of common stock of the
Company, par value $0.03 per share, ("Common Stock") entitled to notice of and
to vote at the Annual Meeting. As of April 23, 2004, the Company had 140,162,698
shares of Common Stock outstanding and entitled to vote at the Annual Meeting.
The holders of a majority of voting power of the Common Stock issued and
outstanding and entitled to vote, present in person or represented by proxy,
shall constitute a quorum at the Annual Meeting except as otherwise provided by
statute. Each holder of Common Stock on the Record Date is entitled to one vote
for each share of Common Stock held by such stockholder, and stockholders shall
not be entitled to cumulate their votes in the election of directors or with
respect to any matter submitted to a vote of the stockholders.
Shares represented by proxies that reflect abstentions or broker non-votes
will be counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. Directors will be elected by a favorable
vote of a plurality of the shares of voting stock present and entitled to vote,
in person or by proxy, at the Annual Meeting. Accordingly, abstentions or broker
non-votes as to the election of directors will not affect the election of the
candidates receiving the plurality of votes. All of the proposals to come before
the Annual Meeting require the approval of a majority of the shares of stock
having voting power present. Abstentions as to a particular proposal will have
the same effect as votes against such proposal. Broker non-votes, however, will
be treated as not voted for purposes of determining approval of such proposal
and will not be counted as votes for or against such proposal.
The shares represented by all valid proxies received will be voted in the
manner specified on the proxies. Where specific choices are not indicated, the
shares represented by all valid proxies received will be voted: (1) for the
nominees for director named in the Proxy Statement; (2) for adoption of the 2004
Incentive Plan and the authorization to reserve shares for issuance thereunder,
and (3) for ratification of the appointment of Odenberg Ullakko Muranishi & Co.
LLP, as independent auditors for the year ending December 31, 2004.
Should any matter not described above be acted upon at the meeting, the
persons named in the proxy form will vote in accordance with their judgment.
The expense of printing and mailing proxy materials will be borne by the
Company. In addition to the solicitation of proxies by mail, solicitations may
be made by certain directors, officers and other employees of the Company by
personal interview, telephone or facsimile. No additional compensation will be
paid for such solicitation. The Company may also, at its discretion, retain the
services of a paid solicitor to solicit proxies. If the Company retains a
solicitor, it is anticipated that the cost will be approximately $5,500 and will
be paid by the Company. The Company will request brokers and nominees who hold
stock in their names to furnish proxy material to beneficial owners of the
shares and will reimburse such brokers and nominees for their reasonable
expenses incurred in forwarding solicitation material to such beneficial owners.
1
ELECTION OF DIRECTORS
(PROPOSAL 1)
At the Annual Meeting, six directors are to be elected to hold office
until the 2005 Annual Meeting or until their successors are elected and have
been qualified. Each director, including a director elected or appointed to fill
a vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected or appointed and qualified. There are no
family relationships among any of the directors or executive officers of the
Company. The nominees listed below are all now Calypte directors. The Board
knows of no reason why any nominee may be unable or unwilling to serve as a
director. If any nominee is unable or unwilling to serve, the shares represented
by all valid proxies will be voted for the election of such other person as the
Board may recommend. The nominees receiving the highest number of affirmative
votes will be elected to the Board.
Certain information relating to each director nominee is set forth below:
NAME AGE PRINCIPAL OCCUPATION DIRECTOR
- ---- --- -------------------- --------
Anthony J. Cataldo 53 Executive Chairman, 5/02
Calypte Biomedical Corporation
John J. DiPietro 46 Chief Financial Officer, Chronix 10/99
Biomedical, Inc.
Paul E. Freiman 69 President and Chief Executive Officer, Neurobiological 12/97
Technologies, Inc.
Julius R. Krevans, M.D. 80 Retired Chancellor Emeritus, Director of International 3/95
Medical Services University of California, San
Francisco
Maxim A. Soulimov 32 Director of Legal Affairs, Global Corporate Ventures 4/04
Limited
Zafar I. Randawa, Ph.D. 55 Director of the New Technology Evaluation Division, 12/96
Otsuka America Pharmaceutical
ANTHONY J. CATALDO was appointed Executive Chairman in May 2002. Mr.
Cataldo has held management positions with a number of emerging growth and
publicly traded companies. He served as the Chief Executive Officer and Chairman
of the Board of Directors of Miracle Entertainment, Inc., a Canadian film
production Company, from May 1999 through May 2002 where he was the executive
producer or producer of several motion pictures. From August 1995 to December
1998, Mr. Cataldo served as President and Chairman of the Board of Senetek, PLC,
a publicly traded biotechnology company involved in age-related therapies. From
1990 to 1995, Mr. Cataldo held various positions including Chairman and Chief
Executive Officer with Management Technologies, Inc., a manufacturer and seller
of trading system and banking software systems. He has also held the position of
Executive Vice President of Hogan Systems, a banking software manufacturer and
retailer. Mr. Cataldo has also served as President of Internet Systems, a
pioneer in the Internet banking arena. Mr. Cataldo served in the United States
Air Force from 1969 to 1973. Since October 2003, Mr. Cataldo has served as the
Chairman of the Board of Directors of BrandPartners Group, Inc. a publicly-held
brand building communication services company.
JOHN J. DIPIETRO was elected to the Company's Board of Directors in
October 1999. Since September 2002, he has served as the Chief Financial Officer
of Chronix Biomedical Inc, a private biotechnology company. Since February 2003,
Mr. DiPietro has also been a member of the Board of Chronix Biomedical. From
September 1999 to September 2002 he had been the Chief Financial Officer and
Vice President-Finance and Administration of Tripath Technology, Inc., a
semi-conductor manufacturing company. He served as Calypte's Chief Operating
Officer, Vice President of Finance, Chief Financial Officer and Secretary from
December 1997 through September 1999. From October 1995 until December 1997, he
served as Calypte's Vice President of Finance, Chief Financial Officer and
Secretary. Prior to joining the Company, he was Vice President of Finance, Chief
Financial Officer and Secretary of Meris Laboratories, Inc., a full service
clinical laboratory, from 1991 until 1995. He is a Certified Public Accountant
and received his M.B.A. from the University of Chicago, Graduate School of
Business and a B.S. in Accounting from Lehigh University.
2
PAUL E. FREIMAN has served as a member of the Company's Board of Directors
since December 1997. He has served as the President and Chief Executive Officer
of Neurobiological Technologies, Inc. since May 1997. In 1995, Mr. Freiman
retired from his position as Chairman and Chief Executive Officer of Syntex
Corporation, a pharmaceutical company. From 1962 until 1994, he held several
other positions at Syntex Corporation, including President and Chief Operating
Officer. Mr. Freiman is currently serving on the board of Penwest
Pharmaceuticals Inc. and Neurobiological Technologies, Inc and several private
biotechnology companies. He has been chairman of the Pharmaceutical
Manufacturers Association of America (PhARMA) and has also chaired a number of
key PhARMA committees. Mr. Freiman is also an advisor to Burrill & Co., a San
Francisco merchant bank.
JULIUS R. KREVANS, M.D. has served on the Company's Board of Directors
since March 1995. Dr. Krevans served as Chancellor Emeritus and Director of
International Medical Care at University of California at San Francisco from
1993 until his retirement in June 2002. From 1982 until 1993, Dr. Krevans served
as Chancellor at UCSF, and was Dean of the School of Medicine at UCSF from 1971
until 1982. Prior to this, Dr. Krevans served as Dean for Academic Affairs at
Johns Hopkins University School of Medicine where he also served on the faculty
for 18 years and was Professor of Medicine from 1968 until 1971. He is also
Chairman of the Board of Directors of Neoprobe Corporation and a member of the
Board of Directors of AccuImage Corporation. Dr. Krevans received his M.D. from
New York University, College of Medicine and completed a residency in Medicine
at Johns Hopkins University School of Medicine.
MAXIM A. SOULIMOV was appointed to the Company's Board of Directors in
April 2004 pursuant to an August 2003 agreement between the Company and Marr
Technologies BV ("MTBV") in which MTBV purchased $2.5 million of Common Stock
and the Company agreed to grant MTBV the right to appoint two mutually-agreeable
representatives to the Board. MTBV is currently the Company's largest
stockholder, holding approximately 28% of the Company's outstanding Common
Stock. Since November 2002, Mr. Soulimov has served as Director of Legal Affairs
of Global Corporate Ventures Limited ("GCVL") of London, a company providing
consultancy services to a variety of private investors including Marr and its
affiliates. From April 2000 through October 2002, Mr. Soulimov served as
in-house legal counsel for Lukoil Europe Limited and Lukoil Europe Holdings
Limited, private companies involved in the management of all Lukoil downstream
companies outside the Russian Federation. From September 1997 to April 2000, Mr.
Soulimov served as Trainee and then as Assistant Solicitor in the London firm of
Norton Rose Solicitors. Mr. Soulimov holds a Degree in Modern Languages from
Tver State University in Russia and an LLB Law degree from University of
Hertfordshire in the United Kingdom.
ZAFAR I. RANDAWA, PH.D. has served on the Company's Board of Directors
since December 1996. Dr. Randawa is currently the Senior Director of Research &
Development of the Otsuka Maryland Research Institute and has served in this
capacity since September 1995. From 1989 until September 1995, Dr. Randawa
served as a Chief Scientist at Otsuka America Pharmaceutical, Inc. Dr. Randawa
received his Ph.D. in Biochemistry at Oregon Health Sciences University, his
Master of Science degree in Biochemistry at Karachi University in Karachi,
Pakistan, his B.Sc. in Biochemistry from Karachi University and his B.S. in
Chemistry from Panjab University in Lahore, Pakistan.
APPROVAL REQUIRED
Approval of Proposal 1 requires the affirmative vote of a plurality of the
outstanding shares of Common Stock of the Company represented and voting at the
Annual Meeting.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF ALL NAMED
NOMINEES. PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS STOCKHOLDERS
SPECIFY A DIFFERENT CHOICE IN THEIR PROXIES.
THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors met 10 times and acted by unanimous written consent
6 times during 2003. The Board has standing Audit, Compensation and Nominating
Committees. All directors attended at least 75% of the aggregate number of
meetings of the Board and the standing committees on which they served in 2003
during the period in which they served as directors. In a continuing effort to
enhance the Company's corporate governance practices and to more fully clarify
the roles of the Audit, Compensation and Nominating Committees, the Board
adopted new charters for each of these standing Committees in January 2004. A
copy of the Audit Committee, Compensation Committee and Nominating Committee
charters as approved by the Board on January 19, 2004 is attached to this Proxy
Statement as Appendix A, Appendix B and Appendix C, respectively.
3
AUDIT COMMITTEE
The Audit Committee currently consists of Mr. Freiman as Chairman, Mr.
DiPietro, and Dr. Randawa. The Audit Committee assists the Board in fulfilling
its oversight responsibilities relating to the integrity of the financial
statements, compliance with legal and regulatory requirements, the independent
auditor's qualifications and independence, and the performance of the
independent auditor. It is not the duty of the Audit Committee to plan or
conduct audits, to prepare the Company's financial statements or to determine
that the Company's financial statements and disclosures are complete and
accurate and are in accordance with generally accepted accounting principles and
applicable rules and regulations. These are the responsibilities of management
and the independent auditor. In discharging its responsibilities, the Audit
Committee engages the Company's independent auditors, approves the services
performed by such auditors, reviews and evaluates the Company's accounting
principles and its system of accounting controls, and reviews with the auditors
the Company's quarterly unaudited and annual audited financial statements and
the results of the reviews and audit thereof. The Audit Committee met 5 times in
2003. Four meetings were held to discuss the Company's financial statements and
the results of the reviews and audits thereof and one meeting was held to
discuss the informal inquiry by the Securities and Exchange Commission ("SEC")
into certain of the Company's press releases and to engage outside counsel on
behalf of the Audit Committee to conduct an investigation regarding the press
releases and related information. Additionally, the Audit Committee and the
Board met concurrently once during 2003 to discuss the SEC's inquiry and the
results of the investigation by the Audit Committee's outside counsel. See
"Report of Audit Committee" below.
The Board has determined that all current members of the Audit Committee
are independent Directors and that each member of the Audit Committee has the
ability to read and understand fundamental financial statements. The Board has
also determined that Mr. Freiman and Mr. DiPietro qualify as "Audit Committee
financial experts" as defined under Item 410(h) of Regulation S-B of the
Securities Exchange Act of 1934 (the "Exchange Act"). Mr. DiPietro served as a
member of the Audit Committee from January 2003 until May 2003, but because of
his prior consulting agreement with the Company, he did not meet the
independence requirements for a member of the Audit Committee at that time.
Consequently, Dr. Randawa replaced Mr. DiPietro on the Audit Committee in May
2003. In January 2004, subsequent to his being considered independent in
September 2003, Mr. DiPietro was re-appointed to the Audit Committee and
replaced Dr. Krevans, who resigned from the Committee.
COMPENSATION COMMITTEE
The Compensation Committee consists of Dr. Krevans as Chairman and Mr.
Freiman, both of whom are independent directors who have served on the
Compensation Committee since at least 2000. The Compensation Committee assists
the Board in fulfilling its oversight responsibilities relating to officer and
director compensation, succession planning for senior management, development
and retention of senior management, and administration of the Company's stock
option, incentive and other benefit plans, including, without limitation the
1995 Director Option Plan (the "Director Plan") and the 2000 Equity Inventive
Plan (the "2000 Plan"). The Compensation Committee met twice in 2003. See
"Compensation Committee Report on Executive Compensation" below.
NOMINATING COMMITTEE
The Nominating Committee consists of Mr. Freiman as Chairman and Dr.
Krevans, both of whom have served on the Nominating Committee since 2002. The
Nominating Committee assists the Board in fulfilling its oversight
responsibilities relating to the Company's corporate governance matters,
including the determination of the independence status of current and
prospective Board members, periodic evaluation of the Board of Directors, its
committees and individual directors, and the identification and selection of
director nominees. The Nominating Committee met twice and acted once by
unanimous written consent during 2003.
The Nominating Committee will consider stockholder suggestions for
nominees for director other than self-nominating suggestions. Suggestions may be
submitted to the Secretary of the Company at the Company's administrative
offices. The Committee will consider suggestions received by the Secretary's
office prior to December 31 at a meeting the following year, preceding the
mailing of proxy material to stockholders.
4
DIRECTOR COMPENSATION
The Company's directors are reimbursed for their out-of-pocket travel
expenses associated with their attendance at Board meetings. Under the terms of
the Director Plan, non-employee directors of the Company are eligible to receive
grants of options to purchase shares of Common Stock. Non-employee directors of
the Company received no cash compensation from the Company during 2003 or since.
DIRECTOR OPTION PLAN
The Board adopted the Director Plan in December 1995 and the stockholders
approved it in 1996. The Director Plan was most recently amended at the
Company's May 2003 Annual Stockholders' Meeting at which time the stockholders
approved an increase in the number of shares reserved for issuance to 2,000,000
shares. The Compensation Committee of the Board recommends and the Board
approves the number of non-qualified stock options to purchase shares of Common
Stock that will be granted each year to newly-elected and re-elected directors.
Options may be granted under the Director Plan to non-employee directors or
directors who also serve as consultants of the Company. Each option granted
under the Director Plan is exercisable at 100% of the fair market value of the
Common Stock on the date such option is granted. Each grant under the plan vests
monthly over the twelve month period commencing with the director's date of
election or re-election, provided that the option will become vested and fully
exercisable on the date of the next annual meeting of stockholders if such
meeting occurs less than one year after the date of the grant. The Director Plan
will expire in 2005 and the Company anticipates that it will seek stockholder
approval for a new plan for the benefit of its non-employee directors at its
2005 Annual Meeting of Stockholders.
The following table shows the number of shares of Common Stock issuable
upon exercise of options granted under the Director Plan during the fiscal year
ended December 31, 2003 and through April 23, 2004.
NUMBER OF
NAME AND POSITION OPTIONS(1)
- ----------------- ----------
Anthony J. Cataldo, Director 0
John J. DiPietro, Director 305,000
Paul E. Freiman, Director 305,000
Dian J. Harrison, Former Director (2) 106,667
Julius Krevans M.D., Director 305,000
Mark Novitch M. D., Former Director (3) 105,000
Maxim A. Soulimov, Director (4) 200,000
Otsuka Pharmaceuticals Co Ltd. (Zafar Randawa, Director) 305,000
- --------------------
(1) All options were granted at fair market value as of the date of grant.
Unless otherwise noted, during the period specified, each non-employee
Board member was granted options to purchase 5,000 shares at $0.32 per
share in May 2003 for service on the Board during 2002; options to
purchase 100,000 shares at $0.32 per share in May 2003 for service on the
Board in 2003 and options to purchase 200,000 shares at $0.585 per share
in February 2004 for service on the Board in 2004.
(2) Ms. Harrison was granted options to purchase 6,667 shares at $1.50 per
share in March 2003 pursuant to her appointment as a member of the Board
and options to purchase 100,000 shares at $0.32 per share in May 2003 for
service on the Board in 2003. All non-vested options were subsequently
cancelled upon her resignation as a member of the Board in July 2003. On
September 5, 2003, when the market price of the Common Stock was $0.88 per
share and prior to the expiration of the allowable exercise period
following her resignation, Ms. Harrison exercised 8,333 of the vested
options exercisable at $0.32 per share.
(3) Dr. Novitch was granted options to purchase 5,000 shares at $0.32 per
share in May 2003 for service on the Board in 2002 and options to purchase
100,000 shares at $0.32 per share for service on the Board in 2003. All
non-vested options were subsequently cancelled upon his resignation as a
member of the Board in July 2003.
(4) Mr. Soulimov was granted options to purchase 200,000 shares at $0.56 per
share in April 2004 pursuant to his appointment as a member of the Board.
5
The Company believes that to attract and retain highly qualified
candidates to serve as directors, it is important that directors have meaningful
equity ownership in the Company. Initially, the reason for creating a
non-discretionary option plan for outside directors and for making such options
non-transferable was to comply with rules of the SEC, while still allowing
equity participation by the outside directors. Subsequent rule changes by the
SEC have eliminated such "disinterested" administration requirements and the
Company believes that the Board should have the discretion to make reasonable
use of all available means to attract and retain such highly qualified director
candidates.
INFORMATION ON EXECUTIVE COMPENSATION
The following table sets forth certain compensation awarded or paid by the
Company during the years ended December 31, 2003, 2002 and 2001 to persons who
served as its Chief Executive Officer and as its other executive officers during
2003 (collectively, the "Named Executive Officers"). The compensation table
excludes other compensation in the form of perquisites and other personal
benefits that constitute the lesser of $50,000 or 10% of the total salary and
bonus earned by each of the named Executive Officers in each fiscal year.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
SECURITIES
UNDERLYING
OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) GRANTED (1) COMPENSATION ($)
--------------------------- ---- ---------- --------- ----------- ----------------
Anthony J. Cataldo (2) 2003 445,667 (3) 0 2,492,341 (4) 0
Executive Chairman of the Board 2002 185,726 (3) 0 30,000 (4) 0
J. Richard George (5) 2003 135,692 0 103,494 (6) 0
Chief Executive Officer and President
Nancy E. Katz (7) 2003 121,073 0 1,544,476 (8) 312,692 (9)
Former President, Chief Executive 2002 265,269 0 14,049 (8) 0
Officer and Member of the Board of 2001 239,039 0 30,000 0
Directors
Jay Oyakawa (10) 2003 209,941 0 0 0
Former President and Chief Operating
Officer and Member of the Board
Richard D. Brounstein (11) 2003 201,792 0 757,371(12) 0
Executive Vice President and Chief 2002 122,596 15,000 0 0
Financial Officer; Former Member of the 2001 4,808 0 25,000 (13 26,000 (14)
Board
- -------------------
(1) All figures in this column represent options to purchase Common Stock.
(2) Mr. Cataldo has served as Executive Chairman of the Board since May 2002.
(3) At the Company's request, Mr. Cataldo deferred approximately 30% of his
cash salary from May 2002 through April 2003. The figure reported here for
calendar 2002 is net of the deferral. At December 31, 2002, the Company
had recorded expense totaling approximately $266,000, including an accrual
of approximately $80,000 for Mr. Cataldo's deferred salary. All deferred
amounts due Mr. Cataldo were paid during 2003 and the figure reported here
for calendar 2003 reflects the payment of all such deferred amounts.
(4) On May 10, 2002, when the market price of the Common Stock was $0.90 per
share and pursuant to his employment agreement, Mr. Cataldo was granted
fully-vested options to purchase 65,556 shares at $0.45 per share and
options to purchase 200,000 shares at $0.90 per share, with the option to
purchase 100,000 shares vested immediately and the option to purchase the
remainder vested on the one-year anniversary of the option grant. In the
fourth quarter of 2002, the Company renegotiated the terms of the option
grant in Mr. Cataldo's employment agreement, canceling all but 30,000 of
the options granted at $0.90. Mr. Cataldo was subsequently granted 235,556
fully-vested options at an exercise price of $0.32 per share, the market
price of the Common Stock on the May 29, 2003 grant date, following
stockholder approval at the May 20, 2003 Annual Stockholders' Meeting of
amendments to the Company's 2000 Plan. Additionally, on May 29, 2003, Mr.
Cataldo was granted fully-exercisable options to purchase 256,785 shares
at $0.01 per share, in recognition of an additional temporary salary
deferral arrangement beyond that described in (3) above, and options to
purchase 2,000,000 shares at $0.32 per share. The latter options were
exercisable 50% upon grant and 50% on the one year anniversary of the
grant.
6
(5) Dr. George has served as President and Chief Executive Officer since
January 2004. He joined the Company in January 2003 as Vice President of
Government Affairs.
(6) Represents a fully-vested option grant for 16,827 shares at an exercise
price of $0.01 per share in recognition of a temporary salary deferral
arrangement and grants of 6,667 shares and 80,000 shares, both at an
exercise price of $0.32 per share, which vest over a three year period
from the grant date.
(7) Ms. Katz served as President and Chief Executive Officer from December
2001 to June 2003. From June 2000 through December 2001, she served as
President, Chief Executive Officer and Chief Financial Officer. She joined
the Company in October 1999 as President, Chief Operating Officer, and
Chief Financial Officer.
(8) All of Ms. Katz' unexercised options, together aggregating options to
purchase 62,573 shares, were cancelled in the fourth quarter of 2002.
Subsequently, Ms. Katz was granted 62,573 fully-vested options at an
exercise price of $0.32 per share, the market price of the Common Stock on
the May 29, 2003 grant date, following stockholder approval at the May 20,
2003 Annual Stockholders' Meeting of amendments to the 2000 Plan. She was
also granted 146,667 fully vested options at $0.32 per share on May 29,
2003 pursuant to her amended October 2002 employment agreement.
Additionally, on May 29, 2003, Ms. Katz was granted fully-exercisable
options to purchase 85,236 shares at $0.01 per share, in recognition of a
temporary salary deferral arrangement, and options to purchase 1,250,000
shares of the Common Stock at $0.32 per share. The latter options were
exercisable 50% upon grant and 50% on the one year anniversary of the
grant.
(9) Under the terms of a Separation Agreement, Mutual Release and Waiver of
Claims, Ms. Katz resigned effective June 2, 2003 as the Company's
President and Chief Executive Officer and effective June 27, 2003 as a
member of the Company's Board of Directors. Under the terms of the
Separation Agreement, the Company agreed to pay Ms. Katz approximately
$313,000 over a period of up to one year and to permit previously issued
options to vest in accordance with the terms of their grants. The Company
paid Ms. Katz all amounts due pursuant to the Separation Agreement during
2003.
(10) Mr. Oyakawa served as the Company's President and Chief Operating Officer
and member of the Board from June 2003 to January 2004. Under the terms of
a January 19, 2004 Separation Agreement and Release, Mr. Oyakawa resigned
effective January 19, 2004 from his positions as an officer and director
of the Company. The Company agreed to pay Mr. Oyakawa a severance equal to
one year's salary of $350,000 over a twelve month period. On January 15,
2004, the Company granted. Mr. Oyakawa options to purchase 750,000 shares
of Common Stock at an exercise price of $0.32 per share. At the time of
Mr. Oyakawa's grant, the market price of the Common Stock was $0.62 per
share. Under the terms of the Separation Agreement and Release the options
were fully vested. Mr. Oyakawa may exercise the options for two years from
the date of grant.
(11) Mr. Brounstein has served as Executive Vice President and Chief Financial
Officer since joining the Company in December 2001. He had served the
Company as a financial consultant from July 2001 through December 2001. He
served as a member of the Board from December 2001 until May 2003, when he
did not stand for re-election.
(12) All of Mr. Brounstein's options, together aggregating options to purchase
25,000 shares, were cancelled in the fourth quarter of 2002. Mr.
Brounstein was granted 25,000 fully-vested options at an exercise price of
$0.32 per share, the market price of the Common Stock on the May 29, 2003
grant date, following stockholder approval at the May 20, 2003 Annual
Stockholders' Meeting of amendments to the 2000 Plan. Under the terms of a
January 2003 employment agreement, Mr. Brounstein was granted fully vested
options to purchase 83,333 shares at an exercise price of $0.32 per share
on May 29, 2003. Additionally, on May 29, 2003, Mr. Brounstein was granted
fully-exercisable options to purchase 24,038 shares at $0.01 per share, in
recognition of a temporary salary deferral arrangement, and options to
purchase 625,000 shares at $0.32 per share. The latter options were
exercisable 50% upon grant and 50% on the one year anniversary of the
grant.
7
(13) Represents option grant for 16,667 shares pursuant to an employment
agreement between Mr. Brounstein and the Company and an option grant for
8,333 shares made pursuant to a July 2001 Consulting Contract between Mr.
Brounstein and the Company under which he served as a financial consultant
to the Company. All of these options were cancelled in the fourth quarter
of 2002.
(14) Represents cash payments made to Mr. Brounstein pursuant to the July 2001
Consulting Contract referred to in Note (13).
STOCK OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
The following table sets forth information concerning stock options
granted to the Named Executive Officers during the fiscal year ended December
31, 2003:
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS GRANTED EXERCISE
UNDERLYING OPTIONS TO EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED FISCAL YEAR(1) $/SH)(2) DATE
- ---- ------- -------------- -------- ----
Anthony J. Cataldo 256,785 (3) 2.80 % 0.01 5/29/13
235,556 (4) 2.57 % 0.32 5/29/08
2,000,000 (5) 21.83 % 0.32 5/29/13
J. Richard George 16,827 (3) 0.18 % 0.01 5/29/13
6,667 (6) 0.07 % 0.32 5/29/13
80,000 (7) 0.87 % 0.32 5/29/13
Nancy E. Katz (8) 85,236 (3) 0.93 % 0.01 5/29/13
62,573 (9) 0.68 % 0.32 5/29/13
146,667 (10) 1.60 % 0.32 5/29/08
1,250,000 (5) 13.65 % 0.32 5/29/13
Jay Oyakawa (11) -- -- -- --
Richard D. Brounstein 24,038 (3) 0.26% 0.01 5/29/13
25,000 (9) 0.27% 0.32 5/29/13
83,333 (12) 0.91% 0.32 5/29/08
625,000 (5) 6.82% 0.32 5/29/13
- -----------------
(1) Based on the aggregate of 8,528,626 options granted under the 2000 Plan to
employees and consultants to the Company and 631,667 options granted to
Directors under the Director Plan during the year ended December 31, 2003,
including grants to the Named Executive Officers.
(2) All options grants reported here were made on May 29, 2003, when the
market price of the Common Stock as reported on the
Over-The-Counter-Bulletin-Board was $0.32 per share.
(3) Options granted as fully vested under the 2000 Plan in recognition of a
temporary salary deferral arrangement. The options expire ten years from
the date of grant.
(4) Options granted as fully-vested under the 2000 Plan. The grant was made
pursuant to Mr. Cataldo's May 2002 Employment Agreement with the Company,
but was deferred until May 29, 2003, following stockholder approval at the
May 20, 2003 Annual Stockholders' Meeting of amendments to the 2000 Plan.
The options expire five years from the date of grant. In the event of a
change of control, the options will become fully vested and Mr. Cataldo
may exercise them for the shorter of the remainder of their five year term
or two years from the effective date of the change of control.
8
(5) Options granted under the 2000 Plan. The options vest 50% on the date of
grant and 50% on the one-year anniversary of the grant date. The options
expire ten years from the date of grant. In the event of a change of
control, the options will become fully vested and the grantee may exercise
them for the shorter of the remainder of their ten year term or two years
from the effective date of the change of control.
(6) Options granted under the 2000 Plan. The options vest at the rate of 1,117
shares on the six month anniversary of the May 29, 2003 grant date and at
185 shares per month for the remaining 30 months. The options will expire
10 years from the date of grant.
(7) Options granted under the 2000 Plan. The options vest at the rate of
13,340 shares on the six month anniversary of the May 29, 2003 grant date
and at 2,222 shares per month for the remaining 30 months. The options
will expire 10 years from the date of grant.
(8) Under the terms of the Separation Agreement, Mutual Release and Waiver of
Claims between the Company and Ms. Katz, the Company agreed to permit the
options issued to Ms. Katz during 2003 prior to her termination to vest in
accordance with the terms of their grants.
(9) Options granted under the 2000 Plan. These options were issued pursuant to
the Company's fourth quarter 2002 cancellation of the grantee's
previously-unexercised options. The options were granted as fully-vested
and expire ten years from the May 29, 2003 grant date. In the event of a
change of control, the grantee may exercise the options for the shorter of
the remainder of their ten year term or two years from the effective date
of the change of control.
(10) Options granted under the 2000 Plan. The grant was made pursuant to Ms.
Katz' October 2002 Employment Agreement with the Company, but was deferred
until May 29, 2003, following stockholder approval at the May 20, 2003
Annual Stockholders' Meeting of amendments to the 2000 Plan. The options
expire five years from the date of grant. In the event of a change of
control, the options will become fully vested and Ms. Katz may exercise
them for the shorter of the remainder of their five year term or two years
from the effective date of the change of control.
(11) Pursuant to the Employment Agreement between the Company and Mr. Oyakawa,
on January 15, 2004, when the market value of the Common Stock was $0.62,
the Company granted Mr. Oyakawa options to purchase 750,000 shares of
Common Stock at $0.32 per share. Under the terms of the January 19, 2004
Separation Agreement and Release between the Company and Mr. Oyakawa, the
options became fully-vested. Mr. Oyakawa may exercise the options for two
years from the date of grant.
(12) Options granted under the 2000 Plan. The grant was made pursuant to Mr.
Brounstein's January 2003 Employment Agreement with the Company, but was
deferred until May 29, 2003, following stockholder approval at the May 20,
2003 Annual Stockholders' Meeting of amendments to the 2000 Plan. The
options expire five years from the date of grant. In the event of a change
of control, the options will become fully vested and Mr. Brounstein may
exercise them for the shorter of the remainder of their five year term or
two years from the effective date of the change of control.
The following table sets forth information concerning option exercises for the
year ended December 31, 2003, with respect to each of the Named Executive
Officers.
9
AGGREGATED OPTION EXERCISES IN 2003
AND DECEMBER 31, 2003 OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISABLE IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR END (#) FISCAL YEAR END ($)
NAME EXERCISE (#) REALIZED ($)(2) EXERCISABLE/UNEXERCISABLE)(1) (EXERCISABLE/UNEXERCISABLE)(1)(3)
---- ------------ --------------- ----------------------------- ---------------------------------
Anthony J. Cataldo 0 0 1,522,341 / 1,000,000 227,639 / 145,000
J Richard George 0 0 33,495 / 69,999 10,073 / 10,150
Nancy E. Katz (4) 919,477 227,666 0 / 624,999 0 / 90,625
Jay Oyakawa (5) 0 0 0 / 0 0 / 0
Richard D. Brounstein 0 0 444,871 / 312,500 71,958 / 45,313
- --------------------
(1) Reflects in-the-money options granted under the 2000 Plan.
(2) Value realized is based on the fair market value of the shares on the date
of exercise as reported on the Over-The-Counter Bulletin Board minus the
exercise price multiplied by the number of shares acquired on exercise.
(3) Value realized and value of unexercised in-the-money options is based on a
value of $0.465 per share of the Common Stock, the closing price on
December 31, 2003 as quoted on the Over-The-Counter-Bulletin-Board.
Amounts reflect such fair market value minus the exercise price multiplied
by the number of shares to be acquired on exercise and do not indicate
that the optionee actually sold such stock.
(4) Under the terms of the Separation Agreement, Mutual Release and Waiver of
Claims between the Company and Ms. Katz, the Company agreed to permit
options previously issued to Ms. Katz to vest in accordance with the terms
of their grants.
(5) Pursuant to the Employment Agreement between the Company and Mr. Oyakawa,
on January 15, 2004, when the fair market value of the Common Stock was
$0.62, the Company granted Mr. Oyakawa options to purchase 750,000 shares
of the Common Stock at $0.32 per share. Under the terms of the January 19,
2004 Separation Agreement and Release between the Company and Mr. Oyakawa,
the options became fully-vested. Mr. Oyakawa may exercise the options for
two years from the date of grant.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
administering the Company's executive compensation policies and programs. The
Compensation Committee also reviews and approves the salaries and bonuses, if
any, of the Company's executive officers as well as all grants of long term
incentive and equity-based compensation awards. The Compensation Committee
currently consists of two directors, each of whom are independent of management
and free from any relationship that, in the opinion of the Board of Directors,
would interfere with the exercise of their independent judgment as a
Compensation Committee member. Further, the members of the Compensation
Committee are directors who qualify as "non-employee directors" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended and
as "outside directors" within the meaning of Section 162(m) of the Internal
Revenue Code.
Executive Officer Compensation Policy. The Compensation Committee
administers the Company's executive compensation policies with the objectives
of:
o aligning the interests of executive officers with the long-term
interests of the Company's stockholders;
o providing competitive levels of compensation which are, in large
part, conditioned on the Company's attainment of specified
performance targets and/or stock price appreciation; and
10
o attracting, motivating and retaining the best possible executive
talent for the benefit of the Company's stockholders.
In assessing overall compensation for executive officers, the Compensation
Committee considers the Company's performance and industry position, and general
industry data. In furtherance of these goals, the components of executive
compensation are linked to both Company and individual performance.
Employment Agreements. Each Named Executive Officer is employed by the
Company pursuant to a written agreement of employment. Each employment agreement
reflects the terms that the Compensation Committee believed were appropriate
and/or necessary to retain the services of the particular executive officer at
the time it was executed, within the framework of the Company's compensation
policies and its financial condition. The Compensation Committee has considered
the advisability of using employment agreements and determined that under
certain circumstances it is in the best interests of the Company and its
stockholders insofar as it permits the Company to achieve its desired goals of
retaining the best possible executive talent. In addition, each employment
agreement contains restrictive covenants, including non-competition,
non-solicitation and confidentiality covenants, for the benefit of the Company.
The Compensation Committee has determined that the use of employment agreements
may be necessary in certain cases to help ensure the retention of key executive
officers, to attract additional executive talent to the Company and to impose
appropriate restrictive covenants on such officers.
Components of Executive Compensation. The material elements of the
Company's current executive compensation arrangements include base salary and
equity incentive awards. In 2003 and prior years, equity awards were generally
granted in the form of options to purchase shares of Common Stock. This strategy
is intended to increase the beneficial ownership of Common Stock by Company
executives while at the same time continuing to align their interests with those
of the Company's stockholders.
The Company does not presently have a formal annual bonus plan.
Nevertheless, subject to the availability of sufficient cash resources,
executives and certain other key employees are eligible to earn annual cash or
stock bonuses for achievement of both Company-wide and individual or
departmental goals.
For 2004, the Company expects to continue to use options to purchase
Common Stock as a primary vehicle for equity grants to further align the
interests of Company employees with Company stockholders. Subject to the
stockholders' approval at the 2004 Annual Meeting of Proposal 2 adopting the
Company's 2004 Incentive Plan, the Committee plans to grant options to purchase
an aggregate of 18,000,000 shares of Common Stock at an exercise price of $0.585
per share to seven executives and other key employees. The Compensation
Committee and Company management view this approach as the most appropriate and
effective manner of meeting the critical goal of retaining key management
employees and minimizing cash outflows while at the same time aligning the
interests of key employees and stockholders. If approved by the stockholders,
the 2004 Incentive Plan permits the Company to issue a variety of other
equity-based awards in addition to stock options, which the Compensation
Committee and management may consider in the future.
Base Salaries. Base salary represents the fixed component of the executive
compensation program. Base salaries of the Executive Chairman, Chief Executive
Officer, Chief Financial Officer, Chief Operating Officer and senior management
are determined by reviewing comparable market base salary compensation,
individual performance, and relevant experience and demonstrated capabilities in
meeting the requirements of the position. The base salaries of the Executive
Chairman, Chief Executive, Financial and Operating Officers and other members of
Senior Management are determined by the Compensation Committee's evaluation of
the Company's attainment of its stated overall goals and targets and the
individual's contribution toward and performance in attaining such goals.
Long-term Incentive Awards. As noted previously, the Committee believes
that stock option grants serve to align the goals of the Company's stockholders
and employees. In addition to that objective, the Company's stock option and
purchase plans, including the proposed 2004 Incentive Plan also assist the
Company in providing (1) a long-term incentive to help reduce employee turnover,
(2) a competitive package for recruiting new employees, (3) a long-term reward
for loyalty, dedication and service, and (4) the vehicle for employees to share
in the rewards of "building stockholder value."
11
Executive Chairman Compensation
In May 2002, in conjunction with the financing proposal enabling the
restart of the Company's operations, the independent members of the Company's
Board entered into a five-year employment agreement with Anthony Cataldo to
serve as the Company's Executive Chairman. The employment agreement specifies a
base annual salary of $400,000 and allows for annual increases based on the
Company's performance and approval of the Compensation Committee. The
Compensation Committee has not adjusted Mr. Cataldo's base salary during 2003 or
subsequently. The Company deferred approximately 30% of Mr. Cataldo's cash
compensation during 2002, which it accrued. The Company continued to defer and
accrue this compensation until it was paid during the third quarter of 2003. On
May 10, 2002, when the market price of the Common Stock was $0.90 per share, the
Company granted Mr. Cataldo fully-vested options to purchase 65,556 shares of
Common Stock at $0.45 per share and options to purchase 200,000 shares of Common
Stock at $0.90 per share, with the option to purchase 100,000 shares vested
immediately and the option to purchase the remainder vesting on the one-year
anniversary of the option grant. Both option grants have a five-year term. In
the fourth quarter of 2002, the Company renegotiated the terms of the option
grant contained in Mr. Cataldo's Employment Agreement, canceling all but 30,000
of the options granted at $0.90. Subsequently, following stockholder approval at
the May 20, 2003 Annual Stockholders' Meeting of amendments to the 2000 Plan, on
May 29, 2003, Mr. Cataldo was granted 235,556 fully-vested options at an
exercise price of $0.32 per share, the market price of the Common Stock on that
date. Additionally, on May 29, 2003, Mr. Cataldo was granted fully-exercisable
options to purchase 256,785 shares of Common Stock at $0.01 per share, in
recognition of an additional salary deferral arrangement, and options to
purchase 2,000,000 shares of Common Stock at $0.32 per share. The latter options
were exercisable 50% upon grant and 50% on the one year anniversary of the
grant. Subject to the approval by the Company's stockholders of Proposal 2 to
adopt the Company's 2004 Incentive Plan, the Committee plans to grant options to
purchase 5,000,000 shares of the Company's common stock to Mr. Cataldo at an
exercise price of $0.585 per share, the price of the Common Stock on February
24, 2004, the date the Committee approved the grant. The options will have a
ten-year term and will be exercisable 50% upon grant and 50% one year
thereafter. The Compensation Committee considers this level of compensation
appropriate in view of Mr. Cataldo's background, leadership and accomplishments.
Chief Executive Officer, President, and Chief Operating Officer
Compensation
In October 2002, the Company entered into a five-year employment agreement
with Nancy E. Katz, the Company's former President and Chief Executive Officer
and member of the Board, that included an annual salary of $300,000, subject to
annual review. The Compensation Committee did not adjust Ms. Katz' base salary
prior to her resignation in June 2003. In conjunction with the agreement, the
Company granted Ms. Katz options to purchase 146,667 shares of Common Stock, at
an exercise price of $2.40, subject to stockholder approval of amendments at the
2003 Annual Meeting of Stockholders to the 2000 Plan. These options were to be
fully vested on the grant date. In February 2003, the exercise price of this
option was reduced to the lesser of $1.50 per share or the market price on the
grant date. In the fourth quarter of 2002, Ms. Katz permitted the Company to
cancel all outstanding options previously granted to her under the 1991
Incentive Stock Plan and the 2000 Plan, an aggregate of 62,573 options.
Subsequently, following stockholder approval at the May 20, 2003 Annual
Stockholders' Meeting of amendments to the 2000 Plan, on May 29, 2003, the
Company granted Ms. Katz 62,573 fully-vested options at an exercise price of
$0.32 per share, the market price of the Common Stock on that date. The options
granted conditionally under Ms. Katz' October 2002 Employment Agreement were
also granted as fully vested at $0.32 per share on May 29, 2003. Additionally,
on May 29, 2003, Ms. Katz was granted fully-exercisable options to purchase
85,236 shares of Common Stock at $0.01 per share, in recognition of an earlier
salary deferral arrangement, and options to purchase 1,250,000 shares of Common
Stock at $0.32 per share. The latter options were exercisable 50% upon grant and
50% on the one year anniversary of the grant. Under the terms of a Separation
Agreement, Mutual Release and Waiver of Claims, Ms. Katz resigned effective June
2, 2003 as the Company's President and Chief Executive Officer and effective
June 27, 2003 as a member of the Company's Board. Under the terms of the
Separation Agreement, the Company agreed to pay approximately $313,000 over a
period of up to one year and to permit previously issued options to vest in
accordance with the terms of their grants. All amounts due to Ms. Katz under the
Separation Agreement were paid during 2003.
In June 2003, the Company entered into a five year employment agreement
with Jay Oyakawa, the Company's former President and Chief Operating Officer and
member of the Board, that included an annual base salary of $350,000. On January
15, 2004, when the market price of the Common Stock was $0.62 per share, Mr.
Oyakawa was granted options to purchase 750,000 shares of Common Stock
exercisable at $0.32 pursuant to the 2000 Plan. The options vested 50% upon
grant and 50% on the one-year anniversary of the grant. On January 19, 2004, Mr.
Oyakawa resigned from his position as President, Chief Operating Officer and as
a member of the Board. The Company entered into a Separation Agreement and
Release with Mr. Oyakawa effective on January 19, 2004 pursuant to which the
Company will pay him severance in an amount equal to one year's salary of
$350,000 over a twelve month period. Under the terms of the Separation Agreement
and Release, the options became fully-vested. Mr. Oyakawa may exercise the
options for two years from the date of grant.
12
In January 2004, the Company entered into a three year employment
agreement with J. Richard George to serve as the Company's Chief Executive
Officer and President and that includes an annual base salary of $250,000.
Subject to the approval by the Company's stockholders of Proposal 2 to adopt the
Company's 2004 Incentive Plan, the Committee plans to grant options to purchase
5,000,000 shares of the Company's common stock to Dr. George at an exercise
price of $0.585 per share, the price of the Common Stock on February 24, 2004,
the date the Committee approved the grant. The options will have a ten-year term
and will be exercisable 50% upon grant and 50% one year thereafter. The
Compensation Committee considers this level of compensation appropriate in view
of Dr. George's background, leadership and accomplishments.
Chief Financial Officer Compensation
On January 1, 2003, the Company entered into a twelve month employment
agreement, with automatic renewal options, with Richard D. Brounstein, the
Company's Executive Vice President and Chief Financial Officer, that included an
annual base salary of $200,000, and the grant of options to purchase 83,333
shares of Common Stock at an exercise price of $1.50 per share, subject to
stockholder approval of amendments at the 2003 Annual Meeting of Stockholders to
the 2000 Plan. The Compensation Committee did not adjust Mr. Brounstein's base
salary during 2003 or subsequently. The options granted were to be fully vested
on the grant date. Mr. Brounstein had previously been granted options to
purchase an aggregate of 25,000 shares of Common Stock in 2001 and 2002,
pursuant to July 2001 consulting contract under which he served as a financial
consultant to the Company. In the fourth quarter of 2002, Mr. Brounstein
permitted the Company to cancel all outstanding options previously granted to
him. Subsequently, following stockholder approval at the May 20, 2003 Annual
Stockholders' Meeting of amendments to the 2000 Plan, on May 29, 2003 Mr.
Brounstein was granted 25,000 fully-vested options at an exercise price of $0.32
per share, the market price of the Common Stock on that date. The options
granted conditionally to Mr. Brounstein under his Employment Agreement were also
granted as fully vested at $0.32 per share on May 29, 2003. Additionally, on May
29, 2003, Mr. Brounstein was granted fully-exercisable options to purchase
24,038 shares of Common Stock at $0.01 per share, in recognition of an earlier
temporary salary deferral arrangement, and options to purchase 625,000 shares of
Common Stock at $0.32 per share. The latter options were exercisable 50% upon
grant and 50% on the one year anniversary of the grant. Subject to the approval
by the Company's stockholders of Proposal 2 to adopt the Company's 2004
Incentive Plan, the Committee plans to grant options to purchase 1,500,000
shares of the Company's common stock to Mr. Brounstein at an exercise price of
$0.585 per share, the price of the Common Stock on February 24, 2004, the date
the Committee approved the grant. The options will have a ten-year term and will
be exercisable 50% upon grant and 50% one year thereafter. The Committee
considers this level of compensation appropriate in view of Mr. Brounstein's
background, leadership and accomplishments.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD
Julius Krevans, M.D.
Paul Freiman
April 16, 2004
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2003, the Compensation Committee consisted of Dr. Julius Krevans
and Mr. Paul Freiman, each of whom is a non-employee director. No member of the
Compensation Committee has a relationship that would constitute an interlocking
relationship with executive officers or directors of another entity.
13
REPORT OF AUDIT COMMITTEE
The following report of the Audit Committee of the Board shall not be deemed to
be incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing by the Company under either the Securities
Act of 1933, as amended, or the Exchange Act, except to the extent that the
Company specifically incorporates this information by reference. The following
report shall not otherwise be deemed filed under such Acts.
Annual Report on Form 10-KSB
The role of the Audit Committee (the "Committee") is to assist the Board in its
oversight of the Company's financial reporting process. The Audit Committee
operates pursuant to a Charter that was last amended and restated by the Board
on January 19, 2004. Management of the Company is responsible for the
preparation, presentation and integrity of the Company's financial statements,
the Company's accounting and financial reporting principles and internal
controls and procedures designed to assure compliance with accounting standards
and applicable laws and regulations. The independent auditors are responsible
for auditing the Company's financial statements and expressing an opinion as to
their conformity with generally accepted accounting principles.
In the performance of its oversight function, the Committee met and held
discussions with management and Odenberg Ullakko Muranishi & Co. LLP (`OUM"),
the Company's independent auditors. Management represented to the Committee that
the Company's consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States, and the Committee
reviewed and discussed the consolidated financial statements with management and
with OUM. The Committee also discussed with OUM the matters required to be
discussed by Statement on Auditing Standards No. 61 (Codification of Statements
on Auditing Standards, AU 380), as amended.
In addition, the Committee discussed with OUM their independence from the
Company and its management, and OUM provided to the Committee the written
disclosures and letter required from the independent auditors by the
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees).
The Committee discussed with the OUM the overall scope and plans for their
audit. The Committee met with OUM, with and without management present, to
discuss the results of their examination, their evaluations of the Company's
internal controls, and the overall quality of the Company's financial reporting.
The members of the Committee are not professionally engaged in the
practice of auditing and therefore rely without independent verification on the
information provided to them and on the representations made by management and
the independent auditors. Accordingly, the Audit Committee's oversight does not
provide an independent basis to determine that management has maintained
appropriate accounting and financial reporting principles or appropriate
internal control and procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Furthermore, the Audit
Committee's reviews and discussions referred to above do not assure that the
audit of the Company's financial statements has been carried out in accordance
with generally accepted auditing standards, that the financial statements are
presented in accordance with generally accepted accounting principles or that
the Company's auditors are in fact "independent."
Based upon the reports and discussions described in this report, and
subject to the limitations on the role and responsibilities of the Audit
Committee referred to above and in the Audit Committee's Charter, the Audit
Committee approved the inclusion of the audited financial statements in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2003 for
filing with the SEC.
SEC Informal Inquiry
The Company was contacted by the San Francisco District Office of the
Securities and Exchange Commission (the "Commission") on October 28, 2003 and
advised that the enforcement staff of the Commission was conducting an informal
inquiry regarding the Company. The Commission has requested, among other things,
documents and information related to certain press releases issued by the
Company. The Commission has advised the Company that the inquiry should not be
construed as an indication by the Commission or its staff that any violation of
law has occurred. The Company has voluntarily provided the information sought by
the Commission and is cooperating with the Commission in connection with its
informal inquiry.
14
Independently, the Committee investigated the matter and retained outside
counsel to assist in its investigation by reviewing the press releases and
related information that were the subject matter of the Commission's informal
inquiry letter. The Committee completed its investigation and reported the
results of its investigation and associated recommendations to the Board of
Directors. Counsel for the Committee advised both the Committee and the Board of
Directors that the results of their investigation, interviews and review of
documents provided in response to the Commission's informal inquiry letter
indicated no evidence of management malfeasance with respect to its inquiry. The
Committee, based upon its counsel's recommendations, proposed that the Company
implement certain practices and procedures, some of which represent a
continuation or formalization of present practices. The recommendations and
proposals of the Committee were approved by the Board of Directors and include
certain improvements in the Company's press release issuance process and
investor relations and regulatory recordkeeping procedures. Additionally, the
Board of Directors has directed management to implement the American Stock
Exchange corporate governance standards (SR-AMEX-2003-65) approved by the
Commission on December 1, 2003. While corporate governance is an on-going
process, the Company has substantially implemented our recommendations and
proposals and we and the Board have approved the updated policies and charters,
including those attached as exhibits to this Proxy Statement.
Change of Auditors
The Company's interim financial statements are required to be reviewed
under Statement of Auditing Standards 100 ("SAS 100") by an independent public
accountant pursuant to Item 310(b) of Regulation S B and our annual financial
statements must be audited by an independent public accountant pursuant to Item
310(a) of Regulation S B. Calypte's former independent auditors, KPMG LLP
("KPMG"), informed the Company that they could not complete their quarterly
review of the Company's interim financial statements contained in the Company's
Quarterly Report on Form 10-QSB for the quarterly period ended September 30,
2003 or audit the Company's financial statements for its fiscal year ended
December 31, 2003 until such time as the Audit Committee had completed its
investigation related to the Commission's informal inquiry letter, the same was
reviewed by KPMG, and KPMG was satisfied that, in its opinion, an adequate
investigation was conducted and appropriate conclusions were reached and actions
taken.
On December 23, 2003, the Board dismissed KPMG as independent auditors for
the Company, effective immediately, at the recommendation of the Committee. As
of the date of KPMG's dismissal, KPMG had advised the Company that, in KPMG's
opinion, the conditions necessary for KPMG to complete its review had not yet
been satisfied. At the time of KPMG's dismissal, the Committee had completed its
investigation, had reported the results of its investigation and associated
recommendations to the Board of Directors, and the Board of Directors had
approved the recommendations. Additionally, at that time, counsel for the
Committee had advised the Company and the Committee that it had commenced to
provide to KPMG information concerning the investigation conducted, the
conclusions reached and the actions taken by the Company.
On December 24, 2003, upon the approval of and at the direction of the
Committee, the Company engaged OUM to audit the consolidated financial
statements of the Company for the two years ended December 31, 2003 and 2002 for
inclusion in the Company's Annual Report on Form 10-KSB and to review the
interim financial statements of the Company contained in its Quarterly Report on
Form 10-QSB for the quarterly period ended September 30, 2003. OUM has completed
the SAS 100 review associated with the Company's Form 10-QSB/A (No.1) and its
audit of the Company's financial statements for the years ended December 31,
2003 and 2002.
The Committee and the Board have appointed, subject to stockholder
ratification, OUM as the Company's independent auditors for the fiscal year
ending December 31, 2004.
SUBMITTED BY THE AUDIT COMMITTEE OF THE BOARD
Paul E. Freiman, Chairman
John J. DiPietro
Zafar I. Randawa, Ph.D.
April 16, 2004
15
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Odenberg Ullakko Muranishi & Co. LLP is the independent accounting firm
that audited the Company's financial statements for the years ended December 31,
2003 and 2002. As indicated in the Report of Audit Committee, OUM was first
engaged in December 2003. OUM performed no services for the Company during
calendar 2003, but performed its audit and review services for 2003 and 2002
during calendar 2004. The aggregate fees billed to date during 2004 for each of
the following categories of services are set forth below:
Audit fees $ $135,000
Audit-related fees $ --
Tax fees $ --
All other fees $ --
"Audit fees" include fees for the audits of the Company's annual financial
statements for 2003 and 2002 and the quarterly review of the statements for the
quarter ended September 30, 2003, as well as fees for consultation regarding
accounting issues and their impact on or presentation in the Company's financial
statements. "Audit-related services" consists primarily of the review of
registration statements and the issuance of related consents. "Tax fees" include
tax planning and the preparation of the Company's tax returns. OUM does not
provide any tax or financial information systems design or implementation
services to the Company.
The following table summarizes fees billed for services for 2003 and 2002
by KPMG LLP, the Company's former auditors, for each of the following categories
of service:
2003 2002
Audit fees $108,450 $160,000
Audit-related fees $ 62,075 $ 83,000
Tax fees -- $ 23,500
All other fees $ 53,365 --
"Audit fees" include fees for the audit of the Company's annual financial
statements for 2002 and the quarterly reviews of the statements for calendar
2002 and through September 30, 2003, as well as fees for consultation regarding
accounting issues and their impact on or presentation in the Company's financial
statements. "Audit-related services" consists primarily of the review of
registration statements and the issuance of related consents. "Tax fees" include
tax planning and the preparation of the Company's tax returns. KPMG did not
provide any financial information systems design or implementation services to
the Company. "All other fees" represents fees billed during the fourth quarter
of 2003 in connection with KPMG's review of documentation supplied by the
Company to the Audit Committee's outside counsel related to the SEC's informal
inquiry.
16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In September 2001, the Company issued a $400,000 8.5% Promissory Note to
the parent company of its then-largest stockholder. The Company renegotiated the
note during 2001, 2002 and subsequently in 2003. This note was repaid in 2003.
In connection with MTBV's aggregate $12.5 million investment in the Common
Stock during 2003, the Company signed a Memorandum Of Understanding with Marr
Technologies Limited, an affiliate of MTBV, to create a joint venture in China
to market the Company's current and future products. Additionally, the
Nominating Committee of the Company's Board agreed to grant MTBV the right to
appoint two mutually-agreeable representatives to the Company's Board at a
mutually-agreeable future date.
In November 2003, the joint venture, Beijing Calypte Biomedical Technology
Ltd., was formed, with the Company owning a 51% interest in the entity and Marr
Technologies Limited holding a 49% interest. In April 2004, upon the nomination
by MTBV and the recommendation of the Nominating Committee of the Board, the
Company's Board appointed Maxim A. Soulimov as a member of the Board.
17
STOCK PERFORMANCE CHART
The graph below compares the cumulative total stockholder return on the
Common Stock assuming an initial investment on December 31, 1998. The
Corporation's return is shown with the cumulative total return of the NASDAQ
Stock Market--U.S. Index and the Nasdaq Biotechnology Index. The graph assumes a
$100 investment made at the beginning of the respective period and reinvestment
of all dividends.
[GRAPHIC CHART APPEARS HERE]
18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as set forth in the footnotes to this table, the following table
sets forth information known to the Company with respect to the beneficial
ownership of its Common Stock as of April 23, 2004 for (i) all persons known by
the Company to own beneficially more than 5% of its outstanding Common Stock,
(ii) each of the Company's directors, (iii) each Named Executive Officer and
(iv) all directors and executive officers of the Company as a group.
SHARES
BENEFICIALLY % OF
5% STOCKHOLDERS, DIRECTORS AND OFFICERS(1) OWNED TOTAL(2)
- ------------------------------------------ ----- --------
Marr Technologies BV (3) 39,915,151 27.76
Strawinskylaan 1431
1077XX, Amsterdam
The Netherlands
Anthony J. Cataldo (4) 5,022,341 3.46
Richard D. Brounstein (5) 1,507,371 1.06
J. Richard George (6) 2,544,606 1.78
John DiPietro (7) 305,245 *
Paul Freiman (8) 309,901 *
Julius Krevans, M.D.(9) 308,001 *
Zafar Randawa, Ph.D.(10) 351,372 *
Maxim A. Soulimov (11) 200,000 *
All current directors and
executive officers as a group (8 persons) 10,349,302 6.88
- -------------------
* Represents beneficial ownership of less than 1%.
(1) To the Company's knowledge, except as set forth in the footnotes to this
table and subject to applicable community property laws, each person named
in this table has sole voting and investment power with respect to the
shares set forth opposite such person's name. Except as otherwise
indicated, the address of each of the persons in this table is as follows:
c/o Calypte Biomedical Corporation, 1265 Harbor Bay Parkway, Alameda,
California 94502.
(2) Based on 140,162,698 shares outstanding as of April 23, 2004.
(3) As reported in Amendment No. 3 to Schedule 13D dated December 2, 2003
filed with the Securities and Exchange Commission. Marat Safin has voting
and investment control over shares held by Marr Technologies BV.
(4) Includes 5,022,341 shares subject to options exercisable within 60 days.
The grant of 2,500,000 options is subject to stockholder approval of
Proposal 2 herein.
(5) Includes 1,507,371 shares subject to options exercisable within 60 days.
The grant of 750,000 options is subject to stockholder approval of
Proposal 2 herein.
(6) Includes 2,544,606 shares subject to options exercisable within 60 days.
The grant of 2,500,000 options is subject to stockholder approval of
Proposal 3 herein.
(7) Includes 305,000 shares subject to options exercisable within 60 days.
(8) Includes 309,901 shares subject to options exercisable within 60 days.
(9) Includes 308,001 shares subject to options exercisable within 60 days.
19
(10) Includes 308,267 shares subject to options exercisable within 60 days. Dr.
Randawa is a director of the Company and an affiliate of Otsuka
Pharmaceutical Co., Ltd. All shares listed are held by Otsuka. Dr. Randawa
disclaims beneficial ownership of the shares except to the extent of his
affiliation with Otsuka.
(11) Includes 200,000 shares subject to options exercisable within 60 days.
Marr Technologies BV ("Marr"), the holder of 38,915,151 shares of Calypte
Common stock (the "Marr Holdings") has the right to nominate two (2)
candidates to serve on the Calypte Board of Directors. Mr. Soulimov was
nominated by Marr and subsequently appointed as a director upon approval
of the Calypte Board of Directors. Mr. Soulimov disclaims any direct or
indirect beneficial ownership of Marr Holdings and does not exercise any
control nor does he take part in any investment decisions undertaken by
Marr and does not have a direct or indirect pecuniary interest in Marr
Holdings.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
executive officers, directors, and persons who own more than 10% of the
Company's Common Stock (collectively, "Reporting Persons") to file reports of
ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the
Commission. Such Reporting Persons are also required by the Securities and
Exchange Commission rules to furnish the Company with copies of all Section
16(a) forms that they file. The Company believes that during fiscal year 2003,
all the Reporting Persons complied with all applicable filing requirements.
20
ADOPTION OF
THE CALYPTE BIOMEDICAL CORPORATION
2004 INCENTIVE PLAN
(PROPOSAL 2)
On February 24, 2004, the Board adopted, subject to approval by the
stockholders at the Annual Meeting, the Calypte Biomedical Corporation 2004
Incentive Plan, (the "2004 Plan"). The text of the 2004 Plan is attached as
Appendix D to this Proxy Statement Stockholders are being asked to approve the
adoption of the 2004 Plan and to approve the reservation for issuance thereunder
of up to 30,000,000 shares of Common Stock.
Purpose. The purpose of the 2004 Plan is to attract, retain and motivate
officers, employees (including prospective employees), consultants and others
who may perform services for the Company, to compensate them for their
contributions to the long-term growth and profits of the Company, and to
encourage them to acquire a proprietary interest in the success of the Company
by providing them with the opportunity to acquire Common Stock or to receive
monetary payments based on the value of the Common Stock or on the financial
performance of the Company, or both, on advantageous terms. The 2004 Plan is
designed to permit the Company to provide several different forms of awards to
meet competitive conditions, including incentive stock options, non-qualified
stock options, stock appreciation rights, dividend equivalent rights, restricted
stock, restricted stock units, other equity-based or equity-related award and
incentive awards based on achievement of performance goals (collectively, the
"Awards").
General. The 2004 Plan authorizes the granting of Awards with respect to
an aggregate of 30,000,000 shares of Common Stock. The 30,000,000 shares
reserved under the 2004 Plan equal approximately 21% of the outstanding Common
Stock as of April 23, 2004. The 2004 Plan will replace the 2000 Equity Incentive
Plan (the "2000 Plan"). As of April 23, 2004, under the 2000 Plan, options to
purchase 7,861,180 shares of Common Stock were outstanding and less than 300,000
shares reserved were available for additional grants. The Common Stock covered
by the 2004 Plan may be either authorized but unissued shares or treasury
shares. If there is a forfeiture, expiration, termination, cancellation or
settlement for cash of any Award granted under the 2004 Plan without the
issuance of shares, the shares covered by such forfeited, terminated or canceled
Award or equal to the number of shares settled, surrendered, withheld or
tendered, shall again become available for transfer pursuant to Awards under the
2004 Plan.
The following summary of certain provisions of the 2004 is qualified in
its entirety by reference to the copy of the 2004 Plan set forth in Appendix C
to this Proxy Statement.
Administration. The 2004 Plan provides that grants of Awards and other
determinations under the Plan shall be made by (i) the Compensation Committee of
the Board or (ii) the Board (the "Administrator"). To the extent required for
Awards to qualify for the exemptions available under Rule 16b-3 promulgated
under the Exchange Act, the Compensation Committee will be composed of two or
more directors, each of whom is a "non-employee direct" within the meaning of
Exchange Act Rule 16b-3. To the extent required for compensation realized from
Awards to be deductible by the Company pursuant to Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), the Compensation
Committee will be composed of two or more directors, each of whom is an "outside
director" within the meaning of Section 162(m) of the Code.
Performance Based Compensation. Section 162(m) of the Code limits to $1
million annually the income tax deduction a public corporation may claim for
compensation paid to any of its top five executive officers, except in limited
circumstances. One such exception is for "performance based compensation," which
is defined as compensation paid solely on account of the attainment of one or
more performance goals, but only (1) if the goals are determined by a
compensation committee of the board of directors comprised of two or more
outside directors, (2) the performance goals are disclosed to stockholders and
approved by a majority vote before the remuneration is paid, and (3) before the
remuneration is paid, the Compensation Committee certifies that the performance
goals and any other material terms were in fact satisfied.
Internal Revenue Service regulations provide that compensation
attributable to a stock option or stock appreciation right will be deemed to
satisfy the requirement that performance goals be preestablished if the grant of
the award is made by a properly appointed Compensation Committee appointed by
the Board; the plan under which the award is granted states the maximum number
of shares with respect to which options or rights may be granted during a
specified period to any employee; and, under the terms of the option or award,
the amount of compensation the employee could receive is based solely on an
increase in the value of the stock after the date of the grant or award. In the
case of all other types of awards, the performance criteria must be established
within 90 days after the commencement of the period of service to which the
performance goal relates, and the performance goal must be objective and capable
of determination by a third party having knowledge of the relevant facts.
21
The 2004 Plan includes features intended to permit the Administrator to
grant Awards to employees that will qualify as performance-based compensation.
The 2004 Plan limits the number of shares with respect to which incentive stock
options, non-qualified stock options, and stock appreciation rights may be
granted in any one calendar year to any one individual participant to 8,000,000
shares of Common Stock. The 2004 Plan further limits the number of shares with
respect to which restricted stock or restricted stock units may be granted in
any one calendar year to any one individual participant to 8,000,000 shares of
Common Stock. The 2004 Plan also provides that the total value of any Award
intended to qualify as performance-based compensation granted to any one
individual participant in any calendar year is limited to $1 million, based upon
the value of the Award assuming performance goals met on the date of the Award
grant. The 2004 Plan provides that the Administrator may condition exercise of
an Award on attainment of an objective performance goal or goals based on one or
more of the following performance criteria: earnings (either in the aggregate or
on a per-share basis), total stockholder return, return on equity, return on
capital, net income, cash flow, operating income or profit, gross revenues,
economic value added, or strategic business criteria. The levels of performance
required with respect to Performance Goals may be expressed in absolute or
relative levels.
Eligibility. Awards under the 2004 Plan may be made to such officers,
employees (including prospective employees), consultants and other individuals
who may perform services for the Company, as the Compensation Committee may
select.
Types of Awards. Awards may be made under the 2004 Plan in the form of (a)
options, (b) stock appreciation rights, (c) dividend equivalent rights, (d)
restricted stock, (e) restricted stock units, (f) other equity-based or
equity-related Awards which the Committee determines to be consistent with the
purpose of the 2004 Plan and the interests of the Company (including, but not
limited to, stock bonuses and warrants), and (g) incentive awards. No incentive
stock option may be granted to a non-employee.
Stock Options. The Incentive Plan permits the granting of options
that are either incentive stock options ("ISOs") or nonqualified stock
options ("NSOs"). ISOs may be granted only to employees (including
officers and directors who are also employees) of the Company or any
parent or subsidiary of the Company. The option exercise price for each
ISO share must be no less than 100% of the "fair market value" (as defined
in the 2004 Plan) of a share of Common Stock at the time the ISO is
granted. In the case of an ISO granted to a 10% stockholder, the exercise
price for each such ISO share must be no less than 110% of the fair market
value of a share of Common Stock at the time the ISO is granted. If the
shares of Common Stock subject to a participant's ISO which become
exercisable for the first time during any calendar year have a fair market
value in excess of $100,000, the options for the excess will be treated as
NSOs.
The exercise price of options granted under the 2004 Plan may be
paid in cash or by such other method as the Committee may prescribe,
provided, however, that any participant exercising rights and obtaining
shares pursuant to awards granted under the 2004 Plan must pay cash or
other valid consideration equal to the aggregate par value of such shares
to the extent required by the Delaware General Corporation Laws. Any taxes
required to be withheld must be paid by the participant at the time of
exercise. The Company may deduct or withhold from any payment or
distribution an amount sufficient to satisfy such withholding obligation.
The grantee may elect to have the Company withhold shares of Common Stock
or may tender previously owned shares of Common Stock to satisfy the
withholding obligation. The period of any option will be determined by the
Administrator, but no option may be exercised after the expiration of ten
years from the date it is granted. Option awards will provide rules
covering the time of exercise of an option in case of retirement, death,
disability, or other termination of employment
Stock Appreciation Rights. The 2004 Plan permits the granting of
stock appreciation rights in conjunction with all or part of a stock
option granted under the Plan. In the case of a NSO, such rights may be
granted either at or after the date of grant of such Option. In the case
of an ISO, such rights may be granted only at the date of grant of such
Option. Stock appreciation rights will be exercisable only at such time
and to the extent that the stock options to which they relate are
exercisable. Upon exercise of a stock appreciation right, a Participant
will receive an amount equal to the product of (a) the excess of the fair
market value of one share of Common Stock over the exercise price per
share specified in the related stock option times (b) the number of shares
in respect of which the stock appreciation right shall have been
exercised, in cash, shares of Common Stock or both, with the Compensation
Committee having the right to determine the form of payment.
22
Dividend Equivalent Rights. The 2004 Plan permits the Compensation
Committee to include in any award a dividend equivalent right entitling
the participant to receive amounts equal to all or any portion of the
dividends that would be paid on the shares of Common Stock covered by the
Award if such shares had been delivered pursuant to the Award. The
Compensation Committee will determine whether the payment of dividend
equivalent rights will be made in cash, in shares of Common Stock or in
another form, whether they shall be conditioned upon the exercise of the
Award to which they relate, the time at which they shall be made, and such
other terms and conditions as the Committee considers appropriate.
Restricted Stock Awards and Restricted Stock Units. The 2004 Plan
permits the granting of or offering for sale restricted shares of Common
Stock and restricted stock units in such amounts and subject to such terms
and conditions as the Compensation Committee may determine. Upon receipt
of restricted shares of Common Stock, the participant has the rights of a
shareholder with respect to the restricted stock, subject to any
restrictions and conditions that the Compensation Committee may impose. On
the delivery date of a restricted stock unit, the participant receives one
share of Common Stock or cash equal in value to a share of Common Stock or
a combination thereof, as specified by the Compensation Committee. No more
than a total of 8,000,000 shares of Common Stock are available for
delivery as restricted stock and restricted stock units.
Other Stock-Based Awards. The 2004 Plan permits the Compensation
Committee to grant other types of equity-based or equity-related awards
(including the grant or offer for sale of unrestricted shares of Common
Stock) in such amounts and subject to such terms and conditions as the
Compensation Committee may determine. Such awards may entail the transfer
of actual shares of Common Stock to participants or payment in cash or
otherwise of amounts based on the value of shares of Common Stock.
Incentive Awards. The 2004 Plan permits the Compensation Committee
to grant Incentive Awards in such amounts and subject to the achievement
of performance goals and other terms and conditions as the Committee may
determine. Incentive awards will be granted and administered to comply
with the requirements of Section 162(m) of the Code. After the term for
the applicable performance period has ended, the participant will be
entitled to payment based on the level of achievement of the performance
goals set by the Compensation Committee. The Compensation Committee shall
certify the achievement of the performance goals in wiritng before the
incentive award is settled. At the discretion of the Compensation
Committee, the settlement of incentive awards may be in cash, shares of
Common Stock, or in some combination thereof.
Tax Offset Bonuses. The Compensation Committee may grant to a
participant specified amount for the purpose of assisting the participant
to pay taxes resulting from the grant of an Award.
Change in Control. The Committee may provide in any award agreement for
provisions relating to a "change in control" of the Company, including, without
limitation, the acceleration or extension of the exercisability of, or the lapse
of restrictions or deemed satisfaction of goals with respect to, any outstanding
Awards. Unless otherwise provided in a participant's award agreement, in the
event of a merger, consolidation, mandatory share exchange or other similar
business combination of the Company with or into any other entity (the
"successor entity") or any transaction in which another person or entity
acquires all of the Company's issued and outstanding Common Stock, or all, or
substantially all, of the Company's assets, outstanding Awards may be assumed or
an equivalent Award may be substituted by the successor entity or a parent or
subsidiary of the successor entity.
Amendment of the 2004 Plan. The Board may from time to time alter,
suspend, discontinue, revise, amend or terminate the 2004 Plan in any respect
whatsoever, provided, that no such modification of the 2004 Plan shall adversely
affect in any material way any award previously granted under the 2004 Plan,
without the written consent of the participant who received such award. However,
the Board may not amend, without stockholder approval, the 2004 Plan in any
manner that requires stockholder approval pursuant to the Code or the
regulations promulgated thereunder, or pursuant to the Exchange Act or Rule
16b-3 (or its successor) promulgated thereunder.
23
Term of the 2004 Plan. Unless terminated earlier as provided in the 2004
Plan, the 2004 Plan will expire ten years from its effective date, which shall
be the date on which it is approved by the Company's stockholders.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of federal income tax consequences is based upon
existing statutes, regulations and interpretations thereof. The applicable rules
are complex, and income tax consequences may vary depending upon the particular
circumstances of each plan participant. This Proxy Statement describes federal
income tax consequences of general applicability, but does not purport to
describe either particular consequences to each individual plan participant or
foreign, state or local income tax consequences, which may differ from the
United States federal income tax consequences.
INCENTIVE STOCK OPTIONS ("ISOS")
Award; Exercise. ISOs are intended to constitute "incentive stock options"
within the meaning of Section 422 of the Code. ISOs may be granted only to
employees of the Company (including directors who are also employees). An
optionee does not recognize taxable income upon either the grant or exercise of
an ISO. However, the excess of the fair market value of the shares purchased
upon exercise over the option exercise price (the "option spread") is includible
in the optionee's "alternative minimum taxable income" ("AMTI") for purposes of
the alternative minimum tax ("AMT"). The option spread is generally measured on
the date of exercise and is includible in AMTI in the year of exercise. Special
rules regarding the time of AMTI inclusion may apply for shares subject to a
repurchase right or other "substantial risk of forfeiture" (including, in the
case of each person subject to the reporting requirements of Section 16 of the
Exchange Act, any limitations on resale of shares imposed under Section 16(b) of
the Exchange Act).
Sale of Option Shares. If an optionee holds the shares purchased under an
ISO for at least two years from the date the ISO was granted and for at least
one year from the date the ISO was exercised, any gain from a sale of the shares
other than to the Company is taxable as long-term capital gain. Under these
circumstances, the Company would not be entitled to a tax deduction at the time
the ISO was exercised or at the time the stock was sold. If an optionee were to
dispose of stock acquired pursuant to an ISO before the end of the required
holding periods (a "Disqualifying Disposition"), the amount by which the market
value of the stock at the time the ISO was exercised exceeded the exercise price
(or, if less, the amount of gain realized on the sale) would be taxable as
ordinary income, and the Company would be entitled to a corresponding tax
deduction. Such income is subject to information reporting requirements. Gain
from a Disqualifying Disposition in excess of the amount required to be
recognized as ordinary income is capital gain, and is "long-term" gain if the
shares have been held more than one year as of the date of sale. Optionees are
required to notify the Company immediately prior to making a Disqualifying
Disposition. If stock is sold to the Company rather than to a third party, the
sale may not produce capital gain or loss. A sale of shares to the Company will
constitute a redemption of such shares, which could be taxable as a dividend
unless the redemption is "not necessarily equivalent to a dividend" within the
meaning of the Code.
Exercise with Stock. If an optionee pays for ISO shares with shares of the
Company acquired under an ISO or a qualified employee stock purchase plan
("statutory option stock"), the tender of shares is a Disqualifying Disposition
of the statutory option stock if the above described (or other applicable)
holding periods respecting those shares have not been satisfied. If the holding
periods with respect to the statutory option stock are satisfied, or the shares
were not acquired under a statutory stock option of the Company, then any
appreciation in the value of the surrendered shares is not taxable upon
surrender. Special basis and holding period rules apply where previously owned
stock is used to exercise an ISO.
The present position of the Internal Revenue Service ("IRS") appears to be
that income and employment withholding taxes are not imposed upon the exercise
of an ISO or the sale of ISO shares. The IRS is studying this position and may
change it at any time, possibly with retroactive effect.
NON-QUALIFIED STOCK OPTIONS (NSOS) AND STOCK APPRECIATION RIGHTS
Award; Exercise. The grant of non-qualified stock options and stock
appreciation rights will not result in income taxable to the employee or provide
a deduction to the Company. However, the exercise of a non-qualified stock
option or a stock appreciation right results in taxable income to the holder,
and the Company is entitled to a corresponding deduction. At the time of the
exercise of a non-qualified stock option, the amount so taxable and so
deductible will be the excess of the fair market value of the shares purchased
over their option price. Upon the exercise of a stock appreciation right, the
participant will be taxed at ordinary income tax rates on the amount of the cash
and the fair market value of the shares received by the employee, and the
Company will be entitled to a corresponding deduction.
24
Sale of Option Shares. Upon sale, other than to the Company, of shares
acquired under an NSO, an optionee generally will recognize capital gain or loss
to the extent of the difference between the sale price and the optionee's tax
basis in the shares, which will be long-term gain or loss if the employee's
holding period in the shares is more than one year. Certain lower rates apply if
the shares have been held for longer periods. If stock is sold to the Company
rather than to a third party, the sale may not produce capital gain or loss. A
sale of shares to the Company will constitute a redemption of such shares, which
could be taxable as a dividend unless the redemption is "not necessarily
equivalent to a dividend" within the meaning of the Code.
Exercise with Stock. If an optionee tenders Common Stock (other than
statutory option stock--see above) to pay all or part of the exercise price of
an NSO, the optionee will not have a taxable gain or deductible loss on the
surrendered shares. Instead, shares acquired upon exercise that are equal in
value to the fair market value of the shares surrendered in payment are treated
as if they had been substituted for the surrendered shares, taking as their
basis and holding period the basis and holding period that the optionee had in
the surrendered shares. The additional shares are treated as newly acquired, are
taxable to the optionee, and have a basis equal to their fair market value on
the exercise date.
If the surrendered shares are statutory option stock as described above
under "Incentive Stock Options", with respect to which the applicable holding
period requirements for favorable income tax treatment have not expired, then
the newly acquired shares substituted for the statutory option shares should
remain subject to the federal income tax rules governing the surrendered shares,
but the surrender should not constitute a Disqualifying Disposition of the
surrendered stock.
RESTRICTED STOCK AWARDS AND RESTRICTED STOCK UNITS
Award; Exercise. A participant who is granted a restricted award or
restricted stock unit will not recognized taxable income upon the receipt of
such shares or stock units so long as the interest in such shares or stock units
is subject to a "substantial risk of forfeiture" within the meaning of Section
83 of the Code. Upon lapse or release of the restrictions, the recipient will
recognize taxable income at ordinary income tax rates on an amount equal to the
fair market value of the shares or stock units less the amount of any price paid
for the shares or stock units. The Company will be entitled to a corresponding
deduction when the value of the award is included in the recipient's taxable
income. The basis of restricted shares or restricted stock units held after
lapse or termination of restrictions will be equal to their fair market value on
the date of lapse or termination of restrictions, and upon subsequent
disposition any further gain or loss will be long-term or short-term capital
gain or loss, depending upon the length of time the shares or stock unites are
held. A participant may elect to be taxed at ordinary income tax rates on the
full fair market value of the restricted shares or restricted stock units at the
time of transfer. If the election is not made, the basis of the shares or stock
units so acquired will be equal to the fair market value at the time of
transfer. If the election is made, no tax will be payable upon the subsequent
lapse or release of the restrictions, and any gain or loss upon disposition will
be a capital gain or loss.
OTHER STOCK BASED AWARDS AND INCENTIVE AWARDS
Award; Exercise. A participant will realize ordinary income as a result of
performance awards at the time Common Stock is transferred or cash is paid in an
amount equal to the value of the shares delivered plus the cash paid.
OPTION GRANTS CONTINGENT UPON STOCKHOLDER APPROVAL OF THE 2004 PLAN
Subject to stockholder approval of this Proposal 2, on February 24, 2004,
when the market price of Calypte's common stock was $0.585 per share, the
Compensation Committee of the Company's Board of Directors granted to seven of
the Company's officers and key employees options under the 2004 Plan to purchase
an aggregate of 18,000,000 shares of Common Stock at an exercise price of
$0.585. Upon approval of the 2004 Plan, the options will be deemed to have been
granted on the effective date of the 2004 Plan. The grants may result in a per
share non-cash charge to compensation expense for an amount equal to the excess,
if any, of the fair market value of the Company's common stock on the grant date
and the $0.585 exercise price. The options will be exercisable 50% upon grant
and 50% on the one year anniversary of the grant. The following table shows the
number of shares to be granted to the current Named Executives and other
employees upon approval of Proposal 2.
25
NUMBER OF
NAME AND POSITION SHARES
----------------- ------
Anthony J. Cataldo 5,000,000
Executive Chairman of the Board
J. Richard George 5,000,000
Chief Executive Officer and President
Richard D. Brounstein 1,500,000
Executive Vice President and
Chief Financial Officer
Non-Executive Employee Group 6,500,000
----------
Total 18,000,000
==========
APPROVAL REQUIRED
Approval of Proposal 2 requires the affirmative vote of a majority of the
outstanding shares of Common Stock of the Company represented and voting at the
Annual Meeting.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE 2004 PLAN.
PROXIES SOLICITED BY THE BOARD WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY A
DIFFERENT CHOICE IN THEIR PROXIES.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL 3)
The Audit Committee of the Board has recommended and the Board has
appointed the accounting firm of Odenberg Ullakko Muranishi & Co. LLP ("OUM") as
independent auditors to audit the financial statements of the Company for the
fiscal year ending December 31, 2004. OUM has been so engaged since December 24,
2003. Additional information concerning the engagement of OUM and the dismissal
of the Company's previous certified public accountants, KPMG LLP may be found in
the Audit Committee Report on pages 14 to 15 above.
Representatives from OUM are expected to be at the Annual Meeting and to
be available to respond to appropriate questions. Such representatives will have
the opportunity to make a statement if they desire to do so and to respond to
appropriate questions raised during the meeting.
APPROVAL REQUIRED
Approval of Proposal 3 requires the affirmative vote of a majority of the
outstanding shares of Common Stock of the Company represented and voting at the
Annual Meeting.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF OUM AS INDEPENDENT AUDITORS TO AUDIT THE FINANCIAL STATEMENTS OF
THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2004. PROXIES SOLICITED BY
THE BOARD WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY A DIFFERENT CHOICE IN
THEIR PROXIES.
OTHER MATTERS
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR INCLUSION IN THE COMPANY'S
PROXY STATEMENT FOR THE 2005 ANNUAL MEETING
Under the rules of the Securities and Exchange Commission, stockholder
proposals submitted for next year's Proxy Statement must be received by the
Company no later than the close of business on February 7, 2005, to be
considered. Proposals should be addressed to Jerrold Dotson, Secretary, Calypte
Biomedical Corporation, 1265 Harbor Bay Parkway, Alameda, California 94502.
26
Any stockholder who wishes to bring a proposal before the Calypte
Biomedical Corporation 2005 Annual Meeting of Stockholders, but does not wish to
include it in the Company's proxy materials, must provide written notice of the
proposal to Calypte's Secretary, at the above address, by March 10, 2005.
OTHER INFORMATION
The Company does not know of any matters other than those referred to in
the accompanying Notice of Annual Meeting of Stockholders that may properly come
before the meeting or other matters incident to the conduct of the meeting. As
to any other matter or proposal that may properly come before the meeting,
including voting for the election of any person as a director in place of a
nominee named herein who becomes unable to serve or for good cause will not
serve and voting on a proposal omitted from this Proxy Statement pursuant to the
rules of the Securities and Exchange Commission, it is intended that proxies
received will be voted in accordance with the discretion of the proxy holders.
There are no matters on the agenda that involve rights of appraisal of a
stockholder. The Company incorporates by reference all items and matters
contained in its Form 10-KSB for the Fiscal Year ended December 31, 2003 as
filed with the Securities and Exchange Commission in addition to its Form
10-QSBs and Form 8-K Reports as filed with the Commission.
By order of the Board of Directors,
/s/ J. Richard George
J. Richard George
President and Chief Executive Officer
Alameda, California
May 3, 2004
27
APPENDIX A
CALYPTE BIOMEDICAL CORPORATION
AUDIT COMMITTEE CHARTER
ADOPTED JANUARY 19, 2004
INTRODUCTION
The Audit Committee of the Board of Directors of Calypte Biomedical Corporation
(the "Company") assists the Board of Directors in fulfilling its oversight
responsibilities relating to the integrity of the financial statements,
compliance with legal and regulatory requirements, the independent auditor's
qualifications and independence, the performance of the independent auditor, and
such other duties as directed by the Board of Directors.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits, to
prepare the Company's financial statements or to determine that the Company's
financial statements and disclosures are complete and accurate and are in
accordance with generally accepted accounting principles and applicable rules
and regulations. These are the responsibilities of management and the
independent auditor.
STRUCTURE AND ORGANIZATION
1. The committee will be composed solely of directors who have the
necessary experience and are independent of the management of the company and
are free of any relationship that may interfere with their exercise of
independent judgment as a committee member, all in accordance with the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") of the United
States Securities and Exchange Commission ("SEC) and applicable stock exchange
requirements.
2. The committee will consist of at least three members of the Board of
Directors. Committee members and the committee chair serve at the pleasure of
the Board of Directors. All members must be or become financially literate, at
least one member must have accounting or related financial management expertise
sufficient to be financially sophisticated as required by the applicable stock
exchange rules, and, if required by the Board of Directors, at least one member
must be an "audit committee financial expert" as defined by SEC rules.
3. A committee member invited to sit on another public company's audit
committee must notify the committee. The committee must determine whether or not
the committee member's service on another company's audit committee impairs the
directors' ability to serve on the Company's audit committee.
4. The committee will meet at least four times a year, on a quarterly
basis, or more frequently as circumstances require. The committee may ask
members of management or others to attend the meetings and provide pertinent
information as necessary. Meetings may be in person or by video or telephone
conference if necessary. Special meetings may be called by the Company's
Executive Chairman or by any member of the committee. A majority of the members
shall constitute a quorum.
5. The committee is expected to maintain free and open communication with
management and the independent auditor.
6. The committee has the authority to investigate any matter brought to
its attention and to retain independent legal, accounting or other advisors for
this purpose or any other purpose if determined appropriate, in its sole
judgment. The Company will provide funding for that purpose as determined by the
committee.
The committee's responsibilities include:
28
GENERAL RESPONSIBILITIES
1. Meet at least quarterly with the independent auditor and management in
separate sessions to discuss any matters that the committee or these groups
believe should be discussed privately with the committee. Provide sufficient
opportunity for the independent auditor to meet with others in the Company as
appropriate.
2. Prepare and submit the minutes of all committee meetings and regularly
report to the Board of Directors on committee matters.
3. Review and reassess the adequacy of this Charter annually and propose
to the Board of Directors any changes to the Charter.
4. Set policies for the Company's hiring of employees or former employees
of the independent auditor who participated in any capacity in the audit of the
company.
5. Prepare a report of the committee in accordance with SEC requirements
to be included in the Company's annual proxy statement.
RESPONSIBILITIES RELATED TO THE INDEPENDENT AUDITOR
1. Appoint and retain and, where appropriate, terminate the independent
auditor. Approve the compensation of the independent auditor, and evaluate the
performance of the independent auditor. The independent auditor shall report
directly to the committee. The committee shall be directly responsible for
oversight of the work of the independent auditor (including resolution of
disagreements between management and such firm regarding financial reporting.)
2. Review with the independent auditor and management the audit plan of
the independent auditor for the current year and the following year.
3. Establish a policy with respect to the evaluation and approval of audit
and permitted non-audit services and related fees to be performed by the
independent auditor in accordance with the applicable laws and requirements of
the applicable stock exchange.
4. On an annual basis, discuss and consider the independent auditor's
written affirmation that the auditor is in fact independent. Obtain a formal
written statement from the independent auditor delineating all relationships
between the Company and the independent auditor, actively engage in dialogue
regarding disclosed relationships or services which may impact the objectivity
and independence of the independent auditor, and take or recommend that the
Board of Directors take appropriate action in response to the outside auditor's
report to satisfy itself of the outside auditor's independence. The committee
will evaluate the qualifications, performance and independence of the
independent auditor and present its conclusions to the Board of Directors.
5. At the committee's discretion, arrange for the independent auditor to
be available to the full Board of Directors to help provide a basis for the
Board of Directors' approval of the independent auditor's appointment.
6. Review with the independent auditor the matters relating to the conduct
of the audit, including any problems or difficulties encountered in the course
of the audit work, any restrictions on the scope of activities or access to
requested information and any significant disagreements with management.
RESPONSIBILITIES FOR OVERSIGHT OF THE QUALITY AND INTEGRITY OF ACCOUNTING,
AUDITING AND REPORTING PRACTICES OF THE COMPANY
1. Review and discuss with management and the independent auditor prior to
filing with the SEC in periodic reports the annual and quarterly financial
statements, including disclosures under "Management's Discussion and Analysis of
Financial Condition and Results of Operations".. The committee should meet and
discuss each quarterly earnings announcement, as well as financial information
and earnings guidance provided to analysts, with management (and the independent
auditor, if desired) prior to release. The discussion may be done generally, and
may include the types of information to be disclosed and the types of
presentations to be made. These discussions should cover the quality (not just
the acceptability) of the financial reporting, and such other matters as the
committee deems appropriate.
29
2. Review with management and the independent auditor critical accounting
policies, significant financial reporting issues and judgments made in
connection with the preparation of the company's financial statements, including
any significant changes in the company's selection or application of accounting
principles.
3. As necessary, discuss with management any significant financial risk
exposure and the steps management has taken to monitor and control such
exposures, including the company's risk assessment and risk management policies.
1. Review with management and the independent auditor the adequacy and
effectiveness of the company's disclosure controls and procedures, internal
controls for financial reporting and computerized information systems controls.
PERIODIC RESPONSIBILITIES
1. Review with management any legal and regulatory matters that may have a
material impact on the company's financial statements, compliance policies and
compliance programs.
2. Oversee the Company's Corporate Compliance Program and periodically
review and suggest to management any necessary improvements in the program.
Establish procedures within the Corporate Compliance Program for the (i)
receipt, retention and treatment of complaints regarding accounting, internal
accounting controls or auditing matters, and (ii) confidential, anonymous
submission by employees of concerns regarding questionable accounting or
auditing matters and other matters under the company's Code of Business Conduct.
3. Act as the Company's Qualified Legal Compliance Committee ("QLCC") for
purposes of internal and external attorney reporting under Section 307 of the
Sarbanes-Oxley Act of 2002. Establish a procedure for confidential receipt,
retention and consideration of any attorney report to the QLCC.
4. Review and approve transactions with the Company involving management
and/or members of the Board of Directors and other related party transactions
which are not otherwise subject to the approval of the Compensation Committee
and would require disclosure under SEC or applicable stock exchange rules.
5. Obtain assurance from the independent auditor that Section 10A(b) of
the Exchange Act has not been implicated.
6. Discuss with management and the independent auditor any correspondence
with regulators or governmental agencies and any published reports which raise
material issues regarding the Company's financial statements or accounting
policies.
7. Annually assess the committee's performance.
8. Perform such other functions assigned by law, applicable stock exchange
requirements, the Company's charter or bylaws or the Board of Directors.
30
APPENDIX B
CALYPTE BIOMEDICAL CORPORATION
COMPENSATION COMMITTEE CHARTER
AS OF JANUARY 19, 2004
The Compensation Committee of the Board of Directors of Calypte Biomedical
Corporation (the "Company") assists the Board of Directors in fulfilling its
oversight responsibilities relating to officer and director compensation,
succession planning for senior management, development and retention of senior
management, and such other duties as directed by the Board of Directors.
STRUCTURE AND ORGANIZATION
1. The committee will be composed solely of directors who are independent
of the management of the company and are free of any relationship that may
interfere with their exercise of independent judgment as a committee member, all
in accordance with United States Securities and Exchange Commission ("SEC") and
applicable stock exchange requirements, and also meet the requirements of
Section 16 of the Securities and Exchange Act of 1934, as amended, and Section
162(m) of the Internal Revenue Code of 1986, as amended..
2. The committee will consist of at least two members of the Board of
Directors. Committee members and the committee chair serve at the pleasure of
the Board of Directors.
3. The committee will meet at least annually, or more frequently as deemed
appropriate. The committee may ask members of management or others to attend the
meetings and provide pertinent information as necessary. Meetings are generally
held in person but may also be held by video or telephone conference if
necessary. Special meetings may be called by the Company's Executive Chairman or
by any member of the committee. A majority of the members shall constitute a
quorum.
4. The committee has the authority to retain and terminate any consulting
firm used to assist in the evaluation of director, chief executive officer or
other officer compensation and to retain independent legal or other advisors, in
each case as the committee may deem appropriate, including the authority to
approve these firm's fees and other retention terms.
5. The committee or the Board of Directors may reassign the
responsibilities of this committee to a subcommittee or another committee of the
Board of Director's choosing as long as the committee is made up entirely of
independent directors.
The committee's responsibilities include:
GENERAL RESPONSIBILITIES
1. Prepare and submit the minutes of all committee meetings and regularly
report to the Board of Directors on committee matters.
2. Review and reassess the adequacy of this Charter annually and propose
to the Board of Directors any changes to the Charter.
3. Prepare a report of the committee on executive compensation in
accordance with SEC requirements to be included in the Company's annual proxy
statement.
4. Annually assess the committee's performance.
5. Perform such other functions assigned by law, applicable stock exchange
requirements, the Company's charter or bylaws or the Board of Directors.
31
RESPONSIBILITIES RELATED TO COMPENSATION
1. Review and approve the Company's compensation guidelines and structure.
2. Review and approve on an annual basis the corporate goals and
objectives with respect to compensation for the executive chairman and the chief
executive officer. The committee will evaluate at least once a year their
individual performance in light of these established goals and objectives and
based upon these evaluations shall set their annual compensation, including
salary, bonus, incentive and equity compensation. These officers may not be
present when their compensation is considered or determined by the committee.
3. Review and approve on an annual basis the evaluation process and
compensation structure for the Company's other officers, including salary,
bonus, incentive and equity compensation. The committee will evaluate at lease
once a year their individual performance in light of these established goals and
objectives and, based upon their evaluations, shall set their annual
compensation.
4. Review the Company's incentive compensation and other equity-based
plans and recommend changes in such plans to the Board of Directors as needed.
The committee may exercise the authority of the Board of Directors with respect
to the administration of such plans.
5. Periodically review and make recommendations to the Board of Directors
regarding the compensation of non-management directors, including Board and
committee retainers, meeting fees, equity-based compensation, and such other
forms of compensation and benefits as the committee may consider appropriate.
6. Oversee the appointment and removal of executive officers. Review and
approve for executive officers, including the executive chairman and the chief
executive officer, any employment, severance or change in control agreements.
7. Approve any loans to employees as allowed by law.
32
APPENDIX C
CALYPTE BIOMEDICAL CORPORATION
NOMINATING COMMITTEE CHARTER
AS OF JANUARY 19, 2004
The Nominating Committee of the Board of Directors of Calypte Biomedical
Corporation (the "Company") assists the Board of Directors in fulfilling its
oversight responsibilities relating to the company's corporate governance
matters, periodic evaluation of the Board of Directors, its committees and
individual directors, identification and selection of director nominees, and
such other duties as directed by the Board of Directors.
STRUCTURE AND ORGANIZATION
1. The committee will be composed solely of directors who are independent
of the management of the company and are free of any relationship that may
interfere with their exercise of independent judgment as a committee member, all
in accordance with United States Securities and Exchange Commission and
applicable stock exchange requirements.
2. The committee will consist of at least two members of the Board of
Directors. Committee members and the committee chair serve at the pleasure of
the Board of Directors.
3. The committee will meet at least annually, or more frequently as deemed
appropriate. The committee may ask members of management or others to attend the
meetings and provide pertinent information as necessary. Meetings are generally
held in person but may also be held by video or telephone conference if
necessary. Special meetings may be called by the Company's Executive Chairman or
by any member of the committee. A majority of the members shall constitute a
quorum.
4. The committee has the authority to retain and terminate any search firm
used to identify director candidates and to retain independent legal or other
advisors, in each case as the committee may deem appropriate, including the
authority to approve these firm's fees and other retention terms.
5. The committee or the Board of Directors may reassign the
responsibilities of this committee to a subcommittee or another committee of the
Board of Director's choosing as long as the committee is made up entirely of
independent directors.
The committee's responsibilities include:
GENERAL RESPONSIBILITIES
1. Prepare and submit the minutes of all committee meetings and regularly
report to the Board of Directors on committee matters.
2. Review and reassess the adequacy of this Charter annually and propose
to the Board of Directors any changes to the Charter.
1. Perform such other functions assigned by law, applicable stock exchange
requirements, the company's charter or bylaws or the Board of Directors.
RESPONSIBILITIES RELATED TO CORPORATE GOVERNANCE
1. Develop and recommend to the Board of Directors for its approval
guidelines and criteria for selecting new directors, enabling stockholders
to send communications to the Board of Directors and director attendance
at annual meetings of stockholders.
33
2. Review from time to time the Board of Directors' committee structure and
recommend to the Board of Directors for its approval directors to serve as
members of each committee.
3. Develop and recommend to the Board of Directors for its approval a set of
corporate governance guidelines. The Committee shall review these
guidelines regularly, and at least annually, and recommend changes as
necessary or appropriate.
4. Monitor the independence of the Board of Directors, assure that the
majority of the Board of Directors continues to be independent and review
any potential conflict of interest between a director and the Company.
RESPONSIBILITIES RELATED TO BOARD CANDIDATES AND NOMINEES
1. Lead searches for qualified candidates to become members of the Board
of Directors and evaluate, select, and approve director nominees to be appointed
by the Board of Directors or presented for approval at the annual meeting of
stockholders.
2. Nominate directors consistent with the guidelines and criteria approved by
the Board of Directors for selecting new directors, including the
Company's policy regarding director independence.
3. Develop and recommend to the Board of Directors for its approval a
policy regarding the consideration of any director candidates recommended by
stockholders.
RESPONSIBILITIES RELATED TO BOARD EVALUATION
1. At least annually, review and assess the composition and performance of
the Board of Directors, each committee, including this committee, and each
individual director.
34
APPENDIX D
THE CALYPTE BIOMEDICAL CORPORATION
2004 INCENTIVE PLAN
ARTICLE I
GENERAL
1.1 PURPOSE.
The purpose of The Calypte Biomedical Corporation 2004 Incentive Plan is
to attract, retain and motivate officers, employees (including prospective
employees), consultants and others who may perform services for the Company, to
compensate them for their contributions to the long-term growth and profits of
the Company, and to encourage them to acquire a proprietary interest in the
success of the Company.
1.2 DEFINITIONS OF CERTAIN TERMS.
1.2.1 "Award" means an award made pursuant to the Plan.
1.2.2 "Award Agreement" means the written document by which each Award is
evidenced.
1.2.3 "Board" means the Board of Directors of Calypte.
1.2.4 " Calypte" means Calypte Biomedical Corporation, and any successor
thereto.
1.2.5 "Cause" means the causes set forth in any written employment or
services agreement between the Company and the grantee, if any, or, in the
absence of such an agreement, means any of the following acts or circumstances:
(i) willful destruction by the grantee of Company property having a material
value to the Company; (ii) fraud, embezzlement, theft, or comparable dishonest
activity committed by the grantee against the Company; (iii) the Participant's
conviction of or entering a plea of guilty or nolo contendere to any crime
constituting a felony or any misdemeanor involving fraud, dishonesty or moral
turpitude; (iv) the grantee's breach, neglect, refusal or failure to discharge,
in each case in any material respect, his or her duties (other than due to
Disability) commensurate with his or her title and function or failure to comply
with the lawful directions of the Board; or (v) a willful and knowing material
misrepresentation by the grantee to the Board.
1.2.6 "Certificate" means a stock certificate (or other appropriate
document or evidence of ownership) representing shares of Common Stock of
Calypte.
1.2.7 "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the applicable rulings and regulations thereunder.
1.2.8 "Committee" means the Compensation Committee of the Board or any
successor thereto or such other committee or subcommittee designated by the
Board to administer the Plan in accordance with Section 1.3.
1.2.9 "Common Stock" means common stock of Calypte, par value $0.03 per
share.
1.2.10 "Company" means Calypte.
1.2.11 "Disability" means, unless otherwise defined in an Award Agreement,
or as otherwise determined under procedures established by the Committee for
purposes of the Plan, a disability within the meaning of Section 22(e)(3) of the
Code.
35
1.1.12 "Employment" means a grantee's performance of services for the
Company, as determined by the Committee. The terms "employ" and "employed" shall
have their correlative meanings.
1.2.13 "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the applicable rules and regulations thereunder.
1.2.14 "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
1.2.14.1 If the Common Stock is listed on any established stock
exchange, the NASDAQ System or a national market system, including without
limitation, the National Market System of NASDAQ, the Fair Market Value of
a share of Common Stock will be the closing sales price for such stock (or
the closing bid, if no sales are reported) as quoted on that system or
exchange (or the system or exchange with the greatest volume of trading in
Common Stock) on the day of determination, as reported in the Wall Street
Journal or any other source the Committee considers reliable.
1.2.14.2 If the Common Stock is not traded as set forth above, the
Fair Market Value will be determined in good faith by the Committee, such
determination by the Committee to be final, conclusive and binding.
1.2.15 "Grant Notice" means the written notice evidencing certain terms
and conditions of an Award. The Grant Notice is part of the Award Agreement.
1.2.16 "Incentive Award" means any Award granted contingently on the
achievement of Performance Goals during Performance Periods, expressed in U.S.
currency or Common Stock or any combination thereof, intended to qualify as
performance-based compensation pursuant to Section 162(m) of the Code, as now
constituted or subsequently amended, or pursuant to a successor provision of the
Code, and which is so designated in the applicable Award Agreement.
1.2.17 "Incentive Stock Option" means an Option that is intended to
qualify for special federal income tax treatment pursuant to Sections 421 and
422 of the Code, as now constituted or subsequently amended, or pursuant to a
successor provision of the Code, and which is so designated in the applicable
Award Agreement.
1.2.18 "Nonqualified Stock Option" means an Option that is not an
Incentive Stock Option.
1.2.19 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option or both, as the context requires.
1.2.20 "Performance Goals" means objectives for the Company or any
individual grantee established by the Committee with respect to Incentive Awards
contingently granted under the Plan. The Performance Goals shall be based on one
or more of the following criteria: earnings (either in the aggregate or on a
per-share basis), total stockholder return, return on equity, return on capital,
net income, cash flow, operating income or profit, gross revenues, economic
value added, or strategic business criteria. The levels of performance required
with respect to Performance Goals may be expressed in absolute or relative
levels.
1.2.21 "Performance Period" means a set time period during which
Performance Goals must be met.
1.2.22 "Plan" means The Calypte Biomedical Corporation 2004 Incentive
Plan, as described herein and as hereafter amended from time to time.
1.2.23 "Termination of Employment" occurs on the first day on which a
grantee is for any reason no longer providing services to the Company in the
capacity of an employee, officer or consultant.
36
1.3 ADMINISTRATION.
1.3.1 Subject to Section 1.3.4, the Plan shall be administered by the
Board or the Committee, whose members shall serve at the pleasure of the Board.
To the extent required for transactions under the Plan to qualify for the
exemptions available under Rule 16b-3 promulgated under the Exchange Act, all
actions relating to Awards to persons subject to Section 16 of the Exchange Act
may be taken by the Board or the Committee composed of two or more members, each
of whom is a "non-employee director" within the meaning of Exchange Act Rule
16b-3. To the extent required for compensation realized from Awards under the
Plan to be deductible by Calypte pursuant to Section 162(m) of the Code, such
Awards may be granted by the Committee composed of two or more members, each of
whom is an "outside director" within the meaning of Code Section 162(m).
1.3.2 Subject to Section 3.1, the Committee shall have complete control
over the administration of the Plan and shall have the authority in its
discretion to (a) exercise all of the powers granted to it under the Plan, (b)
construe, interpret and implement the Plan and any Award Agreements, (c)
prescribe, amend and rescind rules and regulations relating to the Plan,
including rules governing its own operations, (d) make all determinations
necessary or advisable in administering the Plan, (e) correct any defect, supply
any omission and reconcile any inconsistency in the Plan, (f) amend the Plan to
reflect changes in applicable law, (g) amend any outstanding Award Agreement in
any respect, including, without limitation, to accelerate the time or times at
which the Award becomes vested, unrestricted or may be exercised, waive or amend
any goals, restrictions or conditions set forth in such Award Agreement, or
impose new goals, restrictions and conditions, or reflect a change in the
grantee's circumstances (e.g., a change to part-time employment status), and (h)
determine whether, to what extent and under what circumstances and method or
methods (1) Awards may be (A) settled in cash, shares of Common Stock, other
securities, other Awards or other property, (B) exercised or (C) canceled,
forfeited or suspended, (2) shares of Common Stock, other securities, other
Awards or other property, and other amounts payable with respect to an Award may
be deferred either automatically or at the election of the grantee thereof or of
the Committee, (3) loans (whether or not secured by Common Stock) may be
extended by the Company with respect to any Awards and (4) Awards may be settled
by Calypte, any of its subsidiaries or affiliates or any of its or their
designees.
1.3.3 Actions of the Committee may be taken by the vote of a majority of
its members. Any action may be taken by a written instrument signed by a
majority of the Committee members, and action so taken shall be fully as
effective as if it had been taken by a vote at a meeting. The determination of
the Committee on all matters relating to the Plan or any Award Agreement shall
be final, binding and conclusive. The Committee may allocate among its members
and delegate to any person who is not a member of the Committee any of its
administrative responsibilities.
1.3.4 No member of the Board or the Committee or any employee of the
Company shall be liable for any action or determination made in good faith with
respect to the Plan or any Award thereunder. Each such person shall be
indemnified and held harmless by Calypte against and from any loss, cost,
liability, or expense that may be imposed upon or incurred by such person in
connection with or resulting from any action, suit or proceeding to which such
person may be a party or in which such person may be involved by reason of any
action taken or failure act under the Plan or any Award Agreement and against
and from any and all amounts paid by such person, with Calypte's approval, in
settlement thereof, or paid by such person in satisfaction of any judgment in
any such action, suit or proceeding against such person, provided that Calypte
shall have the right, at its own expense, to assume and defend the same. The
foregoing right of indemnification shall not be available to a person to the
extent that a final judgment or other final adjudication binding upon such
person establishes that the acts or omissions of such person giving rise to the
indemnification claim resulted from such person's bad faith, fraud or willful
criminal act or omission. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under Calypte's Certificate of Incorporation or Bylaws, as a matter of
law, or otherwise, or any other power that Calypte may have to indemnify such
persons or hold them harmless.
1.4 PERSONS ELIGIBLE FOR AWARDS.
Awards under the Plan may be made to such officers, employees (including
prospective employees), consultants and other individuals who may perform
services for the Company, as the Committee may select.
1.5 TERMINATION OF EMPLOYMENT.
1.5.1 The Committee may impose on any Award or the exercise or settlement
thereof, at the date of grant or, subject to the provisions of Section 3.1,
thereafter, such additional terms and conditions not inconsistent with the
provisions of the Plan as the Committee shall determine, including terms
requiring forfeiture, acceleration or pro-rata acceleration of Awards in the
event of a Termination of Employment. Except as otherwise determined by the
Committee, all Options that have not been exercised, or any other Awards that
remain subject to a risk of forfeiture or which are not otherwise vested, or
which have outstanding Performance Periods, at the time of a Termination of
Employment shall be forfeited to the Company.
37
1.5.2 TERMINATION FOR CAUSE. If a grantee's Employment is terminated for
Cause, then all Options and other Awards that remain subject to a risk of
forfeiture or which are not otherwise vested held by such grantee shall
immediately be terminated and cancelled upon Termination of Employment.
1.5.3 DEATH, DISABILITY, TERMINATION WITHOUT CAUSE. Except as otherwise
provided in the applicable Award Agreement, upon the grantee's death, Disability
or Termination of Employment for any reason other than for Cause, the grantee:
1.5.3.1 shall forfeit all Awards that have not previously vested or
remain subject to a risk of forfeiture;
1.5.3.2 shall have thirty (30) days to exercise the grantee's Awards
that are vested on the Termination of Employment if such termination is
for any reason other than the grantee's Disability or death; and
1.5.3.3 shall have one (1) year to exercise the grantee's Awards
that are vested on the date of Disability or death if the grantee's
Termination of Employment is due to the grantee's Disability or death.
1.5.4 TERMINATION AFTER CHANGE IN CONTROL. Except as otherwise provided by
the Committee or in the applicable Award Agreement, if any grantee's Employment
is terminated by the Company for any reason other than for Cause within six (6)
months after a "change in control" as defined in Section 3.7, then all unvested
Awards and other Awards remaining subject to a risk of forfeiture held by such
grantee shall become fully vested for exercise upon the Termination of
Employment.
1.5.5 Any Awards not exercised within the permissible period of time shall
be forfeited by the grantee. Notwithstanding any of the foregoing, the grantee
shall not be permitted to exercise any Option at a time beyond the initial
option term.
1.6 TYPES OF AWARDS UNDER PLAN.
Awards may be made under the Plan in the form of (a) Options, (b) stock
appreciation rights, (c) dividend equivalent rights, (d) restricted stock, (e)
restricted stock units, (f) other equity-based or equity-related Awards which
the Committee determines to be consistent with the purpose of the Plan and the
interests of the Company, and (g) Incentive Awards. No Incentive Stock Option
(other than an Incentive Stock Option that may be assumed or issued by Calypte
in connection with a transaction to which Section 424(a) of the Code applies)
may be granted to a person who is not eligible to receive an Incentive Stock
Option under the Code.
1.7 SHARES AVAILABLE FOR AWARDS.
1.7.1 TOTAL SHARES AVAILABLE. Subject to adjustment pursuant to Section
1.7.2, the total number of shares of Common Stock which may be delivered
pursuant to Awards granted under the Plan shall be 30,000,000, of which
8,000,000 shall be available for delivery as restricted stock and restricted
stock units. If, after the effective date of the Plan, any Award is forfeited or
otherwise terminated or canceled without the delivery of shares of Common Stock
or is settled for cash, any shares of Common Stock are surrendered or withheld
from any Award to satisfy a grantee's income tax or other withholding
obligations, or any shares of Common Stock owned by a grantee are tendered to
pay the exercise price of any Award granted under the Plan, then the shares
covered by such forfeited, terminated or canceled Award or which are equal to
the number of shares settled, surrendered, withheld or tendered shall again
become available for transfer pursuant to Awards granted or to be granted under
this Plan.
1.7.2 ADJUSTMENTS. The Committee shall adjust the number of shares of
Common Stock authorized pursuant to Section 1.7.1 and adjust (including, without
limitation, by payment of cash) the terms of any outstanding Awards (including,
without limitation, the number of shares of Common Stock covered by each
outstanding Award, the type of property to which the Award is subject and the
exercise or strike price of any Award), in such manner as necessary to preserve
the benefits or potential benefits intended to be made available to grantees of
Awards, for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
spinoff, splitup, combination or reclassification of the Common Stock, or any
other event the Committee determines in its sole discretion affects the
capitalization of Calypte, including any extraordinary dividend or distribution.
After any adjustment made pursuant to this Section 1.7, the number of shares of
Common Stock subject to each outstanding Award shall be rounded to the nearest
whole number.
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1.7.3 MAXIMUM AWARDS. Subject to adjustment as provided in Section 1.7.2,
(a) the maximum number of shares of Common Stock with respect to which Options
or stock appreciation rights may be granted to an individual grantee during any
calendar year shall equal 8,000,000 shares of Common Stock, (b) the maximum
number of shares of Common Stock with respect to which restricted stock or
restricted stock units may be granted to an individual grantee during any
calendar year shall equal 8,000,000 shares of Common Stock, (c) the total value
of any Incentive Award awarded to an individual grantee during any calendar year
shall not exceed $1,000,000. Any shares of Common Stock (a) delivered by
Calypte, (b) with respect to which Awards are made by Calypte and (c) with
respect to which Calypte becomes obligated to make Awards, in each case through
the assumption of, or in substitution for, outstanding awards previously granted
by an acquired entity, shall not be counted against the shares of Common Stock
available for Awards under this Plan. Shares of Common Stock which may be
delivered pursuant to Awards may be authorized but unissued Common Stock or
authorized and issued Common Stock held in Calypte's treasury or otherwise
acquired for the purposes of the Plan.
ARTICLE II
AWARDS UNDER THE PLAN
2.1 AGREEMENTS EVIDENCING AWARDS.
Each Award granted under the Plan shall be evidenced by a written document
which shall contain such provisions and conditions as the Committee deems
appropriate. The Committee may grant Awards in tandem with or in substitution
for any other Award or Awards granted under this Plan or any award granted under
any other plan of the Company. By accepting an Award pursuant to the Plan, a
grantee thereby agrees that the Award shall be subject to all of the terms and
provisions of the Plan and the applicable Award Agreement.
2.2 NO RIGHTS AS A SHAREHOLDER.
No grantee of an Award shall have any of the rights of a shareholder of
Calypte with respect to shares subject to such Award until the delivery of such
shares. Except as otherwise provided in Section 1.7.2, no adjustments shall be
made for dividends, distributions or other rights (whether ordinary or
extraordinary, and whether in cash, Common Stock, other securities or other
property) for which the record date is prior to the date such shares are
delivered.
2.3 GRANT OF OPTIONS.
The Committee may grant Options to purchase shares of Common Stock from Calypte,
in such amounts and subject to such terms and conditions as the Committee may
determine. The price of an Option under this Plan shall be determined in the
sole discretion of the Committee; provided, however, if the Committee designates
an Option as an Incentive Stock Option, then such Option shall be granted only
to an employee of the Company, shall have a per share price not less than 100%
of the Fair Market Value of a share of Common Stock on the date of grant of the
Option, and, if granted to a person who owns capital stock (including stock
treated as owned under Section 424(d) of the Code) possessing more than 10% of
the total combined voting power of all classes of capital stock of the Company
(a "10% Owner"), have a per share price not less than 110% of the Fair Market
Value of a share of Common Stock on the date of grant, and shall be for a period
of not more than 10 years (five years if the Grantee is a 10% Owner) from the
date of grant. Notwithstanding designation as an Incentive Stock Option, if the
shares of Common Stock subject to a grantee's Incentive Stock Options (granted
under all plans of the Company), which become exercisable for the first time
during any calendar year, have a Fair Market Value in excess of $100,000, the
Options accounting for the excess will be treated as Nonqualified Stock Options.
Incentive Stock Options will be taken into account in the order in which they
were granted, and the Fair Market Value of the shares of Common Stock will be
determined as of the date of grant.
39
1.1 STOCK APPRECIATION RIGHTS.
The Committee may grant Stock Appreciation Rights in conjunction with all
or part of an Option granted under the Plan. In the case of a Nonqualified Stock
Option, such rights may be granted either at or after the date of grant of such
Option. In the case of an Incentive Stock Option, such rights may be granted
only at the date of grant of such Option. A Stock Appreciation Right shall
terminate and no longer be exercisable upon the termination or exercise of the
related Option. In either case, the terms and conditions of a Stock Appreciation
Right shall be set forth in the Award Agreement for the related Option or an
amendment thereto. Stock Appreciation Rights shall be exercisable only at such
time or times and to the extent that the Options to which they relate. Upon
exercise of a Stock Appreciation Right, a grantee shall be entitled to receive
an amount equal to the product of (a) the excess of the Fair Market Value of one
share of Common Stock over the exercise price per share specified in the related
Option times (b) the number of shares in respect of which the Stock Appreciation
Right shall have been exercised, in cash, shares of Common Stock or both, with
the Committee having the right to determine the form of payment.
2.5 EXERCISE OF OPTIONS AND STOCK APPRECIATION RIGHTS.
2.5.1 Any acceptance by the Committee of a grantee's written notice of
exercise of an Option shall be conditioned upon payment for the shares being
purchased. Such payment may be made in cash or by such other method as the
Committee may from time to time prescribe.
2.5.2 After receiving payment from the grantee of the full Option exercise
price, or after receiving notice from the grantee of the exercise of a stock
appreciation right for which payment will be made by Calypte partly or entirely
in shares of Common Stock, Calypte shall, subject to the provisions of the Plan
or any Award Agreement, deliver the shares of Common Stock.
2.6 GRANT OF DIVIDEND EQUIVALENT RIGHTS.
The Committee may include in the Award Agreement with respect to any Award
a dividend equivalent right entitling the grantee to receive amounts equal to
all or any portion of the dividends that would be paid on the shares of Common
Stock covered by such Award if such shares had been delivered pursuant to such
Award. The grantee of a dividend equivalent right will have only the rights of a
general unsecured creditor of Calypte until payment of such amounts is made as
specified in the applicable Award Agreement. In the event such a provision is
included in an Award Agreement, the Committee shall determine whether such
payments shall be made in cash, in shares of Common Stock or in another form,
whether they shall be conditioned upon the exercise of the Award to which they
relate, the time or times at which they shall be made, and such other terms and
conditions as the Committee shall deem appropriate.
2.7 GRANT OF RESTRICTED STOCK.
The Committee may grant or offer for sale restricted shares of Common
Stock in such amounts and subject to such terms and conditions as the Committee
shall determine, including restrictions based upon the achievement of
Performance Goals, time-based restrictions on vesting following the attainment
of the Performance Goals; provided, that such restrictions may lapse, if so
determined by the Committee, in the event of the Grantee's Termination of
Employment due to death, Disability or Termination of Employment by the Company
without Cause. Upon the delivery of restricted shares of Common Stock, the
grantee shall have the rights of a shareholder with respect to the restricted
stock, subject to any restrictions and conditions as the Committee may include
in the applicable Award Agreement. In the event that a Certificate is issued in
respect of restricted shares of Common Stock, such Certificate may be registered
in the name of the grantee but shall be held by Calypte or its designated agent
until the time the restrictions lapse.
2.8 GRANT OF RESTRICTED STOCK UNITS.
The Committee may grant Awards of restricted stock units in such amounts
and subject to such terms and conditions as the Committee shall determine. A
grantee of a restricted stock unit will have only the rights of a general
unsecured creditor of Calypte until delivery of shares of Common Stock or cash
is made as specified in the applicable Award Agreement. On the delivery date,
the grantee of each restricted stock unit not previously forfeited shall receive
one share of Common Stock or cash equal in value to a share of Common Stock or a
combination thereof, as specified by the Committee.
40
2.9 GRANT OF OTHER STOCK-BASED AWARDS.
The Committee may grant other types of equity-based or equity-related
Awards (including the grant or offer for sale of unrestricted shares of Common
Stock) in such amounts and subject to such terms and conditions as the Committee
shall determine. Such Awards may entail the transfer of actual shares of Common
Stock to Plan participants, or payment in cash or otherwise of amounts based on
the value of shares of Common Stock.
2.10 GRANT OF INCENTIVE AWARDS.
The Committee may grant Incentive Awards in such amounts and subject to
the achievement of Performance Goals during Performance Periods and other terms
and conditions as the Committee shall determine. Incentive Awards shall be
granted and administered to comply with the requirements of Section 162(m) of
the Code. After the applicable Performance Period has ended, the grantee shall
be entitled to payment based on the level of achievement of the Performance
Goals set by the Committee. The Committee shall certify the achievement of the
Performance Goals in writing before the Incentive Award is settled. At the
discretion of the Committee, the settlement of Incentive Awards may be in cash,
shares of Common Stock, or in some combination thereof, as set forth in the
Award Agreement. If a grantee is promoted or demoted during a Performance
Period, then, to the extent the Committee determines that the Award, the
Performance Goals or the Performance Period are no longer appropriate, the
Committee may adjust, change, eliminate or cancel the Award, the Performance
Goals or the applicable Performance Period, as it deems appropriate in order to
make them appropriate and comparable to the initial Award, the Performance Goals
or the Performance Period.
2.11 TAX OFFSET BONUSES.
At the time an Award is made hereunder or at any time thereafter, the
Committee may grant to the grantee receiving such Award the right to receive a
cash payment in an amount specified by the Committee, to be paid at such time or
times (if ever) as the Award results in compensation income to the grantee, for
the purpose of assisting the grantee to pay the resulting taxes, all as
determined by the Committee, and on such other terms and conditions as the
Committee shall determine.
ARTICLE III
MISCELLANEOUS
3.1 AMENDMENT OF THE PLAN.
3.1.1 The Board may from time to time alter, suspend, discontinue, revise,
amend or terminate the Plan in any respect whatsoever, provided, that no
termination, amendment, or modification of the Plan shall adversely affect in
any material way any Award previously granted under the Plan, without the
written consent of the grantee of such Award, except as otherwise specifically
permitted in the Plan or such Award Agreement.
3.1.2 Unless otherwise determined by the Board, shareholder approval of
any suspension, discontinuance, revision or amendment shall be obtained only to
the extent necessary to comply with any applicable law, rule or regulation or
stock exchange requirement.
3.2 TAX WITHHOLDING.
3.2.1 As a condition to the delivery of any shares of Common Stock
pursuant to any Award or the lifting or lapse of restrictions on any Award, or
in connection with any other event that gives rise to a federal or other
governmental tax withholding obligation on the part of Calypte or any of its
subsidiaries or affiliates relating to an Award (including, without limitation,
FICA tax), (a) Calypte may deduct or withhold (or cause to be deducted or
withheld) from any payment or distribution to a grantee whether or not pursuant
to the Plan or (b) the Committee shall be entitled to require that the grantee
remit cash to Calypte or any of its subsidiaries or affiliates (through payroll
deduction or otherwise), in each case in an amount sufficient in the opinion of
Calypte to satisfy such withholding obligation.
41
3.2.2 If the event giving rise to the withholding obligation involves a
transfer of shares of Common Stock, then, unless the applicable Award Agreement
provides otherwise, at the discretion of the Committee, the grantee may satisfy
the withholding obligation described under Section 3.2.1 by electing to have
Calypte withhold shares of Common Stock (which withholding will be at a rate not
in excess of the statutory minimum rate) or by tendering previously owned shares
of Common Stock, in each case having a Fair Market Value equal to the amount of
tax to be withheld (or by any other mechanism as may be required or appropriate
to conform with local tax and other rules). For this purpose, Fair Market Value
shall be determined as of the date on which the amount of tax to be withheld is
determined (and Calypte may cause any fractional share amount to be settled in
cash).
3.3 REQUIRED CONSENTS AND LEGENDS.
3.3.1 If the Committee shall at any time determine that any consent (as
hereinafter defined) is necessary or desirable as a condition of, or in
connection with, the granting of any Award, the delivery of shares of Common
Stock or the delivery of any cash, securities or other property under the Plan,
or the taking of any other action thereunder (each such action being hereinafter
referred to as a "plan action"), then such plan action shall not be taken, in
whole or in part, unless and until such consent shall have been effected or
obtained to the full satisfaction of the Committee. The Committee may direct
that any Certificate evidencing shares delivered pursuant to the Plan shall bear
a legend setting forth such restrictions on transferability as the Committee may
determine to be necessary or desirable, and may advise the transfer agent to
place a stop order against any legended shares.
3.3.2 The term "consent" as used herein with respect to any plan action
includes (a) any and all listings, registrations or qualifications in respect
thereof upon any securities exchange or under any federal, state, or local law,
or law, rule or regulation of a jurisdiction outside the United States, (b) any
and all written agreements and representations by the grantee with respect to
the disposition of shares, or with respect to any other matter, which the
Committee may deem necessary or desirable to comply with the terms of any such
listing, registration or qualification or to obtain an exemption from the
requirement that any such listing, qualification or registration be made, (c)
any and all other consents, clearances and approvals in respect of a plan action
by any governmental or other regulatory body or any stock exchange or
self-regulatory agency and (d) any and all consents or authorizations required
to comply with, or required to be obtained under, applicable local law or
otherwise required by the Committee. Nothing herein shall require Calypte to
list, register or qualify the shares of Common Stock on any securities exchange.
3.4 NONASSIGNABILITY.
Except to the extent otherwise expressly provided in the applicable Award
Agreement, no Award (or any rights and obligations thereunder) granted to any
person under the Plan may be sold, exchanged, transferred, assigned, pledged,
hypothecated or otherwise disposed of (including through the use of any
cash-settled instrument) (each such action being hereinafter referred to as an
"assignment"), whether voluntarily or involuntarily, other than by will or by
the laws of descent and distribution, and all such Awards (and any rights
thereunder) shall be exercisable during the life of the grantee only by the
grantee or the grantee's legal representative. Notwithstanding the immediately
preceding sentence, the Committee may permit, under such terms and conditions
that it deems appropriate in its sole discretion, a grantee to transfer any
Award to any person or entity that the Committee so determines. Any assignment
in violation of the provisions of this Section 3.4 shall be void. All of the
terms and conditions of this Plan and the Award Agreements shall be binding upon
any such permitted successors and assigns.
3.5 REQUIREMENT OF CONSENT AND NOTIFICATION OF ELECTION UNDER SECTION 83(B) OF
THE CODE OR SIMILAR PROVISION.
No election under Section 83(b) of the Code (to include in gross income in
the year of transfer the amounts specified in Code Section 83(b)) or under a
similar provision of the law of a jurisdiction outside the United States may be
made unless expressly permitted by the terms of the Award Agreement or by action
of the Committee in writing prior to the making of such election. If a grantee
of an Award, in connection with the acquisition of shares of Common Stock under
the Plan or otherwise, is expressly permitted under the terms of the Award
Agreement or by such Committee action to make any such election and the grantee
makes the election, the grantee shall notify the Committee of such election
within ten (10) days of filing notice of the election with the Internal Revenue
Service or other governmental authority, in addition to any filing and
notification required pursuant to regulations issued under Code Section 83(b) or
other applicable provision.
42
3.6 REQUIREMENT OF NOTIFICATION UPON DISQUALIFYING DISPOSITION UNDER SECTION
421(B) OF THE CODE.
If any grantee shall make any disposition of shares of Common Stock
delivered pursuant to the exercise of an Incentive Stock Option under the
circumstances described in Section 421(b) of the Code (relating to certain
disqualifying dispositions), such grantee shall notify Calypte of such
disposition within 10 days thereof.
3.7 CHANGE IN CONTROL.
3.7.1 The Committee may provide in any Award Agreement for provisions
relating to a "change in control" of Calypte (as such term is defined by the
Committee in any such Award Agreement), including, without limitation, the
acceleration or extension of the exercisability of, or the lapse of restrictions
or deemed satisfaction of goals with respect to, any outstanding Awards.
3.7.2 Unless otherwise provided in the applicable Award Agreement, in the
event of a merger, consolidation, mandatory share exchange or other similar
business combination of Calypte with or into any other entity ("successor
entity") or any transaction in which another person or entity acquires all of
the issued and outstanding Common Stock of Calypte, or all or substantially all
of the assets of Calypte, outstanding Awards may be assumed or an equivalent
Award may be substituted by such successor entity or a parent or subsidiary of
such successor entity.
3.8 RIGHT OF DISCHARGE RESERVED.
Nothing in the Plan or in any Award Agreement shall confer upon any
grantee the right to continued Employment by the Company or affect any right
which the Company may have to terminate such Employment.
3.9 NATURE OF PAYMENTS.
3.9.1 Any and all grants of Awards and deliveries of Common Stock, cash,
securities or other property under the Plan shall be in consideration of
services performed or to be performed for the Company by the grantee. Awards
under the Plan may, in the discretion of the Committee, be made in substitution
in whole or in part for cash or other compensation otherwise payable to an
Employee.
3.9.2 All such grants and deliveries shall constitute a special
discretionary incentive payment to the grantee and shall not be required to be
taken into account in computing the amount of salary or compensation of the
grantee for the purpose of determining any contributions to or any benefits
under any pension, retirement, profit-sharing, bonus, life insurance, severance
or other benefit plan of the Company or under any agreement with the grantee,
unless the Company specifically provides otherwise.
3.10 NON-UNIFORM DETERMINATIONS.
The Committee's determinations under the Plan and Award Agreements need
not be uniform and may be made by it selectively among persons who receive, or
are eligible to receive, Awards under the Plan (whether or not such persons are
similarly situated). Without limiting the generality of the foregoing, the
Committee shall be entitled, among other things, to make non-uniform and
selective determinations under Award Agreements, and to enter into non-uniform
and selective Award Agreements, as to (a) the persons to receive Awards, (b) the
terms and provisions of Awards and (c) whether a grantee's Employment has been
terminated for purposes of the Plan.
3.11 OTHER PAYMENTS OR AWARDS.
Nothing contained in the Plan shall be deemed in any way to limit or
restrict Calypte from making any award or payment to any person under any other
plan, arrangement or understanding, whether now existing or hereafter in effect.
43
3.12 PLAN HEADINGS.
The headings in this Plan are for the purpose of convenience only and are
not intended to define or limit the construction of the provisions hereof.
3.13 DATE OF ADOPTION AND TERM OF PLAN.
The Plan was adopted by the Board on February 24, 2004 and made effective
as of the date of approval by the Company's stockholders. Unless sooner
terminated by the Board, the Plan shall terminate on the day before the tenth
anniversary of the effective date of the Plan. The Board reserves the right to
terminate the Plan at any time; provided, however, that all Awards made under
the Plan prior to its termination shall remain in effect until such Awards have
been satisfied or terminated in accordance with the terms and provisions of the
Plan and the applicable Award Agreements.
3.14 GOVERNING LAW.
ALL RIGHTS AND OBLIGATIONS UNDER THE PLAN AND EACH AWARD AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
3.15 SEVERABILITY; ENTIRE AGREEMENT.
If any of the provisions of this Plan or any Award Agreement is finally
held to be invalid, illegal or unenforceable (whether in whole or in part), such
provision shall be deemed modified to the extent, but only to the extent, of
such invalidity, illegality or unenforceability and the remaining provisions
shall not be affected thereby; provided, that if any of such provisions is
finally held to be invalid, illegal, or unenforceable because it exceeds the
maximum scope determined to be acceptable to permit such provision to be
enforceable, such provision shall be deemed to be modified to the minimum extent
necessary to modify such scope in order to make such provision enforceable
hereunder. The Plan and any Award Agreements contain the entire agreement of the
parties with respect to the subject matter thereof and supersede all prior
agreements, promises, covenants, arrangements, communications, representations
and warranties between them, whether written or oral with respect to the subject
matter thereof.
3.16 WAIVER OF CLAIMS.
Each grantee of an Award recognizes and agrees that prior to being
selected by the Committee to receive an Award he or she has no right to any
benefits hereunder. Accordingly, in consideration of the grantee's receipt of
any Award hereunder, he or she expressly waives any right to contest the amount
of any Award, the terms of any Award Agreement, any determination, action or
omission hereunder or under any Award Agreement by the Committee, Calypte, or
the Board, or any amendment to the Plan or any Award Agreement (other than an
amendment to this Plan or an Award Agreement to which his or her consent is
expressly required by the express terms of an Award Agreement).
3.17 NO THIRD PARTY BENEFICIARIES.
Except as expressly provided therein, neither the Plan nor any Award
Agreement shall confer on any person other than the Company and the grantee of
any Award any rights or remedies thereunder.
3.18 SUCCESSORS AND ASSIGNS OF CALYPTE.
The terms of this Plan shall be binding upon and inure to the benefit of
Calypte and its successors and assigns.
44
CALYPTE BIOMEDICAL CORPORATION
1265 HARBOR BAY PARKWAY
ALAMEDA, CALIFORNIA 94502
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ANTHONY J. CATALDO and J. RICHARD GEORGE, and
each of them, with full power of substitution, as the proxy or proxies of the
undersigned to vote all shares of Common Stock of Calypte Biomedical Corporation
which the undersigned is entitled to vote at the annual meeting of stockholders
of Calypte Biomedical Corporation to be held at Signature Center, 5000 Hopyard
Road, 4th Floor, Pleasanton, California 94588 on June 22, 2004, at 10:00 a.m.
local time, and at any adjournments or postponements thereof, with all powers
that the undersigned would have if personally present thereat:
(CONTINUED ON OTHER SIDE)
/*\ FOLD AND DETACH HERE /*\
- --------------------------------------------------------------------------------
PLEASE MARK |X|
YOUR VOTES
AS THIS
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
FOR Proposals 1, 2 and 3.
WITHHOLD
AUTHORITY TO
FOR ALL NOMINEES VOTE FOR ALL
EXCEPT AS MARKED TO THE NOMINEES
CONTRARY BELOW) LISTED BELOW
1. Election of Directors |_| |_|
Anthony J. Cataldo; John J. DiPietro; Paul E. Freiman; Julius R. Krevans,
M.D.; Zafar I. Randawa, Ph.D.; and Maxim A. Soulimov.
(The Board of Directors recommends a vote FOR.)
This proxy will be voted in the election of directors in the manner
described in the proxy statement for the 2004 annual meeting of
stockholders. (INSTRUCTION: To withhold authority to vote for one or more
individual nominees, write such name or names in the space provided to the
right.)
2. Proposal to adopt the Company's 2004 Incentive Plan and to authorize FOR AGAINST ABSTAIN
30,000,000 shares of Common Stock to be reserved for issuance thereunder. |_| |_| |_|
(The Board of Directors recommends a vote FOR.)
3. Proposal to ratify the appointment of Odenberg Ullakko Muranishi & Co. LLP FOR AGAINST ABSTAIN
as the Company's independent accountants for the 2004 fiscal year. |_| |_| |_|
(The Board of Directors recommends a vote FOR.)
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting and at any adjournment or postponement
thereof.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE. Signature of Stockholder____________________ Signature if
held jointly ___________________ Dated: ________, 2004 Please sign exactly as
name appears above. When shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name by
President or other authorized person.
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