UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, for Use of
the Commission Only
|X| Definitive Proxy Statement (as permitted by Rule
14a-6(e)(2))
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.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):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(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.:
(3) Filing Party:
(4) Date Filed:
1
[GRAPHIC OMITTED]
5000 Hopyard Road, Suite 480
Pleasanton, CA 94588
June 1, 2005
Dear Stockholder:
You are cordially invited to attend Calypte Biomedical Corporation's 2005
Annual Meeting of Stockholders on Thursday, June 30, 2005. The meeting will
begin promptly at 10:00 a.m. local time, at the Four Points Sheraton Hotel,
located at 5115 Hopyard Road, Pleasanton, CA 94588.
The official Notice of Annual Meeting of Stockholders, Proxy Statement,
form of proxy, 2004 Annual Report to Stockholders and our Quarterly Report on
Form 10-QSB for the quarter ended March 31, 2005 are included with this letter
The matters listed in the Notice of Annual Meeting of Stockholders are described
in detail in the Proxy Statement, which you are urged to review carefully.
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/ J. Richard George
----------------------
J. Richard George
President and CEO
2
[GRAPHIC OMITTED]
5000 Hopyard Road, Suite 480
Pleasanton, CA 94588
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on June 30, 2005
June 1, 2005
NOTICE IS HEREBY GIVEN that the 2005 Annual Meeting of Stockholders of
Calypte Biomedical Corporation (the "Company") will be held at the Four Points
Sheraton Hotel located at 5115 Hopyard Road, Pleasanton, California, 94588, on
Thursday, June 30, 2005, at 10:00 a.m. local time, for the following purposes:
1. To elect five directors of the Company to hold office until the next
Annual Meeting of Stockholders or until their successors are
elected.
2. To vote on a proposal to approve the issuance of shares of common
stock in excess of 19.99% of the outstanding common stock and price
adjustments in connection with our April 2005 issuance of Notes and
Warrants;
3. To vote on a proposal to approve the issuance of additional shares
of common stock and warrant shares and adjustment of the warrant
exercise price in connection with amended securities granted to 3
the investors in our May and July 2004 placements;
4. To vote on a proposal to adopt the Company's 2005 Director Incentive
Plan (Appendix A hereto) and to authorize 18,000,000 shares of the
Company's Common Stock for issuance thereunder;
5. To vote on a proposal to amend the Company's 2004 Incentive Plan
(Appendix B hereto) to increase by 17,000,0000 shares the number of
shares of the Company's Common Stock authorized for issuance
thereunder; to permit awards to employees, consultants and others
who provide services to affiliates of the Company thereunder; and to
increase to 20,000,000 shares the number of shares of Common Stock
available for delivery as restricted stock and restricted stock
units thereunder;
6. To ratify the appointment by the Audit Committee and the Board of
Directors of Odenberg Ullakko Muranishi & Co. LLP as the independent
registered public accounting firm to audit the Company's 6 financial
statements for the fiscal year ending December 31, 2005; and
7. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Stockholders of record on May 9, 2005 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.
3
[GRAPHIC OMITTED]
5000 Hopyard Road, Suite 480
Pleasanton, CA 94588
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 the Four Points Sheraton Hotel located at 5115 Hopyard Road, Pleasanton,
California 94588, on Thursday, June 30, 2005, at 10:00 a.m. local time. The
telephone number at that address is (925) 460-8800. Every stockholder on the
Record Date 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. This Proxy
Statement and the accompanying form of proxy are first being mailed to
stockholders of the Company on or about June 1, 2005.
INFORMATION CONCERNING SOLICITATION AND VOTING
The close of business on May 9, 2005 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. At May 9, 2005, the Company had 171,243,303
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 the approval to
issue shares of our common stock in excess of 19.99% of our outstanding common
stock and price adjustments in connections with our April 2005 issuance of notes
and warrants; (3) for the approval to issue additional shares and warrants and
to adjust the warrant exercise price in connection with the amended securities
granted to the investors in our May 2004 and July 2004 private placements; (4)
for adoption of the 2005 Director Incentive Plan and the authorization to
reserve shares for issuance thereunder; (5) for the amendment to the 2004
Incentive Plan and the increase in authorized shares for issuance thereunder;
and (6) for ratification of the appointment of Odenberg Ullakko Muranishi & Co.
LLP, as the Company's registered independent public accounting firm for the year
ending December 31, 2005.
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.
All costs of soliciting proxies 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 $10,000 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, five directors are to be elected to hold office
until the 2006 Annual Meeting or until their successors are elected. 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.
Following is a list of our Directors and Executive Officers as of May 13,
2005.
Name Age Calypte Position; Principal Occupation Director Since
- ---- --- -------------------------------------- --------------
Roger I. Gale 52 Chairman; Chairman, Wavecrest Group
Enterprises Limited 11/04
John J. DiPietro 46 Director; Chief Financial Officer, Chronix
Biomedical, Inc. 10/99
Paul E. Freiman 70 Director; President and Chief Executive Officer,
Neurobiological Technologies, Inc. 12/97
Julius R. Krevans, M.D. 81 Director; Retired Chancellor Emeritus, Director
of International Medical Services University of
California, San Francisco 3/95
Maxim A. Soulimov 33 Director; Director of Legal Affairs, Global
Corporate Ventures, Limited 4/04
J. Richard George, Ph.D. 63 President and Chief Executive Officer,
Calypte Biomedical Corporation N/A
Richard D. Brounstein 55 Executive Vice President and Chief Financial Officer,
Calypte Biomedical Corporation N/A
Richard R. Van Maanen 45 Vice-President - Operations and International Business
Development, Calypte Biomedical Corporation N/A
Roger I. Gale was appointed to the Company's Board of Directors and
elected Chairman in November 2004. Mr. Gale has served since October 2001 as
Executive Chairman of the Board of Directors of Wavecrest Group Enterprises
Limited, a United Kingdom-based communications service provider. He is also a
founder and director of Starnorth Limited, a communications and media
consultancy. From 1999 to 2001, he was Chairman and co-founder of End2End
Wireless Limited, a UK wireless access services provider. Mr. Gale has lectured
in economics at the University of New England (Australia) and Lincoln College
(New Zealand). He serves as a Director of Mechel Steel Group, a Russian
corporation recently listed on the New York Stock Exchange (NYSE: "MTL"). Mr.
Gale holds a Master of Economics degree from the University of New England,
Australia and a Higher National Diploma from the Royal Agricultural College,
Cirencester, Gloucestershire, England. Mr. Gale is one of two Directors
appointed to the Company's Board pursuant to an August 2003 agreement between
the Company and Marr Technologies BV ("Marr"). Marr is currently the Company's
largest stockholder, holding approximately 27% of the Company's outstanding
common stock.
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. 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. 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. He is also Chairman of the Board of
Directors of Neoprobe 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. 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. Mr. Soulimov is one of two Directors
appointed to the Company's Board pursuant to an August 2003 agreement between
the Company and Marr.
J. Richard George, Ph.D. has served as Calypte's President and Chief
Executive Officer since January 2004. Dr. George joined the Company in January
2003 as Vice President - Government Affairs. From September 2000 to March 2002,
Dr. George served as Senior Vice President - Research & Development, Infectious
Diseases at Orasure Technologies, Inc. (Nasdaq: OSUR). Dr. George served from
April 1995 through August 2000 as Chief Science Officer of Epitope, Inc. (a
predecessor company to Orasure Technologies, Inc.). Dr. George was employed in
various roles at the Centers for Disease Control and Prevention (CDC) from 1960
to 1995. He left the CDC in 1995 as Chief of the Developmental Technology
Section, Laboratory Investigations Branch of the Division of HIV/AIDS. Dr.
George received his Ph.D. in Microbiology from the University of Georgia; he
received his Master of Science and B.S. degrees in Biology from Georgia State
University.
Richard D. Brounstein has served as Executive Vice President and Chief
Financial Officer since joining Calypte in December 2001, following a short
period in which he served as a financial consultant and interim CFO. He also
served as member of the Board of Directors from December 2001 until May 2003,
when he did not stand for re-election. Prior to joining Calypte, Mr. Brounstein
served as Chief Financial Officer for Certicom Corporation, a mobile and
wireless software security company from 2000 to 2001. From 1997 to 2000, Mr.
Brounstein served as Chief Financial Officer for VidaMed, Inc., a growth-stage
medical device company. In March 2005 he was appointed to the SEC Advisory
Committee on Smaller Public Companies, where Mr. Brounstein will represent
micro-cap companies and companies in the life sciences industry. The role of the
advisory committee is to advise the SEC on how best to assure that the costs of
regulation for smaller companies under the Act and other securities laws are
commensurate with the benefits. Mr. Brounstein is a CPA; he received both his
MBA in Finance and his BA in Accounting from Michigan State University.
Richard Van Maanen has served as Vice President-Operations and
International Business Development since January 2004. Mr. Van Maanen joined
Calypte in March 1993 as Director of Sales and Marketing. He was appointed
Director of International Business Development in January 2001. Mr. Van Maanen
received his B.S. with honors from the University of Guelph, Canada.
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
Our Board of Directors directs the management of our business and affairs
as provided by Delaware law and conducts its business through meetings of the
full board of directors and three standing committees: the Audit Committee, the
Compensation Committee and the Nominating Committee. The charter for each of
these committees is available on our website at www.calypte.com. From time to
time when necessary, the Board may establish other committees under its
direction to address specific issues. The Board of Directors met 14 times and
acted by unanimous written consent 4 times during 2004. During 2004, the Audit
Committee met 8 times, the Compensation Committee met twice and acted once by
unanimous written consent and the Nominating Committee met once and acted once
by unanimous written consent. All directors attended at least 75% of the
aggregate number of meetings of the Board and the standing committees on which
they served in 2004 during the period in which they served as directors.
The Audit Committee currently includes three independent Directors, Mr.
Freiman as Chairman, Mr. DiPietro and Dr. Krevans. As described in its Charter,
the duties and responsibilities of the Audit Committee include recommending to
the Board of Directors the appointment or termination of the engagement of our
independent public accountants, otherwise overseeing the independent auditor
relationship, reviewing our significant accounting policies and internal
controls and reporting its recommendations and findings to the full Board of
Directors. The Board has determined that Messrs. Freiman and DiPietro are Audit
Committee financial experts as defined by Item 401(e) of Regulation S-B of the
Securities Exchange Act of 1934 (the "Exchange Act") and are independent within
the meeting of Item 7(d)(3)(iv) of Schedule 14A of the Exchange Act.
The Compensation Committee currently includes Dr. Krevans as Chairman and
Mr. Freiman. As described in its Charter, the Compensation Committee reviews and
approves the compensation of our Chief Executive Officer and Chief Financial
Officer, recommends to the Board the compensation of members of the Board and
administers our stock option and other benefit plans.
3
The Nominating Committee currently includes Mr. Freiman as Chairman and
Dr. Krevans. As described in its Charter, 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 will consider candidates nominated by
stockholders in accordance with the procedures set forth in Calypte's by-laws.
Under Calypte's by-laws, nominations other than those made by the Board of
Directors or the Nominating Committee must be made pursuant to timely notice in
proper written form to the secretary of Calypte. To be timely, a stockholder's
request to nominate a person for election to the Board at an annual meeting of
stockholders, together with the written consent of such person to serve as a
Director, must be received by the Corporate Secretary of Calypte not less than
120 days prior to the anniversary of the annual meeting of shareholders held in
the prior year. To be in proper written form, the notice must contain certain
information concerning the nominee and the shareholder submitting the
nomination.
DIRECTOR COMPENSATION
We reimburse our Directors for their out-of-pocket travel expenses
associated with their attendance at Board meetings. We did not pay cash
compensation to any of our non-employee Directors in 2004 or thereafter. Under
the terms of the 1995 Director Option Plan (the "Director Plan"), our
non-employee directors are eligible to receive grants of options to purchase
shares of our common stock. 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. Each option granted under the Director Plan is exercisable
at 100% of the fair market value of our common stock on the date such option is
granted. Each grant vests monthly over the twelve month period commencing with
the director's date of election or re-election; however, the option will become
vested and fully exercisable on the date of the next annual meeting of
stockholders if such meeting occurs less than twelve months after the date of
the grant. The Director Plan expires in 2005. In Proposal 4 in this proxy, we
are seeking stockholder approval for a new plan for the benefit of our
non-employee directors.
The following table shows the number of shares of common stock issuable
upon exercise of options granted to non-employee Directors under the Director
Plan during the fiscal year ended December 31, 2004 and through April 30, 2005.
Number of
Name and Position Options(1)
----------------- ----------
Roger I. Gale, Director (2) 200,000
John J. DiPietro, Director 200,000
Paul E. Freiman, Director 200,000
Julius Krevans M.D., Director 200,000
Otsuka Pharmaceuticals Co Ltd. (Zafar Randawa, Director) (3) 200,000
Maxim A. Soulimov, Director (4) 200,000
- ----------
(1) All options were granted at fair market value on the date of grant. Unless
otherwise noted, each non-employee Board member was granted options to
purchase 200,000 shares at $0.585 per share in February 2004 for service
on the Board in 2004.
(2) Mr. Gale was granted options to purchase 200,000 shares at $0.31 per share
in January 2005 pursuant to his appointment in November 2004 as a member
of and Chairman of the Board.
(3) Dr. Randawa served as a member of the Board as a representative of Otsuka
Pharmaceuticals under the terms of a previous investment agreement. Dr.
Randawa resigned as a member of the Board effective June 30, 2004.
(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.
INFORMATION ON EXECUTIVE COMPENSATION
The following table sets forth certain compensation that we awarded or
paid to persons who served as our Chief Executive Officer and as our other most
highly compensated executive officers in 2004 (collectively, the "Named
Executive Officers") for the years ended December 31, 2004, 2003 and 2002. The
compensation table excludes other compensation in the form of perquisites and
other personal benefits that constitute the lesser of $50,000 or 10% of the
total salary and bonus earned by each of the named Executive Officers in each
fiscal year.
4
Summary Compensation Table
Long-Term
Compensation
Securities
Underlying
Options All Other
Name and Principal Position Year Salary ($) Bonus ($) Granted (1) Compensation ($)
--------------------------- ---- ---------- --------- ----------- ----------------
Anthony J. Cataldo (2) 2004 385,846 0 5,000,000(3) 150,825(4)
Former Executive Chairman 2003 445,667(5) 0 2,492,341(6) 0
of the Board 2002 185,726(5) 0 30,000(6) 0
J. Richard George (7) 2004 251,478 0 5,000,000(3) 0
Chief Executive Officer and 2003 135,692 0 103,494(8) 0
President
Jay Oyakawa (9) 2004 28,269 0 750,000(9) 350,000(9)
Former President and Chief 2003 209,941 0 0 0
Operating Officer and Member of
the Board
Richard D. Brounstein (10) 2004 212,677 0 1,500,000(3) 0
Executive Vice President and 2003 201,792 0 757,371(11) 0
Chief Financial Officer; Former 2002 122,596 15,000 0 0
Member of the Board
Richard R. VanMaanen (12) 2004 203,630 0 2,000,000(3) 0
Vice President-Operations and 2003 148,236 0 131,636(13) 98,248(14)
International Business Development 2002 131,729 0 12,570(15) 0
- ----------
(1) All figures in this column represent options to purchase the Company's
common stock.
(2) Mr. Cataldo served as Executive Chairman of the Board from May 2002
through November 2004. Concurrent with his joining the Company in May
2002, the Company entered into a five-year Employment Agreement with Mr.
Cataldo that required an annual salary of $400,000. Mr. Cataldo resigned
effective November 15, 2004 as the Company's Executive Chairman and as a
member of its Board of Directors. Under the terms of a Separation and
Consulting Agreement and Release of Claims effective November 15, 2004,
the Company agreed to pay Mr. Cataldo approximately $1 million, of which
approximately half was to be a non-cash payment.
(3) Represents an option to purchase the number of shares indicated at an
exercise price of $0.585 per share, the market price of the Company's
common stock on the February 18, 2004 conditional grant date. The grant
was made on that date, subject to stockholder approval of the Company's
2004 Incentive Plan, which was approved by the Company's stockholders on
June 22, 2004, the effective grant date. The grant, from the Company's
2004 Incentive Plan, is exercisable for 50% of the shares upon the
effective grant date, with the remainder of the grant exercisable on June
22, 2005.
(4) Represents (i) $125,825 of compensation recognized upon Mr. Cataldo's
exercise of 256,785 options at $0.01 per share on May 28, 2004, when the
market price was $0.50 per share; and (ii) $25,000 paid in December 2004
under the terms of the Separation and Consulting Agreement and Release of
Claims described in Note (2) above.
(5) At the Company's request, Mr. Cataldo deferred approximately 30% of his
cash salary from May 2002 through April 2003. The figure reported for
calendar 2002 is net of the deferral. At December 31, 2002, the Company
had recorded salary expense totaling approximately $266,000 for Mr.
Cataldo, including an accrual of approximately $80,000 for his deferred
salary. All deferred amounts due Mr. Cataldo were paid during 2003 and the
figure reported for calendar 2003 reflects the payment of all such
deferred amounts.
5
(6) 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 Equity Incentive 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
note (5) 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.
(7) 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.
(8) 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.
(9) 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
from his positions as an officer and director of the Company effective on
that date. Under the terms of the agreement, the Company paid Mr. Oyakawa
a severance equal to one year's salary of $350,000. On January 15, 2004,
when the market price of the common stock was $0.62 per share, the Company
granted Mr. Oyakawa a two- year option to purchase 750,000 shares of
common stock at an exercise price of $0.32 per share. Under the terms of
the grant, the options became fully vested upon the signing of the
Separation Agreement and Release. Mr. Oyakawa may exercise the options at
any time through January 15, 2006.
(10) 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.
(11) 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 Company's 2000 Equity
Incentive 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.
(12) Mr. Van Maanen has served as Vice President - Operations and International
Business Development since January 2004. He joined the Company in March
1993 and served in various sales and marketing management positions prior
to his January 2004 appointment.
(13) Represents a fully-vested option grant for 14,423 shares at an exercise
price of $0.01 per share in recognition of a temporary salary deferral
arrangement and grants of 37,213 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.
(14) Represents compensation recognized upon Mr. Van Maanen's sale, at $1.36
per share, of options exercised for 14,423 shares at $0.01 per share and
37,213 shares at $0.32 per share in September 2003.
(15) Represents option grants for an aggregate of 12,570 shares, all of which
were cancelled in the fourth quarter of 2002.
6
Stock Option Grants in Last Fiscal Year
Individual Grants
The following table sets forth information concerning stock options
granted to the Named Executive Officers during the fiscal year ended December
31, 2004. Through May 13, 2005, there have been no subsequent options grants or
other awards to the Named Executive Officers.
Percent of Total
Number of Securities Options Granted to
Underlying Employees in Fiscal Exercise Price
Name Options Granted Year(1) ($/sh)(2) Expiration Date
- ---- --------------- ------- --------- ---------------
Anthony J. Cataldo (3) 5,000,000 23.90% 0.585 5/17/2007
J. Richard George 5,000,000 23.90% 0.585 6/22/2014
Jay Oyakawa (4) 750,000 3.58% 0.320(4) 1/15/2006
Richard D. Brounstein 1,500,000 7.17% 0.585 6/22/2014
Richard R. Van Maanen 2,000,000 9.56% 0.585 6/22/2014
- ----------
(1) Based on the aggregate of options granted to employees and consultants to
the Company to purchase 18,846,000 shares under the 2004 Incentive Plan
and 1,454,080 shares under the 2000 Equity Incentive Plan and options to
purchase 1,000,000 shares granted to non-employee Directors under the
Director Plan during the year ended December 31, 2004, including grants to
the Named Executive Officers.
(2) Except as otherwise noted, the exercise price for all option grants is the
market price of the Company's common stock on February 18, 2004, the
conditional grant date. The grants were made on that date subject to
stockholder approval of the Company's 2004 Incentive Plan, which was
approved by the Company's stockholders on June 22, 2004, the effective
grant date. The grant is exercisable for 50% of the shares upon the
effective grant date and for the remaining 50% of the grant on the one
year anniversary thereof.
(3) Under the terms of the November 15, 2004 Separation and Consulting
Agreement and Release of Claims between the Company and Mr. Cataldo, the
Company agreed to accelerate the vesting of all his then-unvested options.
The terms of the Separation Agreement and the option grant further provide
that Mr. Cataldo's options remain exercisable for a period of 6 months
following the termination of the consulting arrangement on November 15,
2006.
(4) Pursuant to the Employment Agreement between the Company and Mr. Oyakawa,
on January 15, 2004, when the market price of its common stock was $0.62,
the Company granted Mr. Oyakawa a two-year option to purchase 750,000
shares of common stock at $0.32 per share. Under the terms of the grant,
the options became fully vested upon the signing of a Separation Agreement
and Release, which was executed between the Company and Mr. Oyakawa on
January 19, 2004. Mr. Oyakawa may exercise the options at any time through
January 15, 2006.
The following table sets forth information concerning option exercises for the
year ended December 31, 2004, with respect to each of the Named Executive
Officers.
7
Aggregated Option Exercises in 2004 and December 31, 2004 Option Values
Value of Unexercised
Number of Securities Underlying n-the-Money Options at
Shares Unexercisable Options at Fiscal Fiscal Year End ($)
Acquired on Value Year End (#) (Exercisable/
Name Exercise (#) Realized ($)(2) (Exercisable/Unexercisable)(1) Unexercisable)(1)(3)
- ---- ------------ --------------- ------------------------------ --------------------
Anthony J. Cataldo (4) 256,785 128,393 2,265,556 / 0 60,684 / 0
J Richard George 0 0 63,680 / 66,481 9,674 / 4,654
Jay Oyakawa (5) 0 0 750,000 / 0 52,500 / 0
Richard D. Brounstein 0 0 757,371 / 0 60,684 / 0
Richard R. Van Maanen 0 0 80,000 / 0 5,600 / 0
- ----------
(1) Reflects in-the-money options granted under the Company's 2000 Equity
Incentive Plan. None of the options granted in 2004 from the Company's
2004 Incentive Plan is in-the-money at December 31, 2004.
(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 of unexercised in-the-money options is based on a value of $0.39 per
share for the Company's common stock, the closing price on December 31,
2004 as quoted on the American Stock Exchange. Amounts reflect such 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 a November 15, 2004 Separation and Consulting Agreement
and Release of Claims between the Company and Mr. Cataldo, the options
continue to vest during the period of the consulting arrangement and
remain exercisable for a period of 6 months following its termination on
November 15, 2006.
(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 grant, the
options became fully vested upon the signing of a Separation Agreement and
Release, which was executed between the Company and Mr. Oyakawa on January
19, 2004. Mr. Oyakawa may exercise the options at any time through January
15, 2006.
Employment Contracts
In January 2004, the Company entered into a three year employment agreement with
Dr. Richard George that includes an annual salary of $250,000 and, subject to
the approval of the Company's stockholders of the 2004 Incentive Plan, the grant
of options to purchase 5,000,000 shares of the Company's common stock. Upon the
stockholders' approval of the 2004 Incentive Plan on June 22, 2004, the option
was granted with an exercise price of $0.585 per share. The options are
exercisable 50% upon grant and 50% on the one year anniversary of the grant and
have a ten year term. In the event the Company should terminate Dr. George for
other than cause prior to the expiration of the employment agreement, he is
entitled to the remaining payments due for the full term of the agreement.
In January 2003, the Company entered into a twelve month employment agreement,
with automatic renewal options, with Richard Brounstein that included a base
salary of $200,000 plus options. Following stockholder approval at the May 20,
2003 Annual Stockholders' Meeting of amendments to the Company's 2000 Equity
Incentive Plan, on May 29, 2003, Mr. Brounstein was granted fully-exercisable
options to purchase 24,038 shares of the Company's stock at $0.01 per share, in
recognition of a salary deferral arrangement, fully-exercisable options to
purchase 108,333 shares of the Company's common stock at $0.32 per share, and
options to purchase 625,000 shares of the Company's stock at $0.32 per share.
The latter options were exercisable 50% upon grant and 50% on the one year
anniversary of the grant. On June 22, 2004, upon the approval by the Company's
stockholders of the 2004 Incentive Plan, Mr. Brounstein was granted options to
purchase 1,500,000 shares of the Company's common stock at $0.585 per share. The
options are exercisable 50% upon grant and 50% on the one year anniversary of
the grant and have a ten year term. In the event the Company should terminate
Mr. Brounstein for other than cause, he is entitled to one year's salary under
the terms of the agreement.
8
Section 16(A) Beneficial Ownership Compliance
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 initial
reports of ownership and reports on changes in ownership with the Securities and
Exchange Commission (the "Commission"). Such Reporting Persons are also required
by Commission rules to furnish the Company with copies of all Section 16(a)
forms that they file. To the Company's knowledge, based solely on the review of
copies of such reports furnished to the Company and written representations that
no other reports were required during the fiscal year ended December 31, 2004,
all of the Company's Reporting Persons complied with all applicable Section
16(a) filing requirements.
Code of Business Conduct
We have adopted a Code of Business Conduct that applies to all of our
employees, including our Chief Executive Officer and Chief Financial Officer,
and to the members of our Board of Directors. The Code of Business Conduct is
posted on our website at www.calypte.com.
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
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. With the exception of the Vice President-Operations,
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 obtain or
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.
9
Components of Executive Compensation. The material elements of the
Company's current executive compensation arrangements include base salary and
equity incentive awards. In 2004 and in 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.
In 2005, 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. The Compensation Committee and
Company management currently view this approach as the most appropriate and
effective manner of meeting the critical goals of retaining key management
employees and minimizing cash outflows, while at the same time aligning the
interests of key employees and 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 Chief Executive Officer, Chief
Financial Officer, Vice President-Operations 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 Compensation Committee also evaluates the
Company's attainment of its stated overall goals and targets and the
individual's contribution toward and performance in attaining such goals when
considering modifications to the individual's base salary.
Long-term Incentive Awards. As noted previously, the Committee believes
that stock option grants or other equity awards serve to align the goals of the
Company's stockholders and employees. In addition to that objective, the
Company's equity incentive plan also assists 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."
Executive Chairman Compensation
In May 2002, in conjunction with a financing proposal enabling the
continuation 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
specified a base annual salary of $400,000 and allowed for annual increases
based on the Company's performance and approval of the Compensation Committee.
The Compensation Committee did not adjust Mr. Cataldo's base salary during 2003
or 2004. 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 had 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
Company's 2000 Equity Incentive 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. Upon approval by the Company's stockholders of
the adoption of the Company's 2004 Incentive Plan on June 22, 2004, Mr. Cataldo
was granted options to purchase 5,000,000 shares of the Company's common stock
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 subject to
stockholder approval. The options have a ten-year term and are exercisable 50%
upon grant and 50% one year thereafter. On November 15, 2004, Mr. Cataldo
resigned from his position as Executive Chairman and as Director of the Company.
In connection with his resignation, the Company and Mr. Cataldo entered into an
Separation and Consulting Agreement and Release of Claims (the "Agreement")
pursuant to which Mr. Cataldo's total remuneration is $1,033,389, plus the
payment of a portion of his COBRA medical insurance costs. Mr. Cataldo will
receive a total cash payment of $513,389, payable on a monthly basis over a
two-year period commencing on December 15, 2004, with acceleration of $75,000 in
April 2005 in conjunction with the Company's closing of a financing in excess of
$5,000,000. Additionally, under the terms of the Agreement, on January 3, 2005,
the Company applied $520,000 to the exercise of 1,625,000 of Mr. Cataldo's stock
options at an exercise price of $0.32 per share. Mr. Cataldo will provide
advisory services under the Agreement as may be requested by the Company's Chief
Executive Officer.
10
Chief Executive Officer, President, and Chief Operating Officer
Compensation
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 a two-year option to purchase 750,000 shares of Common Stock
exercisable at $0.32 pursuant to the 2000 Plan. The option became fully vested
on January 19, 2004, upon the effectiveness of a Separation Agreement and
Release between the Company and Mr. Oyakawa. On January 19, 2004, Mr. Oyakawa
resigned from his position as President, Chief Operating Officer and as a member
of the Board. Under the terms of the Separation Agreement and Release, the
Company paid Mr. Oyakawa severance in an amount equal to one year's salary of
$350,000 over a twelve month period. Mr. Oyakawa may exercise the options for
two years from the date of grant.
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. Upon approval by
the Company's stockholders of the adoption of the Company's 2004 Incentive Plan
on June 22, 2004, Dr. George was granted options to purchase 5,000,000 shares of
the Company's common stock 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 subject to stockholder approval. The options have a ten-year term and are
exercisable 50% upon grant and 50% one year thereafter. Effective April 1, 2005,
the Compensation Committee approved an increase in Dr. George's annual base
salary to $350,000. 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, which has not been adjusted since the
commencement of the employment agreement. The employment agreement also included
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 Company's 2000 Equity Incentive Plan.
The options granted were to be fully vested on the grant date. In the fourth
quarter of 2002, Mr. Brounstein permitted the Company to cancel the 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. Upon approval by the Company's stockholders of the adoption of the
Company's 2004 Incentive Plan on June 22, 2004, Mr. Brounstein was granted
options to purchase 1,500,000 shares of the Company's common stock 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 subject to stockholder
approval. The options have a ten-year term and are 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.
11
Vice-President - Operations Compensation
In January 2004, the Company appointed Mr. Richard Van Maanen as
Vice-President Operations and International Business Development at an annual
base salary of $200,000. Mr. Van Maanen has been an employee of the Company
since 1993 in a variety of marketing and sales positions. The Company has not
entered into an employment contract with Mr. Van Maanen. Upon approval by the
Company's stockholders of the adoption of the Company's 2004 Incentive Plan on
June 22, 2004, Mr. Van Maanen was granted options to purchase 2,000,000 shares
of the Company's common stock 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 subject to stockholder approval. The options have a ten-year term and
are exercisable 50% upon grant and 50% one year thereafter. The Committee
considers this level of compensation appropriate in view of Mr. Van Maanen's
background, leadership and accomplishments.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD
Julius R. Krevans, M.D., Chairman
Paul E. Freiman
April 28, 2005
Compensation Committee Interlocks and Insider Participation
During 2004, 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.
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.
The role of the Audit Committee (the "Committee") is to assist the
Board in its oversight of the integrity of the Company's financial reporting
process, the Company's compliance with legal and regulatory requirements, and
the Company's independent registered public accounting firm's qualifications and
independence. The Audit Committee operates pursuant to a Charter that was last
amended and restated by the Board on March 7, 2005 and is included herein as
Appendix C. At December 31, 2004, the Audit Committee consisted of: Paul E.
Freiman (Chairman), John J. DiPietro and Julius R. Krevans, M.D. Dr. Krevans
replaced Zafar I. Randawa, Ph.D., who resigned as a member of the Board of
Directors effective June 30, 2004. Each Audit Committee member is financially
literate under applicable American Stock Exchange listing standards, and Mr.
Freiman and Mr. DiPietro also are "audit committee financial experts" as defined
by the SEC. All members of the Audit Committee also meet the audit committee
independence requirements under the SEC and AMEX rules.
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 registered public accounting
firm is responsible for auditing the Company's financial statements and
expressing an opinion as to their conformity with accounting principles
generally accepted in the United States of America ("GAAP").
12
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 registered public accounting firm. Management
represented to the Committee that the Company's audited consolidated financial
statements for the year ended December 31, 2004 were prepared in accordance with
GAAP, and the Committee reviewed and discussed the consolidated financial
statements for the year ended December 31, 2004 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, as modified or supplemented.
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 registered public
accounting firm by the Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) as modified or supplemented.
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 report of the independent registered public accounting firm 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 controls 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 GAAP or that the Company's auditors
are in fact "independent." The Audit Committee's responsibility is to monitor
and review these processes, acting in an oversight capacity, and the Audit
Committee does not certify the financial statements, internal control over
financial reporting or guarantee the independent registered public accounting
firm's reports.
Based upon the reports and discussions described in this report, and
subject to the limitations on the role and responsibilities of the Committee
referred to above and in the Audit Committee's Charter, the Committee
recommended to the Board of Directors the inclusion of the audited financial
statements in the Company's Annual Report on Form 10-KSB and Form 10-KSB/A
(No.1) for the year ended December 31, 2004 for filing with the SEC.
The Committee has recommended and the Board has appointed OUM as the
Company's independent registered public accounting firm for the fiscal year
ending December 31, 2005. The Audit Committee and the Board request that
stockholders ratify such appointment.
SUBMITTED BY THE AUDIT COMMITTEE OF THE BOARD
Paul E. Freiman, Chairman
John J. DiPietro
Julius R. Krevans, M.D.
April 28, 2005
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
On December 23, 2003, we dismissed KPMG LLP ("KPMG") as our independent
auditor. During 2003, KPMG's report on our financial statements did not contain
an adverse opinion or disclaimer of opinion or modification as to uncertainty,
audit scope or accounting principles. The decision to dismiss KPMG was
recommended by the Audit Committee. We had a disagreement with KPMG regarding
whether conditions necessary for KPMG to complete its review of our interim
financial statements contained in our Quarterly Report on Form 10-QSB for the
period ended September 30, 2003 and to audit our financial statements for our
fiscal year ended December 31, 2003 had been satisfied. The subject matter of
the disagreement regarded whether KPMG believed that the Audit Committee had
adequately conducted an investigation of the matters reported in an informal
inquiry initiated by the SEC and had taken appropriate remedial actions. The
Audit Committee and its outside counsel discussed with KPMG the findings of the
Audit Committee's investigation into the informal inquiry matters and the Audit
Committee's recommended remedial actions. The Audit Committee, with the
assistance of its outside counsel, unsuccessfully attempted to resolve the
disagreement with KPMG.
Subsequently, by letter dated July 14, 2004, the SEC Division of
Enforcement notified us that the matter has been terminated and that no
enforcement action has been recommended by the Commission at this time.
On December 24, 2003, upon approval of the Audit Committee, we engaged
Odenberg Ullakko Muranishi & Co. LLP ("OUM") to audit our consolidated financial
statements for each of the two years ending December 31, 2003 and 2002 and to
review our interim financial statements contained in the our Quarterly Report on
Form 10-QSB for the quarterly period ended September 30, 2003. During our two
most recent fiscal years prior to 2003 and through December 24, 2003, we had not
consulted with OUM regarding either (i) the application of accounting principles
to a specified transaction, either completed or proposed; or the type of audit
opinion that might be rendered on our financial statements, and neither a
written report nor oral advice was provided that was an important factor that we
considered in reaching a decision as to the accounting, auditing or financial
reporting issue; or (ii) any matter that was either the subject of a
disagreement, as that term is defined in Item 304(a)(1)(iv)(A) of Regulation S-B
and the related instructions to Item 304 of Regulation S-B.
We provided OUM with a copy of the disclosures contained in our Form
8-K, Item 4 filings and provided OUM with an opportunity to furnish us a letter
addressed to the SEC containing any new information, clarification of our
expression of our views, or the respects in which it does not agree with the
statements we have made herein. OUM has advised us that it has reviewed these
filings and has no basis on which to submit a letter addressed to the SEC in
response to Item 304(a) of Regulation S-B.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Odenberg Ullakko Muranishi & Co. LLP ("OUM") is the independent
registered public accounting firm that audited the Company's financial
statements for the years ended December 31, 2004 and 2003. The Audit Committee
first engaged OUM in December 2003. OUM performed no services for the Company
during calendar 2003, but performed audit and review services for 2003 during
calendar 2004. The aggregate fees billed during 2004 for each of the following
categories of services are set forth below:
2004 2003 and 2002
-------- -------------
Audit fees $191,280 $ 135,000
Audit-related fees $ 29,447 --
Tax fees -- --
All other fees -- --
13
"Audit fees" include fees invoiced in 2004 for the audits of the
Company's annual financial statements for 2004, 2003 and 2002 and the quarterly
review of the statements for the quarters ended March 31, June 30, and September
30, 2004, and 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.
Since the engagement of OUM in December 2003, the Audit Committee has
pre-approved all audit and permissible non-audit services provided by OUM.
The following table summarizes fees billed for services during 2003 by
KPMG LLP, the Company's former auditors, for each of the following categories of
service:
2003
--------
Audit fees $108,450
Audit-related fees $ 62,075
Tax fees --
All other fees $ 53,365
"Audit fees" include fees invoiced in 2003 for the audit of the
Company's annual financial statements for 2002 and the quarterly reviews of the
statements for calendar 2003 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" consisted 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 tax or 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 described in Part I, Item 8 of this Form
10-KSB/A (No.1).
Certain Relationships and Related Transactions
In August 2001, the Company issued a $400,000 8.5% Promissory Note to LHC
Corporation, the parent company of its then-largest stockholder. The Company
renegotiated the note during 2001, 2002 and subsequently in 2003. The Company
repaid the note in 2003. In November 2003, the Company entered into a Note
Purchase Agreement with Marr Technologies, BV ("Marr"), its largest stockholder,
that it subsequently modifed during 2004. The Company issued no notes under this
facility prior to its December 31, 2004 expiration.
In connection with Marr's purchase of an aggregate of $2.5 million of the
Company's common stock during 2003, the Company signed a Memorandum Of
Understanding to create a joint venture with Marr in China to market the
Company's current and future products. Additionally, the Nominating Committee of
the Company's Board of Directors agreed to grant Marr the right to nominate two
mutually-agreeable representatives to the Company's Board of Directors. During
2004, Roger I. Gale and Maxim A. Soulimov, who were both initially nominated by
Marr, were added to the Company's Board of Directors.
In November 2003, the Company formed a joint venture, Beijing Calypte Biomedical
Technology Ltd., with Marr Technologies Limited, an affiliate of Marr, in which
the Company owns 51% of the stock.
14
STOCK PERFORMANCE CHART
The graph below compares the cumulative total stockholder return on the
Common Stock assuming an initial investment on December 31, 1999. The
Corporation's return is shown with the cumulative total return of the American
Stock Exchange Market Value (U.S.) Index, the NASDAQ Stock Market--U.S. Index,
the American Stock Exchange Health Products and Services Index and the Nasdaq
Biotechnology Index. The graph assumes a $100 investment made at the beginning
of the respective period and reinvestment of all dividends.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG CALYPTE BIOMEDICAL CORPORATION, THE NASDAQ STOCK MARKET (U.S)
INDEX, THE AMERICAN STOCK EXCHANGE MARKET VALUE (U.S) INDEX, THE NASDAQ
BIOTECHNOLOGY INDEX AND THE AMEX HEALTH PRODUCTS AND SERVICES INDEX
[TABLE BELOW REPRESENTS A LINE CHART IN THE ORIGINAL DOCUMENT]
Cumulative Total Return ($)
-----------------------------------------------
12/99 12/00 12/01 12/02 12/03 12/04
CALYPTE BIOMEDICAL CORPORATION 100.00 74.47 13.16 3.84 1.10 0.92
NASDAQ STOCK MARKET (U.S.) 100.00 60.30 45.49 26.40 38.36 40.51
AMEX MARKET VALUE (U.S.) 100.00 77.40 68.68 58.74 83.47 102.61
NASDAQ BIOTECHNOLOGY 100.00 153.84 124.26 69.11 96.95 100.60
AMEX HEALTH PRODUCTS & SERVICES 100.00 147.36 111.91 66.33 115.24 115.15
* $100 invested on 12/31/99 in stock or index - including reinvestment of
dividends. Fiscal year ending December 31.
15
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 May 13, 2005 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) 59,062,225 32.12
Strawinskylaan 1431
1077XX, Amsterdam
The Netherlands
SF Capital Partners Ltd. (4) 18,050,000 9.99
3600 South Lake Drive
St. Francis, WI 53235
Roger I. Gale (5) 1,215,000 *
J. Richard George (6) 5,075,717 2.88
Richard D. Brounstein (7) 2,257,371 1.30
John J. DiPietro (8) 307,977 *
Paul E. Freiman (9) 309,901 *
Julius Krevans, M.D.(10) 308,468 *
Maxim A. Soulimov (11) 200,000 *
Richard R. Van Maanen (12) 2,053,589 1.19
All current directors and executive officers as a group (8 persons) 11,728,023 6.42
- ----------
* 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, 5000 Hopyard Road, Suite 480,
Pleasanton, California 94588.
(2) Based on 171,243,303 shares outstanding as of May 13, 2005.
(3) Marat Safin has voting and investment control over shares held by Marr
Technologies BV. Based on holdings reported in Amendment No. 4 to Schedule
13D dated August 9, 2004 filed with the Securities and Exchange Commission
plus 9,333,333 shares subject to Secured 8% Convertible Notes that are
immediately convertible, 3,125,000 shares subject to warrants exercisable
within 60 days and 188,741 shares underlying convertible notes issuable
within 60 days in payment of interest on the 8% Convertible Notes.
Excludes 14,033,333 shares underlying warrants not exercisable until
October 4, 2005.
(4) Michael A. Roth and Brian J. Stark possess voting and dispositive power
over all of the shares owned by SF Capital Partners Ltd. This number
includes 8,632,324 shares of common stock and 3,500,000 shares of common
stock issuable upon exercise of warrants acquired in our May 2004 private
placement. Under the terms of the Secured 8% Senior Convertible Notes (the
"Notes") and warrants ("Warrants") acquired by SF Capital Partners Ltd. in
April 2005, SF Capital may convert the Notes into 13,333,333 shares of our
common stock and the Warrants may be exercised for the purchase of
19,333,333 shares of our common stock. The Warrants are not exercisable
prior to October 4, 2005 and, accordingly, are excluded from the number of
shares reported as beneficially owned. The Notes are convertible only to
the extent that the number of shares of common stock issuable pursuant to
the Notes or Warrants, together with the number of shares of common stock
owned by SF Capital (but not including shares of common stock underlying
unconverted portions of the Notes or unexercised portions of the Warrants)
would not exceed 9.999% of the then-outstanding common stock as determined
in accordance with Section 13(d) of the Exchange Act. Accordingly, the
number of shares of stock shown as beneficially owned by SF Capital is
limited to 9.999% of the then-outstanding shares. In the absence of
ownership limitations, SF Capital would beneficially own 25,735,287 shares
or 13.66%, including 269,630 shares underlying convertible notes issuable
in payment of interest on the Notes within 60 days, of our
then-outstanding common stock as determined in accordance with Section
13(d) of the Exchange Act.
16
(5) Includes 1,050,000 shares subject to options exercisable within 60 days.
Marr Technologies BV ("Marr"), the beneficial owner of 58,873,484 shares
of Calypte Common stock (the "Marr Holdings") was granted the right to
nominate two (2) mutually-agreeable candidates for appointment to the
Calypte Board of Directors pursuant to an August 2003 agreement. Mr. Gale
was nominated by Marr and subsequently appointed as a Director on November
15, 2004 upon the recommendation of the Nominating Committee and the
approval of the Calypte Board of Directors. Mr. Gale 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.
(6) Includes 5,075,717 shares subject to options exercisable within 60 days.
(7) Includes 2,257,371 shares subject to options exercisable within 60 days.
(8) Includes 307,734 shares subject to options exercisable within 60 days.
(9) Includes 309,901 shares subject to options exercisable within 60 days.
(10) Includes 308,001 shares subject to options exercisable within 60 days.
(11) Includes 200,000 shares subject to options exercisable within 60 days.
Marr Technologies BV ("Marr"), the beneficial owner of 58,873,484 shares
of Calypte Common stock (the "Marr Holdings") was granted the right to
nominate two (2) mutually agreeable candidates for appointment to the
Calypte Board of Directors pursuant to an August 2003 agreement. Mr.
Soulimov was nominated by Marr and subsequently appointed as a director on
April 2, 2004 upon the recommendation of the Nominating Committee and the
approval of the Calypte Board of Directors. He was re-elected as a
Director at the annual Meeting of Stockholders on June 22, 2004. 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.
(12) Includes 2,053,334 shares subject to options exercisable within 60 days.
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 initial
reports of ownership and reports on changes in ownership with the Securities and
Exchange Commission (the "Commission"). Such Reporting Persons are also required
by Commission rules to furnish the Company with copies of all Section 16(a)
forms that they file. To the Company's knowledge, based solely on the review of
copies of such reports furnished to the Company and written representations that
no other reports were required during the fiscal year ended December 31, 2004,
all of the Company's Reporting Persons complied with all applicable Section
16(a) filing requirements.
Code of Business Conduct
We have adopted a Code of Business Conduct that applies to all of our
employees, including our Chief Executive Officer and Chief Financial Officer,
and to the members of our Board of Directors. The Code of Business Conduct is
posted on our website at www.calypte.com.
17
PROPOSAL TO APPROVE THE ISSUANCE OF SHARES OF COMMON STOCK IN EXCESS OF 19.99%
OF THE OUTSTANDING COMMON STOCK AND PRICE ADJUSTMENTS IN CONNECTION WITH OUR
APRIL 2005 ISSUANCE OF NOTES AND WARRANTS
(Proposal 2)
On April 4, 2005, in order to meet our need for additional working capital, we
entered into a Purchase Agreement dated as of that date (the "Purchase
Agreement") pursuant to which we concluded a private placement (the "April 2005
Placement") to five institutional investors (the "2005 Investors") of $8,000,000
million in aggregate principal amount of our Secured 8% Senior Convertible Notes
due on April 3, 2007 (the "Notes"). The Notes are convertible at $0.30 per Share
(the "Conversion Price") into 26,666,667 shares (the "Conversion Shares") of our
Common Stock, par value $0.03 per share ("Common Stock" or "Shares"), subject to
anti-dilution adjustments (discussed more specifically below). The Notes provide
for interest to be paid in cash or, subject to certain conditions, by accreting
the interest to principal (the "Notes Interest Provision"), increasing thereby
the number of Shares into which the Notes are convertible.
We also issued to the 2005 Investors in the April 2005 Placement Series A Common
Stock purchase warrants (the "Series A Warrants") and Series B Common Stock
purchase warrants (the "Series B Warrants"), each expiring on April 3, 2010. The
Series A Warrants are exercisable to purchase 26,666,667 shares of Common Stock
at $0.325 per Share (the "Series A Warrant Shares"). The Series B Warrants are
exercisable to purchase 12,000,000 shares of Common Stock at $0.325 per Share
(the "Series B Warrant Shares"). The terms of the Series A Warrants and the
Series B Warrants provide that they cannot be exercised prior to six months
after their issue date. The Series A Warrants and the Series B Warrants provide
for anti-dilution and other adjustments of Series A Warrant Shares and Series B
Warrant Shares and the exercise prices thereof.
In consideration of financial advisory services rendered prior to and in
connection with the April 2005 Placement, and pursuant to our agreements with
two agents, we issued to those agents, cumulatively, (i) $97,500 principal
amount of Notes; (ii) Series A Warrants to purchase 325,000 Series A Warrant
Shares and Series B Warrants to purchase 146,250 Series B Warrant Shares; and
(iii) Series A Warrants, modified to remove anti-dilution rights (the "Agent Fee
Warrants"), to purchase 533,333 Series A Warrant Shares at $0.30 per Share and
1,333,333 Series A Warrant Shares at $0.23 per Share (the Series A Warrant
Shares issuable upon exercise of the Agent Fee Warrants are called the "Agent
Fee Warrant Shares").
If, without regard to any anti-dilution or other adjustments, the Notes were
converted in full and the Series A Warrants, Series B Warrants and the Agent Fee
Warrants were exercised in full, we would be required to issue 67,996,250
Shares, which is equal to 39.7% of our Common Stock outstanding on April 4,
2005. Our Shares trade on the American Stock Exchange ("AMEX"). As a result of
AMEX Rule 713 and the agreement we entered into with AMEX as a condition to the
listing of our Shares on AMEX, we are required to obtain approval of our
stockholders before issuing or becoming required to issue any shares in excess
of 19.99% of our outstanding Common Stock, which was 34,224,397 Shares on April
4, 2005. Due to the urgency of our need to obtain additional working capital in
early 2005, we entered into the April 2005 Placement before seeking stockholder
approval of the issuance of Shares in excess of 19.99% of our Common Stock. In
order to comply with AMEX requirements applicable to us, the 2005 Investors and
we agreed to structure the April 2005 Placement to make subject to prior
approval by our stockholders the effectiveness of any provisions of the April
2005 Placement that would cause more than 19.99% of our Common Stock to be
issued. Doing so enabled us to complete the April 2005 Placement prior to
obtaining such stockholder approval without violating AMEX's requirements.
18
We are required pursuant to the AMEX requirements and the terms of the April
2005 Placement to obtain the approval of our stockholders before issuing or
becoming required to issue any Shares in excess of the 34,224,397 Shares
constituting 19.99% of our outstanding Common Stock on April 4, 2005. Such
issuance above 19.99% of our outstanding Common Stock on April 4, 2005, could
occur upon:
o the effectiveness of the anti-dilution provisions of the Notes
pursuant to which the number of Conversion Shares issuable could be
increased as a result of our issuance within one year of the issue
date of the Notes any Common Stock or Common Stock equivalents for a
price less than the Conversion Price, thereby causing the Conversion
Price to be reduced to be equal to the price of the new securities
issued (the "Notes Anti-dilution Adjustments"); and
o the effectiveness of the anti-dilution provision of the Series A
Warrants (but not the Series B Warrants or the Agent Fee Warrants)
pursuant to which, within one year of the issue date of the Series A
Warrants, the exercise price of the Series A Warrants could be
reduced to be equal to the price of any Common Stock or Common Stock
equivalents we issue for a price less than the exercise price of the
Series A Warrants (the "Series A Warrants Anti-dilution
Adjustment").
The April 2005 Placement transaction documents provide that the Notes
Anti-dilution Adjustments and the Series A Warrants Anti-dilution Adjustment
will not become effective unless our stockholders approve them.
If, prior to obtaining stockholder approval of Proposal 2, the Notes
Anti-dilution Adjustments were to become effective or the Series A Warrants
Anti-dilution Adjustment were to become effective, we would not be in compliance
with the AMEX rules and would violate our listing agreement with AMEX, with the
result that our Shares would be subject to delisting by AMEX. A delisting of our
Shares from AMEX would likely have a material adverse effect on the market value
of our Shares and would materially impair the ability of our stockholders to
sell their Shares. To avoid that result, we agreed with the 2005 Investors in
the April 2005 Placement to seek stockholder approval for the potential issuance
of Shares in excess of the 34,224,397 Shares described above pursuant to the
Notes Anti-dilution Adjustments and the Series A Warrants Anti-dilution
Adjustment. We have made Proposal 2 in order to fulfill our obligation under the
Purchase Agreement to seek stockholder approval of such potential issuances and
adjustments. Pending such approval, the Notes Anti-dilution Adjustments and the
Series A Warrants Anti-dilution Adjustment cannot be effected.
Proposal 2 requests our stockholders to approve the issuance of Shares pursuant
to the April 2005 Placement in excess of 19.99% of our Common Stock and to
approve the potential reduction of the Conversion Price pursuant to the Notes
Anti-dilution Adjustments and the exercise price of the Series A Warrants
pursuant to the Series A Warrants Anti-dilution Adjustment. Our Board of
Directors recommends that stockholders vote FOR Proposal 2.
19
Description of the Notes
The form of the Notes was filed as Exhibit 10.157 to our Form 8-K filed on April
5, 2005. The principal terms of the Notes are summarized below:
Maturity, Interest, Conversion. The Notes will mature on the second anniversary
of the date of their issuance and bear interest at the rate of 8% per annum. We
will pay interest on a quarterly basis, either in cash or, if Proposal 2 is
approved by the stockholders and as long as we satisfy the applicable conditions
set forth in the Notes, pursuant to the Notes Interest Provision by accreting
interest to the principal amount due under the Notes.
Security, Priority, Ranking. Pursuant to a Security Agreement (the "Security
Agreement") entered into concurrently with the Notes, the Notes are secured by
all of our assets, except certain equipment that we currently own or may acquire
in the future that is (or will be) subject to separate purchase money security
interests. The Notes rank at least pari passu in right of payment with all our
other indebtedness.
Certain Covenants. The Purchase Agreement and the Security Agreement contain
covenants and events of default that are customary for high-yield senior notes.
The Security Agreement provides for: (1) limitations on our ability and the
ability of our subsidiaries to incur or guarantee indebtedness; (2) limitations
on dividends and other payments to holders of equity and subordinated debt; (3)
limitations on investments; (4) limitations on sale and leaseback transactions;
(5) limitations on asset sales, consolidations and mergers; (6) limitations on
creating or assuming liens; and (7) limitations on transactions with affiliates.
These provisions have certain exceptions, minimums and carve-outs. In
particular, the limitation on incurrence of indebtedness permits us to incur (i)
up to $3,000,000 in additional unsecured debt; (ii) up to an additional
$3,000,000 in purchase money debt obligations; (iii) unsecured debt in
connection with a $5,500,000 credit facility with Marr Technologies B.V.
("Marr"); and (iv) up to $5,000,000 in debt associated with foreign
subsidiaries.
Conversion; Participation Rights. The holders of the Notes have the right to
convert their Notes into Shares at any time on or prior to their maturity date.
Any Note that is not converted into Shares prior to the maturity date will be
repaid on the maturity date.
20
The number of Shares to be issued upon conversion of the Notes is determined by
dividing the principal amount to be converted (together with any accrued but
unpaid interest on such principal amount) by the Conversion Price. The initial
Conversion Price is $0.30. Assuming that all the Notes are converted into Shares
on the maturity date at the Conversion Price, the Notes (excluding Conversion
Shares issued pursuant to the Notes Interest Provision) will convert into
26,991,667 Conversion Shares. Assuming that all interest due on the Notes on the
maturity date is paid by accretion to principal pursuant to the Notes Interest
Provision, the interest would be converted into 4,702,335 Conversion Shares. The
Notes contain customary provisions for the adjustment of the Conversion Price in
the event that we declare a stock dividend or stock split or any tender offer,
merger, consolidation, recapitalization, reorganization or similar transaction.
In addition, provided the stockholders approve Proposal 2, if we issue or sell
Shares or any security convertible or exchangeable into Shares within one year
of the issue date of the Notes at a price per Share that is less than the
Conversion Price on the issue date of the Notes, the Conversion Price shall be
reduced, pursuant to the Notes Anti-dilution Adjustments, to be equal to such
lower price. Applicability of the Notes Anti-Dilution Adjustments is subject to
exclusions for issuances related to prior transactions and issuances to
employees and consultants, and issuances in connection with strategic
transactions and capital leases. For example, if, within one year from April 4,
2005, we raise additional funds by issuing Shares for a price of $0.21 per
Share, the Conversion Price would be decreased from $0.30 per share to $0.21 per
share and we would be required to issue 11,567,857 additional Shares if the
Notes were fully converted.
In addition to the Notes Anti-Dilution Adjustments, if we issue additional
Common Stock or Common Stock equivalents within one year of the issue date, each
of the 2005 Investors will have the right, but not the obligation, to
participate in such issuance, upon the same terms as those offered, so that the
2005 Investor's percentage ownership of the Company remains the same.
Forced Conversion. Any time after eighteen months following the issue date, we
can require the holders of the Notes to convert their Notes if (i) the daily
volume weighted average price of Shares for each of 20 consecutive trading days
is greater than a price per Share derived by multiplying the conversion price by
the number two (2); (ii) we have met various conditions regarding authorization
to issue shares, stock exchange listing and registration of shares; (iii) the
average daily trading volume of our Common Stock is at least 450,000 Shares (as
adjusted for stock splits and reverse stock splits); and (iv) we are not in
default on the Notes.
21
Change of Control. In the event of a change of control (which includes the
acquisition by a party of more than one-third of the equity of the Company)
while the Notes are outstanding, the holders have the right to require us to
purchase the then outstanding Notes, plus accrued interest, at 115% of the face
amount of the Notes.
Events of Default. The Notes contain events of default that are customary for
high-yield securities, including failure to make payments of principal and
interest when due, breaches of covenants, cross-default of capital lease
obligations and other indebtedness, change of control, prepayment of Notes and
other indebtedness, bankruptcy, insolvency, unsatisfied judgment defaults,
delisting of stock, failure to maintain authorized shares for conversions,
failure to register shares and violations of the covenants and agreements
contemplated in the Purchase Agreement.
Modification, Amendments. The Purchase Agreement and the Security Agreement may
be amended with the consent of the holders of a majority of the aggregate
principal amount of the Notes then outstanding. Without the consent of each
holder of an outstanding Note, no amendment may, among other things, (1) reduce
the amount of Notes whose holders must consent to any amendment; (2) reduce the
rate of or extend the time for payment of interest on any Note; (3) reduce the
principal of or extend the maturity of any Note; or (4) impair the right of any
holder to receive payment of principal of and interest on such holder's Note on
or after the due dates therefore or to institute suit for the enforcement of any
payment on or with respect to such holder's Note.
Description of the Series A Warrants
The form of the Series A Warrants was filed as Exhibit 10.159 to our Form 8-K
filed on April 5, 2005. The principal terms of the Series A Warrants are
summarized below:
The Series A Warrants are exercisable, at any time after six months from the
issue date, for a period of five years from the issue date. We have issued
Series A Warrants to purchase an aggregate of 26,991,667 Shares at $0.325 per
share. The Series A Warrants contain customary provisions for adjustment of the
exercise price in the event that we declare a stock dividend or stock split or
effect any tender offer, merger, consolidation, recapitalization, reorganization
or similar transaction. In addition, if we issue or sell Common Stock or any
security convertible or exchangeable into Common Stock within one year of the
issue date of the Series A Warrants at a price per Share that is less than the
Series A Warrant exercise price on the issue date, the Series A Warrant exercise
price shall be reduced to be equal to such lower price. For example, if, within
one year from April 4, 2005, we raise additional funds by issuing Shares for a
price of $0.21 per Share, the Series A Warrant exercise price would be decreased
from $0.325 per share to $0.21 per share. No additional Series A Warrant Shares
would be issuable. Such adjustment of the Series A Warrant exercise price is
subject to exclusions for issuances related to prior transactions, and issuances
to employees and consultants, and issuances in connection with strategic
transactions and capital leases.
22
Description of the Agent Fee Warrants
The principal terms of the Agent Fee Warrants are summarized below:
The Agent Fee Warrants are exercisable, at any time after six months from the
issue date, for a period of five years from the issue date. We have issued Agent
Fee Warrants to purchase an aggregate of 533,333 shares of Common Stock at
$0.325 per share and an aggregate of 1,333,333 shares of Common Stock at $0.23
per share. The Agent Fee Warrants exercise price is subject to adjustment only
in the event that we declare a stock dividend or stock split or effect any
tender offer, merger, consolidation, recapitalization, reorganization or similar
transaction.
Description of the Series B Warrants
The form of the Series B Warrants was filed as Exhibit 10.160 to our Form 8-K
filed on April 5, 2005. The principal terms of the Series B Warrants are
summarized below:
The Series B Warrants are exercisable, at any time after six months from the
issue date, for a period of five years from the issue date. We have issued
Series B Warrants to purchase an aggregate of 12,146,250 shares of common Stock
at $0.325 per share. The Series B Warrant exercise price is subject to
adjustment in the event that we declare a stock dividend or stock split or
effect any tender offer, merger, consolidation, recapitalization, reorganization
or similar transaction. At any time after the Series B Warrant can be exercised,
we can require the holders of the Series B Warrant to exercise their Series B
Warrant if (i) the daily volume weighted average price of Shares for each of 20
consecutive trading days is greater than a price per Share derived by
multiplying the Series B Warrant Exercise Price by the number 1.667, (ii) we
have met various conditions regarding authorization to issue shares, listing on
an exchange and registration of shares, (iii) the average daily trading volume
of our Shares is at least 450,000 shares (as adjusted for stock splits and
reverse stock splits), and (iv) we are not in default on the Notes.
23
Registration Rights
We have agreed to register the resale of the Conversion Shares, the Series A
Warrant Shares, the Series B Warrant Shares and the Agent Fee Warrants. In the
event we fail to register the Conversion Shares within the prescribed time, we
will be obligated to pay liquidated damages in cash based on our failure to
timely register those shares.
Limitations of Conversion of Notes and Exercise of Series A Warrants and Series
B Warrants
The Notes, the Series A Warrants and the Series B Warrants contain provisions
that prevent any holder from converting any part of the Notes or exercising any
part of the Series A Warrants or the Series B Warrants if such conversion or
exercise would result in such holder beneficially owning, or having the right to
vote, more than 9.999% of our outstanding shares of Common Stock. This provision
prevents us from requiring the conversion of any Note or the exercise of any
Series B Warrant by a holder that would result in such holder beneficially
owning, or having the right to vote, more than 9.999% of our outstanding shares
of Common Stock. That limitation is not contained in the Notes, the Series A
Warrants and the Series B Warrants issued to Marr, as Marr currently owns more
than 9.999% of our outstanding shares of Common Stock.
Voting Agreement
To facilitate the approval of Proposal 2, we entered into a voting agreement
with Marr and SF Capital Partners LP ("SF") pursuant to which each of Marr and
SF agreed to vote its eligible shares of Common Stock in favor of Proposal 2 and
we agreed to use our reasonable best efforts to seek approval of Proposal 2 at
our annual stockholders' meeting. Marr and SF will not, however, be permitted to
vote shares of Common Stock they acquired as a result of conversion of their
Notes or exercise of their Series A Warrants or Series B Warrants on Proposal 2.
Consideration Received
We issued $8,000,000 aggregate principal amount of the Notes to the 2005
Investors, for aggregate net proceeds of $7,667,500. We used $2,000,000 of the
net proceeds to repay the 7% Promissory Note issued to Marr in January 2005. The
balance of the proceeds from the Notes will be used for general working capital
purposes as well as for the commercialization of our rapid tests for HIV-1/2
diagnosis.
24
Effect of April 2005 Placement and Stockholder Vote on Existing Stockholders
The exact number of shares of Common Stock into which the Notes, the Series A
Warrants and the Series B Warrants may ultimately be convertible and exercisable
may vary over time as described above. Assuming that all the Notes are converted
into shares of Common Stock on the maturity date at the initial Conversion Price
of $0.30, the Notes will be converted into 26,991,667 shares of Common Stock
(excluding any Shares issuable as a result of the Notes Interest Provision).
Assuming that all the Series A Warrants are exercised on the expiration date at
the initial Exercise Price of $0.325, the Series A Warrants will be converted
into 26,991,667 shares of Common Stock. Assuming that all the Series B Warrants
are exercised on the expiration date at the initial Exercise Price of $0.325,
the Series B Warrants will be converted into 12,146,250 shares of Common Stock.
Assuming that all the Agent Fee Warrants are exercised on the expiration date at
their initial exercise prices of $0.30 and $0.23, the Agent Fee Warrants will be
converted into 1,866,666 shares of Common Stock. Assuming no other changes in
current stockholdings or shares outstanding, the stockholdings of all
stockholders other than holders of the Notes, the Series A Warrants and the
Series B Warrants would be diluted from 100% of the total outstanding shares of
Common Stock to approximately 72% of the total outstanding shares of Common
Stock. This dilution could adversely affect the market price of the shares of
Common Stock.
If the stockholders approve Proposal 2, the Notes Anti-Dilution Adjustments and
the Series A Anti-dilution Adjustment will become effective. If we were to
engage in a new equity issuance within one year of the issue date of the Notes
at a price per share less than $0.30, the Conversion Price and the exercise
price of the Series A Warrants would be adjusted downward pursuant to the
formulas described above. If we were to engage in a new equity issuance within
one year of the issue date of the Notes at a price per share between $0.30 and
$0.325, the Exercise Price of the Series A Warrants only would be adjusted
downward pursuant to the formulas described above. The downward adjustment in
the Conversion Price (but not in the exercise price of the Series A Warrant)
would result in the issuance of a greater number of Conversion Shares upon
conversion of the Notes thereby resulting in greater dilution of all
stockholders other than holders of the Notes, the Series A Warrants and the
Series B Warrants.
If the stockholders do not approve Proposal 2, the Notes Anti-Dilution
Adjustments and the Series A Warrants Anti-dilution Adjustment will not become
fully effective, although all other provisions of the Notes, the Series A
Warrants and the Series B Warrants will remain outstanding and will be otherwise
unaffected. Specifically, if the stockholders do not approve Proposal 2, (i) the
Notes Anti-Dilution Adjustments will not be effective to the extent it would
result in the decrease of the Conversion Price and issuance of additional
Conversion Shares in connection with subsequent events triggering the Notes
Anti-Dilution Adjustment Provision; and (ii) the Series A Warrants Anti-dilution
Adjustment will not be effective to the extent it would result in the decrease
of the exercise price of the Series A Warrants.
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 recommends a vote FOR Proposal 2 to approve the issuance of Shares in
excess of 19.99% of our outstanding Common Stock in connection with the rights
granted in the Notes, the Series A Warrants and the Series B Warrants and to
authorize the conversion price and exercise adjustments in the Notes and Series
A Warrants. All proxies solicited by the Board will be voted FOR Proposal 2
unless stockholders specify a contrary choice in their proxies.
25
PROPOSAL TO APPROVE THE ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK AND
WARRANT SHARES AND ADJUSTMENT OF WARRANT EXERCISE PRICE IN CONNECTION WITH
AMENDED SECURITIES GRANTED TO THE INVESTORS IN OUR MAY AND JULY 2004 PLACEMENTS
(Proposal 3)
On May 28, 2004, and July 9, 2004, we concluded two separate, unrelated private
placements (together, the 2004 Transactions") of Shares and common stock
purchase warrants (the "2004 Warrants") to 12 institutional investors (the "2004
Investors"). In the 2004 Transactions we issued, in the aggregate, 26,970,000
Shares and 2004 Warrants to purchase 10,741,500 Shares (the "Original 2004
Warrant Shares"). The 2004 Investors were granted one-year anti-dilution rights
(the "2004 Anti-dilution Rights") that would be triggered by our issuance of
Shares or securities convertible or exchangeable into Shares at a price less
than $0.40 per Share. Subsequent to the 2004 Transactions, as a prerequisite to
the listing of our Shares on AMEX, we agreed with AMEX that, without first
obtaining prior stockholder approval, we would not issue any additional Shares
to the 2004 Investors, increase the number of Original 2004 Warrant Shares
issuable as a result of a decrease of the exercise price of the 2004 Warrants,
pursuant to the 2004 Anti-dilution Rights.
The terms of the April 2005 Placement, described in Proposal 2 of this Proxy
Statement, would have triggered the 2004 Anti-dilution Rights, which, if given
effect before being approved by our Stockholders, would have caused us to be in
breach of our listing agreement with AMEX. Due to the urgency of our need to
obtain additional working capital in early 2005, we entered into the April 2005
Placement before seeking stockholder approval of the 2004 Anti-dilution Rights.
In order to do so and to comply with the AMEX requirements applicable to us, we
entered into an amendment agreement with the 2004 Investors (the "Amendment"),
in which we agreed to revise the 2004 Anti-dilution Rights and grant the 2004
Investors additional rights (as described below) and the 2004 Investors agreed
to subject the applicability of the 2004 Anti-dilution Rights and the
effectiveness of the Amendment to approval by our stockholders, thereby
permitting us to complete the April 2005 Placement prior to obtaining such
stockholder approval without violating AMEX's requirements. Proposal 3 requests
our stockholders to approve our issuance to the 2004 Investors of additional
Shares and additional 2004 Warrants and the adjustment of the exercise price of
the currently outstanding 2004 Warrants, as provided in the Amendment. Our Board
of Directors recommends that stockholders vote for Proposal 3.
The Amendment, if approved by our stockholders, amends the respective terms of
the 2004 Transactions to provide for the following cumulative changes in the
securities issued to the 2004 Investors (collectively, the "Amended
Securities"). (Amounts in parenthesis are the original 2004 Anti-dilution Rights
due as a result of the April 2005 Placement.)
(1) an increase to 7,079,625 (from 6,742,500) in the number of Shares to
be issued, as a result of the April 2005 Placement, pursuant to the
2004 Anti-dilution Rights;
(2) an increase, as a result of the April 2005 Placement, in the number
of 2004 Warrants to purchase 1,253,177 (from 1,193,501) Shares, at
an exercise price of $0.325 (reduced from $0.45) per Share; and
(3) an adjustment, as a result of the April 2005 Placement, of the $0.50
per share exercise price of the Original 2004 Warrant Shares to
$0.45 per Share.
26
Registration Rights with Respect to the Amended Securities
The additional Shares issuable pursuant to the Amendment will initially be
restricted securities and together with additional Shares issued upon exercise
of the 2004 Warrants will be subject to the registration rights granted in the
2004 Transactions, which are customary registration rights for the resale of
common stock issued in private placements. The initial 2004 Warrants are all
still held by the 2004 Investors and the additional Shares and warrants will
only be issued to the 2004 Investors.
Voting Agreement with Respect to the Amendment
To facilitate the approval of Proposal 3, we entered into a voting agreement
with Marr, our largest current stockholder and our largest stockholder prior to
the 2004 Transactions, pursuant to which Marr has agreed to vote its eligible
Shares in favor of Proposal 3 and we agreed to use our reasonable best efforts
to seek approval of Proposal 3 at our annual stockholders' meeting. Marr will
not, however, be permitted to vote Shares it acquired in the 2004 Transactions
on Proposal 3.
No Additional Consideration Received from the Amended Securities
We will not receive any additional consideration in connection with the issuance
of the Amended Securities, unless some or all of the 2004 Warrants are
exercised.
Effect of the Amendment on Existing Stockholders
If the stockholders approve Proposal 3, the rights of the Amended Securities
will become effective and we will (i) issue 7,079,625 Shares, (ii) reduce the
exercise price of the 10,741,500 2004 Warrants issued in the 2004 Placements and
currently held by the 2004 Investors from $0.50 per share to $0.45 per Share;
and (iii) issue 1,253,177 Additional 2004 Warrant Shares at $0.325 per Share.
Assuming no other changes in current stockholdings or shares outstanding, the
issuance of the Amended Securities will dilute the stockholdings of all
stockholders other than stockholders receiving the Amended Securities from 100%
of the total outstanding shares of Common Stock to approximately 95% of the
total outstanding shares of Common Stock. This dilution could adversely affect
the market price of the shares of Common Stock.
If the stockholders do not approve Proposal 3, the rights of the Amended
Securities will not become effective, although all other provisions of the 2004
Placements and 2004 Warrants will remain fully effective. The 2004 Anti-dilution
Rights will remain fully effective with respect to any future financings to the
extent that they occur within one year of the 2004 Placements and at a price
below $0.40 per share.
If the stockholders do not approve Proposal 3 at the annual stockholders'
meeting, we are contractually obligated by the terms of the Amendment to use our
reasonable best efforts to continue to seek approval of Proposal 3. Accordingly,
while we will owe no penalties to the 2004 PIPE Investors for failure to obtain
stockholder approval of Proposal 3, we will be required to bear certain marginal
costs to include such proposal in our proxy materials for every meeting we hold
on a going-forward basis until such proposal is approved by our stockholders.
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 recommends a vote FOR Proposal 3 to approve the Amendment and the
Amended Securities. All proxies solicited by the Board will be voted FOR
Proposal 3 unless stockholders specify a contrary choice in their proxies.
27
PROPOSAL TO ADOPT THE CALYPTE BIOMEDICAL CORPORATION 2005
DIRECTOR INCENTIVE PLAN
(Proposal 4)
On March 7, 2005, the Board adopted, subject to approval by the
stockholders at the Annual Meeting, the Calypte Biomedical Corporation 2005
Director Incentive Plan, (the "2005 Director Plan"). The text of the 2005
Director Plan is attached as Appendix A to this Proxy Statement Stockholders are
being asked to approve the adoption of the 2005 Director Plan and to approve the
reservation for issuance thereunder of up to 18,000,000 shares of Common Stock.
Purpose. The purpose of the 2005 Director Plan is to attract and retain
the best available personnel for service as Outside Directors of the Company and
its affiliates, to provide additional incentive to the Outside Directors of the
Company and its affiliates to serve as directors, and to encourage their
continued service. Outside Director, for purposes of the 2005 Director Plan
only, means a Director who is not an employee or a greater than 10% stockholder,
directly or beneficially, of the Company or an Affiliate. The 2005 Director Plan
is designed to permit the Company to provide several different forms of awards
to meet varying 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 2005 Director Plan authorizes the granting of Awards with
respect to an aggregate of 18,000,000 shares of Common Stock. The 18,000,000
shares reserved under the 2005 Director Plan equal approximately 11% of the
outstanding Common Stock as of May 13, 2005. The 2005 Director Plan will replace
the 1995 Director Option Plan (the "1995 Plan"), which expires under its terms
later this year. As of May 13, 2005, under the 1995 Plan, options to purchase
1,329,413 shares of Common Stock were outstanding and 662,229 shares reserved
were available for additional grants. The Common Stock covered by the 2005
Director 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 2005 Director 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 2005 Director
Plan.
The following summary of certain provisions of the 2005 Director Plan is
qualified in its entirety by reference to the copy of the 2005 Director Plan set
forth in Appendix A to this Proxy Statement.
Administration. The 2005 Director 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.
The 2005 Director Plan does not limit 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 individual
Outside Director.
Eligibility. Awards under the 2005 Director Plan may be made only to
Outside Directors in recognition of such Director's service on the Board and/or
on one or more Committees of the Board.
Types of Awards. Awards may be made under the 2005 Director Plan in the
form of (a) options, (b) stock appreciation rights, (c) dividend equivalent
rights, (d) restricted stock, (e) restricted stock units, and (f) other
equity-based or equity-related Awards which the Committee determines to be
consistent with the purpose of the 2005 Director Plan and the interests of the
Company (including, but not limited to, stock bonuses and warrants).
28
Stock Options. The 2005 Director Plan permits the granting of
stock options whose terms will be solely determined by the
Compensation Committee. The exercise price of options granted under
the 2005 Director 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 2005 Director 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 Compensation
Committee, 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 service as a
Director.
Stock Appreciation Rights. The 2005 Director Plan permits the
granting of stock appreciation rights in conjunction with all or
part of a stock option granted under the 2005 Director Plan. Such
rights may be granted either at or after 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.
Dividend Equivalent Rights. The 2005 Director 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 2005
Director 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.
Other Stock-Based Awards. The 2005 Director 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.
Tax Offset Bonuses. The Compensation Committee may grant to a
participant a specified amount of cash 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.
29
Amendment of the 2005 Director Plan. The Board may from time to time
alter, suspend, discontinue, revise, amend or terminate the 2005 Director Plan
in any respect whatsoever, provided, that no such modification of the 2005
Director Plan shall adversely affect in any material way any award previously
granted under the 2005 Director Plan, without the written consent of the
participant who received such award. However, the Board may not amend, without
stockholder approval, the 2005 Director 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.
Term of the 2005 Director Plan. Unless terminated earlier as provided in
the 2005 Director Plan, the 2005 Director 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.
Stock Options and Stock Appreciation Rights
Award; Exercise. The grant of stock options and stock appreciation rights
under the 2005 Director Plan will not result in income taxable to the
participant or provide a deduction to the Company. However, the exercise of a
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 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.
Sale of Option Shares. Upon sale, other than to the Company, of shares
acquired under a stock option, 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 to pay all or
part of the exercise price of a stock option, 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, 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.
30
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 2005 Director Plan
The Compensation Committee has not made or proposed any option grants or
other awards under the 2005 Director Plan that will become effective subject to
stockholder approval of this Proposal 4.
Approval Required
Approval of Proposal 4 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 2005
Director Plan. Proxies solicited by the Board will be so voted unless
stockholders specify a different choice in their proxies.
31
PROPOSAL TO ADOPT AMENDMENTS TO THE CALYPTE BIOMEDICAL CORPORATION 2004
INCENTIVE PLAN
(Proposal 5)
On February 24, 2004, the Board adopted, subject to approval by the
stockholders at the 2004 Annual Meeting of Stockholders, the Calypte Biomedical
Corporation 2004 Incentive Plan, (the "2004 Plan"). Our stockholders approved
the adoption of the 2004 Plan and the reservation of 30,000,000 shares of Common
Stock for issuance thereunder at the Annual Meeting held on June 22, 2004. On
March 7, 2005, the Board unanimously approved, subject to stockholder approval,
an amendment to the 2004 Plan increasing the number of shares reserved for
issuance thereunder and certain other modifications.
In this Proposal 5, stockholders are being asked to approve an
amendment to the 2004 Plan to (i) increase by 17,000,000 shares the number of
shares of Common Stock reserved for issuance thereunder, (ii) permit the
granting of awards under the 2004 Plan to employees and others providing
services to the Company's affiliates, and (iii) increase from 8,000,000 shares
to 20,000,000 shares the maximum number of shares which shall be available for
delivery as restricted stock and restricted stock units. The text of the 2004
Plan, as amended subject to stockholder approval of this Proposal 5, is attached
as Appendix B to this Proxy Statement
Background of the Proposal
Subject to the approval of the amendment by the Company's stockholders,
the 2004 Plan will authorize the granting of Awards with respect to an aggregate
of 47,000,000 shares of Common Stock. In April 2004, when the Company issued the
Proxy that requested its stockholders approve the adoption of the 2004 Plan,
they also requested that 30,000,000 shares of the Company's Common Stock be
reserved for issuance under the 2004 Plan, an amount which represented
approximately 21% of the Company's then-outstanding Common Stock. As of May 2,
2005, the Company has issued options to purchase approximately 21.6 million
shares of its Common Stock under the 2004 Plan, leaving approximately 8.4
million shares reserved and available for additional grants. Based on the number
of shares of Common Stock outstanding at May 2, 2005 and the number of shares
potentially issuable upon the conversion of the Secured 8% Convertible Notes due
on April 3, 2007 and the related Series B Warrants which the Company issued on
April 4, 2005, the latter of which the Company may be able, under certain
conditions, to require the investors to exercise, both of which have been
described more completely in Proposal 3 herein, the increased number of shares
proposed for reservation under the 2004 Plan would again represent approximately
21% of the Company's outstanding and potentially issuable shares of Common
Stock. The Company believes that the requested 17,000,000 share increase in the
number of shares reserved for issuance is required for the flexibility necessary
to provide appropriate incentives to employees, potential employees, consultants
and other parties to whom awards may be made under the 2004 Plan that will
encourage loyalty to Calypte and continue to align interests of grantees with
those of Calypte's stockholders. Subject to the approval of this Proposal by the
stockholders, there will be approximately 25.2 million shares of Common Stock
reserved and available for grants under the 2004 Plan, which number the Company
estimates should be adequate to satisfy its award requirements for the
foreseeable future. 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.
As Calypte's business expands internationally, we have entered into an
affiliate arrangement to manufacture and market our products in China. In the
future, we may create or acquire other affiliated entities in other locations.
To provide incentives and awards for managers, employees and others who may
provide services to these affiliated entities and to align their interests more
closely with those of Calypte and our stockholders, the Board and the Company
believe it appropriate to permit the granting of options and other awards under
the 2004 Plan to employees, consultants and others who provide services to
Calypte's affiliates. Since the 2004 Plan, as originally adopted, limited the
granting of awards under the Plan to parties performing services as Calypte's
employees or consultants, stockholders are now being requested to expand the
eligibility of awards to include parties who provide services to Calypte's
affiliated entities.
32
Although Calypte has historically awarded stock options as its primary
equity incentive, the 2004 Plan permits other equity-based awards, including
restricted stock and restricted stock units. As adopted, the 2004 Plan limited
to 8,000,000 shares the aggregate number of shares that could be awarded as
restricted stock or restricted stock units. The Board and the Company believe
that it is necessary for Calypte to continue to provide competitive equity
incentives to attract and retain the services of qualified employees, executives
and consultants and to better align their interests with those of stockholders.
Additionally, the Board and the Company are reviewing Financial Accounting
Standards Board Statement No. 123, Share Based Payments, (Revised 2004) and
believe that a greater degree of flexibility than was originally contemplated
may be necessary with respect to the types of awards that may be granted under
the 2004 Plan. Accordingly, the Board is recommending that the aggregate limit
on the number of shares of restricted stock and restricted stock units that can
be issued under the 2004 Plan be increased from 8,000,000 shares to 20,000,000
shares. This proposed amendment will provide Calypte the flexibility to continue
to offer competitive equity incentives as desired.
Description of 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, incorporating the
proposed amendments, which is set forth in Appendix B to this Proxy Statement.
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 or an affiliate, to compensate
them for their contributions to the long-term growth and profits of the Company
or an affiliate, 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").
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.
33
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 to an
aggregate of 20,000,000 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 or an Affiliate, 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, subsidiary, or affiliate 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 2004 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.
34
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 20,000,000
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 writing 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.
Term of the 2004 Plan. Unless terminated earlier as provided in the
2004 Plan, the 2004 Plan will expire on June 22, 2014, which is ten years from
its effective date, the date on which it was approved by the Company's
stockholders.
35
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) or an
affiliate. 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.
36
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 stock award
or restricted stock unit will not recognize 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 units 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 Amendment to the 2004
Plan
The Compensation Committee has not made or proposed any option grants or other
awards under the 2004 Plan that will become effective subject to stockholder
approval of this Proposal 5. Option grants from the 2004 Plan during 2004 to the
Named Executive Officers are detailed in the table on page 8 of this Proxy.
Approval Required
Approval of Proposal 5 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
amendments to the 2004 Plan. Proxies solicited by the Board will be so voted
unless stockholders specify a different choice in their proxies.
37
PROPOSAL TO RATIFY THE APPOINTMENT OF REGISTERED INDEPENDENT
PUBLIC ACCOUNTING FIRM
(Proposal 6)
The Audit Committee of the Board has recommended and the Board has
appointed the firm of Odenberg Ullakko Muranishi & Co. LLP ("OUM") as the
independent registered public accounting firm to audit the financial statements
of the Company for the fiscal year ending December 31, 2005. OUM has been so
engaged since December 24, 2003. The Board recommends that stockholders vote in
favor of ratifying such appointment.
OUM representatives are expected to attend the 2005 Annual Meeting. They
will have an opportunity to make a statement if they desire to do so and will be
available to respond to appropriate stockholder questions.
We are asking our stockholders to ratify the selection of OUM as our
independent registered public accounting firm. Although ratification is not
required by our By-Laws or otherwise, the Board is submitting the selection of
OUM to our stockholders for ratification as a matter of good corporate practice.
Even if the selection is ratified, the Audit Committee, in its discretion, may
select a different registered public accounting firm at any time during the year
if it determines that such a change would be in the best interests of the
company and our stockholders.
Approval Required
Approval of Proposal 6 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 the independent registered accounting firm to audit the
financial statements of the Company for the fiscal year ending December 31,
2005. 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 2006 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 28, 2006, to be
considered. Proposals should be addressed to: Secretary, Calypte Biomedical
Corporation, 5000 Hopyard Road, Suite 480, Pleasanton, CA 94588.
Any stockholder who wishes to bring a proposal before the Calypte
Biomedical Corporation 2006 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 30, 2006.
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.
Information Incorporated By Reference
The Company incorporates by reference all items and matters contained in
its Annual Report on Form 10-KSB/A (No. 1) for the fiscal year ended December
31, 2004 and its Quarterly Report on Form 10-QSB for the quarter ended March 31,
2005 each as filed with the Securities and Exchange Commission
By order of the Board of Directors,
/s/ J. Richard George
J. Richard George
President and Chief Executive Officer
Pleasanton, California
June 1, 2005
38
Appendix A
THE CALYPTE BIOMEDICAL CORPORATION
2005 DIRECTOR INCENTIVE PLAN
ARTICLE I
GENERAL
1.1 Purpose.
The purpose of the Calypte Biomedical Corporation 2005 Director Incentive
Plan is to attract and retain the best available personnel for service as
Outside Directors (as defined herein) of the Company and its Affiliates, to
provide additional incentive to the Outside Directors of the Company and its
Affiliates to serve as Directors and to encourage their continued service.
1.2 Definitions of Certain Terms.
1.2.1 "Affiliate" means a corporation which, for purposes of Section
424 of the Code, is a Parent or Subsidiary of the Company,
direct or indirect.
1.2.2 "Award" means an award made pursuant to the Plan.
1.2.3 "Award Agreement" means the written document by which each
Award is evidenced.
1.2.4 "Board" means the Board of Directors of Calypte.
1.2.5 "Calypte" means Calypte Biomedical Corporation, a Delaware
corporation, and any successor thereto.
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 "Director" means a member of the Board or of the board of
directors of an Affiliate.
1.2.12 "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.
1.2.13 "Employee" means any person, including officers and Directors
employed by the Company or an Affiliate. Neither service as a
Director nor payment of a Director's fee by the Company or an
Affiliate will be sufficient, in and of itself, to constitute
"employment" by the Company or by an Affiliate.
1.2.14 "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the applicable rules and
regulations thereunder.
1.2.15 "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
39
1.2.15.1 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.
1.2.15.2 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.
1.2.16 "Grant Notice" means the written notice evidencing certain
terms and conditions of an Award. The Grant Notice is part of
the Award Agreement.
1.2.17 "Inside Director" means a Director who is an Employee.
1.2.18 "Option" means a stock option granted pursuant to the Plan.
1.2.19 "Outside Director," for purposes of this Plan only, means a
Director who is not an Employee or a greater than 10%
stockholder, directly or beneficially of the Company or an
Affiliate.
1.2.20 "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
1.2.21 "Plan" means the Calypte Biomedical Corporation 2005 Director
Plan, as described herein and as hereafter amended from time
to time.
1.2.22 "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the
Internal Revenue Code of 1986.
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 3.2, 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 or an Affiliate with respect to any Awards and
(4) Awards may be settled by Calypte, any of its Affiliates or
any of its or their designees.
40
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 or of an Affiliate 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.
1.4.1 Awards under the Plan may be made only to Outside Directors.
1.4.2 The Plan shall not confer upon any grantee any right with
respect to continuation of service as a Director or nomination
to serve as a Director, nor shall it interfere in any way with
any rights which the Director or the Company may have to
terminate the Director's relationship with the Company or with
an Affiliate at any time.
1.5 Termination of Continuous Status as a Director.
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 grantee's status as a
Director. Except as otherwise determined by the Committee, in
the event a grantee's status as a Director terminates (other
than upon the grantee's death or Disability), 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 at the time of such termination shall immediately be
terminated and cancelled upon such termination.
1.5.2 Death or Disability. Except as otherwise provided in the
applicable Award Agreement, upon the grantee's Disability or
death, the grantee:
1.5.2.1 shall forfeit all Awards that have not previously vested
or remain subject to a risk of forfeiture; and
1.5.2.2 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 status as a Director is terminated due to
the grantee's Disability or death.
41
1.5.3 Termination after Change in Control. Except as otherwise
provided by the Committee or in the applicable Award
Agreement, if any grantee's status as a Director is terminated
by the Company or an Affiliate for any reason other than the
grantee's Disability or death within six (6) months after a
"change in control" as defined in Section 3.9, 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 such termination. 1.5.4 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. 1.5.5 Awards
granted under the Plan shall not be affected by any change of
service within or among the Company and any Affiliates so long
as the grantee continues to be a Director of the Company or
any Affiliate, provided, however, if a grantee's service as a
Director by either the Company or an Affiliate should cease
(other than to become a Director of an Affiliate or the
Company), such termination shall affect the grantee's rights
under any Award granted to such grantee in accordance with the
terms of the Plan and the applicable Award Agreement.
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, and (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 or an Affiliate.
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 18,000,000. 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 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.
1.7.3 Adjustments. The Committee shall have the authority (but shall
not be required) to adjust the number of shares of Common
Stock authorized pursuant to Section 1.7.1 and to adjust
equitably (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 it deems appropriate 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.
42
1.7.4 Except as provided under the terms of any applicable Award
Agreement, there shall be no limit on the number or the value
of shares of Common Stock that may be subject to Awards to any
individual under the Plan.
1.7.5 There shall be no limit on the amount of cash, securities or
other property that may be delivered pursuant to any Award.
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 or an Affiliate. 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 Stockholder.
No grantee of an Award shall have any of the rights of a stockholder 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 or an Affiliate, 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 or an Affiliate (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 or an Affiliate), 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.
2.4 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.
43
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
or an Affiliate without Cause. Upon the delivery of restricted shares of Common
Stock, the grantee shall have the rights of a stockholder 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.
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.
44
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
assisting the purpose of the grantee to pay the resulting taxes, all as
determined by and on such other terms the Committee, andconditions as the
Committee shall determine.
ARTICLE III MISCELLANEOUS
3.1 Date of Adoption and Term of Plan.
The Plan was adopted by the Board on March 7, 2005, and shall be made
effective as of such date, subject to the approval of the Plan by the
stockholders of Calypte. 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 shall its termination
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.
3.2 Amendment of the Plan.
3.2.1 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.
3.2.2 Unless otherwise determined by the Board, stockholder 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.
3.3 Stockholder Approval.
The Plan shall be subject to approval by the stockholders of the Company
within twelve (12) months after the date the Plan is adopted. Such stockholder
approval shall be obtained in the degree and manner required under applicable
state and federal law and any stock exchange rules.
3.4 Tax Withholding.
3.4.1 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.
3.4.2 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 3.4.1 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).
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3.5 Required Consents and Legends.
3.5.1 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.
3.5.2 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.
3.6 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 3.6 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.
3.7 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.
3.8 Change in Control.
3.8.1 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.
46
3.8.2 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.
3.9 Right of Discharge Reserved.
Nothing in the Plan or in any Award Agreement shall confer upon any
grantee the right to continued by the Company or an Employment Affiliate or
affect any right which the Company or an Affiliate may have to terminate such
Employment.
3.10 Nature of Payments.
3.10.1 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.
3.10.2 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.
3.11 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.
3.12 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.
3.13 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.
3.14 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.
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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
amendmento 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
Agreemenshall 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.
48
Appendix B
THE CALYPTE BIOMEDICAL CORPORATION
2004 INCENTIVE PLAN
AMENDED AND RESTATED AS OF MARCH 7, 2005
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 or
an Affiliate, to compensate them for their contributions to the long-term growth
and profits of the Company or an Affiliate, and to encourage them to acquire a
proprietary interest in the success of the Company or an Affiliate.
1.2 Definitions of Certain Terms.
1.2.1 "Affiliate" means a corporation which, for purposes of Section 424
of the Code, is a Parent or Subsidiary of the Company, direct or indirect.
1.2.2 "Award" means an award made pursuant to the Plan.
1.2.3 "Award Agreement" means the written document by which each Award is
evidenced.
1.2.4 "Board" means the Board of Directors of Calypte.
1.2.5 " Calypte" means Calypte Biomedical Corporation, a Delaware
Corporation, and any successor thereto.
1.2.6 "Cause" means the causes set forth in any written employment or
services agreement between the Company and the grantee or an Affiliate or 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 or Affiliate property having a material value to the Company or an
Affiliate; (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.
1.2.7 "Certificate" means a stock certificate (or other appropriate
document or evidence of ownership) representing shares of Common Stock of
Calypte.
1.2.8 "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the applicable rulings and regulations thereunder.
1.2.9 "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.
1.2.10 "Common Stock" means common stock of Calypte, par value $0.03 per
share.
1.2.11 "Company" means Calypte.
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1.2.12 "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.
1.2.13 "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.
1.2.14 Act" means the "Exchange Securities Exchange Act of 1934, as
amended from time to time, and the applicable rules and regulations thereunder.
1.2.15 "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows: If the Common Stock is
1.2.15.1 listed on any established stock exchange, the NASDAQ
System or a national market system, including without limitation, the National
System of Market NASDAQ, the Fair Market Value of a share of Common Stock will
be closing the 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.
1.2.15.2 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.
1.2.16 "Grant Notice" means the written notice evidencing certain terms
and conditions of an Award. The Grant Notice is part of the Award Agreement.
Award" means any Award
1.2.17 "Incentive granted contingently on the achievement of Performance
Goals during Performance Periods, expressed in U.S. currency or Stock or any
combination Common thereof, intended to qualify as compensation pursuant to
performance-based 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.
1.2.18 "IncentiveStock Option" means an Option that is intended to qualify
for ncome tax treatment special federali 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.
1.2.19 "Nonqualified Stock Option" means an Option that is not an
Incentive Stock Option.
1.2.20 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option or both, as the context requires.
1.2.21 "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.'
1.2.22 "Performance Goals" means objectives for the Company, an Affiliate
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.
1.2.23 "Performance Period" means a set time period during which
Performance Goals must be met.
1.2.24 "Plan" means the Calypte Biomedical Corporation 2004 Incentive
Plan, as described herein and as hereafter amended from time to time.
1.2.25 "Subsidiary" means a `subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
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1.2.26 "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.
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 3.2, 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 or an Affiliate with respect to any Awards and (4)
Awards may be settled by Calypte, any of its 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 or of an Affiliate 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 or for an Affiliate, as the Committee may select.
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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.
1.5.2 Awards granted under the Plan shall not be affected by any change of
employment or other service within or among the Company and any Affiliates so
long as the grantee continues to be an employee or consultant of the Company or
any Affiliate, provided, however, if a grantee's employment by either the
Company or an Affiliate should cease (other than to become an employee of an
Affiliate or the Company), such termination shall affect the grantee's rights
under any Award granted to such grantee in accordance with the terms of the Plan
and the applicable Award Agreement.
1.5.3 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.
1.5.4 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:
1.5.4.1 shall forfeit all Awards that have not previously vested
or remain subject to a risk of forfeiture;
1.5.4.2 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
1.5.4.3 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.
1.5.5 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 or an Affiliate 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.
1.5.6 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 or an Affiliate, 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.
52
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 47,000,000, of which
20,000,000 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 terminates or is 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 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.
1.7.3 Adjustments. The Committee shall have the authority (but shall not
be required) to adjust the number of shares of Common Stock authorized pursuant
to Section 1.7.1 and to adjust equitably (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.
1.7.4 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 or an Affiliate. 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 Stockholder.
No grantee of an Award shall have any of the rights of a stockholder 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.
53
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 or an Affiliate, 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 or an Affiliate (a "10% Owner"), have a per share price not less
than 110% of the Fair Market Value of a share Stock on the date of of Common
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 or an
Affiliate), 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.
2.5 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 A Option. 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 Appreciation Right
shall have been exercised, in cash, shares of Stock 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.
54
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 including shall determine, restrictions based upon the achievement of
Performance Goals, time-based restrictions on vesting following the attainment
of the Goals; provided, that such Performance restrictions may lapse, if so
determined by in the event of the the Committee, Grantee's Termination of
Employment due to death, Disability or Termination of Employment by the Company
or an Affiliate without Cause. Upon the delivery of restricted shares of Common
Stock, the grantee shall have the rights of a stockholder with respect to the
restricted subject to stock, any restrictions and conditions as the Committee
may include in the applicable In the event that a Certificate Award Agreement.
is issued in respect of shares of Common Stock, such restricted 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 may grant Committee Awards of restricted stock units in such amounts
and subject to terms such and conditions as the Committee shall determine. A
grantee of a restricted stock unit will have only the rights of a general
creditor of Calypte until delivery of shares of Common unsecured Stock or cash
is made as specified in the applicable Award Agreement. On the delivery date,
the grantee of each stock unit not restricted previously forfeited shall receive
one share of Stock Common or cash equal in value to a share of Common Stock or a
combination thereof, as specified by the Committee.
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
Such Awards may entail the transfer of actual shares of shall determine. 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 based on the level payment ofachievement 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 the settlement of Incentive Awards may be in Committee, cash,
shares of Common Stock, or in some combination thereof, as set forth in the
Award Agreement. If a grantee is or demoted promoted during a Performance
Period, then, to the extent Committee determines the that the Award, the
Performance Goals or the Performance Period are no longer appropriate, the
hange, eliminate or cancel the Committee may adjust,c Award, the Performance
Goals or the Performance Period, as it deems appropriate in order applicable 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 the any time thereafter,
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.
55
ARTICLE III
MISCELLANEOUS
3.1 Date of Adoption and Term of Plan
The Plan was originally adopted by the Board on March 2, 2004, and made
effective as of June 22, 2004. 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.
3.2 Amendment of the Plan.
3.2.1 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.
3.2.2 Unless otherwise determined by the Board, stockholder 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.
3.3 Tax Withholding.
3.3.1 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.
3.3.2 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).
3.4 Required Consents and Legends.
3.4.1 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.
56
3.4.2 The term "consent" as used herein with respect to any plan action
includes (a) any and all listings, ualification registrations or q s 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
Committeemay deemnecessary or desirable to comply with the terms of any such
listing, registration or qualification or to obtain an exemption from the that
any such listing, requiremen 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 bodyor any stock exchange or self-regulatory
agency and (d) any and all consents or authorizations required to with, required
to be obtained comply or under, applicable local law or required by the
Committee. herein otherwiseNothing shall require Calypte to list, register or
qualify the shares of Common Stock on any securities exchange.
3.5 Nonassignability.
Except to the otherwise provided in extent expressly 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
instrument) (each such action being hereinafter referred to as cash-settled an ,
whether voluntarily or "assignment") involuntarily, other than by will or by the
laws and distribution, and all of descent such Awards (and any rights
thereundeshall be exercisable during the life of the grantee only by the grantee
or the grantee's legal representative. Notwithstanding the immediately the
Committee may precedingsentencepermit, under such terms and conditions that it
appropriate in its sole deems discretion, a grantee to transfer any Award to any
person or entity that the Committee so determines. Any assignment provisions of
this Section 3.5 shall be in violationo the void. All of the terms and
conditions of this Plan and the Award Agreements shall be binding upon any such
permitted successors and assigns.
3.6 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.
3.7 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.
3.8 Change in Control.
3.8.1 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.
3.8.2 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.
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3.9 Right of Discharge Reserved.
Nothing in the Plan or in any Award Agreement shall confer upon any
grantee the right to continued by the Company or Employment an Affiliate or
affect any right which the Company or an Affiliate may have to terminate such
Employment.
3.10 Nature of Payments.
3.10.1 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 or an Affiliate 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.
3.10.2 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 an Affiliate or under any agreement with
the grantee, unless the Company or an Affiliate specifically provides otherwise.
3.11 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.
3.12 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.
3.13 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.
3.14 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.
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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
amendmento 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
Agreemenshall 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.
59
APPENDIX C
CALYPTE BIOMEDICAL CORPORATION
AUDIT COMMITTEE CHARTER
Restated As of March 7, 2005
INTRODUCTION
The Audit Committee of the Board of Directors assists the Board of Directors of
Calypte Biomedical Corporation (the "Company") 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 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. This is the responsibility of
management and the independent auditor.
STRUCTURE AND ORGANIZATION
1. The committee will be composed solely of directors who have the necessary
experience and independent of the management of the Company and are free are of
any relationship that may interfere with their exercise of independent judgment
as a committee all in accordance with United States member, Security Exchange
Commission ("SEC) and American Stock Exchange requirements.
2. The committee will consist of at least three members of the Board of
Directors. Committeemembers 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, and
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 committee.
4. The committee will meet at least four times a year, on a quarterly basis, or
more frequently as circumstances require. A majority of the committee members
shall be present to constitute a quorum for the transaction of the committee's
business. 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.
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 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:
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. Regularly report to the Board of Directors on committee matters.
60
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. Retain and, where appropriate, terminate the independent auditor. On an
annual basis, approve the compensation of the independent auditor, and evaluate
the performance of the independent auditor. The independent auditor reports
directly to the committee.
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
permittednon-audit services and related fees, to be performed by the independent
auditor.
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 including any problems or audit, 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. Discuss the annual and quarterly financial statements, including disclosures
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations," with management and the independent auditor prior to filing. 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.
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.
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4. 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 compliance policies and financial statements,
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. From time to time,
meet with the Company's Chief Compliance Officer.
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 and Management
Development Committee and would require disclosure under SEC rules.
5. Annually assess the committee's performance.
6. Perform such other functions assigned by law, the Company's charter or
bylaws, or the Board of Directors.
62
CALYPTE BIOMEDICAL CORPORATION
5000 HOPYARD ROAD, SUITE 480
PLEASANTON, CALIFORNIA 94588
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J. RICHARD GEORGE and RICHARD D. BROUNSTEIN, 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 the Four Points Sheraton Hotel,
located at 5115 Hopyard Road, Pleasanton, CA 94588 on June 30, 2005, 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, 3, 4, 5 and 6.
WITHHOLD
FOR all nominees AUTHORITY to
(except as marked to vote for all
the contrary below) nominees listed below
1. Election of Directors |_| |_|
Roger I. Gale; John J. DiPietro; Paul E.
Freiman; Julius R. Krevans, M.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 2005 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 approve the issuance of shares FOR AGAINST ABSTAIN
of common stock in excess of 19.99% of the |_| |_| |_|
outstanding common stock and price
adjustments in connection with our April
2005 issuance of notes and warrants. (The
Board of Directors recommends a vote FOR.)
3. Proposal to approve the issuance of FOR AGAINST ABSTAIN
additional shares of common stock and |_| |_| |_|
warrant shares and adjustment of the warrant
exercise price in connection with amended
securities granted to the investors in our
May and July 2004 placements. (The Board of
Directors recommends a vote FOR.)
4. Proposal to adopt the Company's 2005 Director FOR AGAINST ABSTAIN
Incentive Plan and to authorize 18,000,000 |_| |_| |_|
shares of Common Stock to be reserved for
Pssuance thereunder. (The Board of
Directors recommends a vote FOR.)
5. Proposal to amend the Company's 2004 FOR AGAINST ABSTAIN
Incentive Plan and to authorize an |_| |_| |_|
additional 17,000,000 shares of Common Stock
to be reserved for Pssuance thereunder; to
permit grants to employees, consultants and
others providing services to affiliates of
the Company; and to increase to 20,000,000
shares the number of shares of Common Stock
available for delivery as restricted stock
and restricted stock inits thereunder. (The
Board of Directors recommends a vote FOR.)
6. Proposal to ratify the appointment of FOR AGAINST ABSTAIN
Odenberg Ullakko Muranishi & Co. LLP as the |_| |_| |_|
independent registered public accounting
firm to audit the Company's financial
statements for the fiscal year ending
December 31, 2005.
(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: ________, 2005
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.