-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ApAiJE05VqMVLFzVCGhtvLOpm8Rx/LNynQ1b32U+OtzFq6K2kI4AXYR2esY5H1ys vT16BjvonYtwJbnxfFmb9w== 0000891618-96-001005.txt : 19960626 0000891618-96-001005.hdr.sgml : 19960626 ACCESSION NUMBER: 0000891618-96-001005 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 19960625 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALYPTE BIOMEDICAL CORP CENTRAL INDEX KEY: 0000899426 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY ANALYTICAL INSTRUMENTS [3826] STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-04105 FILM NUMBER: 96585536 BUSINESS ADDRESS: STREET 1: 1440 FOURTH STREET CITY: BERKELEY STATE: CA ZIP: 94710 MAIL ADDRESS: STREET 1: 1265 HARBOR BAY PKWY CITY: ALAMEDA STATE: CA ZIP: 94502 S-1/A 1 AMENDMENT NO. 1 TO FORM S-1 DATED JUNE 26, 1996 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 25, 1996 REGISTRATION NO. 333-04105 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 1 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ CALYPTE BIOMEDICAL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 3826 06-1226727 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
1440 FOURTH STREET BERKELEY, CALIFORNIA 94710 (510) 526-2541 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) JOHN P. DAVIS PRESIDENT AND CHIEF EXECUTIVE OFFICER CALYPTE BIOMEDICAL CORPORATION 1440 FOURTH STREET BERKELEY, CALIFORNIA 94710 (510) 526-2541 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ Copies to: JOHN B. GOODRICH, ESQ. ALAN C. MENDELSON, ESQ. AARON J. ALTER, ESQ. ROBERT J. BRIGHAM, ESQ. WILSON SONSINI GOODRICH & ROSATI COOLEY GODWARD CASTRO HUDDLESON & TATUM PROFESSIONAL CORPORATION FIVE PALO ALTO SQUARE, 4TH FLOOR 650 PAGE MILL ROAD 300 EL CAMINO REAL PALO ALTO, CALIFORNIA 94304-1050 PALO ALTO, CALIFORNIA 94306-2155 (415) 493-9300 (415) 843-5000
------------------------ Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. ------------------------ If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the following box. / / If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If the only securities being delivered pursuant to this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / ------------------------ CALCULATION OF REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------- PROPOSED PROPOSED MAXIMUM MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF AMOUNT TO OFFERING AGGREGATE OFFERING REGISTRATION SECURITIES TO BE REGISTERED BE REGISTERED(1) PRICE PER SHARE(2) PRICE(2) FEE(3) - ---------------------------------------------------------------------------------------------------------- Common Stock, $.001 par value....................... 2,875,000 $10.00 $28,750,000 $9,913.80 - ---------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------
(1) Includes 375,000 shares that the Underwriters have the option to purchase to cover over-allotments, if any. (2) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(a). (3) Previously paid. ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 CALYPTE BIOMEDICAL CORPORATION ------------------------ CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING LOCATION IN PROSPECTUS OF PART I ITEMS OF FORM S-1
ITEM NUMBER AND HEADING IN FORM S-1 REGISTRATION STATEMENT LOCATION OF CAPTION IN PROSPECTUS ---------------------------------------------------- ----------------------------------- 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus...................... Outside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus.......................................... Inside Front Cover Page; Outside Back Cover Page 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges........................... Prospectus Summary; Risk Factors 4. Use of Proceeds..................................... Use of Proceeds 5. Determination of Offering Price..................... Outside Front Cover Page; Underwriting 6. Dilution............................................ Dilution 7. Selling Security Holders............................ Not Applicable 8. Plan of Distribution................................ Outside and Inside Front Cover Pages; Underwriting; Outside Back Cover Page 9. Description of Securities to be Registered.......... Prospectus Summary; Capitalization; Description of Capital Stock; Shares Eligible for Future Sale 10. Interests of Named Experts and Counsel.............. Legal Matters; Experts 11. Information with Respect to the Registrant.......... Outside and Inside Front Cover Pages; Prospectus Summary; Risk Factors; Use of Proceeds; Dividend Policy; Capitalization; Dilution; Selected Consolidated Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business; Management; Certain Transactions; Principal Stockholders; Description of Capital Stock; Shares Eligible for Future Sale; Consolidated Financial Statements; Outside Back Cover Page 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities...................... Not Applicable
3 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION DATED JUNE 25, 1996 2,500,000 SHARES LOGO COMMON STOCK ------------------------------------------------ All of the shares of common stock ("Common Stock") offered hereby are being sold by Calypte Biomedical Corporation ("Calypte" or the "Company"). Prior to this Offering, there has been no public market for the Common Stock, and there can be no assurance that such a market will develop or, if one does develop, that it will be sustained. It is currently estimated that the initial public offering price will be between $8.00 and $10.00 per share. For a discussion of the factors to be considered in determining the initial public offering price, see "Underwriting." Application has been made for inclusion of the Common Stock on the Nasdaq National Market under the symbol "CALY." ------------------------------------------------ THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5. ------------------------------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - ----------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------- UNDERWRITING PRICE TO DISCOUNTS AND PROCEEDS TO PUBLIC COMMISSIONS(1) COMPANY(2) - ----------------------------------------------------------------------------------------------------- Per Share.................... $ $ $ - ----------------------------------------------------------------------------------------------------- Total(3)..................... $ $ $ - ----------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------
(1) See "Underwriting" for indemnification arrangements with the Underwriter. (2) Before deducting expenses payable by the Company estimated at $1,020,000. (3) The Company has granted to the Underwriters an option, exercisable within 30 days from the date of this Prospectus, to purchase up to 375,000 additional shares solely to cover over-allotments, if any. If the Underwriters exercise such option in full, the total Price to Public, Underwriting Discounts and Commissions and Proceeds to Company will be $ , $ and $ , respectively. See "Underwriting." ------------------------------------------------ The shares of Common Stock are offered by the Underwriter, subject to prior sale, withdrawal, cancellation or modification of the offer without notice, delivery to and acceptance by the Underwriter, and certain other conditions. It is expected that delivery of the shares of Common Stock, offered hereby will be made in New York, New York, on or about , 1996. ------------------------------------------------ PACIFIC GROWTH EQUITIES, INC. The date of this Prospectus is , 1996. 4 THE CALYPTE HIV-1 URINE-BASED TEST HAS NOT BEEN APPROVED BY THE FDA FOR MARKETING IN THE UNITED STATES. THE TEST CANNOT BE SOLD IN THE UNITED STATES UNLESS AND UNTIL SUCH FDA APPROVAL IS OBTAINED, IF AT ALL. [Pictures to Come] IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. The Company intends to furnish its stockholders with annual reports containing consolidated financial statements audited by its independent auditors and quarterly reports containing unaudited consolidated financial data for the first three quarters of each fiscal year. CalypteTM and SentinelTM are trademarks of the Company. This Prospectus also contains trademarks and tradenames of other companies. 2 5 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information, including the Consolidated Financial Statements and Notes thereto, appearing elsewhere in this Prospectus. THE COMPANY Calypte Biomedical Corporation ("Calypte" or the "Company") is a leader in the development of a urine-based screening test for the detection of Human Immunodeficiency Virus Type-1 ("HIV-1"), the putative cause of Acquired Immunodeficiency Syndrome ("AIDS"). The Company has integrated several proprietary technologies to develop a test which, in Company-funded clinical trials conducted by or on behalf of the Company, detected the presence of HIV antibodies in urine with 99.33% sensitivity (as compared to blood). Specificity of the screening test with a companion western blot confirmatory test was 100%. Calypte believes that its proprietary urine-based test offers significant advantages compared to existing blood-based tests, including ease-of-use, lower costs, and significantly reduced risk of infection from collecting and handling specimens. Urine collection is non-invasive and painless, and urine is the most commonly collected body fluid. The Company estimates that the cost of collecting, handling, testing and disposing of urine specimens will be significantly less than that of blood specimens. Independent studies report that the likelihood of finding infectious HIV virus in urine is extremely low, which greatly reduces the risk and cost of accidental exposure to health care workers, laboratory personnel, and patients being tested. On March 28, 1996, the Company received a letter from the U.S. Food and Drug Administration ("FDA") stating that the Company's HIV-1 urine screening test was approvable pending finalization of the package insert and other labeling. The Company's screening test, when used with the western blot confirmatory test for urine licensed from Cambridge Biotech Corporation ("Cambridge Biotech"), will provide the only complete urine-based HIV testing system. This western blot test is already licensed by the FDA for use with blood, and is currently pending FDA clearance for use with urine. On June 21, 1996 the FDA Blood Products Advisory Committee determined that the clinical data and test protocol of the Cambridge Biotech urine confirmatory test supported its use in conjunction with the Calypte urine based HIV-1 test. The Company believes that the benefits of its testing system will enable it to penetrate existing markets and expand into new markets that are currently not served by blood-based and oral fluid-based HIV test systems. The Company also intends to submit a pre-market application ("PMA") to the FDA for approval to market the Company's over-the-counter ("OTC") home urine collection kit. The Company's home collection kit would allow consumers, in the privacy of their homes, to take a urine sample, mail it to Calypte Biomedical Laboratories for analysis and then anonymously obtain results and professional counseling by telephone. On May 14, 1996, Direct Access Diagnostics, a subsidiary of Johnson & Johnson, received FDA clearance for the first OTC home blood collection kit for HIV. The Company believes that the Direct Access Diagnostics FDA approved OTC product will accelerate consumer acceptance and awareness of home collection for HIV. The Company believes that an OTC urine collection kit for HIV would have advantages compared to an OTC blood collection kit for HIV. HIV is the leading cause of death for persons age 25 to 44 in the United States. Those infected with HIV are generally asymptomatic until several years after HIV infection, and during this period most are unaware of their HIV status. According to the World Health Organization, HIV currently infects approximately 10 million individuals and is forecasted to infect between 30 and 40 million individuals by the year 2000. It is estimated that 27 million blood bank screening tests and 26 million other HIV screening tests were performed in 1994 in the United States. In addition to blood banks, the largest domestic demand for HIV testing is generated by physicians, the life insurance industry, the military, the criminal justice system and the Immigration and Naturalization Service. The high cost of testing blood for HIV has precluded large HIV public health screening programs. Even in the United States, only four million of the 14 million life insurance policies written each year currently utilize HIV screening. The Company's objective is to be the leader in the development and commercialization of urine-based diagnostic tests. The Company's primary strategy is to exploit the advantages of using urine instead of blood for HIV testing in order to establish its diagnostic screening test as the screening method of choice for HIV. The Company plans to build upon its expertise in urine-based diagnostics to develop additional urine-based tests for sexually transmitted diseases and other human conditions. Initially, the Company intends to focus on developing and commercializing urine-based screening tests for HIV-2, Chlamydia and H. pylori. The key components of the Company's business strategy are to: (i) target and expand the life insurance testing market, (ii) penetrate the United States clinical laboratory market, (iii) pursue international markets through distributor relationships, (iv) establish Calypte Biomedical Laboratories, (v) enter the emerging OTC market, and (vi) develop additional urine-based diagnostics. This Prospectus contains forward-looking statements which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in "Risk Factors." 3 6 THE OFFERING Common Stock offered by the Company.......... 2,500,000 shares Common Stock to be outstanding after the offering................................... 10,359,046 shares(1) Use of proceeds.............................. Expand product development efforts and support clinical trials; develop Calypte Biomedical Laboratories; expand manufacturing capacity; redeem mandatorily redeemable preferred stock; repay certain indebtedness; and for working capital and general corporate purposes. Proposed Nasdaq National Market symbol....... CALY
SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
THREE MONTH PERIOD YEAR ENDED DECEMBER 31, ENDED MARCH 31, --------------------------------- --------------------- 1993 1994 1995 1995 1996 --------- --------- --------- --------- --------- CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Revenue................................... $ -- $ -- $ -- $ -- $ -- Loss from operations...................... (6,303) (5,462) (10,380) (1,462) (2,723) Net loss attributable to common stockholders............................ (6,301) (5,587) (10,411) (1,428) (2,846) Net loss per share attributable to common stockholders(2)......................... $ (1.22) $ (0.90) $ (1.40) $ (0.19) $ (0.38) Weighted average shares used to compute net loss per share attributable to common stockholders(2).................. 5,182,594 6,187,396 7,450,692 7,450,212 7,450,241
MARCH 31, 1996(1) ---------------------------- ACTUAL AS ADJUSTED(3) -------- --------------- CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents.......................................... $ 1,842 $ 16,730 Working capital.................................................... (3,791) 14,348 Total assets....................................................... 4,826 19,714 Mandatorily Redeemable Series A Preferred Stock.................... 1,766 -- Deficit accumulated during development stage....................... (33,217) (33,217) Total stockholders' equity (deficit)............................... (4,248) 15,657
- --------------- (1) The actual and as adjusted information excludes, as of June 21, 1996, (i) 1,311,420 shares of Common Stock issuable upon exercise of outstanding options granted under the Company's stock option plans at a weighted average exercise price of $0.54 per share, (ii) 1,303,007 shares of Common Stock available for future grant under the Company's stock option plans, (iii) warrants to purchase 1,066,355 shares of Common Stock at prices ranging from $5.00 to $7.50 per share and (iv) options to purchase 475,000 shares of Common Stock at $7.50 per share. See "Capitalization" and "Management -- Stock Option Plans" and Notes 9, 10 and 12 of Notes to Consolidated Financial Statements and Notes 5, 6 and 7 of Notes to Consolidated Condensed Financial Statements. (2) See Note 2 of Notes to Consolidated Financial Statements and Note 2 of Notes to Consolidated Condensed Financial Statements. (3) Adjusted to give effect to (i) the receipt of the net proceeds from the sale of 2,500,000 shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $9.00 per share and after deducting the estimated underwriting discounts and commissions and offering expenses payable by the Company, (ii) the redemption by the Company of its Mandatorily Redeemable Series A Preferred Stock including accumulated unpaid dividends and (iii) the repayment of $2.7 million of current notes payable. As adjusted information also reflects the repayment of $503,000 of current notes payable which were repaid by the Company in April 1996. See "Use of Proceeds" and "Capitalization." --------------- Except as otherwise noted, all information in this Prospectus (i) assumes no exercise of the Underwriter's over-allotment option, (ii) reflects the reincorporation of the Company into Delaware to be effected in July 1996, and (iii) except in the Consolidated Financial Statements reflects, (a) the conversion of outstanding shares of Convertible Preferred Stock of the Company (except for the Mandatorily Redeemable Series A Preferred Stock being redeemed after the Offering) into Common Stock, which will occur automatically upon the completion of this Offering. See "Capitalization," "Description of Capital Stock" and "Underwriting." RISK FACTORS For a discussion of considerations relevant to an investment in the Common Stock, see "Risk Factors" beginning on page 5. 4 7 RISK FACTORS This Prospectus contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in the following risk factors, which should be carefully considered by potential investors, before purchasing the Common Stock offered hereby: UNCERTAINTY OF REGULATORY APPROVAL FOR HIV-1 SCREENING TEST. The Company has filed a product license application ("PLA") and an establishment licensing application ("ELA") with the FDA relating to its urine-based HIV-1 screening test. On March 28, 1996, the Company received a letter from the FDA stating that the Company's HIV-1 urine screening test was approvable, pending finalization of the package insert and other labeling. The satisfaction of these conditions is determined solely by the FDA, and the Company cannot predict when approval of its test may be received, if at all. There can be no assurance that the Company will ultimately receive approval for its urine-based HIV-1 test. Failure to obtain approval for its test would have a material adverse effect on the Company's business, financial condition and results of operations. DEPENDENCE ON SOLE SOURCE OF SUPPLY AND REGULATORY APPROVAL OF CONFIRMATORY TEST. In order to minimize the possibility of false positive reports, positive HIV screening results must be confirmed with an additional test format before being reported to the physician or patient in the United States and in most developed countries. The Company has entered into an agreement with Cambridge Biotech under which both Calypte and Cambridge Biotech will market and distribute a urine-capable western blot confirmatory test which uses technology licensed from the Company. The western blot kit manufactured by Cambridge Biotech has already received FDA approval for blood testing, and is the only confirmatory test for which application has been made for FDA approval for use with urine. Failure of Cambridge Biotech to receive FDA approval of its application could have a material adverse effect on the Company's business, financial condition and results of operations. LIMITED OPERATING HISTORY; HISTORY OF LOSSES. The Company has a limited history of operations, and since its inception in February 1988, the Company has been primarily engaged in research and development. As of March 31, 1996, the Company has generated revenues of $2.4 million primarily from research and development contracts. The Company has experienced significant operating losses since inception and, as of March 31, 1996, had an accumulated deficit of $33.2 million. The Company expects operating losses to continue as it initiates marketing and sales activities and expands research and development. The Company does not have experience in manufacturing, marketing or selling its products in commercial quantities. There can be no assurance that the Company's products will be successfully commercialized or that the Company will achieve significant product revenues. In addition, there can be no assurance that the Company will achieve or sustain profitability in the future. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." RELIANCE ON PROPRIETARY TECHNOLOGY AND KNOW-HOW; LICENSE OBLIGATIONS. The Company's ability to compete effectively will depend in large part on its ability to develop and maintain proprietary aspects of its technology. The Company has the right to utilize certain patents and proprietary rights under licensing agreements with New York University ("NYU"), Cambridge Biotech, Repligen Corporation ("Repligen"), Texas A&M University System and Stanford University. These license arrangements secure intellectual property rights for the manufacture and sale of the Company's products. Pursuant to these license agreements, the Company must pay product royalties and under certain agreements the Company must make minimum royalty payments. In the event that the Company does not receive approval for its urine-based HIV-1 test or develop alternate sources of revenues, the obligation to make minimum royalty payments could have a material adverse impact on the Company's results of operations. Failure to make required minimum royalty payments may result in the loss of exclusivity or termination of the license. There can be no assurance that the Company will be able to maintain exclusivity or maintain its current license agreements. Termination of any of these licenses could have a material adverse effect on the Company's business, financial condition and results of operations. The HIV testing industry has been characterized by extensive litigation regarding patents and other intellectual property rights. Litigation or interference proceedings could result in significant diversion of efforts 5 8 by the Company's management and technical personnel. There are a number of filed and issued patents involved with the detection of HIV antibodies. One such patent is currently owned by Chiron Corporation. There can be no assurances that Chiron will not assert such claims against the Company. Patent litigation can be costly and protracted. The expense of litigating a claim against the Company for patent infringement could have a material adverse effect on the Company's business, financial condition and results of operations. In the event that the Company was found to be infringing a validly issued patent, and the Company could not obtain a license to such patent on reasonable terms, the Company could be forced to pay damages, obtain a license to such patent at a significantly higher rate or, possibly, remove its urine-based HIV-1 test from the market. Such an event would have a material adverse effect on the Company's business, financial condition and results of operations. See "Business -- Reliance On Proprietary Technology and Know-How." In addition, there can be no assurance that competitors, many of which have substantial resources and have made substantial investments in competing technologies, do not have, or will not seek to apply for and obtain, patents that will prevent, limit or interfere with the Company's ability to make, use or sell its products either in the U.S. or in international markets. There can be no assurance that the Company will not be required to obtain additional cross licenses in the future or that the Company will not in the future become subject to patent infringement claims and litigation or interference proceedings declared by the U.S. Patent and Trademark Office ("USPTO") to determine the priority of inventions. The defense and prosecution of intellectual property suits, USPTO interference proceedings and related legal and administrative proceedings are both costly and time consuming. Litigation may be necessary to enforce patents issued to or licensed by the Company, to protect trade secrets or know-how owned by the Company or to determine the enforceability, scope and validity of the proprietary rights of others. The Company relies on trade secrets and proprietary know-how, which it seeks to protect, in part, through appropriate confidentiality and proprietary information agreements. These agreements generally provide that all information developed by or made known to the individual by the Company during the course of the individual's relationship with the Company is to be kept confidential and not disclosed to third parties, except in specific circumstances. The agreements generally provide that all inventions conceived by the individual in the course of rendering services to the Company shall be the exclusive property of the Company; however, certain of the Company's agreements with consultants, who typically are employed on a full-time basis by academic institutions or hospitals, do not contain assignment of invention provisions. There can be no assurance that proprietary information or confidentiality agreements with employees, consultants and others will not be breached, that the Company would have adequate remedies for any breach, or that the Company's trade secrets will not otherwise become known to or independently developed by competitors. See "Business -- Reliance on Proprietary Technology and Know-How." UNCERTAINTY OF MARKET ACCEPTANCE; LACK OF SALES AND MARKETING EXPERIENCE. The Company's first product represents a new method of determining the presence of HIV antibodies in humans, and there can be no assurance that this product will gain market acceptance even if necessary international and U.S. regulatory and reimbursement approvals are obtained. The Company believes that recommendations and endorsements by the medical diagnostic community will be essential for market acceptance of this product, and there can be no assurance that any such recommendations or endorsements will be obtained. Failure of the Company's products to achieve market acceptance would have a material adverse effect on the Company's business, financial condition and results of operations. The Company has no experience marketing and selling its product either directly or through distributors. The Company intends to establish a small direct sales force for sales to certain U.S. laboratories. There can be no assurance that the Company's marketing and direct sales efforts will be successful. The Company's sales and marketing strategy relies significantly upon third party distributors for the sale of its product. There can be no assurance that these distributors will market the Company's product successfully or that, if such relationships are terminated, the Company will be able to establish relationships with other distributors on satisfactory terms, if at all. Any disruption in the Company's distribution, sales or marketing network could have a material adverse effect on the Company's business, financial condition and results of operations. See "Business -- Sales, Marketing and Distribution." 6 9 DEPENDENCE ON A SINGLE PRODUCT. The Company's HIV-1 urine-based screening test, if licensed for marketing by the FDA, will be the Company's only FDA-approved product. Upon approval, there can be no assurance that the Company's marketing efforts will be successful. Furthermore, because the screening test will represent the Company's sole near-term product, the Company could be required to cease operations if this product fails to achieve market acceptance or generate significant revenue. See "Business -- Products." DEPENDENCE UPON KEY SUPPLIERS. The Company purchases raw materials and components used in its products from various suppliers and relies on single sources for several of these components. Establishment of additional or replacement suppliers for these components cannot be accomplished quickly. The Company has a number of single-source components, and any delay or interruption in supply of these components could significantly impair the Company's ability to manufacture its products in commercial quantities, and therefore would have a material adverse effect on the Company's business, financial condition and results of operations, particularly if and when the Company scales up its manufacturing activities in support of commercial sales. See "Business -- Manufacturing." LIMITED MANUFACTURING EXPERIENCE; SCALE-UP RISK. The Company has only limited experience in manufacturing its product. The Company has primarily manufactured its product in limited quantities for submission to the FDA for ongoing compliance, international clinical trials and building its inventory in anticipation of commercialization. The Company does not have experience in manufacturing its products in commercial quantities. Manufacturers often encounter difficulties in scaling-up production of new product, including problems involving production yields, quality control and assurance, raw material supply and shortages of qualified personnel. The Company's manufacturing relies on certain rare reagents including its viral seed stock, the loss of which would impair the Company's ability to manufacture its product. The Company currently manufactures its product in, and is awaiting final FDA license for, its Berkeley, California facility. The Company is completing qualification of a larger manufacturing facility in Alameda, California, and is preparing an amendment to its pending establishment license for this facility. Difficulties encountered by the Company in manufacturing scale-up to meet commercial demand, including delays in receiving FDA approval for the Alameda facility, could have a material adverse effect on its business, financial condition and results of operations. See "Business -- Manufacturing" and " -- Government Regulation." DEPENDENCE UPON INTERNATIONAL DISTRIBUTORS AND SALES. The Company intends to market and sell its products internationally through a network of distributors, and the Company's international sales are dependent upon the marketing efforts of, and sales by, these distributors. The Company anticipates that a significant portion of its revenues for the next several years will be derived from international distributor sales. International sales and operations involve a number of inherent risks and may be limited or disrupted by the imposition of government controls, export license requirements, political instability, trade restrictions, changes in tariffs, difficulties in managing international operations and fluctuations in foreign currency exchange rates. The Company's distribution agreement with Otsuka Pharmaceutical Co. Ltd. is terminable without cause upon 120 days prior notice. Certain of the Company's distributors have limited international marketing experience, and there can be no assurance that the Company's distributors will be able to market successfully the Company's products in any international market. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business -- Sales, Marketing and Distribution." INTENSE COMPETITION IN COMPANY'S MARKETS AND RAPID TECHNOLOGICAL ADVANCES BY COMPETITORS. Competition in the emerging market for HIV testing is intense and is expected to increase. The Company believes its principal competition will come from existing HIV blood-based assays and from oral fluid testing assays. Furthermore, new testing methodologies could be developed in the future that render the Company's urine-based HIV test impractical, uneconomical, or obsolete. Most of the Company's competitors have significantly greater financial, manufacturing, technical, research, marketing, sales, distribution and other resources than the Company. There can be no assurance that the Company's competitors will not succeed in developing or marketing technologies and products that are more effective than those developed by the Company or that would render the Company's technologies or products obsolete or otherwise commercially unattractive. In addition, there can be no assurance that competitors will not succeed in obtaining regulatory approval for such products, or introducing or commercializing them prior to the Company. Such developments could have a 7 10 material adverse effect on the Company's business, financial condition and results of operations. See "Business -- Competition." POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS. The Company expects that its revenues and results of operations may fluctuate significantly from quarter to quarter and will depend on a number of factors, many of which are outside the Company's control. These factors include actions relating to regulatory matters, the extent to which the Company's products gain market acceptance, the timing and size of distributor purchases, introduction of alternative means for testing for HIV, competition, the timing and cost of new product introductions, and general economic conditions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." EXTENSIVE GOVERNMENT REGULATION. The Company's products are subject to extensive regulation by the FDA and, to varying degrees, by state and foreign regulatory agencies. The manufacture and sale of diagnostic products, including the Company's products, are subject to extensive regulation by numerous governmental authorities in the U.S. and other countries. In the U.S., the Company's products are regulated either as biologics, such as in the case of the Company's HIV-1 urine-based screening test, or as medical devices, as in the case of the Company's anticipated HIV-1 urine collection kit. The process of obtaining FDA and other required regulatory approvals is lengthy, expensive and uncertain, frequently requiring from one to several years from the date of FDA submissions if approval is obtained at all. Sales of diagnostic tests and products outside of the U.S. are subject to foreign regulatory requirements that vary widely from country to country. The time required to obtain approval for sale in foreign countries may be longer or shorter than that required for FDA approval and the requirements may differ. The preparation of required applications and the subsequent foreign regulatory approval process is expensive, lengthy and uncertain. There can be no assurance that the Company will be able to obtain necessary regulatory approvals or clearances in a timely manner or at all, and delays in receipt of or failure to receive such approvals or clearances, the loss of previously received approvals or clearances, or failure to comply with existing or future regulatory requirements would have a material adverse effect on the Company's business, financial condition and results of operations. If the FDA believes that a company is not in compliance with the regulations, it can institute proceedings to detain or seize a product or prohibit marketing and sales of the Company's products, issue a recall, and assess civil and criminal penalties against the Company, its officers or its employees, and take other enforcement actions. The Company intends to file a pre-market approval application ("PMA") with the FDA for the HIV-1 urine collection kit which constitutes an application for approval of over-the-counter sales of this urine collection device so that consumers could purchase the device for the collection and mailing of specimens directly to the Company for HIV testing. The Company believes that a submission for this device must set forth Calypte's plans for reporting results to the consumer and for providing counseling services as well as the collection kit itself. There can be no assurance that the FDA will approve the Company's HIV-1 urine collection device for over-the-counter distribution and sale. Furthermore, there can be no assurance that the FDA will not request additional data or require that the Company conduct further clinical studies causing the Company to incur further cost and delay. In addition, there can be no assurance that the FDA will not limit the intended use of the Company's products as a condition of PMA approval. In addition, the manufacture, sale or use of the Company's products are subject to regulation by other federal entities, such as the Occupational Safety and Health Agency, the Environmental Protection Agency, and by various state agencies, including the California Environmental Protection Agency. Federal and state regulations regarding the manufacture, sale or use of the Company's products are subject to future change and these changes could have a material adverse effect on the Company's business, financial condition and results of operations. Distribution of the Company's products outside the U.S. is also subject to extensive government regulation. In a majority of foreign countries, FDA approval is required first in order to receive approval in that country. The export by the Company of certain of its products which have not yet been cleared for domestic commercial distribution may be subject to FDA export restrictions. Failure to obtain necessary regulatory approvals, or failure to comply with regulatory requirements, would have a material adverse effect on the Company's business, financial condition and results of operations. 8 11 The Company will be required to adhere to applicable FDA regulations regarding current Good Manufacturing Practices ("cGMP") in the U.S. and similar regulations in other countries, which include testing, control and documentation requirements. Ongoing compliance with GMP and other applicable regulatory requirements, such as reporting requirements will be monitored through periodic inspections by state and federal agencies, including the FDA, and by comparable agencies in other countries. Failure to comply with applicable regulatory requirements, including marketing products for unapproved uses, could result in, among other things, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, refusal of the government to grant premarket clearance or premarket approval for products, withdrawal of approvals and criminal prosecution. In addition, changes in existing regulations or adoption of new governmental regulations or policies could prevent or delay regulatory approval of the Company's products or result in increased regulatory costs. Furthermore, once approval is granted, subsequent modifications to the approved product or manufacturing process may require a supplemental PLA and ELA or PMA as the case may be or may require the submission of a new PMA application, which could require substantial additional clinical data and FDA review. Due to the nature of its manufacturing processes, the Company is subject to stringent federal, state and local laws, rules, regulations and policies governing the use, generation, manufacture, storage, air emission, discharge, handling and disposal of certain materials and wastes. There can be no assurance that the Company will not be required to incur significant costs to comply with land use and environmental regulations as manufacturing is scaled-up to commercial levels, nor that the operations, business or financial condition of the Company will not be materially and adversely affected by current or future environmental laws, rules, regulations and policies. There can be no assurance that the Company will be able to obtain and maintain all required permits in connection with the operation of its manufacturing facilities. When and if the Company begins to produce products on a commercial scale, it will be a significant user and disposer of water. The disposal of water used in the Company's manufacturing processes must comply with applicable federal, state and local environmental protection laws, and compliance with these laws may be costly and difficult. See "Business -- Manufacturing." ESTABLISHMENT AND REGULATION OF REFERENCE LABORATORY. The Company intends to establish a clinical reference laboratory in connection with seeking approval for an OTC home urine collection kit for HIV-1. There are a number of risks in establishing a reference laboratory especially for testing for HIV. The Company must, among other actions, seek to hire and retain key laboratory personnel, purchase necessary equipment, secure required permits, incur marketing expenses, obtain customers, and comply with government regulations. The Company's planned laboratory would test for HIV using the Company's urine-based HIV-1 test and, if approvals are obtained, receive home collected urine for HIV testing. The Company may be required to offer counseling in connection with the reporting of results to laboratory customers. There can be no assurance that the Company can establish or receive the necessary approval for the laboratory. If the Company establishes a reference laboratory for the testing of urine samples using the Company's urine-based HIV-1 screening test, the Company's laboratory would be regulated under the Clinical Laboratory Improvement Amendments of 1988 ("CLIA"). CLIA is intended to ensure the quality and reliability of all medical testing in laboratories in the U.S. by requiring that any health care facility in which testing is performed meet specified standards in the areas of personnel qualification, administration, participation in proficiency testing, patient test management, quality control, quality assurance, and inspections. The regulations have established three levels of regulatory control based on the test's complexity: "waived," "moderately complex," and "highly complex." Calypte believes that its test will be categorized as highly complex, which would require the Company and laboratories using its test to meet certain quality control and personnel standards that are more rigorous than those for moderately complex tests. Under the CLIA regulations, all laboratories performing high or moderately complex tests are required to obtain either a registration certificate or certifications of accreditation from the Health Care Finance Administration ("HCFA"). There can be no assurance that the CLIA regulations and future administrative interpretations of CLIA will not have an adverse impact on the potential market for the Company's products. The Company would also be subject to state laboratory licensure standards and laws governing the disposal of infectious and/or hazardous wastes. 9 12 PRODUCT LIABILITY AND RECALL RISK; LIMITED INSURANCE COVERAGE. The manufacture and sale of medical diagnostic products entail significant risk of product liability claims or product recalls. While the Company maintains product liability insurance, the Company faces the risk of litigation in the event of false positive or false negative reports. There can be no assurance that the Company's existing insurance coverage limits will be adequate to protect the Company from any liabilities it might incur in connection with the clinical trials or sales of its products. In addition, the Company may require increased product liability coverage as its products are commercialized. Such insurance is expensive and in the future may not be available on acceptable terms, if at all. A successful product liability claim or series of claims brought against the Company in excess of its insurance coverage, or a recall of the Company's products, could have a material adverse effect on the Company's business, financial condition and results of operations. DEPENDENCE UPON KEY PERSONNEL. The Company is dependent upon a number of key management and technical personnel. The Company has employment agreements with the members of its core management team. The Company's ability to manage its transition to commercial-scale operations, and hence its success, will depend on the efforts of these individuals, among others. The loss of the services of one or more key employees could have a material adverse effect on the Company. The Company's success will also depend on its ability to attract and retain additional highly qualified management and technical personnel. The Company faces intense competition for qualified personnel, many of whom are often subject to competing employment offers, and there can be no assurance that the Company will be able to attract and retain such personnel. William A. Boeger is the Chief Executive Officer and Chief Financial Officer of Pepgen, a 49% owned therapeutic subsidiary of the Company, and Dr. Howard B. Urnovitz is President and Chief Science Officer. In addition, Mr. Boeger and Dr. Unrovitz are both officers of the Chronic Illness Research Foundation, a non- profit organization. Accordingly, although these individuals will devote such amount of their working hours as they reasonably deem necessary to the business of the Company, these individuals do not devote all of their working hours to the Company's affairs. See "Business -- Employees" and "Management." CONTROL BY DIRECTORS, EXECUTIVE OFFICERS AND AFFILIATED ENTITIES. The Company's directors, executive officers and entities affiliated with them will, in the aggregate, beneficially own approximately 29.22% of the Company's outstanding Common Stock following the completion of this Offering. Accordingly, these stockholders, individually and as a group, would be able to effectively control the Company on substantially all matters requiring approval by the stockholders of the Company, including the election of directors and the approval of mergers or other business combination transactions. See "Principal Stockholders." NO PRIOR PUBLIC TRADING MARKET; POSSIBLE VOLATILITY OF STOCK PRICE; DILUTION. Prior to this Offering, there has been no public market for the Common Stock, and there can be no assurance that an active trading market will develop or, if one does develop, that it will be maintained. The initial public offering price, which is established by negotiations between the Company and the Underwriters, may not be indicative of prices that will prevail in the trading market. The stock market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the market price of the Company's Common Stock. In addition, the market price of the shares of Common Stock is likely to be highly volatile. Factors such as fluctuations in the Company's operating results, announcements of technological innovations or new products by the Company or its competitors, FDA and international regulatory actions, actions with respect to reimbursement matters, developments with respect to patents or proprietary rights, public concern as to the safety of products developed by the Company or others, changes in health care policy in the U.S. and internationally, changes in stock market analysts' recommendations regarding the Company, other medical products companies or the medical product industry generally and general market conditions may have a significant effect on the market price of the Common Stock. The initial public offering price is substantially higher than the net tangible book value per share of Common Stock. Investors purchasing shares of Common Stock in this Offering will therefore incur immediate and substantial net tangible book value dilution. See "Underwriting and Dilution." RISK OF UNALLOCATED PROCEEDS. The Company expects that it will use a portion of the net proceeds of this offering for general corporate purposes, including working capital. The Company has no specific plans as to the use of the unallocated proceeds from this offering. Pending use, the Company plans to invest the net proceeds 10 13 in investment-grade, interest-bearing securities. Accordingly, management will have significant flexibility in applying a portion of the net proceeds of this offering. See "Use of Proceeds." POTENTIAL ADVERSE EFFECT ON MARKET PRICE OF SHARES ELIGIBLE FOR FUTURE SALE. Sales of Common Stock (including shares issued upon the exercise of outstanding options) in the public market after this Offering could materially adversely affect the market price of the Common Stock. Such sales also might make it more difficult for the Company to sell equity securities or equity-related securities in the future at a time and price that the Company deems appropriate. Upon the completion of this Offering, the Company will have 10,359,046 shares of Common Stock outstanding, of which the 2,500,000 shares offered hereby will be freely tradable (unless held by affiliates of the Company) and the remaining 7,859,046 shares will be restricted securities within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). Holders of an aggregate of 7,611,736 shares of Common Stock and options to purchase 1,170,273 shares of Common Stock have entered into lock-up agreements under which they have agreed not to sell, directly or indirectly, any shares owned by them for a period of 180 days after the date of this Prospectus without the prior written consent of the Representatives of the Underwriters. Upon expiration of the 180-day lock-up agreements, approximately 5,805,713 shares of Common Stock will become eligible for immediate public resale subject to the volume limitations of Rule 144, under Rule 144(k) or by non-affiliates holding stock issued to them under Rule 701. A total of 7,392,010 of the shares outstanding immediately following the completion of this Offering will be entitled to registration rights with respect to such shares upon termination of lock-up agreements. See "Shares Eligible for Future Sale." In addition, 475,000 shares of Calypte Common Stock may be acquired by stockholders of Pepgen Corporation upon exercise of options issued to them, 1,066,355 shares may be acquired by warrantholders upon exercise of warrants issued to them, and an additional 1,311,420 shares may be acquired by other optionholders (to the extent vested), which shares will become eligible for public resale at various times two years after the acquisition of such shares. See "Business -- Investment in Pepgen Corporation" and "Certain Transactions." ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS. Certain provisions of Calypte's Certificate of Incorporation and Bylaws could discourage potential acquisition proposals and could delay or prevent a change in control of Calypte. Such provisions could diminish the opportunities for a stockholder to participate in tender offers, including tender offers at a price above the then current market value of the Common Stock. Such provisions may also inhibit increases in the market price of the Common Stock that could result from takeover attempts. In addition, the Board of Directors of Calypte, without further stockholder approval, may issue Preferred Stock with such terms as the Board of Directors may determine, that could have the effect of delaying or preventing a change in control of Calypte. The issuance of Preferred Stock could also adversely affect the voting power of the holders of Common Stock, including the loss of voting control to others. See "Description of Capital Stock -- Change of Control Provisions." DIVIDENDS. The Company has accumulated unpaid dividends on its Series A Preferred Stock, which accumulated dividends will be paid upon redemption of the Series A Preferred Stock upon the closing of this Offering. The Company currently intends to retain any future earnings for future growth and, therefore, does not anticipate either declaring or paying any cash dividends in the foreseeable future. 11 14 THE COMPANY Urnotech Calypte Biomedical Corporation was incorporated in California in November 1989, changed its name to Calypte Biomedical Corporation in November 1992 and will be reincorporated in Delaware in July 1996. The Company's principal office is located at 1440 Fourth Street, Berkeley, California 94710, and its telephone number is (510) 526-2541. USE OF PROCEEDS The net proceeds to the Company from the sale of 2,500,000 shares of Common Stock offered by the Company hereby at an assumed initial public offering price of $9.00 per share are estimated to be $20 million ($23 million if the Underwriter's over-allotment option is exercised in full). Of the net proceeds of this Offering, the Company expects to expend approximately $5 million to expand product development efforts and to support clinical trials, approximately $4 million to fund the development of Calypte Biomedical Laboratories, approximately $2 million to expand manufacturing capacity, approximately $2 million to redeem the Company's Series A Preferred Stock, approximately $1.5 million to repay a loan bearing interest at the prime rate plus 3.5% (11.75% at June 21, 1996) due on July 5, 1996 to Silicon Valley Bank, $1 million to repay the Pepgen promissory note bearing interest at 4% per annum due on October 31, 1996, and approximately $250,000 to repay a note bearing interest at 10% per annum due on August 1, 1996 to the Purdue Frederick Corporation. The balance of the net proceeds amounting to approximately $4.2 million will be used for working capital and general corporate purposes. A portion of the proceeds may also be used for investments in or acquisitions of complementary businesses, products or technologies. From time to time the Company considers and engages in discussions with other parties regarding possible investments in or acquisitions of complementary businesses, products or technologies, although there are currently no agreements or understandings regarding any such investments or acquisitions. Pending the use of the proceeds as described above, the Company intends to invest such net proceeds in short-term, investment grade, interest-bearing securities. DIVIDEND POLICY The Company has accumulated unpaid dividends on its Series A Preferred Stock, which accumulated dividends will be paid upon redemption of the Series A Preferred Stock upon the closing of this Offering. The Company currently intends to retain any future earnings for future growth and, therefore, does not anticipate either accumulating, declaring or paying any cash dividends in the foreseeable future. 12 15 CAPITALIZATION The following table sets forth the capitalization of the Company as of March 31, 1996 (i) on an actual basis, (ii) on a pro forma basis to reflect (a) the automatic conversion of all outstanding shares of Convertible Preferred Stock into Common Stock upon the closing of this Offering and (b) the repayment of approximately $503,000 of current notes payable which were repaid by the Company in April 1996 and (iii) on an as adjusted basis to give effect to (a) the receipt by the Company of the net proceeds from the sale of 2,500,000 shares of Common Stock offered hereby at an assumed initial public offering price of $9.00 per share after deducting the estimated underwriting discounts and commissions and offering expenses payable by the Company, (b) the redemption by the Company of its mandatorily redeemable Series A Preferred Stock, including accumulated unpaid dividends and (c) the repayment of approximately $2,748,000 of current notes payable. This table should be read in conjunction with the Consolidated Financial Statements of the Company and the Notes thereto and the Consolidated Condensed Financial Statements of the Company and the Notes thereto included elsewhere in this Prospectus.
MARCH 31, 1996 ---------------------------------------- ACTUAL PRO FORMA AS ADJUSTED -------- --------- ----------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Long-term portion of capital lease obligations.......... $ 683 $ 683 $ 683 Mandatorily Redeemable Series A Preferred Stock: 100,000 shares authorized at $0.001 par value; 100,000 shares issued and outstanding, actual; 100,000 shares issued and outstanding, pro forma; no shares issued and outstanding, as adjusted................ 1,766 1,766 -- Stockholders' equity (deficit): Convertible Preferred Stock, $0.001 par value, 8,637,638 shares authorized; 6,832,416 shares issued and outstanding, actual; no shares issued or outstanding, pro forma and as adjusted............. 7 -- -- Preferred Stock, no shares authorized, actual and pro forma; 5,000,000 shares authorized, as adjusted; no shares issued or outstanding, actual pro forma and as adjusted........................................ -- -- -- Common Stock, $0.001 par value; 12,000,000 shares authorized, actual; 20,000,000 shares authorized, pro forma and as adjusted; 574,018 shares issued and outstanding, actual; 7,406,434 shares issued and outstanding, pro forma; 9,906,434 shares issued and outstanding, as adjusted (1)................... -- 7 10 Additional paid-in capital............................ 29,329 29,329 49,231 Deferred compensation................................. (367) (367) (367) Deficit accumulated during development stage.......... $(33,217) $ (33,217) $ (33,217) ======== ======== ======== Total stockholders' equity (deficit).......... $ (4,248) $ (4,248) $ 15,657 ======== ======== ======== Total capitalization.......................... $ (1,799) $ (1,799) $ 16,340 ======== ======== ========
- --------------- (1) The actual, pro forma, and as adjusted information excludes, as of March 31, 1996, (i) 1,292,561 shares of Common Stock issuable upon exercise of outstanding options granted under the Company's stock option plans at a weighted average exercise price of $0.54 per share, (ii) 1,321,907 shares of Common Stock available for grant under the Company's stock option plans, (iii) warrants to purchase 1,762,101 shares of Common Stock at prices ranging from $5.00 to $7.50 per share and options to purchase 475,000 shares of Common Stock at $7.50 per share. See "Capitalization" and "Management -- Stock Option Plans" and Notes 9, 10 and 12 of Notes to Consolidated Financial Statements and Notes 5, 6 and 7 of Notes to Consolidated Condensed Financial Statements. 13 16 DILUTION As of March 31, 1996, the Company had negative pro forma net tangible book value of $(4,247,684) or $(0.57) per share of Common Stock. "Pro forma net tangible book value" per share represents the amount of total pro forma tangible assets less total pro forma liabilities and less total pro forma mandatorily redeemable Series A Preferred Stock divided by 7,406,434, the pro forma number of shares of Common Stock issued and outstanding after giving effect to the automatic conversion upon consummation of the offering of net outstanding shares of Convertible Preferred Stock at March 31, 1996 into Common Stock. Without taking into account any other changes in the pro forma net tangible book value after March 31, 1996, other than to give effect to the receipt by the Company of the net proceeds from the sale of the 2,500,000 shares of Common Stock offered hereby at an assumed initial public offering price of $9.00 per share, the pro forma as adjusted net tangible book value of the Company as of March 31, 1996 would have been approximately $15,657,316 or $1.58 per share. This represents an immediate increase in net tangible book value of $2.15 per share to existing stockholders and an immediate dilution of net tangible book value of $7.42 per share to new investors purchasing shares at an assumed initial public offering price of $9.00 per share. The following table illustrates this per share dilution: Assumed initial public offering price per share..................... $ 9.00 Pro forma net tangible book value per share before the offering... (0.57) Increase per share attributable to new investors.................. 2.15 ------ Pro forma net tangible book value per share after the offering...... 1.58 ----- Dilution per share to new investors................................. $ 7.42 =====
The following table summarizes, on a pro forma basis as of March 31, 1996, the differences between existing stockholders and purchasers of shares in the offering (at an assumed initial public offering price of $9.00 per share) with respect to the number of shares of Common Stock purchased from the Company, the total consideration paid and the average price per share paid:
SHARES TOTAL PURCHASED CONSIDERATION -------------------- ---------------------- AVERAGE PRICE NUMBER PERCENT AMOUNT PERCENT PER SHARE -------- ------- ---------- ------- ------------- Existing stockholders....... 7,406,434 74.8% $30,816,598 57.8% $4.16 New investors............... 2,500,000 25.2 22,500,000 42.2 9.00 --------- ----- ----------- ----- Total............. 9,906,434 100.0% $53,316,598 100.0% ========= ===== =========== =====
The foregoing table assumes no exercise of stock options or warrants outstanding after March 31, 1996. As of March 31, 1996, there were options outstanding to purchase a total of 1,292,561 shares of Common Stock at a weighted average exercise price of $0.54 per share: there were warrants outstanding to purchase 1,762,101 shares of Common Stock at prices ranging from $5.00 to $7.50 per share; and there were options to purchase 475,000 shares of Common Stock at $7.50 per share. To the extent that any shares of Common Stock are issued on exercise of any of these options or warrants or additional options or warrants granted after March 31, 1996, there will be further dilution to new investors. See "Management -- Stock Plans" and Notes 9, 10 and 12 of Notes to Consolidated Financial Statements and Notes 5, 6 and 7 of Notes to Consolidated Condensed Financial Statements. 14 17 SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated financial data as of and for the years ended December 31, 1991, 1992, 1993, 1994 and 1995 are derived from the audited consolidated financial statements of the Company. The financial statements of the Company as of December 31, 1994 and 1995 and for each of the years in three-year period ended December 31, 1995, together with the notes thereto and the related report of KPMG Peat Marwick LLP independent certified public accountants, are included elsewhere in this Prospectus. The selected consolidated financial data set forth below as of and for the three months ended March 31, 1995 and 1996, and for the period from February 18, 1988 (inception) through March 31, 1996 were derived from unaudited consolidated condensed financial statements, which are included elsewhere in this Prospectus, and include, in the opinion of the Company, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Company's financial position at that date and results of operations for those periods. The results for the three months ended March 31, 1996 are not necessarily indicative of the results for any future period. The selected consolidated financial data set forth below is qualified in its entirety by, and should be read in conjunction with, the Consolidated Financial Statements and Notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in the Prospectus.
FEBRUARY 18, 1988 THREE MONTH PERIOD (INCEPTION) YEAR ENDED DECEMBER 31, ENDED MARCH 31, THROUGH --------------------------------------------------------- ---------------------- MARCH 31, 1991 1992 1993 1994 1995 1995 1996 1996 --------- --------- --------- --------- --------- --------- --------- ------------ (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Revenue earned under research and development contracts, substantially from related parties..................... $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ 2,390 Operating expenses: Research and development.... 1,205 2,604 4,519 3,644 5,018 971 1,827 22,174 Purchased in-process research and development costs..................... -- -- -- -- 2,500 -- -- 2,500 Selling, general and administrative............ 1,096 1,280 1,784 1,818 2,862 491 896 11,823 --------- --------- --------- --------- --------- -------- --------- --------- Loss from operations.......... (2,301) (3,884) (6,303) (5,462) (10,380) (1,462) (2,723) (34,107) Interest income (expense), net......................... (58) 45 108 (35) 78 43 (98) (131) Other income.................. 5 38 15 31 12 21 5 76 --------- --------- --------- --------- --------- -------- --------- --------- Loss before income taxes and extraordinary item.......... (2,354) (3,801) (6,180) (5,466) (10,290) (1,398) (2,816) (34,162) Income taxes.................. (51) (1) (1) (1) (1) -- -- (61) --------- --------- --------- --------- --------- -------- --------- --------- Loss before extraordinary item........................ (2,405) (3,802) (6,181) (5,467) (10,291) (1,398) (2,816) (34,223) Extraordinary gain on debt extinguishment.............. 485...... -- -- -- -- -- -- 485 --------- --------- --------- --------- --------- -------- --------- --------- Net loss...................... (1,920) (3,802) (6,181) (5,467) (10,291) (1,398) (2,816) (33,738) Less dividend on mandatorily redeemable Series A preferred stock............. (120) (120) (120) (120) (120) (30) (30) (766) --------- --------- --------- --------- --------- -------- --------- --------- Net loss attributable to common stockholders......... $ (2,040) $ (3,922) $ (6,301) $ (5,587) $ (10,411) $ (1,428) $ (2,846) $(34,504) ========= ========= ========= ========= ========= ======== ========= ========= Net loss per share attributable to common stockholders before extraordinary item.......... $ (1.14) $ (0.98) $ (1.22) $ (0.90) $ (1.40) $ (0.19) $ (0.38) Extraordinary gain on debt extinguishment, per share... 0.22 -- -- -- -- -- -- --------- --------- --------- --------- --------- -------- --------- Net loss per share attributable to common stockholders(1)............. $ (0.92) $ (0.98) $ (1.22) $ (0.90) $ (1.40) $ (0.19) $ (0.38) ========= ========= ========= ========= ========= ======== ========= Weighted average shares used to compute net loss per share attributable to common stockholders(1)............. 2,210,447 3,985,278 5,182,594 6,187,396 7,450,692 7,450,212 7,450,241
DECEMBER 31, MARCH 31, 1996 -------------------------------------------------- ------------------------ 1991 1992 1993 1994 1995 ACTUAL PRO FORMA(2) ------- ------- -------- -------- -------- -------- ------------ (IN THOUSANDS, EXCEPT SHARE DATA) CONSOLIDATED BALANCE SHEET DATA: Cash and cash equivalents......................... $ 2,233 $ 7,254 $ 1,492 $ 4,478 $ 2,559 $ 1,842 $ 1,339 Working capital................................... 1,196 6,042 867 3,117 (2,402) (3,791) (3,791) Total assets...................................... 2,561 7,770 2,887 5,965 5,337 4,826 4,323 Long-term portion of capital lease obligations and notes payable................................... 471 310 462 196 543 683 683 Mandatorily redeemable Series A preferred stock... 1,256 1,376 1,496 1,616 1,736 1,766 1,766 Deficit accumulated during development stage...... (4,659) (8,461) (14,643) (20,110) (30,401) (33,217) (33,217) Total stockholders' equity (deficit).............. (213) 4,812 (26) 2,659 (2,746) (4,248) (4,248)
- --------------- (1) See Note 2 of Notes to Consolidated Condensed Financial Statements and Note 2 of Notes to Consolidated Condensed Financial Statements. (2) Reflects the conversion of 6,832,416 shares of Convertible Preferred Stock into 6,832,416 shares of Common Stock as of March 31, 1996 and reflects the repayment of $503,000 of current notes payable which were repaid by the Company in April 1996. 15 18 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors" and elsewhere in this Prospectus. OVERVIEW Since commencement of operations in 1988, the Company has reported its results as a development stage company, engaged in research, development and commercialization of its products. The Company's efforts have been primarily focused on developing and obtaining approval for its urine-based diagnostic tests for sexually transmitted diseases. In March, 1996, the Company received a letter from the FDA stating that the Company's urine-based HIV-1 test was approvable pending finalization of the package insert and other labeling. The Company has a limited history of operations and has experienced significant operating losses since inception. As of March 31, 1996, the Company had an accumulated deficit of $33.2 million. The Company has not begun to market its urine-based HIV-1 test. The Company expects operating losses to continue as it initiates marketing and sales activities and additional research and development. The Company's marketing strategy is to use distributors, focused direct selling and marketing partners to penetrate certain targeted domestic markets. The Company plans to maintain a small direct sales force to sell the Company's urine-based HIV-1 test to 12 major laboratories serving the life insurance, military, immigration and criminal justice markets. Other U.S. and all international markets will be penetrated utilizing diagnostic product distributors. RESULTS OF OPERATIONS Three Months Ended March 31, 1996 and 1995 Research and development expense, consisting primarily of research, manufacturing and quality assurance personnel and materials related to the development of the urine-based HIV-1 test, increased 88% to $1.8 million for the three months ended March 31, 1996 from $971,000 for the three months ended March 31, 1995. The increase was principally due to additional personnel, facility and material costs required for increased manufacturing activity. Selling, general and administrative expenses, consisting primarily of personnel, outside consultants, facility operating leases and related expenses, increased 82% to $896,000 for the three months ended March 31, 1996 from $491,000 for the three months ended March 31, 1995. The increase was primarily due to personnel additions and related expenses. Interest income (expense) and other income, consisting primarily of interest earned on cash and cash equivalents, interest paid on equipment lease financing and interest paid or accrued on outstanding notes payable, decreased $157,000 to $(93,000) for the three months ended March 31, 1996 from $64,000 for the three months ended March 31, 1995. The decrease was primarily due to interest payments on the Company's bank line of credit and interest accrued on the note payable to Pepgen, and also due to lower interest income as a result of lower cash balances. Years Ended December 31, 1995 and 1994 Research and development expenses increased 38% to $5.0 million in 1995 from $3.6 million for 1994. This increase was principally due to additional personnel and material costs required for increased manufacturing activities. Purchased in-process research and development costs of $2.5 million were incurred in 1995; no such costs were incurred in 1994. The 1995 costs were attributable solely to the Company's investment in Pepgen Corporation and the resulting write-off of research and development in process acquired. Pepgen is a 16 19 therapeutic research and development company engaged primarily in the development of therapeutic compounds. Selling, general and administrative expenses, increased 57% to $2.9 million in 1995 from $1.8 million in 1994. This increase was primarily due to additional legal and consulting fees relating to general corporate matters and an increase in marketing personnel in anticipation of product launch. Interest income (expense) and other income, increased $94,000 to $90,000 in 1995 from ($4,000) in 1994. This increase was primarily due to interest earned on proceeds from preferred stock offerings. Years Ended December 31, 1994 and 1993 Research and development expenses decreased 19%, to $3.6 million in 1994 from $4.5 million in 1993. The decrease was due primarily to approximately $1.0 million of non-recurring payments made in 1993 for patent license fees and technology licenses. Interest income (expense) and other income decreased $127,000 to ($4,000) for 1994 from $123,000 for 1993. This decrease related primarily to a full year of interest payments in 1994 on equipment lease lines. LIQUIDITY AND CAPITAL RESOURCES The Company has financed operations from inception primarily through the private placement of preferred stock and, to a lesser extent, from payments related to research and development agreements, bank lines of credit, equipment lease financings and borrowings from notes payable. Since inception through March 31, 1996, the Company has received approximately $30.3 million in net proceeds from private placements of the Company's equity securities. In addition, approximately $1.3 million was borrowed by the Company through equipment lease financings, of which approximately $1.1 million was outstanding as of March 31, 1996, and $2.4 million was received from research and development agreements. In addition, in December 1995 the Company executed a $2.0 million line of credit with a bank which was due on March 5, 1996. In March 1996 the Company signed an amendment to the agreement, whereby the Company agreed to repay $500,000 on the line of credit and the due date was extended to July 5, 1996. In April, the Company repaid the $500,000 and the line of credit was reduced to $1.5 million. In addition, the Company has a note payable to a former related party for $248,000 due August 1, 1996. During the three months ended March 31, 1996 and the years ended December 31, 1995, 1994 and 1993 the Company's cash used in operations was $2.1 million, $6.6 million, $4.6 million, and $6.6 million, respectively. The cash used in operations was primarily to fund research and development expenses related to the urine-based HIV-1 test along with general and administrative expenses of the Company. The Company has entered into employment agreements with officers and other employees of the Company, with varying terms and lengths. Included in current liabilities at March 31, 1996 is $260,000 payable to an officer for relocation expense. The Company acquired equipment and leasehold improvements during the three months ended March 31, 1996 and the years ended December 31, 1995, 1994, and 1993 of $217,000, $1.1 million, $625,000, and $813,000, respectively. Costs incurred included the purchase of equipment relating to build-out and scale-up of manufacturing facilities in 1996 and 1995, the build-out of the Company's Alameda facility in 1994 and the renovation of its manufacturing facility in Berkeley in 1994 and 1993. During 1995, the Company acquired a 49% interest in Pepgen for $2.5 million, comprised of $1.0 million in cash paid at closing, a note payable of $1.0 million, and options to purchase 475,000 shares of Common Stock valued at $500,000. The note payable is due upon the earlier of (i) October 1996 or (ii) 60 days following either FDA approval of the Company's urine-based HIV-1 screening test or the closing of this Offering. Other than the payment of the $1.0 million promissory note, Calypte does not have any ongoing commitments to fund Pepgen. The Company has entered into an agreement that provides for royalty payments to former related parties based on sales of certain products conceived by the former related parties prior to March 30, 1989. 17 20 The Company has entered into arrangements with various organizations to receive the right to utilize certain patents and proprietary rights under licensing agreements in exchange for the Company making certain royalty payments based on sales of certain products and services. The royalty obligations are based on a percentage of net sales of licensed products and include minimum annual royalty payments under some agreements. In August 1993 and as amended in 1994, the Company entered into a research agreement that allowed for a university to perform certain research on behalf of the Company for a seven-year period. Under the terms of the agreement, the Company may negotiate certain license rights to the inventions made by the university resulting from this research. The Company's annual payment under this agreement is approximately $150,000 through 1999. As of March 31, 1996, the Company had $1.8 million in cash and cash equivalents. Subsequent to March 31, 1996 and as of June 21, 1996 the Company received $3.4 million in proceeds related to the exercise of warrants issued in conjunction with the Series E Preferred Stock offering in May and June 1995. As of June 21, 1996, potential proceeds related to unexercised warrants expiring on June 23, 1996, totaled $1.1 million. The Company expects to use a portion of the net proceeds of this Offering for research and development and clinical studies, increase of manufacturing capacity, repayment of a bank line of credit, redemption of the Series A Preferred Stock, repayment of the note payable to a former related party, repayment of the note issued to Pepgen, as well as for working capital and general corporate purposes. A portion of the proceeds may also be used for investments in or acquisitions of complementary businesses, products or technologies. Although the Company believes net proceeds from this Offering, together with current cash, will be sufficient to meet the Company's operating expenses and capital requirements for the next eighteen months, the Company's future liquidity and capital requirements will depend on numerous factors, including regulatory actions by the FDA and other international regulatory bodies, market acceptance of its products, and intellectual property protection. There can be no assurance that the Company will not be required to raise additional capital or that such capital will be available on acceptable terms, if at all. 18 21 BUSINESS THE COMPANY Calypte Biomedical Corporation ("Calypte" or the "Company") is a leader in the development of a urine-based screening test for the detection of Human Immunodeficiency Virus, Type-1 ("HIV-1"), the putative cause of Acquired Immunodeficiency Syndrome ("AIDS"). The Company has integrated several proprietary technologies to develop a test which, in Company-funded clinical trials conducted by or on behalf of the Company, detected the presence of HIV antibodies in urine with 99.3% sensitivity (as compared to blood). Specificity of the screening test with a companion western blot confirmatory test was 100%. Calypte believes that its proprietary urine-based test offers significant advantages compared to existing blood-based tests, including ease-of-use, lower costs, and significantly reduced risk of infection from collecting and handling specimens. Urine collection is non-invasive and painless, and urine is the most commonly collected body fluid. The Company estimates that the cost of collecting, handling, testing and disposing of urine specimens will be significantly less than that of blood specimens. Independent studies report that the likelihood of finding infectious HIV virus in urine is extremely low, which greatly reduces the risk and cost of accidental exposure to health care workers, laboratory personnel, and patients being tested. On March 28, 1996, the Company received a letter from the FDA stating that the Company's HIV-1 urine screening test was approvable pending finalization of the package insert and other labeling. The Company's screening test, when used with the western blot confirmatory test for urine licensed exclusively from Cambridge Biotech, will provide the only complete urine-based HIV testing system. This western blot test is already licensed by the FDA for use with blood, and is currently pending FDA clearance for use with urine. On June 21, 1996 the FDA Blood Products Advisory Committee determined that the clinical data and test protocol of the Cambridge Biotech urine confirmatory test supported its use in conjunction with the Calypte urine-based HIV-1 test. The Company believes that the benefits of its testing system will enable it to penetrate existing markets and expand into new markets that are currently not served by blood-based and oral fluid-based HIV test systems. The Company also intends to submit a PMA to the FDA for approval of the Company's OTC home urine collection kit. The Company's home collection kit would allow consumers, in the privacy of their homes, to take a urine sample, mail it to Calypte Biomedical Laboratories for analysis and then anonymously obtain results and professional counseling by telephone. On May 14, 1996, Direct Access Diagnostics, a subsidiary of Johnson & Johnson, received FDA clearance for the first OTC home blood collection kit for HIV. The Company believes that the Direct Access Diagnostics FDA approved OTC product will accelerate consumer acceptance and awareness of home collection for HIV. The Company believes that an OTC urine collection kit for HIV would have advantages compared to an OTC blood collection kit for HIV. The Company intends to develop and commercialize additional urine-based tests for other sexually transmitted diseases and other human retroviruses and diseases based on its enabling urine testing technologies. Initially, the Company intends to focus on developing and commercializing urine-based screening tests for HIV-2, Chlamydia and H. pylori. Upon approval, the Company intends to market its urine-based HIV-1 screening test through direct sales personnel and distributors depending upon the market segment and the location of the market. Calypte believes that its urine-based test will achieve market acceptance because of safety, cost, convenience, and painless collection of the fluid to be tested. There can be no assurance that the Company's products or the Company's planned products will receive FDA clearance or approval and become commercially available. BACKGROUND HIV is the putative cause of AIDS, which is the leading cause of death for persons ages 25 to 44 in the U.S. Those infected with HIV generally do not show symptoms of AIDS until several years after HIV infection, if at all. Because most persons infected with HIV are asymptomatic for AIDS and are unaware of their HIV status, such persons do not avail themselves of medical treatment and may unknowingly expose others to the risk of infection. Prior exposure to HIV can be detected in laboratory tests even though the individual infected with HIV is asymptomatic. 19 22 According to the World Health Organization, Human Immunodeficiency Virus ("HIV") currently infects approximately 10 million individuals worldwide and will infect between 30 and 40 million individuals worldwide by the year 2000. HIV is spread by a transfer of bodily fluids primarily through sexual contact, blood transfusions, sharing intravenous needles, accidental needle sticks or transmission from infected mothers to newborns. The Rockefeller Foundation reports that heterosexual transmission accounts for 75% of HIV infection worldwide. The incidence of HIV-2 is insignificant except in certain countries in West Africa where its incidence is more frequently reported. The discovery in 1984 of circulating HIV antibodies in the blood led to the development and widespread use of HIV blood screening tests. Testing by blood banks of blood used in transfusions soon followed in an effort to maintain and protect the integrity of the blood supply. Most HIV antibody screening tests are EIAs. These tests operate on the principle that antibodies will react with a known antigen; this reaction is detected by using enzymes as indicators. It is estimated that 27 million blood bank screening tests and 26 million other HIV screening tests were performed in 1994 in the United States. Outside of blood bank screening, the largest domestic demand for HIV testing is generated by physicians, the life insurance industry, the military, the criminal justice system and the Immigration and Naturalization Service. To minimize the risk of incorrectly reporting that an individual is infected with HIV (a false positive result), most countries require a strict testing protocol. The protocol is to first test a sample for the presence of HIV. Any sample found to be reactive in the initial screen is then retested in duplicate. If either of the retests are reactive, the same sample is tested again using a more precise and expensive confirmatory test. The presence of HIV antibodies, based on the results of the confirmatory test, is considered diagnostic for HIV infection. HIV blood testing can be expensive and poses risk of infection to health care personnel. The typical HIV screening test requires a trained health care worker or phlebotomist to draw and centrifuge a blood sample, which is then tested for the presence of HIV antibodies. Blood is typically drawn at physician offices, hospitals, or blood draw stations, where trained personnel are available, and then sent to a laboratory for HIV testing. Blood samples and related blood-sampling equipment require careful handling to avoid accidental exposure to blood-borne pathogens, including HIV. In addition, the use of blood-based tests has become increasingly costly because of the costs of disposing of potentially infected specimens, syringes, needles and transfer tubes. The overall cost of blood-based testing has precluded large public health screening programs, particularly in less developed countries, many of which have significantly higher rates of HIV infection than that of the U.S. Even in the United States, certain populations are not routinely screened due to the high cost of blood-based testing. For example, currently only four million of the approximately 14 million life insurance policies written each year utilize HIV screening. In December 1994, the FDA approved the first non-invasive method for HIV-1 testing, an oral fluid-based screening test and collection device. Collection of oral fluid is technique dependent, and detailed instructions on the proper use of the oral fluid collection device need to be carefully followed. In addition, oral fluid is not commonly collected and is rarely tested for other diagnostic purposes. In June 1996, one manufacturer received approval from the FDA for a western blot oral-fluid confirmatory test. HIV screening can also be performed by using a dried blood spot ("DBS") specimen. DBS sampling, which was developed in the late 1980's, is a variant of blood sampling for the testing of newborns. The DBS sampling method involves sticking a baby's heel or an adult's finger with a sharp lancet and collecting five or six drops of blood onto filter paper. The laboratory punches the dried blood spots out of the filter paper, and the non-cellular components of the blood spot are eluted back in liquid form by soaking the punches in diluent. The resulting fluid is then assayed by one of several traditional serum/plasma EIAs. The DBS method, which is comparable in cost to traditional serum tests, is susceptible to problems in sample variability, the adequacy of volume for testing, pain on sample withdrawal, and invasiveness. The Company believes that a large market opportunity exists for home urine collection and remote testing for HIV infection. On May 14, 1996, the FDA approved the first DBS OTC home collection kit for HIV. This 20 23 collection kit, to be marketed by Direct Access Diagnostics, a subsidiary of Johnson & Johnson, is reported to retail for $40. Two other companies have submitted applications to the FDA for DBS OTC home collection kits for HIV. These companies are Home Access Health Corporation and ChemTrak Incorporated. The Company believes that the Direct Access Diagnostics FDA approved OTC product will accelerate consumer acceptance and awareness of home collection for HIV. THE CALYPTE URINE-BASED HIV-1 SCREENING TEST Calypte's proprietary urine-based HIV-1 screening test is non-invasive, easy to use, reliable and avoids many of the costs and risks associated with blood-based testing. The Company's screening test, when used with the western blot confirmatory test for urine licensed exclusively from Cambridge Biotech, will provide the only complete urine-based HIV testing system. Laboratories using the Company's system can complete the entire testing profile for HIV-1 using a single urine specimen. The Company believes that the benefits of its testing system will enable it to penetrate existing markets and expand into new markets that are not served currently by the more expensive blood and oral fluid-based HIV test systems. Key benefits of the Company's test include: - -- Ease of Use/Non-Invasive Collection. Urine is the most commonly collected bodily fluid for laboratory testing. Because it requires no special preservatives or containers, it is also easier to collect, handle, and discard than blood. Furthermore, the Company's test is in standard EIA format and is designed to be used with standard laboratory equipment. Blood sampling is invasive and, for many patients, stressful and painful. The ability to screen non-invasively for HIV in all types of patients, including intravenous drug users and newborns, will enhance patient comfort and may significantly increase the voluntary testing rates in patients who might otherwise decline testing. - -- Lower Overall Cost. The Company's urine-based screening test may lower significantly the overall cost of testing for HIV because the cost of collecting, transporting, testing and disposing of urine specimens can be significantly less than that of blood specimens, and less than the cost of an oral fluid screening test with a blood-based confirmatory test. Additional cost savings may accrue as a function of reduced needlestick incidents and associated counseling, testing and lost productivity. - -- Safety. Independent studies have concluded that the likelihood of finding infectious HIV virus in urine is extremely low. There have been no reported cases of transmission of HIV virus through contact with urine of HIV-infected patients. Accordingly, the risk of HIV infection to health care and laboratory workers accidentally exposed to urine samples is negligible. Since no needles are used in the Calypte urine sampling process, the test eliminates this route of accidental infection. In developing countries, where the supply of sterile needles and syringes cannot be guaranteed, the safety benefits of using urine sampling extend to patients as well as to health care workers. - -- Reliability. The Company has performed clinical studies demonstrating the effectiveness of using urine as a reliable and clinically valid sample for HIV testing. In Company-funded clinical trials conducted by or on behalf of the Company, for the HIV-1 urine EIA, a total of approximately 11,000 matched blood and urine specimens were tested. In two different studies, assay specificity was assessed by testing samples from a combined subset of low risk individuals, and specificity of the screening test in conjunction with the confirmatory tests was 100%. Sensitivity (correlation to blood tests) of the urine screening test was estimated by testing samples from a subset of individuals with a clinical diagnosis of AIDS at five sites, and sensitivity was 99.33%. In spite of the benefits of the Company's urine-based screening test, such test represents a new method of determining the presence of HIV antibodies. Blood-based and oral-fluid based tests which constitute competitive products, have the advantage of already being commercially marketed and have gained acceptance from the medical community. There can be no assurance that the Company's urine-based screening test will gain any significant degree of market acceptance among physicians, patients or health care payors, even if necessary regulatory and reimbursement approvals are obtained. 21 24 The Company's test uses an industry standard 96 well microtiter plate to detect antibodies to HIV-1 in urine. The HIV-1 antibodies, when present in urine, bind to Calypte's proprietary antigen coated on prepared microtiter plates. A subsequent enzymatic reaction produces a color change revealing the presence of HIV-1 antibodies. The test requires only 200 microliters of urine (approximately four drops) and can be performed using standard laboratory equipment. Collection of the urine can take place any time of day, and the test does not require a 24-hour voided specimen or a midstream, clean-catch sample. Samples can be shipped and stored at two to 30 degrees centigrade for up to 55 days before testing. The laboratory protocol for testing urine is nearly identical to that of blood, requiring few, if any, modifications to existing laboratory protocols. The Company has entered into an agreement with Cambridge Biotech under which both Calypte and Cambridge Biotech will market and distribute a urine-capable western blot confirmatory test which uses technology licensed from the Company. The western blot kit manufactured by Cambridge Biotech has already received FDA approval for blood testing, and is the only confirmatory test for which application has been made for FDA approval for use with urine. Clinical data related to the Cambridge Biotech License Amendment Application was reviewed by the FDA Blood Products Advisory Committee on June 21, 1996. The Blood Products Advisory Committee provides guidance to the FDA on issues related to product licence applications currently under review by the FDA. At the June 21, 1996 meeting, the Blood Products Advisory Committee determined that the clinical data and test protocol of the Cambridge Biotech urine confirmatory test supported its use in conjunction with the Calypte urine-based HIV-1 test. There can be no assurance that the FDA will grant approval of the Cambridge Biotech urine confirmatory test. STRATEGY The Company's objective is to be the leader in the development and commercialization of urine-based diagnostic tests. The Company's primary strategy is to exploit the advantages of using urine instead of blood for HIV testing to establish its diagnostic screening test as the screening method of choice for HIV. In addition, building on its expertise in urine-based diagnostics, the Company intends to develop additional urine-based tests for sexually transmitted diseases and other human conditions. The key components of the Company's business strategy are to: - -- Target and Expand Life Insurance Testing Market. Upon FDA approval, the Company intends to market its urine-based HIV screening test kit directly to the five major laboratories that perform the substantial majority of HIV tests for the domestic life insurance industry. These laboratories currently collect and test urine from most life insurance applicants for other diseases and risks. Because of the overall lower cost and because urine is already routinely collected, the Company believes that its test will enable life insurance companies to increase the number of applicants tested for HIV. - -- Penetrate U.S. Clinical Laboratory Market. The Company, through its distributors, intends to market its tests to laboratories currently serving physicians. Because of restrictions on the collection of blood in the physician's office imposed by CLIA, many physicians refer their HIV "at-risk" patients to phlebotomists at outside laboratory service centers for blood collection. The Company's urine-based HIV test will allow physicians' offices to collect the specimen for use with the Company's HIV test. - -- Pursue International Markets Through Distributor Relationships. Upon approval from appropriate regulatory authorities, the Company intends to market its HIV test in international markets pursuant to existing worldwide distribution agreements. Because of its safety, ease of collection and lower costs, the Company believes that its urine-based test may be widely employed in certain international markets not presently served by HIV blood tests. - -- Enter Emerging OTC Market. The Company intends to file a PMA for FDA approval of its OTC urine collection kit for home collection. The Company believes that its OTC urine collection kit would be used by consumers who desire home urine collection and anonymous HIV testing through Calypte Biomedical Laboratories. The Company intends to collaborate with a corporate partner to market and distribute its collection kit to retail outlets in the United States. 22 25 - -- Establish Calypte Biomedical Laboratories. The Company intends to establish Calypte Biomedical Laboratories -- a reference testing laboratory to perform HIV testing of home-collected urine specimens. - -- Develop Additional Urine-Based Diagnostics. The Company intends to develop and commercialize additional urine-based tests for other sexually transmitted diseases, other human retroviruses and non-sexually transmitted diseases based on its enabling urine testing technologies. Initially, the Company intends to focus on developing and commercializing a urine-based screening test for HIV-2, Chlamydia and H. pylori. PRODUCTS UNDER DEVELOPMENT OTC. The Company believes a market opportunity exists for home urine collection and remote testing for HIV infection. The Company intends to submit an application for FDA approval for an OTC home urine collection device, which the consumer would purchase at retail outlets instead of visiting a physician's office or laboratory for HIV testing. The consumer would provide a specimen sent in a prepaid mailer to the Company's testing laboratory, Calypte Biomedical Laboratories. The Company would perform the test, and the consumer will obtain the results by telephoning the Company and identifying himself or herself with a unique code to preserve anonymity. The Company believes that the FDA will require that the results of the tests be reported under strictly controlled protocols, including counseling. In the event that the Company's OTC HIV home urine collection kit is approved by the FDA, the Company intends to continue to manufacture the urine-based HIV-1 test and operate the testing laboratory. The Company plans to enter into an agreement with an OTC marketing partner to market and distribute the collection kit. Chlamydia. The Company received a notice of allowance for a U.S. patent for the detection of Chlamydia antibodies in urine and is developing a urine-based Chlamydia detection test. It has been estimated that there are 4.0 million new cases of Chlamydia occurring annually in the United States and 15 to 20 million tests for Chlamydia are conducted each year in the United States. Existing tests for Chlamydia, because they require a urethral swab or a blood sample, are uncomfortable for the patient. The majority of Chlamydia patients are asymptomatic and therefore, seldom seek medical treatment. Chlamydia is estimated to be responsible for between one quarter to one half of all pelvic inflammatory diseases, about half of all cases of tubal infertility and about half of all ectopic pregnancies. HIV-2. The Company is also developing a test for HIV-2, the less common form of HIV. The Company believes that such a test is important in certain export markets where the incidence of HIV-2 is higher or where such testing is mandated by government regulation. In addition, the Company believes that the ability to detect HIV-2 antibodies will be of value in protecting the Company's competitive position. The Company has the first right of negotiation with Cambridge Biotech for certain rights for the detection of HIV-2 under the Cambridge Biotech patent license from Sanofi Diagnostic Pasteur. H. pylori. The Company is in discussions with Otsuka Pharmaceutical Co., Ltd. ("Otsuka") to obtain a license to distribute Otsuka's urine-based diagnostic test for Helicobacter pylori (H. pylori), the putative cause of gastric ulcers and other intestinal conditions. The H. pylori urine-based test is currently under development at Otsuka. Other Diagnostics. The Company is also planning to evaluate the development of urine-based diagnostic tests for syphilis and herpes. Ultimately, the Company intends to expand its diagnostic test line so that it will be possible to test for a wide range of sexually transmitted and other diseases with a single, non-invasively collected urine sample. SALES, MARKETING AND DISTRIBUTION The Company's marketing strategy is to use distributors, focused direct selling and marketing partners to penetrate certain targeted domestic markets. The Company plans to maintain a small direct sales force to sell the Company's HIV-1 screening test and potential future products to 12 major laboratories serving the life insurance, military, immigration and criminal justice markets. Other U.S. and all international markets will be 23 26 penetrated utilizing diagnostic product distributors. The Company will work collaboratively with its distributors to market and promote the products in their local markets. The following table summarizes the markets and geographic regions covered by the Company and its distributors for its HIV-1 test:
COMPANY GEOGRAPHIC REGION MARKETS ---------------- -------------------------------- -------------------------------- Calypte United States 12 laboratories serving the life insurance, military, immigration and criminal justice markets. Calypte Canada All Seradyn United States All but the above laboratories. Seradyn Europe, Latin America, Africa, All Middle East Otsuka Asia, Australia, New Zealand All Travenol Israel All
Seradyn, Inc. Seradyn, Inc. ("Seradyn") a subsidiary of Mitsubishi Chemical Corporation, is a manufacturer and distributor of clinical diagnostic and industrial/analytical instrumentation products. In April 1995, the Company entered into an agreement with Seradyn under which Seradyn was granted exclusive distribution rights for the HIV-1 tests under the trade name "Seradyn Sentinel" for all non-Calypte accounts in the United States, and all customers in Europe, Latin America, Africa and the Middle East (excluding Israel). The agreement provides for certain minimum purchases by Seradyn. If such minimum purchases are not met, the Company has the right to terminate the agreement or render Seradyn's rights non-exclusive for the region in which the minimum purchases were not met, provided that Seradyn will be guaranteed the prices given to Calypte's most favored customers in the territory. The initial term of the agreement extends through December 1998. Seradyn has the right to extend the agreement for successive two-year terms provided it has met minimum sales requirements. Seradyn has agreed to assist the Company in obtaining regulatory approvals in its distribution territory at the Company's expense. The agreement also grants Seradyn a right of first refusal on distribution rights for certain new products which may be developed during the term of the agreement. Otsuka Pharmaceutical Co., Ltd. Otsuka Pharmaceutical Co., Ltd ("Otsuka") is a Japanese integrated health care and consumer products conglomerate. In August 1994 the Company entered into a distribution agreement with Otsuka, which gives Otsuka exclusive distribution rights for the urine-based HIV-1 test and to use the trademark "Calypte" to market the test in 22 Asian countries, Australia and New Zealand. To maintain exclusivity, the agreement requires that Otsuka purchase certain annual minimums, which increase each year, and total 70 million tests over ten years. Otsuka has agreed to use its best efforts to obtain regulatory approvals for the product in its territory. The agreement is for a term of ten years, and is terminable without cause by Otsuka upon 120-days notice. The Company has committed up to one-half of its total manufacturing capacity to Otsuka. If the Company is unable to meet Otsuka's manufacturing requirements, Otsuka has a right to manufacture tests itself. The agreement also grants Otsuka the right of first refusal to distribute certain new products which may be developed during the term of the agreement. Travenol Laboratories (Israel) Ltd. In December 1994 the Company entered into an agreement with Travenol Laboratories (Israel) Ltd. ("Travenol"), a division of Baxter-Travenol Laboratories. The agreement gives Travenol exclusive rights to distribute the HIV-1 test and to use the trademark "Calypte" within Israel. Under the agreement, Travenol will undertake registration of the product in Israel with the Company paying regulatory fees. The term of the agreement is perpetual unless terminated earlier for specified causes. No minimum purchase levels are required. The Company's products represent a new method of determining the presence of HIV antibodies and there can be no assurance that these products will gain any significant degree of market acceptance among physicians, patients or health care payors, even if necessary international and U.S. regulatory and reimbursement approvals are obtained. The Company believes that recommendations and endorsements by the medical community will be essential for market acceptance of the products, and there can be no assurance that any such recommendations or endorsements will be obtained. The Company has no experience marketing and 24 27 selling its products either directly or through its distributors. The Company's marketing strategy relies upon its alliances with third-party distributors for the success of its products. There can be no assurance that the Company's direct sales force will be effective, that its distributors will market successfully the Company's products or that, if such relationships are terminated, the Company will be able to establish relationships with other distributors on satisfactory terms, if at all. Any disruption in the Company's distribution, sales or marketing network, or failure of the Company's products to achieve market acceptance, could have a material adverse effect on the Company's business, financial condition and results of operations. MANUFACTURING The manufacture of the Company's urine-based HIV test involves antigen production, plate processing and preparation of certain washes and other reagents. Under cGMP, all steps are recorded, those requiring measurement or calculation are checked by a second technician and all components are inspected and/or tested at four stages by quality control technicians. Antigen production involves cell culture, antigen expression and purification. Following purification, the antigen is tested extensively and optimized for plate coating. The coating of standard 96 well microtiter plates with antigen is completed using standard plate coating equipment. Following binding of the antigen to the plates, the plates are blocked and stabilized to prevent nonspecific binding of the antigen. The plates are then dried and packaged in foil pouches. The washes and reagents are produced using standard solution preparation techniques. Calypte's manufacturing operations are located in Berkeley, California with an annual capacity of approximately 4.5 million tests. The Company has applied for an establishment license from the FDA for the production of its HIV-1 screening test at this facility. The Company has completed a larger manufacturing facility in Alameda, California and is manufacturing pilot lots required for an amendment to its pending FDA license for approval of this facility. The capacity of the Alameda facility is approximately 20 million tests per year. Additionally, the Company has entered into a manufacturing agreement with Biomira Diagnostics, Inc., a Canadian corporation, for the production of the Company's tests for export to certain international markets, in compliance with Company specifications. Calypte purchases raw materials and components used in the manufacture of its product from various suppliers and relies on single sources for several of these components. Establishment of additional or replacement suppliers for these components cannot be accomplished quickly. The Company has a number of single-source components, and any delay or interruption in supply of these components could significantly impair the Company's ability to manufacture its products in sufficient quantities, and therefore would have a material adverse effect on the Company's business, financial condition and results of operations, particularly as the Company scales up its manufacturing activities in support of commercial sales. The Company has limited experience in manufacturing its products. The Company currently manufactures its products in limited quantities for submission to FDA for ongoing compliance, international clinical trials and building its inventory in anticipation of commercialization. The Company does not have experience in manufacturing its products in commercial quantities. Manufacturers often encounter difficulties in scaling-up production of new products, including problems involving production yields, quality control and assurance, raw material supply and shortages of qualified personnel. Such assumptions may be incomplete or inaccurate and unanticipated events and circumstances are likely to occur. The larger Alameda facility will be needed if initial demand exceeds the more limited capacity of the Berkeley facility. Difficulties encountered by the Company in manufacturing scale-up to meet demand, including delays in receiving FDA approval for the Alameda facility, could have a material adverse effect on its business, financial condition and results of operations. Due to the nature of its manufacturing processes, the Company is subject to stringent federal, state and local laws, rules, regulations and policies governing the use, generation, manufacture, storage, air emission, discharge, handling and disposal of certain materials and wastes. There can be no assurance that the Company will not be required to incur significant costs to comply with land use and environmental regulations as manufacturing is scaled-up to commercial levels, nor that the operations, business or financial condition of the Company will not be materially and adversely affected by current or future environmental laws, rules, regulations and policies. There can be no assurance that the Company will be able to obtain and maintain all 25 28 required permits in connection with the operation of its manufacturing facilities. When and if the Company begins to produce products on a commercial scale, it will be a significant user and disposer of water. The disposal of water used in the Company's manufacturing processes must comply with applicable federal, state and local environmental protection laws, and compliance with these laws may be costly and difficult. TECHNOLOGY The Company's HIV-1 urine-based test is based on the finding of scientists at the New York University Medical Center in 1988 that antibodies to HIV-1 could be found in urine. Prior to this discovery, it was commonly held that antibodies to systemic infections could not pass through the kidneys, and thus, could not be found in the urine of infected individuals. The researchers showed that HIV-1 envelope antibodies were present in all urine samples from HIV-1 seropositive subjects. Building on this discovery, the Company developed an HIV-1 urine enzyme immunoassay ("EIA") to detect antibodies to HIV-1 in urine. There are two proprietary features of the Company's HIV-1 urine-based EIA that result in a format sensitive enough to detect the low levels of HIV antibodies in urine: the antigen target and the sample buffer in the assay. Recognizing the prominence of envelope antibodies in urine, the antigen target in the assay is a full length, recombinant glycosylated HIV-1 envelope protein, rgp160. Although this antigen is a recombinant glycoprotein, it is identical to the viral envelope protein gp160 in amino acid sequence and in the presence of carbohydrate at glycosylation sites. This kind of antigen target can efficiently capture the full range of HIV-1 envelope specific antibodies produced in the human polyclonal response to the virus. The microwell assay format permits the high availability of epitopes of the recombinant envelope glycoprotein for antibody binding. This availability of epitopes results in the sensitivity verified in clinical trials. The Company has non-exclusive rights to the proprietary process used to express the recombinant HIV-1 envelope glycoprotein from Texas A&M University. This proprietary process for manufacture of rgp160 begins with the baculovirus expression vector system established in an insect cell culture. The consistent and high levels of rgp160 expression in baculovirus infected insect cell culture is a critical step in the overall manufacture of rgp160. The Company improved and upgraded the Repligen process with a proprietary process which uses a system in which the HIV-1 envelope protein is produced in the insect cell membrane rather than typical tissue culture systems where the protein is secreted into insect cell culture media. Rgp160 is an insoluble protein and requires detergent based extraction and purification procedures which are proprietary. The Company developed and has obtained a U.S. patent claiming a sample buffer formulation, which is used in the HIV-1 urine test. This sample buffer acts as a diluent for urine in the assay procedure and significantly increases test specificity by reducing non-specific binding of immunoglobulins (non-specific antibodies) and other substances in urine that would decrease specificity and sensitivity of HIV-1 antibody binding. Sample buffer is manufactured in the Company's facilities. The Company's products incorporate classical immunoassay technology based on antibody-antigen reactions. Antibodies are immune system proteins produced as a result of an organism's immune response to substances (antigens) foreign to the body and specifically bind to antigens and signal the immune system to assist in eliminating them. Immunoassays are used for diagnostic applications where the presence or absence of a specific analyte is being evaluated and allow the detection of some analytes at levels as low as one part per billion. Antigens include viruses, bacteria, parasites, chemical toxins and other foreign substances and hormones. The HIV-1 urine assay format includes a standard 96 well microtiter plate which is compatible with standard laboratory instrumentation. The microwell plates are coated with proprietary recombinant HIV-1 envelope protein antigen. Patient urine and the unique specimen diluent are introduced to the microwell simultaneously. If HIV-1 antibodies are present, they bind to the antigen coated well and remain during the subsequent wash steps. An enzyme labeled conjugate is added to the well. This conjugate binds specifically to human antibody which remains from the previous step. Following another wash, substrate reagent is added and color development occurs due to the presence of the enzyme conjugate in the well. This color is measured spectrophotometrically on a standard laboratory microwell plate reader. The presence of HIV antibody in the 26 29 specimen is indicated by the development of color in the microwell, and the intensity of the color is proportional to the amount of antibody. CLINICAL TRIALS The Company has performed preclinical and clinical studies which support the use of urine as a reliable and clinically valid sample. Four of the studies are described below: Metpath Laboratories, Inc. The feasibility of HIV-1 antibody detection in urine was established in a large preclinical study at Metpath Laboratories, Inc. which included 7,357 urine samples from a low risk population. A positive prevalence rate for HIV-1 in urine of 0.80% agreed with the reported HIV-1 serum positive rate. Of the 1,746 urine samples matched to serum, five urine positives agreed with the five serum positives. For urine negatives, 1,736 out of 1,741 were correctly identified resulting in a 99.71% correlation to serum. In addition, in a study of 94 paired urine and serum samples from subjects previously determined to be HIV-1 seropositive, antibodies to HIV-1 were detected in all urine by Calypte's urine-based HIV-1 screening test. Center for AIDS Prevention Studies and the University of California at San Francisco. Researchers at the Center for AIDS Prevention Studies and the University of California at San Francisco ("UCSF") carried out a large validation study of the diagnostic accuracy of the urine-based HIV-1 screening test for HIV envelope antibodies in urine. Matched blood and urine specimens collected from 586 recovering alcoholics were tested by two independent laboratories blinded to results at the other site. The matched urine samples were tested by and confirmed by a urine-based western blot. The urine-based HIV-1 screening test when confirmed by a urine western blot led to a correct diagnosis in all samples. The authors reported that the urine EIA demonstrated a specificity of 100% and a sensitivity also estimated to be 100%. Multicenter Trial. In clinical trials for the urine-based HIV-1 screening test conducted at five geographic locations, approximately 11,000 matched blood and urine specimens were tested. Assay specificity was assessed by testing paired urine and serum samples from a combined subset of 7,074 low risk individuals. Specificity of the screening test (prior to confirmation with western blot) was determined to be 99.18%. In diagnosis of AIDS, sensitivity was estimated to be 99.33%. Paired urine and serum specimens from asymptomatic and symptomatic HIV-1 infected subjects and subjects at high risk for HIV-1 infection were also tested. Urine correlation with blood for these 614 samples was 98.20%. Japanese Ministry of Health Study. An independent study of the performance of the urine-based HIV-1 screening test was carried out by the Japanese Ministry of Health and reported at the 1994 International AIDS Conference in Yokohama, Japan. Paired urine and serum samples from 200 HIV-1 infected subjects and 700 healthy subjects in a low risk population were tested using the urine-based HIV-1 screening test, confirmed by urine western blot and compared with serum EIA and serum western blot results. There was agreement between all 200 urine positives and serum positives and agreement between all 700 urine negative and serum negative results. Urine correlation with serum was 100% for all urine samples tested. INVESTMENT IN PEPGEN In October 1995 Calypte purchased a 49% equity interest in Pepgen, a therapeutic research and drug development company with two lead compounds in preclinical evaluation. The first compound is an interferon product, called interferon-tau, which in early animal trials has shown to be effective both as an anti-viral and anti-tumor agent with less toxicity than other interferons. Pepgen has planned further preclinical studies and if the preclinical studies are successful, Pepgen anticipates seeking approval from the FDA to commence human clinical trials. Pepgen's second lead compound is a growth factor called uteroferrin. This compound has stimulatory effects on the growth and differentiation of blood cells. Uteroferrin is a glycoprotein that is secreted by the uterine endometrioepithelium. Based on animal studies, the stimulation of hematopoietic cells by uteroferrin appears to act at an earlier stage of stem cell development than other known hematopoietic growth factors. Pepgen holds an exclusive worldwide license to both of these compounds from the University of Florida. The Company purchased its equity position in Pepgen for $2.5 million, comprised of $1.0 million paid at closing, 27 30 $1.0 million payable to Pepgen pursuant to a promissory note and options to purchase the Company's Common Stock valued at $500,000. The $1.0 million promissory note is due and payable upon the earlier of (i) October 1996 or (ii) 60 days following either FDA approval of the Company's urine-based HIV-1 screening test or the closing of this Offering. The options were granted to Pepgen shareholders for the purchase of an aggregate of 475,000 shares of the Company's Common Stock at a price of $7.50 per share, of which 100,000 are immediately exercisable and the remaining 375,000 are exercisable upon attainment of certain milestones. The options expire at the earlier of September 2005 or three years after becoming exercisable. In addition, Calypte has the right of first negotiation to purchase the remaining 51% of Pepgen at fair market value, and the Company is entitled to elect two of the seven Board members of Pepgen. Other than the payment of the $1.0 million promissory note, Calypte does not have any ongoing commitments to fund Pepgen. See "Certain Transactions" and "Use of Proceeds." PATENTS, PROPRIETARY RIGHTS AND LICENSES The Company believes that its future success will depend in large part on its ability to protect its patents and proprietary rights. Accordingly, the Company's ability to compete effectively will depend in part on its ability to develop and maintain proprietary aspects of its technology. The Company has one U.S. patent, four pending U.S. patent applications, and thirteen foreign patents, and sixteen pending foreign patent applications. In addition, the Company has the right to utilize certain patents and proprietary rights under licensing agreements with NYU, Cambridge Biotech, Repligen, Texas A&M University System and Stanford University. These license arrangements secure intellectual property rights for the manufacture and sale of the Company's products. The Company has licensed from NYU, on an exclusive basis, a U.S. patent for the detection of antibodies to HIV in urine. The rights under the license extend until the expiration of the U.S. patent in 2009 provided the Company makes certain payments. The Company has the right to make, use, sell and sublicense products utilizing the technology described in the patent and is obligated to make certain fixed and royalty payments to NYU to maintain exclusivity of the license. In connection with the NYU license, the Company also funded research at NYU, and expects to continue to do so through 1999. The Company has exclusive worldwide license to NYU inventions that arise from the research funded by the Company. The Company has sublicensed from Cambridge Biotech proprietary technology related to the HIV envelope glycoprotein. The Company has a non-exclusive worldwide sublicense to make, have made, use and sell products that relate to the licensed technology. The Company is required to pay Cambridge Biotech royalties on products incorporating the licensed technology. The license extends until the expiration of the licensed patents in 2005, although the Company can terminate the agreement at any time upon 30-day's written notice. The Company has been granted a non-exclusive license from Texas A&M University to make, have made, use and sell products based on its proprietary recombinant expression systems. The Company is required to pay certain fixed and royalty payments to Texas A&M University on net sales varying with the content of Texas A&M's technology in the Company's products. The Company licensed from Repligen HIV-1 gp160 recombinant virus seed stock. The Company has been granted (i) an exclusive license to make, have made, use and sell products incorporating this material for diagnostic purposes, and (ii) non-exclusive license to make, have made, use and sell the gp160 seed stock for research purposes. For seven years beginning on the date the Company first realizes net sales from products incorporating gp160, the Company must pay to Repligen certain royalties on net sales derived such from products and certain royalties on net sublicensing revenue derived from sales of products incorporating. In addition, the Company is required to pay certain fixed and royalty payments for a non-transferrable, non-exclusive license from Stanford University to a patent relating to recombinant DNA processes. The HIV testing industry has been characterized by extensive litigation regarding patents and other intellectual property rights. Litigation or interference proceedings could result in significant diversion of efforts by the Company's management and technical personnel. There are a number of filed and issued patents involved with the detection of HIV antibodies. One such patent is currently owned by Chiron Corporation. While the Company, based on the opinion of its patent counsel, believes that its urine-based HIV-1 screening 28 31 test does not infringe the Chiron patent, there can be no assurances that Chiron will not assert such claims against the Company. Patent litigation can be costly and protracted. The expense of litigating a claim against the Company for patent infringement could have a material adverse effect on the Company's business, financial condition and results of operations. In the event that the Company was found to be infringing a validly issued patent, and the Company could not obtain a license to such patent on reasonable terms, the Company could be forced to pay damages, obtain a license to such patent at a significantly higher rate or, possibly, remove its urine-based HIV-1 screening test from the market. Such an event would have a material adverse effect on the Company's business, financial condition and results of operations. There can be no assurance that the Company will not in the future become subject to patent infringement claims and litigation or interference proceedings declared by the USPTO to determine the priority of inventions. Although patent and intellectual property disputes in the medical diagnostic area have often been settled through licensing or similar arrangements, costs associated with such arrangements may be substantial and could include ongoing royalties. Furthermore, there can be no assurance that necessary licenses would be available to the Company on satisfactory terms if at all. Adverse determinations in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent the Company from manufacturing and selling its products, which would have a material adverse effect on the Company's business, financial condition and results of operations. There can be no assurance that the Company will be able to maintain exclusivity under or maintain its current license agreements. The Company relies on trade secrets and proprietary know-how, which it seeks to protect, in part, through appropriate confidentiality and proprietary information agreements. These agreements generally provide that all confidential information developed or made known to the individual by the Company during the course of the individual's relationship with the Company is to be kept confidential and not disclosed to third parties, except in specific circumstances. The agreements generally provide that all inventions conceived by the individual in the course of rendering services to the Company shall be the exclusive property of the Company; however, certain of the Company's agreement with consultants, who typically are employed on a full-time basis by academic institutions or hospitals, do not contain assignment of invention provisions. There can be no assurance that proprietary information or confidentiality agreements with employees, consultants and others will not be breached, that the Company would have adequate remedies for any breach, or that the Company's trade secrets will not otherwise become known to or independently developed by competitors. GOVERNMENT REGULATION Overview The Company's products are subject to extensive regulation by the FDA and, to varying degrees, by state and foreign regulatory agencies. The Company's products are regulated by the FDA under the Federal Food, Drug, and Cosmetic Act (the "Act"), as amended by the Medical Device Amendments of 1976 and the Safe Medical Devices Act of 1990, among other laws. Under the Act, the FDA regulates the preclinical and clinical testing, manufacturing, labeling, distribution, sale and promotion of medical devices in the U.S. The FDA prohibits a device, whether or not cleared under a 510(k) premarket notification or approved under a PMA, from being marketed for unapproved clinical uses. If the FDA believes that a company is not in compliance with the regulations, it can institute proceedings to detain or seize a product, issue a recall, prohibit marketing and sales of the Company's products and assess civil and criminal penalties against the Company, its officers or its employees. Furthermore, the Company plans to sell products in certain foreign countries of which impose local regulatory requirements. The preparation of required applications and subsequent FDA and foreign regulatory approval process is expensive, lengthy and uncertain. Failure to comply with FDA and similar foreign requirements could result in civil monetary penalties or criminal sanctions, restrictions on or injunctions against marketing of the Company's products. Additional enforcement actions may potentially include seizure or recall of the Company's products, and other regulatory action. There can be no assurance that the Company will be able to obtain necessary regulatory approvals or clearances in a timely manner or at all, and delays in receipt of or failure to receive such approvals or clearances, the loss of previously received 29 32 approvals or clearances, or failure to comply with existing or future regulatory requirements would have a material adverse effect on the Company's business, financial condition and results of operations. HIV-1 Screening and Diagnostic Tests The Company's HIV-1 screening test is regulated by the FDA Center for Biologics Evaluation and Research. When the test was submitted to the FDA in September 1992, the FDA required a PLA and an ELA for the Company's Berkeley, California manufacturing facility. OTC Home Urine Collection Kit The Company intends to file a PMA with the FDA for the HIV-1 home urine collection kit which would allow consumers, in the privacy of their homes to take a urine sample, mail it to Calypte Biomedical Laboratories for analysis and then anonymously obtain results and professional counseling by telephone. The Company believes that a submission for FDA approval of this product must set forth the Company's plans for the reporting of results to the consumer and consumer counseling services. In addition, the PMA will need to include the results of extensive clinical studies and manufacturing information and may be reviewed by a panel of experts outside the FDA. Clinical studies need to be conducted in accordance with FDA requirements, and the failure to strictly comply with such requirements could result in the FDA's refusal to accept the data or in other sanctions. There can be no assurance that the FDA will approve the Company's HIV-1 home urine collection kit for OTC distribution and sale. Furthermore, there can be no assurance that the FDA will not request additional data or require that the Company conduct further clinical studies causing the Company to incur additional costs and delay. In addition, there can be no assurance that the FDA will not limit the intended use of the Company's products as a condition of PMA approval. Failure to receive or delays in receipt of FDA approvals, or any FDA limitations on the intended use of the Company's products, would have a material adverse effect on the Company's business, financial condition and results of operations. Manufacturing Facilities The FDA requires the Company's products to be manufactured in compliance with cGMP regulations. In addition, the Company is subject to certain additional manufacturing regulations imposed by the State of California. These regulations require that the Company manufacture its products and maintain related documentation for testing and control activities. The Company's facilities and manufacturing processes have been periodically inspected by the State of California and other agencies and remain subject to audit from time to time. The Company believes that it is in substantial compliance with all applicable federal and state regulations. Nevertheless, there can be no assurance its manufacturing facility will satisfy cGMP or California manufacturing requirements. Enforcement of the cGMP regulations has increased significantly in the last several years, and the FDA has publicly stated that compliance will be more strictly enforced. In the event that the FDA determines the Company to be out of compliance with its regulations and to the extent that the Company is unable to convince the FDA of the adequacy of its compliance, the FDA has the power to assert penalties, including injunctions or temporary suspension of shipment until compliance is achieved. In addition, FDA will not approve ELA or PMA if the facility is found in noncompliance with cGMPs. Such penalties could have a material adverse effect on the Company's business, financial condition and results of operations. In addition, the manufacture, sale or use of the Company's products are subject to regulation by other federal entities, such as the Occupational Safety and Health Agency, the Environmental Protection Agency, and by various state agencies, including the California Environmental Protection Agency. Federal and state regulations regarding the manufacture, sale or use of the Company's products are subject to future change, and these changes could have a material adverse effect on the Company's business, financial condition and results of operations. 30 33 International Distribution of the Company's products outside the United States is also subject to regulatory requirements that vary from country to country. In a number of foreign countries, FDA approval is required prior to approval in that country. The export by the Company of certain of its products which have not yet been approved for domestic commercial distribution may be subject to FDA export restrictions. To date, the Company has not received approval for the sale of its product in any foreign country. Failure to obtain necessary regulatory approvals or failure to comply with regulatory requirements would have a material adverse effect on the Company's business, financial condition and results of operations. Calypte Biomedical Laboratories Any of Calypte's laboratory customers, using the Company's diagnostic devices for clinical use in the United States, and the Company itself when it establishes its own laboratory, will be regulated under CLIA. CLIA is intended to ensure the quality and reliability of all medical testing in laboratories in the United States by requiring that any health care facility in which testing is performed meet specified standards in the areas of personnel qualification, administration, participation in proficiency testing, patient test management, quality control, quality assurance and inspections. The regulations have established three levels of regulatory control based on complexity: "waived," "moderately complex," and "highly complex." Calypte believes that its test will be categorized as highly complex tests for clinical use in the United States. Laboratories that perform either moderately or highly complex tests must meet quality control and personnel standards. Personnel requirements for highly complex tests are more rigorous than those for moderately complex tests, requiring that personnel have more education and experience than personnel conducting moderately complex tests. Under the CLIA regulations, all laboratories performing high or moderately complex tests are required to obtain either a registration certificate or certifications of accreditation from the Health Care Financial Administration. There can be no assurance that the CLIA regulations and future administrative interpretations of CLIA will not have an adverse impact on the potential market for the Company's products. Therapeutic Products If the Company exercises its rights to acquire a controlling interest in or substantially all of Pepgen, Calypte will be required to obtain FDA approval for Pepgen's therapeutic products, a process which has historically been substantially more costly and time consuming than for diagnostic products. To obtain such approval, the Company must conduct preclinical safety and toxicology studies in the laboratory and Phase I, II, and III clinical studies under FDA approved protocols. The results of the pre-clinical and clinical testing for a new drug, together with detailed manufacturing and other information, would then be submitted to the FDA in the form of a new drug application. In responding to a new drug application, the FDA may refuse to accept the application for filing, request additional information or deny the application if the FDA determines that the application does not satisfy its regulatory approval criteria. The process of completing clinical testing usually takes a number of years and requires the expenditure of substantial resources. The length of the FDA review period varies widely depending upon the amount and quality of the data in the application and the nature and indications of the proposed product. In addition, the FDA may require post-marketing reporting and may require surveillance programs to monitor the usage and side effects of the drug product after product approval. The Company has no current plans to acquire the remaining equity ownership in Pepgen or to develop Pepgen therapeutic products. COMPETITION Competition in the in vitro diagnostic market is intense and expected to increase. Within the United States, the Company will face competition from a number of well-established manufacturers of blood-based EIAs, plus at least one system for the detection of HIV antibodies using oral fluid samples. In addition, the Company may face intense competition from competitors with significantly greater financial, marketing and distribution resources than the Company, several of whom have already submitted applications to FDA for approval of their OTC products. 31 34 The suppliers of blood-based HIV tests in the United States include Abbott Laboratories ("Abbott"), Organon-Teknika Corporation ("Organon-Teknika"), Sanofi Diagnostic Pasteur ("Sanofi"), Ortho Diagnostics ("Ortho") and Cambridge Biotech. All of these companies have many years of HIV market experience, and they typically offer a number of different testing products. Abbott, Sanofi and Ortho currently sell FDA-licensed blood-based HIV-1/HIV-2 combination tests on the market in the United States, and other companies may be developing HIV-1/HIV-2 products. The Company believes that HIV screening tests which permit the use of oral fluid may offer significant competition to the Company's urine-based HIV-1 screening test. The OraSure(TM) collection device manufactured by Epitope, Inc. ("Epitope") used in conjunction with an HIV-1 EIA manufactured by Organon- Teknika received FDA approval for marketing in the United States in December 1994. In June 1996, Epitope received approval from the FDA for a western blot oral-fluid confirmatory test. The Company is not aware of any competitors which have submitted urine-based HIV screening tests to the FDA, but there can be no assurance that such tests will not be submitted in the future for approval by the FDA. The Company is aware of only one other manufacturer, Murex Corporation ("Murex"), which has publicly announced urine capability for an HIV test. Murex manufactures a number of HIV assays in microtiter format, none of which have been submitted to the FDA for review. One such microtiter assay, "gacelisa," is intended for use on saliva and urine samples but is marketed only outside of the U.S. primarily as a research assay. Murex markets one HIV product in the U.S., the SUDS(TM) rapid test, which is intended for use on serum and plasma only. Although urine capability for this test has been reported in scientific literature, the Company is not aware of any applications for expanded sampling claims for this assay. In addition, the SUDS(TM) assay format is not conducive to high-volume testing. Essentially all of the Company's competitors actively market their diagnostic products outside of the U.S. In addition, outside of the U.S., where the regulatory requirements for HIV screening tests are less onerous than those of the FDA, a much wider range of competitors can be found. Manufacturers from Japan, Canada, Europe, and Australia offer a number of HIV screening tests in those markets including HIV-1/HIV-2 tests, rapid tests and other non-EIA format tests, which are not approved for sale in the U.S. market. There can be no assurances that the Company's products will compete effectively against these products in foreign markets, or that these competing products will not achieve FDA approval. Three companies have submitted applications to the FDA for OTC HIV blood testing: Direct Access Diagnostics, a subsidiary of Johnson & Johnson, Home Access Health Corporation, and ChemTrak Incorporated. The FDA has approved the home collection kit for HIV blood testing developed by Direct Access Diagnostics. The Company believes that an OTC HIV testing system which does not require consumers to collect their own blood may compete favorably against DBS systems. However, there can be no assurances that the earlier market entry of these competitors, their substantial promotional and distribution resources, and future introduction of HIV-1/HIV-2 products will not prevent the Company from competing favorably. The Company's inability to compete favorably with respect to any of these factors could have a material adverse effect on its business, financial condition, and results of operations. If the Company is successful in developing and introducing urine-based Chlamydia or other STD tests, it will face competition from established diagnostic testing companies with greater financial, marketing and distribution resources than the Company. Some of these companies are marketing established tests in widely-used formats. In addition, Abbott Laboratories has applied for FDA approval for a urine-based diagnostic test for chlamydia antigen. EMPLOYEES As of March 31, 1996, the Company had 59 full time employees, 13 of whom were engaged in or directly supported the Company's research and development activities, 29 of whom were in manufacturing, facilities and quality assurance, three of whom were in marketing and sales and 14 of whom were in administration. The Company's employees are not represented by a union or collective bargaining entity. The Company believes its relations with its employees are good. 32 35 FACILITIES The Company currently leases approximately 20,000 square feet of office, research and manufacturing space in Berkeley, California. The existing lease expires in June 1997, with an option to renew the lease for two one-year terms. The Company also leases approximately 22,000 square feet of office and manufacturing space in Alameda, California. The existing lease expires in November, 1998, with an option to renew the lease for two successive five-year periods. The Company believes that existing facilities are adequate to support the Company's activities for the foreseeable future. LEGAL PROCEEDINGS An action was brought against the Company in California Superior Court by a former employee, alleging, in connection with the Company's termination of the employee, gender and age discrimination, wrongful termination, breach of contract and breach of implied covenant of good faith and fair dealing. This former employee has requested in her complaint compensatory and punitive damages along with attorneys fees and costs. The Company believes that the claims are without merit and plans to vigorously defend against them. SCIENTIFIC ADVISORY BOARD The Scientific Advisory Board is composed of certain of the Company's scientists and other leading scientists who have been actively involved in pioneering HIV research. Scientific Advisory Board members meet as a group and individually with management and key scientific employees of the Company on a regular basis. Scientific Advisory Board members have taken an active role in helping the Company identify scientific and product development opportunities and recruiting and evaluating the Company's scientific staff. The Company has granted options to acquire its Common Stock to members of the Scientific Advisory Board. The members of the Scientific Advisory Board and their experience are set forth below: ABUL K. ABBAS, M.D., Professor, Department of Pathology, Harvard Medical School. Dr. Abul Abbas is an expert in the cellular interactions and cytokine regulation of the immune response. Professor Abbas received his M.D. in India in 1968 and interned at Harvard Medical School in 1970. He has held the position of Professor of Pathology since 1991. Professor Abbas has also received the Parke-Davis Award for Experimental Pathology (1987). ALVIN FRIEDMAN-KIEN, M.D., Professor, New York University Medical Center, New York. Since 1994, Dr. Friedman-Kien has been a Professor of Microbiology and Dermatology at New York University Medical Center and Bellevue Hospital. Dr. Friedman-Kien is a clinician and researcher with expertise in the field of AIDS and AIDS related opportunistic infections. In particular, Professor Friedman-Kien is an expert in the etiological relationship between HIV and other human viruses. The detection of antibodies to HIV in urine was first reported by Dr. Friedman-Kien. Dr. Friedman-Kien graduated in 1956 with a B.A. degree from Brown University and received an M.D. degree from Yale University Medical School in 1960. TOBY D. GOTTFRIED, PH.D. is the Company's Director of Research and Development. See "Management -- Directors and Executive Officers." HOWARD JOHNSON, PH.D., Graduate Research Professor, Department of Microbiology and Cell Science at the University of Florida in Gainesville. From 1985 to 1988 he was Professor in the Department of Comparative and Experimental Pathology at the University of Florida. Prior to this, Dr. Johnson was also on the faculty of the University of Texas. He was also Founder and President of PepTech, Inc., a subsidiary of Pepgen, and holds the patent on arginine vasopressin-binding antihypertensive peptide. He is currently a member of a National Advisory Council for the National Institutes of Health. Dr. Johnson received his B.S. and Ph.D. degrees from The Ohio State University. NORMAN KLINMAN, M.D., PH.D., Member, Department of Immunology, The Scripps Research Institute, La Jolla, California. Dr. Klinman received his M.D. in 1962 and Ph.D. in Microbiology in 1965 from the University of Pennsylvania. He served on the faculty of the Department of Pathology and Microbiology at the University of Pennsylvania for 10 years before accepting his current position in 1978 in the Department of Immunology at Scripps. 33 36 DANIEL LANDERS, M.D., Director for the Division of Reproductive and Infectious Diseases and Immunology, Department of Obstetrics, Gynecology & Reproductive Sciences, Magee-Womens Hospital at the University of Pittsburgh. From 1992 to 1995, Dr. Landers was Associate Professor for the Department of Obstetrics, Gynecology and Reproductive Sciences at UCSF. He is a well-known expert in sexually transmitted diseases in women, and the recipient of numerous awards, including the Susman Memorial Award for the Infectious Diseases Society of America, Young Investigator Award for Infectious Disease Society for OB/GYN, an NIH Physician-Scientist Award, and the Pediatric AIDS Foundation Scholar Award. He received his M.D. in 1980 at UCSF. LUC MONTAGNIER, M.D., Professor, Pasteur Institute, Paris, France. Professor Montagnier began his career as a researcher at the Centre National de la Recherche Scientifique. In 1972, he joined the Pasteur Institute and formed the Division of Viral Oncology. In 1983, he discovered the HIV virus and showed its etiologic role in AIDS. In 1985, his research team isolated the second human AIDS virus (HIV-2) from West African patients. Among the numerous honors and prizes received by Professor Montagnier are the Rosen Price (1971), the Gallien Prize (1985), the Lasker Prize (1986), the Gairdner Price (1987), the Japan Prize (1988), and the Amsterdam Prize (1994). He is also a Comandeur de l'Ordre National merite and is a Director of the French National Center of Scientific Research. HOWARD B. URNOVITZ, PH.D. is the Company's Chief Science Officer and a Director. See "Management -- Directors and Executive Officers." 34 37 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The following table sets forth certain information with respect to the executive officers and directors of the Company as of May 15, 1996:
NAME AGE POSITION - ------------------------------- --- ---------------------------------------------- William A. Boeger (1)(2)....... 46 Chairman of the Board of Directors John P. Davis.................. 54 President, Chief Executive Officer and Member of the Board of Directors Howard B. Urnovitz, Ph.D....... 42 Chief Science Officer and Member of the Board of Directors John J. DiPietro............... 38 Vice President of Finance, Chief Financial Officer and Secretary Toby Gottfried, Ph.D........... 57 Director of Research and Development Richard Van Maanen............. 36 Director of Marketing, Sales and Business Development Jeffrey Lang................... 45 Director of Operations Cynthia Green.................. 49 Director of Regulatory Affairs and Quality Assurance and Quality Control Kuo-Yu (Frank) Chiang.......... 44 Member of the Board of Directors David Collins (1).............. 62 Member of the Board of Directors Julius R. Krevans, M.D. (2).... 71 Member of the Board of Directors Mark Novitch, M.D. (1)......... 64 Member of the Board of Directors Roger Quy, Ph.D. (2)........... 45 Member of the Board of Directors Hideji Nonomura................ 49 Member of the Board of Directors
- --------------- (1) Member of the Audit Committee. (2) Member of the Compensation Committee. WILLIAM A. BOEGER has served as the Company's Chairman of the Board since January 1994. From January 1994 until September 1995, Mr. Boeger served as the Company's Chairman, President and Chief Executive Officer. Mr. Boeger has been a Director of the Company since 1991. He is a founder and Managing General Partner of Quest Ventures, a venture capital partnership founded in August 1985. Prior to that he was a General Partner of Continental Capital Ventures, a venture capital partnership. Before entering the venture capital field, he worked at Harvard Medical School and Peter Bent Brigham Hospital and served on the faculty of the Amos Tuck Business School at Dartmouth College. Mr. Boeger also serves as Chief Executive Officer and Chief Financial Officer of Pepgen Corporation, the 49% owned therapeutic subsidiary of Calypte. He also serves on the Board of Directors of IRIDEX Corporation and several private life sciences companies and non-profit corporations. Mr. Boeger received his M.B.A. from the Harvard Business School and his B.S. from Williams College. JOHN P. DAVIS has served as the Company's President and Chief Executive Officer since September 1995. He joined the Company in May 1995 as President and Chief Operating Officer. Prior to joining the Company, from 1984 until 1995, Mr. Davis was co-founder, President and, later, Chief Executive Officer of Dianon Systems, Inc., a medical laboratory company specializing in oncology, urology, and anatomic pathology testing services and information systems. From 1981 until 1984, Mr. Davis was Division President of API, a diagnostic products division of American Home Products Corporation. Mr. Davis was employed from 1966 until 1981 by Abbott Laboratories, a multinational health care corporation company, where he held senior management positions in both the Ross Laboratories and the Diagnostics Products Divisions, most recently as Division Vice President and General Manager of the Diagnostic Products Business Unit. Mr. Davis also serves as a director of Pepgen and is a member of the board of directors of Athena Neuroscience Inc. He is a board 35 38 member and Vice Chairman of the Board of Directors of Dianon Systems Inc. Mr. Davis received a B.S. from The Ohio State University. HOWARD B. URNOVITZ, PH.D. is the founder of the Company and serves as Chief Science Officer. Prior to founding the Company in 1988, Dr. Urnovitz was a Senior Scientist at the Institute of Cancer Research in San Francisco from 1985 to 1987. He was Director of Molecular and Cellular Engineering at Xoma Corporation, a biotechnology corporation, from 1983 to 1985. Prior to this, he was Director of the Hybridoma Laboratory at the University of Iowa. Dr. Urnovitz received a B.S. in Microbiology and a Ph.D. in Microbiology from the University of Michigan, and completed a post-doctoral study at Washington University. JOHN J. DIPIETRO has served as the Company's Vice President of Finance, Chief Financial Officer and Secretary since October 1995. Prior to joining the Company, he was Vice President of Finance, Chief Financial Officer and Secretary of Meris Laboratories, a full service clinical laboratory, from 1991 until 1995. While at Meris Laboratories, Mr. DiPietro, inter alia, was a respondent in an SEC administrative proceeding (No. 3-8484), dated September 26, 1994 in which, without admitting or denying the SEC's findings, Mr. DiPietro consented to the entry of an order that Mr. DiPietro cease and desist from committing or causing any violation, and any future violations of Sections 17(a)(2) and (3) of the Securities Act, Section 13(a) of the Exchange Act and Rules 126-20, 13a-1, and 13a-13 thereunder. From 1980 until 1983 and from 1986 until 1991, Mr. DiPietro was a Senior Manager at Price Waterhouse. Mr. DiPietro served as Credit Manager for Motorola, Inc., an electronics company, from 1983 until 1986. 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. TOBY GOTTFRIED, PH.D. has served as Director of Research and Development since joining the Company in 1988. From 1983 until 1988 she was a founding Senior Scientist of Carcinex Corporation, a cancer therapeutic company. From 1978 until 1980, Dr. Gottfried was a scientist at the Hepatitis Research Laboratory of the University of California, San Francisco Medical Center. Dr. Gottfried received her Ph.D. in Biochemistry from the University of Pennsylvania and her B.S. from Cornell University. RICHARD VAN MAANEN has served as Director of Marketing, Sales and Business Development since March 1993. Prior to joining Calypte, Mr. Van Maanen held several positions from 1987 until 1993 at ADI Diagnostics Inc., a medical manufacturing company, including Director of Sales and Marketing, Marketing Manager, and Canadian Business Manager. From 1983 until 1987 he held sales and marketing positions with the Diagnostics Division of Abbott Laboratories and from 1981 until 1983 he was with Millipore Corporation, a filtration products company. Mr. Van Maanen received a B.S. in Biology from the University of Guelph, Ontario. JEFFREY LANG has served as Director of Operations since June 1993. From 1992 until 1993 he was Director of Operations at Varian Associates, a medical products company, supporting medical device operations. Prior to that, from 1983 until 1991 Mr. Lang held several positions with Airco Coating Technology, an engineering and glass coating company, including Vice President of Manufacturing and Engineering, Director of Manufacturing and Engineering, and Operations Manager. From 1973 until 1983, he held several positions with Miles Laboratories, a pharmaceutical company, including Production Manager, Senior Manufacturing Engineer, and Production Supervisor. Mr. Lang received his B.S. in Physics from California State University, Hayward. CYNTHIA GREEN has served as Director of Regulatory Affairs, Quality Assurance and Quality Control since June 1992. From 1990 until 1992, she was Manager of Regulatory and Quality Assurance at CellPro Inc., a biotechnology company. Prior to that, from 1983 until 1990, Ms. Green worked at Genetic Systems, a manufacturer of HIV and hepatitis diagnostic products, as the Quality Assurance and Quality Control Manager. Ms. Green received a B.S. in Bacteriology and Public Health from Washington State University. FRANK CHIANG has served on the Company's Board of Directors since March 1992. From 1972 to the present he has been employed by the Ta Chiang Corporation, Ltd., a Taiwanese holding corporation, where he has served in a number of executive capacities including his most recent position as President. Mr. Chiang also serves on the Board of Directors of the G.C.H. Company, the Ta Security Limited Company, and the Fidelity Venture Capital Corporation. 36 39 DAVID COLLINS has served on the Company's Board of Directors since December 1995. From 1989 until 1994 he served as Executive Vice President with Schering-Plough Corporation, a medical products company, and President of the HealthCare Products division, responsible for all OTC and consumer health care products. From 1988 to 1989, he was a founding partner of Galen Partners, a venture capital firm. From 1985 to 1988, he held several positions at Johnson & Johnson, including Vice Chairman Board of Directors for Public Affairs & Planning and Vice Chairman Executive Committee & Chairman Consumer Sector. He is also a member of the Board of Directors of Penederm, Inc., Lander, Inc., and Claneil Enterprises, Inc., a private company. Mr. Collins received his L.L.B. at Harvard Law School and his B.A. at the University of Notre Dame. JULIUS KREVANS, M.D. has served on the Company's Board of Directors since March 1995. Dr. Krevans has been Chancellor Emeritus and Director of International Medical Care at University of California at San Francisco since 1993. From 1982 until 1993, Dr. Krevans served as Chancellor at UCSF, and was Dean of the School of Medicine at UCSF from 1971 until 1982. Prior to this, Dr. Krevans served as Dean for Academic Affairs at The Johns Hopkins University School of Medicine where he also served on the faculty for 18 years and was Professor of Medicine from 1968 until 1971. He is also a director of Neoprobe. Dr. Krevans served as a director of Parnassus Pharmaceuticals Incorporated, which was liquidated under Chapter 7 of the Federal Bankruptcy Code in 1995. Dr. Krevans received his M.D. from New York University, College of Medicine and completed a residency in Medicine at The Johns Hopkins University School of Medicine. MARK NOVITCH, M.D. has served on the Company's Board of Directors since September 1995. Dr. Novitch has been a Professor of Health Care Sciences at George Washington University since the beginning of 1994. From 1985 until 1993, Dr. Novitch served in senior executive positions with the Upjohn Company, a medical products company, including Vice Chairman of the Board of Directors, Corporate Executive Vice President, Corporate Senior Vice President for Scientific Administration and Corporate Vice President. Prior to this, for 14 years, Dr. Novitch served with the FDA where from 1983 until 1984 he was Acting Commissioner. For seven years, Dr. Novitch was on the faculty at Harvard Medical School. He is also a member of the Board of Directors of Osiris Therapeutics, Inc., Neurogen Corporation, Guidant Corporation and Alteon, Inc. Dr. Novitch received his A.B. from Yale University, and his M.D. from the New York Medical College. ROGER QUY, PH.D. has served on the Company's Board of Directors since November 1991. Dr. Quy has been general partner of Technology Partners, a venture capital firm focused on early stage companies since 1989. From 1982 to 1989, Dr. Quy held several management positions with Hewlett-Packard Corporation including member of Directors Staff for Hewlett-Packard Labs and Research and Development for HP Labs Europe. He serves as a Chairman or a Director of several early stage medical companies. Dr. Quy received an M.B.A. in finance from the Haas School of Business, University of California at Berkeley, a Ph.D. in Neuroscience and a B.A. from the University of Keele, England. HIDEJI NONOMURA has served on the Company's Board of Directors since December 1995. Mr. Nonomura is currently the Director of the Diagnostic Reagents Division of Otsuka Pharmaceutical Company and has served in this capacity since April 1996. From January 1991 until March 1996, Mr. Nonomura served as the Director of Overseas Affairs of Otsuka Pharmaceutical Company. Mr. Nonomura holds a B.S. in Chemistry from Tokyo University of Education. DIRECTOR COMPENSATION The Company's directors are reimbursed for their out-of-pocket travel expenses associated with their attendance at Board meetings. Under the Company's 1995 Director Option Plan, non-employee directors of the Company receive automatic grants of stock options to purchase shares of Common Stock. In addition, all outside directors receive $5,000 per year in consideration of their attendance on the Board of Directors. 1995 DIRECTOR OPTION PLAN The Company's Director Option Plan was adopted by the Company's Board of Directors in December 1995 and stockholders in 1996. Under the Director Option Plan, the Company reserved 200,000 shares of Common 37 40 Stock for issuance to the directors of the Company pursuant to nonstatutory stock options. Under the Director Option Plan directors who are also not employees or consultants of the Company automatically receive an option to purchase 12,000 shares of Common Stock (the "First Option") on the date on which such person first becomes a director, whether through election by the stockholders of the Company or appointment by the Board to fill a vacancy. Thereafter, each such person shall receive an option to acquire 3,000 shares of the Company's Common Stock (the "Subsequent Option") on each date of the Company's Annual Meeting of Stockholders where such outside director is reelected. Each option granted under the Director Option Plan shall be exercisable at 100% of the fair market value of the Company's Common Stock on the date such option was granted. Twenty-five percent of the First Option shall vest one year after the date of grant, with 25% vesting each anniversary thereafter. Twelve and one-half percent of the shares subject to the Subsequent Option shall be exercisable on the first day of each month following the date of grant. The Plan shall be in effect for a term of ten years unless sooner terminated under the Director Option Plan. EXECUTIVE COMPENSATION The following table sets forth certain compensation awarded or paid by the Company during the year ended December 31, 1995 to its Chief Executive Officer and each of the other most highly compensated executive officers of the Company whose salary and bonus for such fiscal year were in excess of $100,000 (collectively, the "Named Executive Officers"). SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ------------ SECURITIES UNDERLYING ANNUAL COMPENSATION OPTIONS ------------------------------------- GRANTED NAME AND PRINCIPAL POSITION SALARY BONUS OTHER (#) - ------------------------------------------ -------- ------- ------- ------------ William A. Boeger, Chief Executive Officer and Chairman of the Board of Directors(1)............................ $272,500(2) $ -- $ 7,210(3) 220,000(4) John P. Davis, President and Chief Executive Officer(5).................... 126,602 -- 15,819(6) 320,000 Howard B. Urnovitz, Chief Science Officer................................. 139,691 16,816 -- 180,000 Cynthia Green, Director of Regulatory Affairs and QA/QC....................... 192,000(7) -- 9,961(3) --
- --------------- (1) Mr. Boeger served as the Company's Chairman of the Board of Directors, Chief Executive Officer, and President until May 1995. From May 1995 to September 1995 he served as Chairman of the Board of Directors and Chief Executive Officer. Since September 1995 he has served as Chairman of the Board of Directors. (2) $135,000 was paid to an affiliate of Quest Ventures, a venture capital partnership of which Mr. Boeger is Managing General Partner, in 1995 for services rendered by Mr. Boeger in 1994. $118,750 was paid to an affiliate of Quest Ventures in 1995 for services rendered by Mr. Boeger in 1995. $18,750 was paid to Pepgen Corporation, a subsidiary of the Company of which Mr. Boeger is President and Chief Financial Officer, in 1995 for services rendered by Mr. Boeger in 1995. (3) Represents reimbursements for living expenses. (4) Excludes options to purchase 67,303 shares issued to an affiliate of Quest Ventures. (5) Mr. Davis joined the Company in May 1995 as its President and Chief Operating Officer. In September 1995 Mr. Davis was named President and Chief Executive Officer. (6) Represents reimbursements for living expenses. Excludes $75,000 which the Company accrued for reimbursement of moving expenses. Such amount was not paid in 1995. (7) Ms. Green is retained by the Company as a consultant. 38 41 The following table sets forth information concerning stock options granted to the Named Executive Officers during the fiscal year ended December 31, 1995. STOCK OPTION GRANTS IN LAST FISCAL YEAR INDIVIDUAL GRANTS
POTENTIAL REALIZABLE VALUE AT ASSUMED NUMBER OF PERCENT OF ANNUAL RATES OF STOCK SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR UNDERLYING GRANTED TO EXERCISE OPTION TERM(3) OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------- NAME GRANTED FISCAL YEAR(1) ($/SH)(2) DATE 5%($) 10%($) - ---------------------------- ---------- -------------- --------- ---------- ---------- ---------- William A. Boeger........... 220,000(4) 22.2% $0.50 01/25/01 $2,543,389 $3,397,691 John P. Davis............... 320,000(5) 32.2% $0.50 05/31/05 $4,531,217 $7,309,978 Howard B. Urnovitz.......... 180,000(6) 18.1% $0.50 01/25/01 $2,080,955 $2,779,929 Cynthia Green............... -- -- -- -- -- --
- --------------- (1) Based on an aggregate of 992,371 options granted under the Company's Incentive Stock Plan to employees and directors of, and consultants to, the Company during the year ended December 31, 1995, including the Named Executive Officers. (2) The exercise price per share of each option was equal to the fair market value of the Common Stock on the date of grant as determined by the Board of Directors. (3) The potential realizable value is calculated based on the term of the option at its time of grant. It is calculated assuming that the public offering price of $9.00 per share appreciates from the date of grant at the indicated annual rate compounded annually for the entire term of the option and the option is exercised and sold on the last day of its term for the appreciated stock price. With respect to options granted at fair market value, no gain to the optionee is possible unless the stock price increases over the option term. (4) Options granted become exercisable at the rate of 110,000 of the shares subject to the option at January 25, 1995 and 8.34% of the remaining 110,000 shares subject to the option each month thereafter for the next 12 months. The options expire six years from the date of grant, or earlier upon termination of employment. (5) Options granted become exercisable at the rate of 20% of the shares subject to the option at May 1, 1996 and at the rate of 1.67% per month thereafter for the next four years. The options expire ten years from the date of grant, or earlier upon termination of employment. (6) Options granted become exercisable at the rate of 25% of the shares subject to the option at January 25, 1996 and at the rate of 2.08% per month thereafter for the next three years. 39 42 The following table sets forth information concerning option exercises for the year ended December 31, 1995, with respect to each of the Named Executive Officers. AGGREGATED OPTION EXERCISES IN 1995 AND DECEMBER 31, 1995 OPTION VALUES
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED UNEXERCISABLE IN-THE-MONEY OPTIONS OPTIONS AT SHARES AT DECEMBER 31, 1995 DECEMBER 31, 1995 ACQUIRED ON VALUE (EXERCISABLE/ (EXERCISED/ NAME EXERCISE($) REALIZED($) UNEXERCISABLE) UNEXERCISABLE)(1) - ------------------------------ ----------- ----------- -------------------- ----------------------- William A. Boeger............. -- -- 210,831/ 9,169 $ 1,792,063/ $ 77,937 John P. Davis................. -- -- -- / 320,000 $-- / $2,720,000 Howard B. Urnovitz............ -- -- 105,000/ 180,000 $ 921,900/ $1,530,000 Cynthia Green................. -- -- 10,625/ 27,625 $ 90,462/ $ 234,913
- --------------- (1) Value realized and value of unexercised in-the-money options is based on a value of $9.00 per share of the Company's Common Stock, the estimated public offering price, even though at the December 31, 1995 the fair market value of the Common Stock was determined by the Board of Directors to be $5.00 per share. Amounts reflected are based on the assumed value minus the exercise price multiplied by the number of shares acquired on exercise and do not indicate that the optionee sold such stock. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS The Compensation Committee is responsible for determining salaries, incentives and other forms of compensation for directors, officers and other employees of the Company and administers various incentive compensation and benefit plans. The Compensation Committee consists of Dr. Krevans, Dr. Quy and Mr. Boeger, who is a non-voting member. INCENTIVE STOCK PLAN A total of 2,740,992 shares of Common Stock have been reserved for issuance under the Company's Incentive Stock Plan (the "Stock Plan"). As of March 31, 1996, 126,524 shares had been issued upon the exercise of stock options granted under the Stock Plan, 1,292,561 shares were subject to outstanding options and 1,321,907 remained available for future grant. The Stock Plan is administered by the compensation committee of the board of directors. Under the Stock Plan, options may be granted to employees, including directors who are employees, and consultants. Only employees may receive "incentive stock options," which are intended to qualify for certain tax treatment; nonemployees receive "nonstatutory stock options," which do not qualify for such treatment. In the event of a change in control of the Company, including a merger or sale of substantially all of the Company's assets, outstanding options may be assumed by any successor corporation or may become exercisable. The exercise price of incentive stock options under the Stock Plan must at least equal the fair market value of the Common Stock on the date of grant, while the exercise price of nonstatutory options must at least equal 85% of such market value. Options granted under the Stock Plan generally vest on a cumulative monthly basis over four or five years, and in the case of incentive stock options, must be exercised within six or ten years. The Board may amend or modify the Stock Plan at any time. The Stock Plan will terminate in 2001, unless sooner terminated by the Board. 1995 EMPLOYEE STOCK PURCHASE PLAN The Company's Employee Stock Purchase Plan (the "Purchase Plan") was adopted by the Company's Board of Directors in December 1995 and stockholders in June 1996. The Purchase Plan is intended to qualify under Section 423 of the Code. The Company has reserved 300,000 shares of Common Stock for issuance under the Purchase Plan. Under the Purchase Plan, an eligible employee may purchase shares of Common Stock from the Company through payroll deductions of up to 10% of his or her compensation, at a price per share equal to 85% of the lower of (i) the fair market value of the Company's Common Stock on the first day of an offering 40 43 period under the Purchase Plan or (ii) the fair market value of the Common Stock on the last day of an offering period. Except for the first offering period, each offering period will last for six months and will commence the first day on which the national stock exchanges and The Nasdaq Stock Market are open for trading, on or after May 1 and November 1 of each year. The first offering period will begin upon the effective date of this Offering and will end on October 31, 1996. Any employee who is customarily employed for at least 20 hours per week and more than five months per calendar year, who has been so employed for at least three consecutive months on or before the commencement date of an offering period is eligible to participate in the Purchase Plan. LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS Prior to the closing of the Offering, the Company intends to reincorporate in Delaware, in part to take advantage of certain provisions in Delaware's corporate law relating to limitations on liability of corporate officers and directors. The Company believes that the reincorporation into Delaware, the provisions of its Certificate of Incorporation and Bylaws and the separate indemnification agreements outlined below are necessary to attract and retain qualified persons as directors and officers. The Company's Certificate of Incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a company will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability (i) for any breach of their duty of loyalty to the company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments or dividends or unlawful stock repurchases or redemptions as provided in Section 174 of Delaware General Corporation Law or (iv) for transactions from which the director derived an improper personal benefit. The Company's Bylaws provide that the Company shall indemnify its officers and directors and may indemnify its employees and other agents to the fullest extent provided by Delaware law, including those circumstances where indemnification would otherwise be discretionary under Delaware law. The Company believes that indemnification under its Bylaws covers at least negligence on the part of indemnified parties. The Bylaws authorize the use of indemnification agreements and the Company has entered into such agreements with each of its directors and executive officers. The Company has obtained officer and director liability insurance with respect to liabilities arising out of certain matters, including matters arising under the Securities Act. At present, there is no pending litigation or proceeding involving any director or officer, employee or agent of the Company where indemnification will be required or permitted. The Company is not aware of any threatened litigation or proceeding which may result in a claim for such indemnification. 41 44 CERTAIN TRANSACTIONS FORMATION OF THE COMPANY AND RELATED TRANSACTIONS From its inception to June 21, 1996, the Company has issued or sold shares of Common Stock at prices ranging from $0.20 to $8.10, and Series B, Series C, Series D and Series E Preferred Stock at prices of $1.86, $3.70, $5.00 and $5.00 to $7.50 per share, respectively, to the following directors, entities affiliated with directors, and 5% stockholders.
SERIES SERIES SERIES SERIES NAME COMMON B C D E - ------------------------------------------------- ------- ------- ------- ------- ------- Directors William A. Boeger.............................. -- -- -- -- -- John P. Davis.................................. -- -- -- -- -- Howard B. Urnovitz............................. 139,000 -- -- -- -- David Collins.................................. -- -- -- -- -- Julius R. Krevans.............................. -- -- -- -- 4,000 Mark Novitch................................... -- -- -- -- -- Roger Quy...................................... -- -- -- -- -- Hideji Nonomura................................ -- -- -- -- -- Kuo-Yu (Frank) Chiang.......................... 5,662 -- 556,082 -- -- Entities Affiliated with Directors Quest Ventures II (1).......................... 29,322 79,680 83,482 14,850 -- Quest Ventures International(1)................ 20,042 54,461 57,059 10,150 -- Otsuka Pharmaceutical Co., Ltd.(2)............. -- 268,282 164,685 260,000 600,000 Technology Partners West Fund IV(3)............ -- -- 270,270 150,000 200,000 Steven F. Urnovitz(4).......................... 1,569 -- -- -- -- Other 5% Stockholders Suez Technology Fund........................... 30,853 134,141 209,459 50,000 66,500 H&Q HealthCare Investors....................... -- -- -- 200,000 50,400 H&Q Life Sciences Investors.................... -- -- -- 100,000 48,300 Entities Affiliated with MVP Investors, L.P. ....................................... -- -- 216,217 242,000 --
- --------------- (1) William A. Boeger is a founder of the Company and Managing General Partner of Quest Ventures, an affiliate of these entities. (2) Hideji Nonomura is the Director of the Diagnostic Reagents Division of Otsuka Pharmaceutical Co., Ltd. (3) Roger Quy is a general partner of Technology Partners, an affiliate of Technology Partners West Fund IV. (4) Steven F. Urnovitz is the brother of Howard B. Urnovitz. Upon the completion of this Offering, each outstanding share of Series B, C, D and E Preferred Stock will be converted into one share of Common Stock. PEPGEN CORPORATION In October 1995, Calypte purchased a 49% equity interest in Pepgen Corporation. Pepgen is a research and development stage company involved in the field of human therapeutics. Calypte purchased the equity position for a total of $2,500,000, with $1,000,000 paid in cash at closing, a promissory note in the amount of $1,000,000 and options to purchase 475,000 shares of Common Stock valued at $500,000. The note is due and payable the earlier of (i) October 1996 or (ii) 60 days following either the Company's approval by the FDA of its HIV-1 urine assay or the completion of a public offering of securities. In addition to its 49% ownership, Calypte has the first right of negotiation to purchase the remaining 51% of Pepgen at fair market value. 42 45 Calypte is also entitled to elect two of seven members of the Pepgen board of directors. Other than the second installment of the equity purchase described above, Calypte does not anticipate that it will use any of the proceeds from this Offering for Pepgen (see "Use of Proceeds"). Pepgen expects to fund its product development through loans, grants, collaborations, or equity investment from corporate partners and governmental agencies. Calypte has no ongoing obligation to provide Pepgen with any additional funds beyond its original equity investment. The option grants by the Company in connection with its purchase of 49% of Pepgen, were granted to the current Pepgen shareholders and consisted of options to purchase an aggregate of 475,000 shares of Calypte Common Stock at an exercise price of $7.50 per share. 100,000 of such shares are exercisable immediately, with the remaining shares subject to exercise upon the attainment of the following milestones:
MILESTONE CALYPTE SHARES SUBJECT TO ADDITIONAL OPTIONS - -------------------------------------------------------- -------------------------------------------- Upon signing of a Research and Development Contract with proceeds of $1,000,000 or more to Pepgen 100,000 shares Upon signing of a licensing agreement with proceeds of $5,000,000 or more to Pepgen 100,000 shares Upon the filing of an Investigation of New Drug ("IND") application with the FDA or with similar agencies in Europe or Japan 25,000 shares Upon the filing of a New Drug Application ("NDA") with the USFDA or with similar agencies in Europe or Japan 50,000 shares Upon first commercial sales of a Pepgen product based on an NDA 100,000 shares
EMPLOYMENT ARRANGEMENTS On April 10, 1995, and amended as of April 22, 1996, the Company entered into an employment agreement with John P. Davis providing for employment of Mr. Davis as the Company's President and Chief Executive Officer for a term from May 1, 1995 through December 31, 1996. The agreement is automatically renewable each year subject to 90 days notice prior to the end of each calender year. Mr. Davis' salary under this agreement initially $185,000 per year, increased to $195,000 per year upon his appointment as Chief Executive Officer of the Company, which occurred in September 1995. Mr. Davis is also eligible for a maximum $35,000 bonus in 1996. This agreement also entitles Mr. Davis to moving expenses in connection with relocating Mr. Davis and his family from Connecticut to California, which expenses shall not exceed $150,000 and which expenses shall be increased sufficiently to reimburse Mr. Davis for the taxes owed on such expenses. In addition, Mr. Davis shall be entitled to receive $1,000 per month as reimbursement for temporary living expenses for up to nine months. The agreement also provides that Mr. Davis shall receive a $375 car allowance and reimbursement for all operating expenses, maintenance, licence fees, and insurance. Mr. Davis shall also be entitled to vacation and other benefits provided to the Company's employees generally. Mr. Davis was granted an option to purchase 320,000 shares of Common Stock at $0.50 per share, which option Mr. Davis can exercise as to 64,000 of the shares on May 1, 1996, and 5,333 shares per month thereafter, or in the event of an acquisition of the Company as to all of the shares subject to the option. In the event Mr. Davis's employment with the Company is terminated by the Company other than for cause (i) during the first year of employment, Mr. Davis shall receive his base salary for 12 months; (ii) during the second year or employment, Mr. Davis shall receive his base salary for nine months; and (iii) thereafter, he shall receive his base salary for six months. On January 10, 1994, the Company entered into an employment agreement with William Boeger, the Company's Chairman of the Board and a Director, and the Company's former Chief Executive Officer. This agreement provided that Mr. Boeger would devote not less than one-half time to the Company, and the Company would issue to Mr. Boeger or Quest Ventures, an investment partnership with which Mr. Boeger served as a principal prior to joining the Company, an option to acquire 154,276 shares of the Company at an exercise price of $0.50 per share. On January 25, 1995, the Company entered into an employment agreement with Howard Urnovitz, a Founder, Director, and Chief Science Officer of the Company. This agreement provides for annual salary of $140,000 43 46 plus an annual bonus not to exceed $35,000 per year. Dr. Urnovitz will also be entitled to vacation and other benefits available to the Company's employees generally. The agreement provides that on the date the Company's urine-based HIV test is approved by the FDA, the Company will forgive $42,500 in principal owed to the Company on the promissory note and reduce the collateral securing the note by one-half, and, pay Dr. Urnovitz a one-time bonus to defray the federal tax liability on the deemed income from the forgiveness of the note. When this agreement was executed, all of Dr. Urnovitz's unvested stock options immediately vested, and Dr. Urnovitz was granted an option to acquire 180,000 shares of the Company's Common Stock at $0.50 per share, which option Dr. Urnovitz can exercise as to 25% of the shares one year after grant and 2.08% of the shares per month thereafter, subject to ratable 48-month vesting. If the Company terminates Dr. Urnovitz's employment other than for cause, Dr. Urnovitz would be entitled to six months of base salary. In March 1992, the Company loaned Dr. Howard Urnovitz $85,000. The loan is evidenced by the above-mentioned promissory note and secured by shares of Common Stock of the Company owned by Dr. Urnovitz. The note, as amended, provides for current interest payments at the rate of 7% per annum, and a lump-sum remaining principal repayment in March 1997. In May 1993, the Company entered into a Business Consultant Agreement with Cynthia L. Green, the Company's Director of Regulatory Affairs and Quality Assurance and Quality Control. The agreement is automatically renewable each year unless cancelled by either party on 90 days notice. Ms. Green's fee for acting as Director of Regulatory Affairs and Quality Assurance and Quality Control for the Company was set at $16,000 per month. In addition, Ms. Green received an option to acquire 2,500 shares of Common Stock at an exercise price equal to the fair market value of the Common Stock on the date of grant. Such option vests 20% one year after grant, plus 1.66667% per month thereafter. In September 1992, Ms. Green was granted an option to purchase 2,500 shares of Common Stock at an exercise price equal to the fair market value of the Common Stock on the date of grant. Such option vests 20% one year after grant, plus 1.66667% per month thereafter. In January 1994, Ms. Green was issued 8,250 shares of Common Stock at a purchase price equal to the fair market value of the Common Stock on the date of issuance. Such shares vested 11 months after issuance. In March 1994, Ms. Green was issued an option for 25,000 shares at an exercise price equal to the fair market value of the Common Stock on the date of grant. Such option vests upon FDA approval of the Company's HIV-1 urine-based test. In October 1995, the Company entered into an employment agreement with John J. DiPietro, providing for the employment of Mr. DiPietro as the Company's Vice President, Finance and Chief Financial Officer, for a term from October 1995 through December 1996. The agreement is automatically renewable each year subject to 90 days notice prior to the end of each calendar year. Mr. DiPietro's salary under this agreement is initially $125,000 per year. This agreement also provides Mr. DiPietro with reimbursement for the cost of a corporate apartment, which expenses shall be increased sufficiently to reimburse Mr. DiPietro for the taxes owed on such expenses. Mr. DiPietro is also eligible for a bonus under the Company's bonus plan and shall be entitled to vacation and other benefits provided to the Company's employees generally. Mr. DiPietro was granted an option to purchase 35,000 shares of Common Stock at $1.00 per share, which option Mr. DiPietro can exercise as to 20% of the shares one year after grant and 583 shares per month thereafter, or in the event of certain defined events or an acquisition of the Company, as to all of the shares subject to the option. In the event Mr. DiPietro's employment with the Company is terminated by the Company other than for cause, (i) during the first year of employment, Mr. DiPietro shall receive his base salary for nine months; (ii) thereafter, Mr. DiPietro shall receive his base salary for six months. FUTURE TRANSACTIONS All future transactions, including any loans from the Company to its officers, directors, principal stockholders or affiliates, will be approved by a majority of the board of directors, including a majority of the independent and disinterested members of the board of directors or, if required by law, a majority of disinterested stockholders, and will be on terms no less favorable to the Company than could be obtained from unaffiliated third parties. 44 47 PRINCIPAL STOCKHOLDERS The following table sets forth information known to the Company with respect to the beneficial ownership of its Common Stock as of May 10, 1996, and as adjusted to reflect the sale of Common Stock offered by the Company hereby and conversion of all outstanding shares of Preferred Stock into shares of Common Stock, for (i) each who is known by the Company to own beneficially more than 5% of the Common Stock, (ii) each of the Company's directors, (iii) each Named Executive Officer and (iv) all directors and executive officers as a group.
PERCENT OF TOTAL(2) SHARES ----------------------- BENEFICIALLY BEFORE AFTER 5% STOCKHOLDERS, DIRECTORS AND OFFICERS OWNED(1) OFFERING OFFERING - ------------------------------------------------------------------------------- ------------ -------- -------- Otsuka Pharmaceutical Co., Ltd.(3)............................................. 1,493,147 18.99% 14.14% 463-10 Kagasuno Kawauchi-cho Tokoshima Japan Hideji Nonomura(3)............................................................. 1,493,147 18.99 14.14 Entities Affiliated with Quest Ventures(4)..................................... 723,322 9.00 6.74 126 South Park San Francisco, CA 94107 William A. Boeger(4)........................................................... 723,322 9.00 6.74 Technology Partners(5)......................................................... 620,270 8.09 5.65 1550 Tiburon Boulevard, Suite A Belvedere, CA 94920 Roger Quy, Ph.D.(5)............................................................ 620,270 8.09 5.65 Kuo-Yu (Frank) Chiang.......................................................... 561,744 7.33 5.42 Suez Technology Fund(6)........................................................ 557,453 7.21 5.35 3000 Sand Hill Road Bldg. 2, Suite 160 Menlo Park, CA 94028 Entities Affiliated with MVP Investors, L.P.................................... 458,217 5.98 4.42 45 Milk Street Boston, MA 02109 Entities Affiliated with H&Q Capital Management(7)............................. 417,400 5.43 4.02 Howard B. Urnovitz, Ph.D.(8)................................................... 307,749 3.93 2.92 John P. Davis(9)............................................................... 69,333 * * Richard Van Maanen(10)......................................................... 25,902 * * Toby Gottfried, Ph.D.(11)...................................................... 15,462 * * Cynthia Green(12).............................................................. 11,207 * * Jeffrey Lang(13)............................................................... 5,083 * * Julius R. Krevans, M.D.(14).................................................... 4,000 * * John J. DiPietro............................................................... -- * * David Collins.................................................................. -- * * Mark Novitch, M.D.............................................................. -- * * All directors and executive officers as a group (14 persons)(3)(4)(5)(8)(9)(10)(11)(12)(13)(14).............................. 3,837,219 44.98% 33.93%
- --------------- * Represents beneficial ownership of less than 1% (1) Based on 7,664,651 shares outstanding prior to the Offering and 10,359,046 shares outstanding after the Offering. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of Common Stock subject to options held by that person that are currently exercisable or exercisable within 60 days of May 10, 1996 are deemed outstanding. 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 proves 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, 1440 Fourth Street, Berkeley, California 94710. (2) Assumes no exercise of the Underwriters' over allotment option to purchase up to 375,000 additional shares of Common Stock. See "Underwriting." (3) Includes 200,000 shares subject to warrants exercisable within 60 days. Mr. Nonomura is a director of the Company and an affiliate of Otsuka Pharmaceutical Co., Ltd. (4) Includes 154,276 shares subject to options exercisable within 60 days owned by entities affiliated with Quest Ventures. Also includes 220,000 shares subject to options exercisable within 60 days owned by Mr. Boeger. Mr. Boeger is a partner of Quest Ventures. (5) Includes 620,270 shares owned by Technology Partners. Mr. Quy is a director of the Company and an affiliate of Technology Partners. (6) Includes 66,500 shares subject to warrants exercisable within 60 days. (7) Includes 18,700 shares subject to warrants exercisable within 60 days. (8) Includes 168,749 shares subject to options exercisable within 60 days. (9) Includes 69,333 subject to options exercisable within 60 days. (10) Includes 25,902 shares subject to options exercisable within 60 days. (11) Includes 10,062 shares subject to options exercisable within 60 days. (12) Includes 11,207 shares subject to options exercisable within 60 days. (13) Includes 5,083 shares subject to options exercisable within 60 days. (14) Includes 2,000 shares subject to warrants exercisable within 60 days. 45 48 DESCRIPTION OF CAPITAL STOCK The authorized capital stock of the Company will consist of 20,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock, after giving effect to the restatement of the Company's Articles of Incorporation upon the closing of this Offering. The following summaries of certain provisions of the Common Stock and Preferred Stock do not purport to be complete and are subject to, and qualified in their entirety by, the provisions of the Company's Articles of Incorporation, which is included as an exhibit to the Registration Statement of which this Prospectus forms a part, and by applicable law. COMMON STOCK As of June 21, 1996 there were 7,859,046 shares of Common Stock outstanding, which were held of record by 227 stockholders. The holders of Common Stock are entitled to one vote per share on all matters to be voted upon by the stockholders. Subject to preferences that may be applicable to any outstanding Preferred Stock, the holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available for that purpose. See "Dividend Policy." In the event of a liquidation, dissolution or winding up of the Company, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of Preferred Stock, if any, then outstanding. The Common Stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Common Stock. All outstanding shares of Common Stock are fully paid and nonassessable, and the shares of Common Stock to be issued upon the closing of this Offering will be fully paid and nonassessable. PREFERRED STOCK The board of directors has the authority, without action by the stockholders, to designate and issue Preferred Stock in one or more series and to designate the rights, preferences and privileges of each series, any or all of which may be greater than the rights of the Common Stock. It is not possible to state the actual effect of the issuance of any shares of Preferred Stock upon the rights of holders of the Common Stock until the board of directors determines the specific rights of the holders of such Preferred Stock. However, the effects might include, among other things, restricting dividends on the Common Stock, diluting the voting power of the Common Stock, impairing the liquidation rights of the Common Stock and delaying or preventing a change in control of the Company without further action by the stockholders. The Company has no present plans to issue any shares of Preferred Stock. WARRANTS As of June 21, 1996, the Company had outstanding warrants to purchase 1,066,355 shares of Common Stock, at a weighted average exercise price of $5.42 per share. Such warrants expire on various dates, the latest of which is 7 years from the effective date of the Offering. The holders of such warrants are entitled to certain registration rights with respect to the Common Stock issued upon exercise thereon. See "Description of Capital Stock -- Registration Rights." CHANGE OF CONTROL PROVISIONS Certain provisions of the Company's Certificate of Incorporation and Bylaws may have the effect of preventing, discouraging or delaying any change in the control of the Company and may maintain the incumbency of the Board of Directors and management. The authorization of undesignated preferred stock makes it possible for the Board of Directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of the Company. The Company is subject to the provisions of Section 203 of the Delaware General Corporation Law (the "Antitakeover Law") regulating corporate takeovers. The Antitakeover Law prevents certain Delaware corporations, including those whose securities are listed on the Nasdaq National Market, from engaging, under certain circumstances, in a "business combination" (which includes a merger or sale of more than 10% of the corporation's assets) with any "interested stockholder" (a stockholder who acquired 15% or more of the corporation's outstanding voting stock without the prior approval of the corporation's Board of Directors) for 46 49 three years following the date that such stockholder became an "interested stockholder." A Delaware corporation may "opt out" of the Antitakeover Law with an express provision in its original certificate of incorporation or an express provision in its certificate of incorporation or bylaws resulting from a stockholders' amendment approved by at least a majority of the outstanding voting shares. The Company has not "opted out" of the application of the Antitakeover Law. REGISTRATION RIGHTS OF CERTAIN HOLDERS The holders of 7,392,010 shares of Common Stock (the "Registrable Securities") or their transferees are entitled to certain rights with respect to the registration of such shares under the Securities Act. These rights are provided under the terms of an agreement between the Company and the holders of Registrable Securities. Subject to certain limitations in the agreement, the holders of at least 30% of the Registrable Securities may require, on two occasions beginning after three months from the date of this Prospectus, that the Company use its best efforts to register the Registrable Securities for public resale. If the Company registers any of its Common Stock either for its own account or for the account of other security holders, the holders of Registrable Securities are entitled to include their shares of Common Stock in the registration, subject to the ability of the underwriters to limit the number of shares included in the offering. The holders of Registrable Securities may also require the Company (not more than once during any 12-month period) to register all or a portion of their Registrable Securities on Form S-3 when use of such form becomes available to the Company, provided, among other limitations, that the proposed aggregate selling price (net of any underwriters' discounts or commissions) is at least $1.0 million. All registration expenses must be borne by the Company and all selling expenses relating to Registrable Securities must be borne by the holders of the securities being registered. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the Company's Common Stock is First Interstate Bank of California. Its telephone number is (415) 773-7801. SHARES ELIGIBLE FOR FUTURE SALE Prior to this Offering, there has been no market for the Common Stock of the Company. Future sales of substantial amounts of Common Stock in the public market could adversely affect market prices prevailing from time to time. As described below, no shares currently outstanding will be available for sale immediately after this Offering due to certain legal restrictions on resale. Sales of substantial amounts of Common Stock of the Company in the public market after the restrictions lapse could adversely affect the prevailing market price and the ability of the Company to raise equity capital in the future. Upon the completion of this Offering, the Company will have 10,359,046 shares of Common Stock outstanding, assuming no exercise of options or warrants after June 21, 1996. Of these shares, the 2,500,000 shares sold in this Offering will be freely tradable without restriction under the Securities Act, unless held by "affiliates" of the Company, as that term is defined in Rule 144 under the Securities Act. The remaining 7,859,046 shares of Common Stock held by existing stockholders were issued and sold by the Company in reliance on exemptions from the registration requirements of the Securities Act. These shares may be sold in the public market only if registered, or pursuant to an exemption from registration such as Rule 144, 144(k) or 701 under the Securities Act. Stockholders who in the aggregate hold 97% of the shares of Common Stock of the Company outstanding immediately prior to the completion of this Offering have entered into lock-up agreements under which they have agreed not to offer, sell, contract to sell, grant any option to purchase or otherwise dispose of, or agree to dispose of, directly or indirectly, any shares of Common Stock, options or warrants to acquire shares of Common Stock or securities exchangeable for or convertible into Common Stock owned by them for a period of 180 days after the date of this Prospectus, without the prior written consent of the Representatives of the Underwriters. The Company has entered into a similar agreement, except that the Company may grant options and issue stock under its current stock option and stock purchase plans and pursuant to other currently outstanding options. 47 50 As of June 21, 1996, 2,852,775 shares were subject to outstanding options and warrants. Of these shares 75% are subject to the lock-up agreements described above. Approximately 120 days after the date of this Prospectus, the Company intends to file a Registration Statement on Form S-8 covering shares issuable under the Company's 1991 Stock Plan (including shares subject to then outstanding options), 1995 Director Option Plan and 1995 Employee Stock Purchase Plan, thus permitting the resale of such shares in the public market without restriction under the Securities Act after expiration of the applicable agreements. Upon expiration of the lock-up agreements, approximately 2,465,586 shares of Common Stock will become eligible for immediate public resale, pursuant to Rule 144(k) or for non-affiliates in certain cases pursuant to Rule 701. An additional 3,220,560 shares will be available for resale subject to the volume limitations of Rule 144. 7,392,010 of the shares outstanding immediately following the completion of this Offering will be entitled to registration rights with respect to such shares upon the release of lock-up agreements. The number of shares sold in the public market could increase if such rights are exercised. In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated) who has beneficially owned shares for at least two years (including the holding period of any prior owner, except an affiliate) is entitled to sell in "broker's transactions" or to market makers, within any three-month period commencing 90 days after the date of this Prospectus, a number of shares that does not exceed the greater of (i) one percent of the number of shares of Common Stock then outstanding (approximately 101,000 shares immediately after this Offering) or (ii) the average weekly trading volume of the Common Stock during the four calendar weeks preceding the required filing of a Form 144 with respect to such sale. Sales under Rule 144 are generally subject to certain manner of sale provisions and notice requirements and to the availability of current public information about the Company. Under Rule 144(k), a person who is not deemed to have been an affiliate of the Company at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least three years, is entitled to sell such shares without having to comply with the manner of sale, public information, volume limitation or notice provisions of Rule 144. Under Rule 701 under the Securities Act, persons who purchase shares upon exercise of options granted prior to the effective date of this Offering are entitled to sell such shares 90 days after the effective date of this Offering in reliance on Rule 144, without having to comply with the holding period requirements of Rule 144 and, in the case of non-affiliates, without having to comply with the public information, volume limitation or notice provisions of Rule 144. The Securities and Exchange Commission has recently proposed reducing the initial Rule 144 holding period to one year and the Rule 144(k) holding period to two years. There can be no assurance as to when or whether such rule changes will be enacted. If enacted, such modification will have a material effect on the time when shares of the Company's Common Stock become eligible for resale. 48 51 UNDERWRITING Subject to the terms and conditions of the Underwriting Agreement, the Underwriters named below, through their Representatives Pacific Growth Equities, Inc., have agreed to purchase from the Company the following respective number of shares of Common Stock:
NAME NUMBER OF SHARES ---------------------------------------------------------- ------------------ Pacific Growth Equities, Inc.............................. ---------- Total..................................................... ==============
The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent, including the absence of any material adverse change in the Company's business and the receipt of certain certificates, opinions and letters from the Company, its counsel and independent auditors. The nature of the Underwriters' obligation is such that they are committed to purchase all shares of the Common Stock offered hereby if any of such shares are purchased. The Underwriters propose to offer the shares of Common Stock directly to the public at the initial public offering price set forth on the cover page of this Prospectus and to certain dealers at such price less a concession not in excess of $ per share. The Underwriters may allow and such dealers may reallow a concession not in excess of $ per share to certain other dealers. After the initial public offering of the shares, the offering price and other selling terms may be changed by the Representatives of the Underwriters. The Company has granted to the Underwriters an option, exercisable not later than 30 days after the date of this Prospectus, to purchase up to 375,000 additional shares of Common Stock at the initial public offering price, less the underwriting discount, set forth on the cover page of this Prospectus. To the extent that the Underwriters exercise this option, each of the Underwriters will have a firm commitment to purchase approximately the same percentage thereof which the number of shares of Common Stock to be purchased by it shown in the above table bears to the total number of shares of Common Stock offered hereby. The Company will be obligated, pursuant to the option, to sell such shares to the Underwriters to the extent the option is exercised. The Underwriters may exercise such option only to cover over-allotments made in connection with the sale of shares of Common Stock offered hereby. The offering of the shares is made for delivery when, as and if accepted by the Underwriters and subject to prior sale and to withdrawal, cancellation or modification of the offering without notice. The Underwriters reserve the right to reject an order for the purchase of shares in whole or in part. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments the Underwriters may be required to make in respect thereof. Stockholders, including the executive officers and directors, who will own in the aggregate 7,428,879 shares of Common Stock after the offering, have agreed that they will not, without the prior written consent of Pacific Growth Equities, Inc. offer, sell or otherwise dispose of any shares of Common Stock, options or warrants to acquire shares of Common Stock or securities exchangeable for or convertible into shares of Common Stock 49 52 owned by them during the 180-day period following the date of this Prospectus. The Company has agreed that it will not, without the prior written consent of Pacific Growth Equities, Inc. offer, sell or otherwise dispose of any shares of Common Stock, options or warrants to acquire shares of Common Stock or securities exchangeable for or convertible into shares of Common Stock during the 180-day period following the date of this Prospectus, except that the Company may issue. Upon the exercise of options granted prior to the date hereof, and may grant additional options under its stock and employee stock purchase plans, provided that, without the prior written consent of Pacific Growth Equities, Inc., such additional options shall not be exercisable during such period. Sales of such shares in the future could adversely affect the market price of the Common Stock. The Representatives of the Underwriters have informed the Company that the Underwriters do not intend to confirm sales to accounts over which they exercise discretionary authority. Prior to this Offering, there has been no public market for the Common Stock. The initial public offering price for the Common Stock will be determined by negotiation between the Company and the Representatives. Among the factors to be considered in determining the initial public offering price are prevailing market and economic conditions, revenues and earnings of the Company, market valuations of other companies engaged in activities similar to the Company estimates of the business potential and prospects of the Company, the present state of the Company's business operations, the Company's management and other factors deemed relevant. The estimated initial public offering price range set forth on the cover of this preliminary prospectus is subject to change as a result of market conditions and other factors. At the request of the Company, the Underwriters have reserved up to 125,000 shares of Common Stock for sale at the initial public offering price to officers, directors, employees and certain other persons associated with the Company. The number of shares available for sale to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the Underwriters to the general public on the same basis as the other shares offered hereby. Reserved shares purchased by individuals will, except as restricted by applicable securities laws, be available for resale following the Offering. LEGAL MATTERS The validity of the Common Stock offered hereby will be passed upon for the Company by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California. Certain legal matters will be passed upon for the Underwriters by Cooley Godward Castro Huddleson & Tatum, Palo Alto, California. As of the date of this Prospectus, certain members of Wilson Sonsini Goodrich & Rosati, Professional Corporation and investment partnerships of which such persons are partners beneficially own 10,000 shares of the Company's Common Stock. 50 53 EXPERTS The consolidated financial statements of Calypte Biomedical Corporation and subsidiary (a development stage company) as of December 31, 1994 and 1995 and for each of the years in the three-year period ended December 31, 1995, and for the period from February 18, 1988 (inception) through December 31, 1995, and the financial statements of Pepgen Corporation and subsidiary (a development stage enterprise) as of December 31, 1993 and 1994, and for the period from July 8, 1992 (inception) through December 31, 1992 and for each of the years in the two-year period ended December 31, 1994 and for the period from July 8, 1992 (inception) through December 31, 1994, have been included herein and in the Registration Statement in reliance upon the reports of KPMG Peat Marwick LLP, independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. The statements in this Prospectus in paragraphs 2 and 3 under the caption "Risk Factors -- Reliance on Proprietary Technology and Know-How" and in paragraphs 6 and 7 under the caption "Business -- Patents, Proprietary Rights and Licenses" have been reviewed and approved by Arnold, White & Durkee, special patent counsel for the Company, as experts in such matters, and included herein in reliance upon such review and approval. ADDITIONAL INFORMATION The Company has filed with the Securities and Exchange Commission (the "Commission"), Washington, D.C. a Registration Statement on Form S-1 under the Securities Act with respect to the shares of Common Stock being offered hereby. This Prospectus does not contain all the information set forth in the Registration Statement and the exhibits and schedules thereto. For further information with respect to the Company and such Common Stock, reference is made to the Registration Statement and to the exhibits and schedules filed as a part thereof. Statements contained in this Prospectus as to the contents of any contract or other document referred to are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement. A copy of the Registration Statement may be inspected without charge at the Commission's principal office in Washington, D.C., and copies of all or any part of the Registration Statement may be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of certain fees prescribed by the Commission. In addition, the Commission maintains a Web site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commisison through the Electronic Data Gathering, Analysis, and Retrieval system. 51 54 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ----- CONSOLIDATED FINANCIAL STATEMENTS, CALYPTE BIOMEDICAL CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) Independent Auditors' Report..................................................... F-2 Consolidated Balance Sheets as of December 31, 1994 and 1995..................... F-3 Consolidated Statements of Operations for the years ended December 31, 1993, 1994 and 1995 and for the period from February 18, 1988 (inception) through December 31, 1995........................................................................ F-4 Consolidated Statements of Stockholders' Equity (Deficit) for the period from February 18, 1988 (inception) through December 31, 1995......................... F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 and for the period from February 18, 1988 (inception) through December 31, 1995........................................................................ F-7 Notes to Consolidated Financial Statements....................................... F-8 CONSOLIDATED CONDENSED FINANCIAL STATEMENTS, CALYPTE BIOMEDICAL CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) (UNAUDITED) Consolidated Condensed Balance Sheets as of December 31, 1995 and March 31, 1996............................................................................ F-23 Consolidated Condensed Statements of Operations for the three-months ended March 31, 1995 and 1996 and for the period from February 18, 1988 (inception) through March 31, 1996.................................................................. F-24 Consolidated Condensed Statements of Cash Flows for the three-months ended March 31, 1995 and 1996 and for the period from February 18, 1988 (inception) through March 31, 1996.................................................................. F-25 Notes to Consolidated Condensed Financial Statements............................. F-26 PRO FORMA FINANCIAL INFORMATION, CALYPTE BIOMEDICAL CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) (UNAUDITED) Pro Forma Financial Information.................................................. F-30 Pro Forma Consolidated Condensed Statement of Operations for the year ended December 31, 1995............................................................... F-31 CONSOLIDATED FINANCIAL STATEMENTS, PEPGEN CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) Independent Auditors' Report..................................................... F-32 Consolidated Balance Sheets as of December 31, 1993 and 1994..................... F-33 Consolidated Statements of Operations for the period from July 8, 1992 (inception) through December 31, 1992, for the years ended December 31, 1993 and 1994 and the period from July 8, 1992 (inception) through December 31, 1994..... F-34 Consolidated Statements of Shareholders' Equity (Deficiency) for the period from July 8, 1992 (inception) through December 31, 1994.............................. F-35 Consolidated Statements of Cash Flows for the period from July 8, 1992 (inception) through December 31, 1992, for the years ended December 31, 1993 and 1994 and the period from July 8, 1992 (inception) through December 31 1994...... F-36 Notes to Consolidated Financial Statements....................................... F-37 CONSOLIDATED FINANCIAL STATEMENTS, PEPGEN CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) (UNAUDITED) Consolidated Balance Sheet as of December 31, 1995............................... F-43 Consolidated Statements of Operations for the year ended December 31, 1995 and for the period from July 8, 1992 (inception) through December 31, 1995.......... F-44 Consolidated Statements of Shareholders' Equity (Deficiency) for the period July 8, 1992 (inception) through December 31, 1995................................... F-45 Consolidated Statements of Cash Flows for the year ended December 31, 1995 and for the period from July 8, 1992 (inception) through December 31, 1995.......... F-46 Notes to Consolidated Financial Statements....................................... F-47
F-1 55 INDEPENDENT AUDITORS' REPORT The Board of Directors Calypte Biomedical Corporation: We have audited the accompanying consolidated balance sheets of Calypte Biomedical Corporation and subsidiary (a development stage enterprise) (the Company) as of December 31, 1994 and 1995, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 1995, and for the period from February 18, 1988 (inception) through December 31, 1995. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Calypte Biomedical Corporation and subsidiary (a development stage enterprise) as of December 31, 1994 and 1995, and the consolidated results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, and for the period from February 18, 1988 (inception) through December 31, 1995, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP San Francisco, California January 16, 1996 F-2 56 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED BALANCE SHEETS ASSETS
DECEMBER 31, ----------------------------- 1994 1995 ------------ ------------ Current assets: Cash and cash equivalents.............................................. $ 4,477,924 $ 2,558,650 Other current assets................................................... 40,956 755,572 ------------ ------------ Total current assets................................................ 4,518,880 3,314,222 Property and equipment, net.............................................. 1,255,521 1,854,010 Note receivable from officer............................................. 85,000 42,500 Other assets............................................................. 105,115 126,144 ------------ ------------ $ 5,964,516 $ 5,336,876 =========== =========== LIABILITIES, MANDITORILY REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable....................................................... $ 169,429 $ 1,053,536 Accrued expenses....................................................... 365,850 643,911 Notes payable -- current portion....................................... 277,255 3,258,456 Capital lease obligations -- current portion........................... 89,519 260,214 Deferred revenue....................................................... 500,000 500,000 ------------ ------------ Total current liabilities........................................... 1,402,053 5,716,117 Deferred rent obligation................................................. 91,280 87,357 Notes payable -- long-term portion....................................... 10,613 -- Capital lease obligations -- long-term portion........................... 185,232 542,725 ------------ ------------ Total liabilities................................................... 1,689,178 6,346,199 Mandatorily redeemable Series A preferred stock, $0.001 par value; 100,000 shares authorized, issued, and outstanding; aggregate redemption and liquidation value of $1,000,000 plus cumulative dividends.............................................................. 1,616,438 1,736,438 Commitments and contingencies Stockholders' equity (deficit): Series B convertible preferred stock, $0.001 par value; 804,860 shares authorized; 804,846 shares issued and outstanding as of December 31, 1994 and 1995; aggregate liquidation value of $1,500,235 as of December 31, 1994 and 1995.......................................... 805 805 Series C convertible preferred stock, $0.001 par value; 1,702,727 shares authorized; 1,702,705 shares issued and outstanding as of December 31, 1994 and 1995; aggregate liquidation value of $6,300,004 as of December 31, 1994 and 1995......................... 1,703 1,703 Series D convertible preferred stock, $0.001 par value; 2,130,051 shares authorized; 2,116,999 shares issued and outstanding as of December 31, 1994 and 1995; aggregate liquidation value of $10,584,995 as of December 31, 1994 and 1995........................ 2,117 2,117 Series E convertible preferred stock, $0.001 par value; 4,000,000 shares authorized; 1,077,500 and 1,967,866 shares issued and outstanding as of December 31, 1994 and 1995, respectively; aggregate liquidation value of $5,387,500 and $9,839,330 as of December 31, 1994 and 1995, respectively............................ 1,077 1,967 Common stock, $0.001 par value; 12,000,000 shares authorized; 569,352 and 573,899 shares issued and outstanding as of December 31, 1994 and 1995, respectively.............................................. 569 574 Additional paid-in capital............................................. 22,762,330 28,014,030 Deferred compensation.................................................. -- (365,871) Deficit accumulated during development stage........................... (20,109,701) (30,401,086) ------------ ------------ Total stockholders' equity (deficit)................................ 2,658,900 (2,745,761) ------------ ------------ $ 5,964,516 $ 5,336,876 =========== ===========
See accompanying notes to consolidated financial statements. F-3 57 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED STATEMENTS OF OPERATIONS
PERIOD FROM FEBRUARY 18, 1988 (INCEPTION) YEARS ENDED DECEMBER 31, THROUGH ----------------------------------------- DECEMBER 31, 1993 1994 1995 1995 ---------- ---------- ----------- ------------ Revenue earned under research and development contracts, substantially from related parties.......................... $ -- $ -- $ -- $ 2,390,187 Operating expenses: Research and development................. 4,518,984 3,643,781 5,017,545 20,346,564 Purchased in-process research and development costs..................... -- -- 2,500,000 2,500,000 Selling, general and administrative...... 1,784,318 1,818,560 2,862,049 10,926,405 ----------- ----------- ------------ ------------ Loss from operations............. (6,303,302) (5,462,341) (10,379,594) (31,382,782) Interest income............................ 163,509 47,714 194,944 569,828 Interest expense........................... (55,274) (81,782) (116,842) (603,019) Other income............................... 15,395 31,027 11,707 70,443 ----------- ----------- ------------ ------------ Loss before income taxes and extraordinary item............. (6,179,672) (5,465,382) (10,289,785) (31,345,530) Income taxes............................... (1,600) (1,600) (1,600) (60,750) ----------- ----------- ------------ ------------ Loss before extraordinary item... (6,181,272) (5,466,982) (10,291,385) (31,406,280) Extraordinary gain on debt extinguishment........................... -- -- -- 485,453 ----------- ----------- ------------ ------------ Net loss......................... (6,181,272) (5,466,982) (10,291,385) (30,920,827) Less dividend on mandatorily redeemable Series A preferred stock................. (120,000) (120,000) (120,000) (736,438) ----------- ----------- ------------ ------------ Net loss attributable to common stockholders............................. $(6,301,272) $(5,586,982) $(10,411,385) $(31,657,265) =========== =========== ============ ============ Net loss per share attributable to common stockholders............................. $ (1.22) $ (0.90) $ (1.40) =========== =========== ============ Weighted average shares used to compute net loss per share attributable to common stockholders............................. 5,182,594 6,187,396 7,450,692 =========== =========== ============
See accompanying notes to consolidated financial statements. F-4 58 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) PERIOD FROM FEBRUARY 18, 1988 (INCEPTION) THROUGH DECEMBER 31, 1995
JOINT CONVERTIBLE PREFERRED STOCK ADDITIONAL VENTURERS' ----------------------------------------- COMMON PAID-IN DEFERRED CAPITAL SERIES B SERIES C SERIES D SERIES E STOCK CAPITAL COMPENSATION ----------- -------- -------- -------- -------- ------- ----------- ------------ Issuance of common stock as of February 18, 1988 (date of inception).................... $ -- $ -- $ -- $ -- $ -- $75,500 $ -- $ -- Capital contributions.......... 1,610,779 -- -- -- -- -- -- -- Exchange of Calypte, Inc. stock for 100,000 shares of common stock and 100,000 shares of mandatorily redeemable Series A preferred stock of the Company on November 11, 1989 at $0.001 per share.......... -- -- -- -- -- (75,400) -- -- Common stock of 60,035 shares issued for cash.............. -- -- -- -- -- 60 99,837 -- Compensation paid by issuance of 170,610 shares of common stock........................ -- -- -- -- -- 171 33,951 -- Conversion of notes payable to 61,426 shares of common stock........................ -- -- -- -- -- 60 12,225 -- Conversion of notes payable to 29,506 shares of Series B convertible preferred stock........................ -- 30 -- -- -- -- 54,970 -- Series B convertible preferred stock of 775,340 shares issued for cash.............. -- 775 -- -- -- -- 1,387,333 -- Series C convertible preferred stock of 810,812 shares issued for cash.............. -- -- 811 -- -- -- 2,946,008 -- Dividend requirements on mandatorily redeemable Series A preferred stock............ -- -- -- -- -- -- (90,000) -- Net loss....................... (1,610,779) -- -- -- -- -- -- -- ----------- -------- -------- -------- -------- ------- ----------- ------------ Balances as of December 31, 1991......................... -- 805 811 -- -- 391 4,444,324 -- Exercise of stock options for 68,083 shares of common stock........................ -- -- -- -- -- 68 13,128 -- Compensation paid by issuance of 31,670 shares of common stock........................ -- -- -- -- -- 32 5,267 -- Series C convertible preferred stock of 891,893 shares issued for cash.............. -- -- 892 -- -- -- 3,208,379 -- Series D convertible preferred stock of 800,000 shares issued for cash.............. -- -- -- 800 -- -- 5,718,631 -- Dividend requirements on mandatorily redeemable Series A preferred stock............ -- -- -- -- -- -- (120,000) -- Net loss....................... -- -- -- -- -- -- -- -- ----------- -------- -------- -------- -------- ------- ----------- ------------ Balances as of December 31, 1992......................... $ -- $805 $1,703 $ 800 $ -- $ 491 $13,269,729 $ -- DEFICIT ACCUMULATED TOTAL DURING STOCKHOLDERS' DEVELOPMENT EQUITY STAGE (DEFICIT) ------------ ------------- Issuance of common stock as of February 18, 1988 (date of inception).................... $ -- $ 75,500 Capital contributions.......... -- 1,610,779 Exchange of Calypte, Inc. stock for 100,000 shares of common stock and 100,000 shares of mandatorily redeemable Series A preferred stock of the Company on November 11, 1989 at $0.001 per share.......... (924,600) (1,000,000) Common stock of 60,035 shares issued for cash.............. -- 99,897 Compensation paid by issuance of 170,610 shares of common stock........................ -- 34,122 Conversion of notes payable to 61,426 shares of common stock........................ -- 12,285 Conversion of notes payable to 29,506 shares of Series B convertible preferred stock........................ -- 55,000 Series B convertible preferred stock of 775,340 shares issued for cash.............. -- 1,388,108 Series C convertible preferred stock of 810,812 shares issued for cash.............. -- 2,946,819 Dividend requirements on mandatorily redeemable Series A preferred stock............ (166,438) (256,438) Net loss....................... (3,567,913) (5,178,692) ------------ ------------- Balances as of December 31, 1991......................... (4,658,951) (212,620) Exercise of stock options for 68,083 shares of common stock........................ -- 13,196 Compensation paid by issuance of 31,670 shares of common stock........................ -- 5,299 Series C convertible preferred stock of 891,893 shares issued for cash.............. -- 3,209,271 Series D convertible preferred stock of 800,000 shares issued for cash.............. -- 5,719,431 Dividend requirements on mandatorily redeemable Series A preferred stock............ -- (120,000) Net loss....................... (3,802,496) (3,802,496) ------------ ------------- Balances as of December 31, 1992......................... $ (8,461,447) $ 4,812,081
F-5 59 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED) PERIOD FROM FEBRUARY 18, 1988 (INCEPTION) THROUGH DECEMBER 31, 1995
JOINT CONVERTIBLE PREFERRED STOCK ADDITIONAL VENTURERS' ----------------------------------------- COMMON PAID-IN DEFERRED CAPITAL SERIES B SERIES C SERIES D SERIES E STOCK CAPITAL COMPENSATION ----------- -------- -------- -------- -------- ------- ----------- ------------ Balances as of December 31, 1992......................... $ -- $805 $1,703 $ 800 $ -- $ 491 $13,269,729 $ -- Common stock of 2,500 shares issued for cash.............. -- -- -- -- -- 3 1,997 -- Exercise of stock options for 22,444 shares of common stock........................ -- -- -- -- -- 23 8,640 -- Compensation paid by issuance of 10,000 shares of common stock........................ -- -- -- -- -- 10 7,990 -- Series D convertible preferred stock of 199,999 shares issued for cash.............. -- -- -- 200 -- -- 1,444,729 -- Dividends requirements on mandatorily redeemable Series A preferred stock............ -- -- -- -- -- -- (120,000) -- Net loss....................... -- -- -- -- -- -- -- -- ---- ---- ------ ------ ------ ---- ----------- -------- Balances as of December 31, 1993......................... -- 805 1,703 1,000 -- 527 14,613,085 -- Conversion of Series D convertible preferred stock into 1.5 shares for each share outstanding as of March 3, 1994; 500,000 additional shares issued................ -- -- -- 500 -- -- (500) -- Common stock of 11,250 shares issued for cash.............. -- -- -- -- -- 11 8,839 -- Exercise of stock options for 31,334 shares of common stock........................ -- -- -- -- -- 31 12,034 -- Series D convertible preferred stock of 617,000 shares issued for cash.............. -- -- -- 617 -- -- 2,885,466 -- Series E convertible preferred stock of 1,077,500 shares issued for cash.............. -- -- -- -- 1,077 -- 5,363,406 -- Dividend requirements on mandatorily redeemable Series A preferred stock............ -- -- -- -- -- -- (120,000) -- Net loss....................... -- -- -- -- -- -- -- -- ---- ---- ------ ------ ------ ---- ----------- -------- Balance as of December 31, 1994......................... -- 805 1,703 2,117 1,077 569 22,762,330 -- Series E convertible preferred stock of 888,446 shares issued for cash, 1,920 issued for other than cash.......... -- -- -- -- 890 -- 4,302,278 -- Exercise of stock options for 4,547 shares of common stock........................ -- -- -- -- -- 5 2,431 -- Dividend requirements on mandatorily redeemable Series A preferred stock............ -- -- -- -- -- -- (120,000) -- Options issued upon the investment in Pepgen Corporation.................. -- -- -- -- -- -- 500,000 -- Compensation relating to granting of stock options.... -- -- -- -- -- -- 566,991 (566,991) Amortization of deferred compensation................. -- -- -- -- -- -- -- 201,120 Net loss....................... -- -- -- -- -- -- -- -- ---- ---- ------ ------ ------ ---- ----------- -------- Balances as of December 31, 1995......................... $ -- $805 $1,703 $2,117 $1,967 $ 574 $28,014,030 $ (365,871) ==== ==== ====== ====== ====== ==== =========== ======== DEFICIT ACCUMULATED TOTAL DURING STOCKHOLDERS' DEVELOPMENT EQUITY STAGE (DEFICIT) ------------ ------------- Balances as of December 31, 1992......................... $ (8,461,447) $ 4,812,081 Common stock of 2,500 shares issued for cash.............. -- 2,000 Exercise of stock options for 22,444 shares of common stock........................ -- 8,663 Compensation paid by issuance of 10,000 shares of common stock........................ -- 8,000 Series D convertible preferred stock of 199,999 shares issued for cash.............. -- 1,444,929 Dividends requirements on mandatorily redeemable Series A preferred stock............ -- (120,000) Net loss....................... (6,181,272) (6,181,272) ------------- ----------- Balances as of December 31, 1993......................... (14,642,719) (25,599) Conversion of Series D convertible preferred stock into 1.5 shares for each share outstanding as of March 3, 1994; 500,000 additional shares issued................ -- -- Common stock of 11,250 shares issued for cash.............. -- 8,850 Exercise of stock options for 31,334 shares of common stock........................ -- 12,065 Series D convertible preferred stock of 617,000 shares issued for cash.............. -- 2,886,083 Series E convertible preferred stock of 1,077,500 shares issued for cash.............. -- 5,364,483 Dividend requirements on mandatorily redeemable Series A preferred stock............ -- (120,000) Net loss....................... (5,466,982) (5,466,982) ------------- ----------- Balance as of December 31, 1994......................... (20,109,701) 2,658,900 Series E convertible preferred stock of 888,446 shares issued for cash, 1,920 issued for other than cash.......... -- 4,303,168 Exercise of stock options for 4,547 shares of common stock........................ -- 2,436 Dividend requirements on mandatorily redeemable Series A preferred stock............ -- (120,000) Options issued upon the investment in Pepgen Corporation.................. -- 500,000 Compensation relating to granting of stock options.... -- -- Amortization of deferred compensation................. -- 201,120 Net loss....................... (10,291,385) (10,291,385) ------------- ----------- Balances as of December 31, 1995......................... $(30,401,086) $ (2,745,761) ============= ===========
See accompanying notes to consolidated financial statements. F-6 60 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED STATEMENTS OF CASH FLOWS
PERIOD FROM FEBRUARY 18, 1988 YEARS ENDED DECEMBER 31, (INCEPTION) ---------------------------------------- THROUGH DECEMBER 31, 1993 1994 1995 1995 ----------- ----------- ------------ -------------------- Cash flows from operating activities: Net loss.................................................... $(6,181,272) $(5,466,982) $(10,291,385) $(30,920,827) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization........................... 198,445 331,760 465,585 1,817,247 Loss on sale or disposal of equipment................... 5,254 -- 73,581 115,192 Extraordinary gain on debt extinguishment............... -- -- -- (485,453) Amortization of deferred compensation................... -- -- 201,120 201,120 Compensation paid by stock issuance..................... 8,000 -- -- 47,421 Purchased in-process research and development costs..... -- -- 2,500,000 2,500,000 Changes in operating assets and liabilities: Other current assets................................. (235,269) 254,426 (714,616) (516,732) Organizational costs................................. -- -- -- (123,074) Other assets......................................... (33,537) (52,925) 21,471 (407,484) Accounts payable and accrued expenses................ (395,206) 319,802 1,162,168 2,099,517 Deferred rent obligation............................. 33,422 57,858 (3,923) 87,350 Note payable in exchange for expenses paid on behalf of the Company..................................... -- -- -- 191,964 ----------- ----------- ------------ ------------ Net cash used in operating activities.............. (6,600,163) (4,556,061) (6,585,999) (25,393,759) ----------- ----------- ------------ ------------ Cash flows from investing activities: Proceeds from disposition of equipment...................... -- -- -- 25,000 Purchase of equipment....................................... (504,343) (625,231) (476,299) (2,276,552) Investment in Pepgen........................................ -- -- (1,000,000) (1,000,000) ----------- ----------- ------------ ------------ Net cash used in investing activities.............. (504,343) (625,231) (1,476,299) (3,251,552) ----------- ----------- ------------ ------------ Cash flows from financing activities: Proceeds from the sale of stock............................. 1,510,664 8,493,415 4,444,516 28,279,403 Expenses paid related to sale of stock...................... (55,072) (221,934) (138,912) (870,006) Prepaid license fee......................................... -- -- -- 500,000 Principal payments on notes payable......................... (188,890) (76,322) (29,412) (916,926) Principal payments on capital lease obligations............. (5,520) (28,137) (133,168) (166,824) Proceeds from notes payable................................. 81,860 -- 2,000,000 2,692,035 Capital contributions....................................... -- -- -- 75,500 Joint ventures' capital contributions....................... -- -- -- 1,610,779 ----------- ----------- ------------ ------------ Net cash provided by financing activities.......... 1,343,042 8,167,022 6,143,024 31,203,961 ----------- ----------- ------------ ------------ Net (decrease) increase in cash and cash equivalents.......... (5,761,464) 2,985,730 (1,919,274) 2,558,650 Cash and cash equivalents at beginning of period.............. 7,253,658 1,492,194 4,477,924 -- ----------- ----------- ------------ ------------ Cash and cash equivalents at end of period.................... $ 1,492,194 $ 4,477,924 $ 2,558,650 $ 2,558,650 =========== =========== ============ ============ Supplemental disclosure of cash flow activities: Cash paid for interest...................................... $ 52,975 $ 83,036 $ 104,509 $ 478,178 Cash paid for income taxes.................................. 1,600 1,600 1,600 60,100 Supplemental disclosure of noncash activities: Acquisition of equipment through obligations under capital leases.................................................... 308,408 -- 661,356 969,764 Accrued liabilities converted to notes payable.............. -- -- -- 363,091 Accrued liabilities converted to common stock............... -- -- -- 38,978 Notes payable converted to common stock..................... -- -- -- 458,760 Notes payable converted to Series B convertible preferred stock..................................................... -- -- -- 50,000 Note payable issued upon investment in Pepgen Corporation... -- -- 1,000,000 1,000,000 Options issued upon investment in Pepgen Corporation........ -- -- 500,000 500,000 Dividend on mandatorily redeemable Series A preferred stock..................................................... 120,000 120,000 120,000 736,438 Deferred compensation attributable to stock grants.......... -- -- 566,991 566,991
See accompanying notes to consolidated financial statements. F-7 61 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1994, AND 1995 (1) THE COMPANY AND BASIS OF PRESENTATION Calpyte Biomedical Corporation (the Company) was incorporated on November 11, 1989 and is a development stage enterprise. The Company's primary activities have been to obtain funding and to perform research and development. The Company is in the process of applying for approvals to market and sell its product in both domestic and foreign markets. The accompanying consolidated financial statements include the results of operations of the Company and its wholly owned subsidiary, Calypte, Inc., and Calypte Biomedical Company (the Joint Venture). All significant intercompany accounts and transactions have been eliminated in consolidation. The Company accounts for its 49% interest in Pepgen Corporation (Pepgen) under the equity method (Note 12). In December 1995, the Board of Directors authorized the incorporation of a wholly owned subsidiary in the state of Delaware. After receipt of stockholder approval and upon closing of the Company's initial public offering (IPO), the Board of Directors intends to direct management to merge the Company into the Delaware subsidiary, with the Delaware company becoming the surviving entity. The Board of Directors has authorized 20 million shares of common stock in the Delaware company. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and Cash Equivalents Cash equivalents consist primarily of fixed income securities. The Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Property and Equipment Property and equipment are stated at cost. Machinery and equipment, furniture and fixtures, and computer equipment are depreciated using the straight-line method over the estimated useful life of the assets, generally four to five years. Leasehold improvements and equipment under capital leases are amortized or depreciated over the shorter of the lease term or the useful life of the improvement. Fair Value of Financial Instruments Financial assets and liabilities have carrying values which approximate their fair values for all periods presented. Revenue Revenue from product sales is recognized upon product shipment. Deferred Revenue Deferred revenue is accrued on payments received from customers in advance of product shipment and will be recognized as revenue upon shipment of the related products. Income Taxes Prior to January 1, 1993, income taxes were provided for all items included in the accompanying consolidated statements of operations regardless of when such items were reported for income tax purposes in accordance with the requirements of Accounting Principles Board Opinion No. 11, Accounting for Income Taxes. F-8 62 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993, 1994, AND 1995 Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. SFAS No. 109 requires an asset and liability approach for the financial reporting of income taxes. Under SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Reclassifications Certain reclassifications in the accompanying consolidated financial statements have been made in order to conform to the December 31, 1995 consolidated financial statement presentation. Net Loss Per Share Attributable to Common Stockholders Except as noted below, net loss per share attributable to common stockholders is computed using the weighted average number of shares of common stock outstanding. Common equivalent shares from stock options and warrants are excluded from the computation as their effect is antidilutive, except that, pursuant to the Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 83, common stock issued for consideration below the assumed initial public offering (IPO) price and warrants exercised, warrants granted and stock options granted with exercise prices below the IPO price during the 12-month period preceding the date of the initial filing of the Registration Statement, even when antidilutive, have been included in the calculation of common equivalent shares, using the treasury stock method based on the assumed IPO price, as if they were outstanding for all periods presented. Furthermore, common equivalent shares from convertible preferred stock that will be converted upon the completion of the Company's IPO are included using the "as if converted" method. In accordance with paragraph 23 of Accounting Principles Board Opinion No. 15, pro forma net loss per share has been presented to reflect the use of proceeds from the Company's IPO to repay the mandatorily redeemable Series A preferred stock and to repay certain debt obligations as of the beginning of the period presented. The pro forma weighted average shares for the year ended December 31, 1995 were 7,948,465 and pro forma net loss was $10,174,543 which resulted in pro forma net loss per share of $1.28 for the year ended December 31, 1995. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-9 63 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993, 1994, AND 1995 (3) OTHER CURRENT ASSETS Other current assets as of December 31, 1994 and 1995 consisted of the following:
1994 1995 ------- -------- Receivable under equipment lease line of credit....... $ -- $315,846 Deferred public offering costs........................ -- 200,667 Other prepaid expenses................................ 13,732 205,977 Other................................................. 27,224 33,082 ------- -------- $40,956 $755,572 ======= ========
(4) PROPERTY AND EQUIPMENT Property and equipment as of December 31, 1994 and 1995 consisted of the following:
1994 1995 ----------- ----------- Computer equipment.............................. $ 133,993 $ 237,405 Machinery and equipment......................... 775,878 1,403,520 Furniture and fixtures.......................... 225,961 187,657 Leasehold improvements.......................... 1,257,605 1,415,402 ----------- ----------- 2,393,437 3,243,984 Accumulated depreciation and amortization....... (1,137,916) (1,389,974) ----------- ----------- Property and equipment, net..................... $ 1,255,521 $ 1,854,010 ========== ==========
During 1988, property was purchased from an unrelated party subject to a note for $442,052. The note was subsequently assigned to Purdue Frederick Diagnostics, Inc., a former related party of the Company. The Company's remaining obligation is reflected in notes payable (Note 6). The Company recognized depreciation expense of $178,000, $315,000 and $466,000 for the years ended December 1993, 1994 and 1995, respectively. (5) ACCRUED EXPENSES Accrued expenses as of December 31, 1994 and 1995 consisted of the following:
1994 1995 -------- -------- Accrued minimum royalty payments..................... $120,000 $160,000 Accrued management fee to shareholder................ 135,000 -- Other................................................ 110,850 483,911 -------- -------- $365,850 $643,911 ======== ========
F-10 64 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993, 1994, AND 1995 (6) NOTES PAYABLE Notes payable as of December 31, 1994 and 1995 consisted of the following:
1994 1995 ------- ---------- Prime plus 3.5%; 12% as of December 31, 1995; note payable to a bank; secured by property and equipment; due March 1996......................... $ -- $2,000,000 10% note payable to a former related party; secured by property and equipment; due October 1995....... 247,843 247,843 12% note payable; secured by equipment; due April 1996.............................................. 40,025 10,613 4% note payable to Pepgen, due the earlier of: 60 days following either FDA approval of the Company's urine-based HIV-1 test or completion of an IPO; or April 23, 1996......................... -- 1,000,000 ------- ---------- Notes payable.................................. 287,868 3,258,456 Less current portion................................ 277,255 3,258,456 ------- ---------- Long-term portion................................... $10,613 $ -- ======= =========
In December 1995, the Company entered into a line of credit agreement with a bank to borrow up to $2,000,000 at an interest rate of prime plus 3.5%. The agreement requires the Company to maintain a balance of cash and cash equivalents of not less than $700,000 as of the last day of each month during the term of the agreement. In addition, borrowings under the line of credit agreement are secured by the Company's assets. Borrowings under the line of credit are due upon the earlier of the closing of the Company's sale of its common stock in an IPO or March 5, 1996, at which time the line of credit agreement will expire. The note payable to Pepgen relates to the Company's September 1995 investment in Pepgen (Note 12). The Company intends to extend the note payable to a former related party. In March 1991, the Company issued 61,426 shares of common stock in satisfaction of notes payable of $458,760 and accrued interest of $38,978. The difference between the fair market value of the common stock and the exchange value of $8.103 per share resulted in an extraordinary gain on debt extinguishment of $485,453. (7) LEASES Capital Leases In 1993, and as amended in 1995, the Company obtained two equipment lease lines of credit which aggregated $2,300,000 and were collateralized by the related equipment acquired with the borrowings. The Company's ability to draw additional funds on these lease lines of credit expired in December 1995. However, drawdowns subsequent to the expiration have been allowed under one of the lease lines. Lease payments under the lines of credit are based on the total delivered equipment cost multiplied by a monthly rate factor of approximately 3.5% (approximate effective interest rate of 18% per annum). In addition, as partial consideration for obtaining the lease lines, the Company issued certain warrants to purchase common stock of the Company (Note 9). F-11 65 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993, 1994, AND 1995 Equipment acquired under the lease lines of credit as of December 31, 1994 and 1995 consisted of the following:
1994 1995 --------- --------- Machinery and equipment............................ $ 226,251 $ 887,607 Leasehold improvements............................. 82,157 82,157 --------- --------- 308,408 969,764 Accumulated depreciation and amortization.......... (129,959) (250,149) --------- --------- $ 178,449 $ 719,615 ========= =========
Future minimum lease payments under capital leases as of December 31, 1995 were:
YEAR ENDED DECEMBER 31, -------------------------------------------------------- 1996............................................... $390,028 1997............................................... 349,063 1998............................................... 314,964 -------- 1,054,055 Less amount representing interest....................... 251,116 -------- Present value of capital lease obligations.............. 802,939 Less current portion of capital lease obligations....... 260,214 -------- Capital lease obligations -- long-term portion.......... $542,725 ========
Operating Leases The Company leases office and manufacturing space in Berkeley and Alameda, California, under two noncancelable operating leases. Under the Alameda lease agreement, the Company is required to provide a security deposit in the form of a letter of credit in the amount of $50,000, secured by a $50,000 certificate of deposit which is included in other assets in the accompanying consolidated balance sheets. Total rent expense, net of income from a one-year sublease agreement of $184,000 in 1995, under these leases was $209,627, $504,971, and $327,056 for the years ended December 31, 1993, 1994, and 1995, respectively. Future minimum rental payments under all noncancelable operating leases as of December 31 were:
YEAR ENDED DECEMBER 31, --------------------------------------------------------- 1996.................................................. $ 559,560 1997.................................................. 472,560 1998.................................................. 314,405 1999.................................................. 11,004 2000.................................................. 7,866 ---------- Total.......................................... $1,365,395 ==========
(8) MANDATORILY REDEEMABLE PREFERRED STOCK In February 1988, a Joint Venture was formed between Calypte, Inc. and CBC Diagnostics, Inc. (CBC), formerly known as Purdue Frederick Diagnostics, Inc. When the Company was incorporated, the Company issued common stock and mandatorily redeemable Series A preferred stock in exchange for all the common F-12 66 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993, 1994, AND 1995 stock of Calypte, Inc. and all of the interests of the venturers in the Joint Venture. The Joint Venture's losses up to total capital contributions were allocated to CBC, who reported the losses on its income tax return. Holders of mandatorily redeemable Series A preferred stock shares are entitled to a preference over holders of common stock in involuntary or voluntary liquidation, in the amount of $10.00 per share plus all accrued but unpaid dividends (the redemption value) at the date of liquidation. The Company has the option to voluntarily redeem all or a portion of the mandatorily redeemable Series A preferred stock at any time that funds are legally available. The Company is required to redeem all shares of mandatorily redeemable Series A preferred stock within 60 days of any fiscal year-end in which the Company attains $3,000,000 in retained earnings, and funds are legally available. The mandatorily redeemable Series A preferred stock is nonvoting. Holders of mandatorily redeemable Series A preferred stock shares are entitled to receive cumulative dividends at the rate of $1.20 per share per annum. Through December 31, 1995, cumulative preferred dividends totaling $736,438 have been charged to stockholders' equity to accrete for the mandatorily redeemable Series A preferred stock redemption value with a corresponding increase in the recorded amount of the mandatorily redeemable Series A preferred stock. (9) STOCKHOLDERS' EQUITY Reverse Stock Split On November 22, 1994, the stockholders and the Board of Directors approved a 1-for-10 reverse stock split of the Company's common and preferred stock. Par value remained at $0.001. The stock accounts have been reduced and additional paid-in capital has been increased to reflect the change in the cumulative par value of the stock issued. All share and per share information in the accompanying consolidated financial statements have been adjusted to reflect this reverse stock split. Series B Convertible Preferred Stock Holders of Series B convertible preferred stock are entitled to a preference over the holders of mandatorily redeemable Series A preferred stock in involuntary or voluntary liquidation in the amount of $1.864 per share, subject to certain limitations. Series C Convertible Preferred Stock Holders of Series C convertible preferred stock are entitled to a preference over the holders of mandatorily redeemable Series A preferred stock and the holders of Series B convertible preferred stock in involuntary or voluntary liquidation in the amount of $3.70 per share, subject to certain limitations. Series D Convertible Preferred Stock In 1992, 800,000 shares of Series D convertible preferred stock were issued at a price of $7.50 per share. In 1993, an additional 199,999 shares of Series D convertible preferred stock were issued at a price of $7.50 per share. In March 1994, in accordance with certain antidilution rights, each outstanding share of Series D convertible preferred stock was converted into 1.5 shares of Series D convertible preferred stock. The liquidation preference and conversion price of the Series D convertible preferred stock was reduced to $5.00 per share. Also, the Company issued an additional 617,000 shares of Series D convertible preferred stock during 1994 at a price of $5.00 per share. F-13 67 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993, 1994, AND 1995 Holders of the Series D convertible preferred stock are entitled to a preference over the holders of mandatorily redeemable Series A preferred stock and the holders of Series B and C convertible preferred stock in involuntary or voluntary liquidation in the amount of $5.00 per share, subject to certain limitations. Series E Convertible Preferred Stock In November 1994, the Board of Directors authorized the issuance of up to 3,200,000 shares of Series E convertible preferred stock. In May 1995, the Board of Directors increased the authorized shares of Series E convertible preferred stock to 4,000,000. During 1994, 1,077,500 shares of Series E convertible preferred stock along with warrants to purchase an additional 1,079,100 shares of Series E convertible preferred stock were issued at $5.00 per share. Each warrant gives the holder the right to purchase a share of Series E convertible preferred stock for $5.00 per share. During 1995, an additional 890,366 shares of Series E convertible preferred stock were issued at a price of $5.00 per share. In connection with this issuance, warrants to purchase an additional 885,046 shares of Series E convertible preferred stock were issued. Each of the warrants gives its holder the right to purchase a share of Series E convertible preferred stock for $7.50. Holders of Series E convertible preferred stock are entitled to a preference over the holders of mandatorily redeemable Series A preferred stock, and the holders of Series B, C, and D convertible preferred stock in involuntary or voluntary liquidation in the amount of $5.00 per share, subject to certain limitations. Rights of Convertible Preferred Stockholders Holders of the Series B, C, D, and E convertible preferred stock are entitled to (i) receive one vote for each share of common stock into which their shares are convertible; (ii) elect members of the Company's Board of Directors; and (iii) receive dividends prior and in preference to any payment of any dividend on common stock. Automatic Conversion of Convertible Preferred Stock The Series B, C, D and E convertible preferred stock is convertible at any time into common stock of the Company at the initial ratio of one share of common stock for one share of Series B, C, D or E convertible preferred stock. The conversion ratio is adjustable under certain circumstances. Dividends are not cumulative and will not accrue unless declared. Series B, C, D, and E convertible preferred stock are automatically convertible into shares of common stock immediately upon the closing of the Company's IPO at a per share price of not less than $7.50 and which results in aggregate cash proceeds to the Company of at least $8,000,000. Common Stock Warrants and Options During 1993, the Company issued stock warrants for the purchase of 35,155 shares of the Company's common stock at exercise prices ranging from $5.00 to $7.50 per share as partial consideration for obtaining two lease lines of credit (Note 7). These warrants expire upon the later of 2003 or five years after the closing of the Company's sale of its common stock in a public offering. During 1995, the Company made an investment in Pepgen, a development stage enterprise. The Company's investment consisted in part, of options for the purchase of up to 475,000 shares of the Company's common stock at an exercise price of $7.50 per share (see Note 12). F-14 68 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993, 1994, AND 1995 Convertible Preferred Stock Warrants In conjunction with the Series D convertible preferred stock offerings during 1993 and 1994, the Company issued a stock warrant for the purchase of 18,000 shares of the Company's Series D convertible preferred stock at an exercise price of $5.60 per share. This warrant expires on the earlier of the warrant's expiration date of February 1996, the date of closing of the Company's sale of common stock at a per share price of not less than $10.00 and which results in aggregate cash proceeds to the Company of at least $10,000,000, or upon the occurrence of certain other events as set forth in the warrant agreement. In addition, the Company issued stock warrants for the purchase of 2,800 shares of the Company's Series D convertible preferred stock at an exercise price of $6.00 per share. These warrants expire in 1997. In conjunction with the Series E convertible preferred stock offerings in November 1994 and May, June and September 1995, the Company issued stock warrants for the purchase of 1,079,100, 414,000, 430,046 and 41,000 shares, respectively, of the Company's Series E convertible preferred stock. The warrants issued in November 1994 are exercisable at $5.00 per share and expire in November 1997. The warrants issued in May, June and September 1995 are exercisable at $7.50 per share and expire upon the earlier of one year after the date of issue, 60 days following receipt by the Company of FDA approval on its urine-based HIV-1 test, or 60 days following the closing date of the Company's IPO. As of December 31, 1995, there were 1,079,100 of the $5.00 warrants outstanding and 885,046 of the $7.50 warrants outstanding. Change of Control Provisions Certain provisions of the Company's Certificate of Incorporation and Bylaws may have the effect of preventing, discouraging or delaying any change in the control of the Company and may maintain the incumbency of the Board of Directors and management. The authorization of undesignated preferred stock makes it possible for the Board of Directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of the Company. (10) INCENTIVE STOCK AND STOCK OPTION PLANS Incentive Stock Plan In April 1991, the Company's Board of Directors approved the adoption of the Company's Incentive Stock Plan (the Stock Plan) which authorized the issuance of up to 290,992 shares of the Company's common stock. In January 1992 and November 1994, 200,000 and 1,000,000 additional shares, respectively, of common stock were authorized by the Company's Board of Directors for issuance under the Stock Plan. In December 1995, 1,250,000 additional shares of common stock were authorized by the Company's Board of Directors. Under the Stock Plan, employees or consultants may be granted options that allow for the purchase of shares of the Company's common stock. Under the terms of the Stock Plan, nonstatutory stock options may be granted only to employees, including directors who are employees, and consultants. Incentive stock options may be granted only to employees. Nonstatutory stock options may be granted under the Stock Plan at a price not less than 85% of the fair market value of the common stock on the date the option is granted. Incentive stock options may be granted under the Stock Plan at a price not less than 100% of the fair market value of the common stock on the date the option is granted. The fair value of the common stock is determined by the Board of Directors and includes consideration of a variety of factors including other equity transactions of the Company. Options granted under the Stock Plan generally vest monthly over four to five years. The term of the nonstatutory and incentive stock options granted is 10 years or less from the date of the grant, as provided in the option agreements. F-15 69 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993, 1994, AND 1995 Incentive and nonstatutory stock options granted to employees and consultants who, on the date of grant, own stock representing more than 10% of the voting power of all classes of stock of the Company are granted at an exercise price not less than 110% of the fair market value of the common stock. Any options granted are exercisable at the time and under conditions as determined by the Company's Board of Directors. The Board of Directors may amend or modify the Stock Plan at any time. The Stock Plan will terminate in 2001, unless sooner terminated by the Board of Directors. The following table summarizes activity under the Stock Plan:
OPTIONS EXERCISE PRICE --------- -------------- Outstanding as of December 31, 1992................. 248,845 $ 0.20 - 0.40 Granted........................................... 62,300 0.40 - 0.50 Exercised......................................... (22,444) 0.20 - 0.40 Canceled.......................................... (6,808) 0.40 - 0.50 --------- ------------ Outstanding as of December 31, 1993................. 281,893 0.20 - 0.50 Granted........................................... 148,582 0.50 - 1.00 Exercised......................................... (31,334) 0.20 - 0.50 Canceled.......................................... (84,314) 0.20 - 1.00 --------- ------------ Outstanding as of December 31, 1994................. 314,827 0.20 - 1.00 Granted........................................... 992,371 0.50 - 5.00 Exercised......................................... (4,547) 0.50 - 1.00 Canceled.......................................... (17,237) 0.50 - 1.00 --------- ------------ Outstanding as of December 31, 1995................. 1,285,414 $ 0.20 - 5.00 ========= ============ Exercisable as of December 31, 1995................. 543,799 $ 0.20 - 5.00 ========= ============
As of December 31, 1995, 1,329,173 shares of common stock were available for grant under the Stock Plan. In accordance with Staff Accounting Bulletin No. 83, the Company has recorded deferred compensation of $567,000 for the difference between the grant price and the deemed fair value of the stock for financial reporting purposes at the grant date related to stock options granted within one year of a planned public offering of the Company's common stock. This amount is being amortized over the relevant period of benefit. For the year ended December 31, 1995, $201,000 was amortized. In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 applies to all transactions in which an entity acquires goods or services by issuing equity instruments such as common stock, except for employee stock ownership plans. SFAS No. 123 establishes a new method of accounting for stock-based compensation arrangements with employees which is fair value based. The statement encourages (but does not require) employers to adopt the new method in place of the provisions of Accounting Principles Board Opinion No. 25 (APB No. 25), Accounting for Stock Issued to Employees. Companies may continue to apply the accounting provisions of APB No. 25 in determining net income; however, they must apply the disclosure requirements SFAS No. 123. If the Company were to adopt the fair value based method of SFAS No. 123, a higher compensation cost would result for fixed stock option plans and a different compensation cost would result for the Company's contingent or variable stock option plans. The recognition provisions and disclosure requirements of SFAS No. 123 are effective for the year ending December 31, 1996. The Company has elected to continue to use its current practice under APB No. 25. Also see Notes 9 and 12 regarding outstanding warrants. F-16 70 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993, 1994, AND 1995 1995 Employee Stock Purchase Plan In December 1995, the Company's Board of Director's approved the Company's Employee Stock Purchase Plan (the Purchase Plan) subject to the closing of the Company's IPO of its common stock. The Purchase Plan is intended to qualify under Section 423 of the Internal Revenue Code (the Code). The Company will reserve 300,000 shares of common stock for issuance under the Purchase Plan. Under the Purchase Plan, an eligible employee may purchase shares of common stock from the Company through payroll deductions of up to 10% of his or her compensation, at a price per share equal to 85% of the lower of (i) the fair market value of the Company's common stock on the first day of an offering period under the Purchase Plan or (ii) the fair market value of the common stock on the last day of an offering period. Except for the first offering period, each offering period will last for six months and will commence the first day on which the national stock exchanges and the Nasdaq Stock Market are open for trading, on or after May 1 and November 1 of each year. The first offering period will begin upon the effective date of the Company's IPO and will end on October 31, 1996. Any employee who is customarily employed for at least 20 hours per week and more than five months per calendar year, who has been employed for at least three consecutive months on or before the commencement date of an offering period is eligible to participate in the Purchase Plan. 1995 Director Option Plan In December 1995, the Company's Board of Director's approved the Company's Director Option Plan (the Director Option Plan) subject to the closing of the Company's IPO of its common stock. Under the Director Option Plan, the Company will reserve 200,000 shares of common stock for issuance to the directors of the Company pursuant to nonstatutory stock options. Under the Director Option Plan, directors who are not employees or consultants of the Company automatically receive an option to purchase 12,000 shares of common stock (the First Option) on the date on which such person first becomes a director, whether through election by the stockholders of the Company or appointment by the Board of Directors to fill a vacancy. Thereafter, each person shall receive an option to acquire 3,000 shares of the Company's common stock (the Subsequent Option) on each date such outside director is reelected. Each option granted under the Director Option Plan shall be exercisable at 100% of the fair market value of the Company's common stock on the date such option was granted. Twenty-five percent of the First Option shall vest one year after the date of grant, with 25% vesting each anniversary thereafter. Twelve and one-half percent of the shares subject to the Subsequent Option shall be exercisable on the first day of each month following the date of grant. The plan shall be in effect for a term of ten years unless sooner terminated under the Director Option Plan. (11) SECTION 401(K) PLAN In October 1995 (effective January 1, 1995), the Company adopted a Retirement Savings and Investment Plan (the 401(k) Plan) covering the Company's full-time employees located in the United States. The 401(k) Plan is intended to qualify under Section 401(k) of the Internal Revenue Code, so that contributions to the 401(k) Plan by employees or by the Company, and the investment earnings thereon, are not taxable to employees until withdrawn from the 401(k) Plan, and so that contributions by the Company, if any, will be deductible by the Company when made. Pursuant to the 401(k) Plan, employees may elect to reduce their current compensation by up to the statutorily prescribed annual limit and to have the amount of such reduction contributed to the 401(k) Plan. The 401(k) Plan permits, but does not require, additional matching contributions to the 401(k) Plan by the Company on behalf of all participants in the 401(k) Plan. The Company has not made any contributions to the 401(k) Plan. F-17 71 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993, 1994, AND 1995 (12) INVESTMENT IN PEPGEN CORPORATION During 1995, the Company purchased a 49% equity interest in Pepgen for $1.0 million paid at closing, $1.0 million payable to Pepgen pursuant to a promissory note (Note 6) and options to purchase the Company's common stock valued at $500,000. The options were granted to Pepgen stockholders' for the purchase of an aggregate of 475,000 shares of the Company's common stock at a price of $7.50 per share, of which 100,000 of such shares were immediately exercisable upon signing of the agreement and the remaining 375,000 shares become exercisable upon attainment of certain milestones. The options expire in September 2005. In addition, Calypte has the right of first negotiation to purchase the remaining 51% of Pepgen at fair market value, and the Company is entitled to elect two of the seven Board members of Pepgen. Other than the payment of the $1.0 million dollar promissory note, Calypte does not have any ongoing commitments to fund Pepgen. The Company uses the equity method to account for its investment in Pepgen. Upon completion of this transaction, the Company wrote-off its entire investment in Pepgen as purchased in-process research and development costs. (13) INCOME TAXES As discussed in Note 2, the Company adopted SFAS No. 109 effective January 1, 1993 on a prospective basis. The cumulative effect of this change in accounting for income taxes did not have a significant effect on the consolidated financial statements. Income tax expense differed from the amounts computed by applying the U.S. federal income tax rate of 34% to pretax losses as a result of the following:
DECEMBER 31, ------------------------------------------- 1993 1994 1995 ----------- ----------- ----------- Computed "expected" tax expense..... $(2,101,600) $(1,829,600) $(3,418,300) Meals and entertainment expenses, and officers' life insurance not deductible for income taxes....... 3,300 7,000 5,500 Research expenses................... 59,000 62,900 86,200 State tax expense................... 1,100 1,100 1,100 Losses and credits for which no benefit has been recognized....... 2,089,200 1,790,100 3,334,500 Other............................... (49,400) (29,900) (7,400) ----------- ----------- ----------- $ 1,600 $ 1,600 $ 1,600 =========== =========== ===========
F-18 72 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993, 1994, AND 1995 The tax effect of temporary differences that give rise to significant portions of the deferred tax assets is presented below:
DECEMBER 31, ---------------------------- 1994 1995 ----------- ------------ Deferred tax assets: Employee benefit reserves, including accrued vacation.................................... $ 13,000 $ 25,500 Start-up and other capitalization.............. 9,100 7,300 Fixed assets, due to differences in depreciation................................ 224,500 298,800 Deferred rent.................................. 36,600 35,100 Net operating loss carryover................... 6,290,100 8,941,100 Research and development credit................ 600,400 920,900 Loss contingency............................... 20,100 20,100 Purchased research and development............. -- 978,400 ----------- ------------ Total gross deferred tax assets........ 7,193,800 11,227,200 Less valuation allowance......................... (7,193,800) (11,227,200) ----------- ------------ Net deferred tax asset................. $ -- $ -- =========== ============
The net change in the valuation allowance for the years ended December 31, 1993, 1994, and 1995 was an increase of $2,444,000, $2,142,000, and $4,033,400, respectively. Because there is uncertainty regarding the Company's ability to realize its deferred tax assets, a 100% valuation allowance has been established. As of December 31, 1995, the Company had federal tax net operating loss carryforwards of approximately $24,107,000, which will expire in the years 2004 through 2010. The Company also has federal research and development credit carryforwards as of December 31, 1995 of approximately $750,000, which will expire in the years 2005 through 2010. State tax net operating loss carryforwards were approximately $12,133,000 and state research and development credit carryforwards were $259,000 as of December 31, 1995. The state net operating loss carryforwards will expire in the years 1997 through 2000 and the state research and development credits will expire in the years 2005 through 2010. The Company's ability to utilize its net operating loss and research and development tax credit carryforwards may be limited in the future if it is determined that the Company experienced an ownership change, as defined in Section 382 of the Internal Revenue Code, as a result of prior transactions or upon the completion of the IPO. (14) ROYALTY, LICENSE, AND RESEARCH AGREEMENTS Royalty and License Agreements The Company has entered into an agreement that provides for royalty payments to former related parties based on sales of certain products conceived by the former related parties prior to March 30, 1989. The Company has entered into arrangements with various organizations to receive the right to utilize certain patents and proprietary rights under licensing agreements in exchange for the Company making certain royalty payments based on sales of certain products and services. The royalty obligations are based on a percentage of net sales of licensed products and include minimum annual royalty payments under some agreements. During 1993, the Company paid $1,040,000 in product license and related legal fees as consideration for these F-19 73 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993, 1994, AND 1995 agreements, which has been recorded as research and development expense in the accompanying consolidated statements of operations. Research Agreement In August 1993 and as amended in 1994, the Company entered into a research agreement that allowed for a university to perform certain research on behalf of the Company for a seven-year period. Under the terms of the agreement, the Company may negotiate certain license rights to the inventions made by the university resulting from this research. The Company's annual payment under this agreement is approximately $150,000 through 1999. (15) DISTRIBUTION AGREEMENTS Seradyn, Inc. In April 1995, the Company entered into an agreement with Seradyn, Inc. (Seradyn), under which Seradyn was granted exclusive distribution rights for the Company's urine-based HIV-1 test under the trade name "Seradyn Sentinel" for all non-Calypte accounts in the United States and all customers in Europe, Latin America, Africa, and the Middle East (excluding Israel). The agreement provides for certain minimum purchases by Seradyn. If such minimum purchases are not met, the Company has the right to terminate the agreement or render Seradyn's rights non-exclusive for the region in which the minimum purchases were not met provided that Seradyn will be guaranteed the prices given to Calypte's most favored customers in the territory. The initial term of the agreement extends through December 1998. Seradyn has the right to extend the agreement for successive two-year terms provided it has met minimum sales requirements. Seradyn has agreed to assist the Company in obtaining regulatory approvals in its distribution territory at the Company's expense. The agreement also grants Seradyn a right of first refusal on distribution rights for certain new products which may be developed during the term of the agreement. Otsuka Pharmaceutical Co., Ltd. In August 1994, the Company entered into a distribution agreement with Otsuka Pharmaceutical Co., Ltd. (Otsuka), a drug development and distribution company incorporated in Japan. Otsuka is also a stockholder of the Company. The agreement gives Otsuka exclusive distribution rights for the Company's urine-based HIV-1 test and to use the name "Calypte" to market the test in 22 Asian countries, Australia and New Zealand. To maintain exclusivity, the agreement requires that Otsuka purchase certain annual minimums, which increase each year, and total 70 million tests over ten years. Otsuka has agreed to use its best efforts to obtain regulatory approvals for the product in its territory. In 1993, Otsuka paid $500,000 to the Company to be applied against future commercial product purchases from the Company. The Company recorded this $500,000 payment as deferred revenue as of December 31, 1994 and 1995. The agreement between the Company and Otsuka is for a term of ten years, and is terminable without cause by Otsuka upon 120-days notice. The Company has committed up to one-half of its total manufacturing capacity to Otsuka. If the Company is unable to meet Otsuka's manufacturing requirements, Otsuka has a right to manufacture tests itself. The agreement also grants Otsuka the right of first refusal to distribute certain new products which may be developed during the term of the agreement. F-20 74 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993, 1994, AND 1995 Travenol Laboratories (Israel) Ltd. In December 1994, the Company entered into an agreement with Travenol Laboratories (Israel) Ltd. (Travenol). The agreement gives Travenol exclusive rights to distribute the Company's urine-based HIV-1 test under the trade name "Calypte" within Israel. Under the agreement, Travenol will undertake registration of the product in Israel with the Company paying regulatory fees. The term of the agreement is perpetual unless terminated earlier for specified causes. No minimum purchase levels are required under this agreement. (16) CONSULTING AND EMPLOYEE AGREEMENTS On April 10, 1995, the Company entered into an employment agreement with an officer which is effective from May 1, 1995 through December 31, 1996. Under the agreement the officer is receiving a salary of $195,000 per year and is eligible for a maximum bonus in 1996 of $35,000. The agreement is automatically renewable each year subject to three months notice prior to the end of each calendar year. In the event the officer's employment with the Company is terminated by the Company other than for cause, the officer may be entitled to receive his base salary for up to 12 months. In addition, the Company agreed to pay the officer's moving expenses in connection with his relocation to California. On January 1, 1995, the Company entered into an employment agreement with an officer for the year ended December 31, 1995, which provided for an annual salary of $140,000 plus an annual bonus not to exceed $35,000 per year. The agreement was automatically renewed for the year ending December 31, 1996 and is automatically renewable each year subject to three months notice prior to the end of each calendar year. The Company has entered into other employee and consulting agreements with varying terms, in the ordinary course of business. (17) RELATED PARTY TRANSACTIONS Included in revenue earned under research and development contracts is $2,099,116 for the period from February 18, 1988 (inception) to December 31, 1995 earned from CBC or its affiliates. The founders of the Company included entities affiliated with CBC. In March 1992, the Company advanced $85,000 to a stockholder and officer of the Company in exchange for a note receivable issued by the stockholder and officer. In anticipation of the forgiveness of a portion of the note, the Company wrote-off half of the note during 1995. The remaining $42,500 balance of the note is due March 20, 1997 and is secured by shares in the Company's common stock acquired by the borrower since 1989. Interest income recognized by the Company and paid by the borrower was $6,132, $5,950, and $5,950 in 1993, 1994, and 1995, respectively. In January 1994, the Company entered into an agreement with a stockholder of the Company for management services. Expense related to cash payments under this agreement for such services was $135,000 and $137,500 for 1994 and 1995, respectively. In addition, options to purchase 154,276 shares of the Company's common stock at a per share price of $0.50 were granted to the stockholder. (18) LEGAL MATTERS The Company is subject to litigation from time to time in the ordinary course of business. Although the amount of any liability with respect to such litigation cannot be determined, in the opinion of management such liability, if any, will not have a material adverse effect on the Company's financial condition or results of operations. F-21 75 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993, 1994, AND 1995 (19) ACCOUNTING CHANGES In connection with the Company's filing of a registration statement with the SEC for the planned sale of common stock in an IPO and pursuant to the provisions of APB Opinion No. 20, Accounting Changes, the Company has retroactively restated its consolidated financial statements for all periods presented to reclassify its mandatorily redeemable Series A preferred stock out of permanent equity and to accrue dividends on the manditorily redeemable Series A preferred stock regardless of their declaration by the Company's Board of Directors. The impact of this change was to recognize dividends of $120,000 in each of the years in the three-year period ended December 31, 1995 and $736,438 for the period February 18, 1988 (inception) through December 31, 1995. In addition, the Company changed its policy with regards to the date it commences depreciating and amortizing amounts capitalized for new facilities to the date such facilities are available for their intended use. This change resulted in an increase in the 1994 net loss of approximately $86,000. F-22 76 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) ASSETS
MARCH 31, 1996 DECEMBER 31, -------------------------------- 1995 ACTUAL PRO FORMA(NOTE 2) ------------ ------------ ----------------- Current assets: Cash and cash equivalents........................................... $ 2,558,650 $ 1,841,696 $ 1,339,003 Other current assets................................................ 755,572 914,591 914,591 ------------ ------------ ------------ Total current assets......................................... 3,314,222 2,756,287 2,253,594 Property and equipment, net........................................... 1,854,010 1,884,298 1,884,298 Note receivable from officer.......................................... 42,500 42,500 42,500 Other assets.......................................................... 126,144 143,485 143,485 ------------ ------------ ------------ $ 5,336,876 $ 4,826,570 $ 4,323,877 ============ ============ ============ LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable and accrued expenses............................... $ 1,697,447 $ 2,249,153 $ 2,249,153 Notes payable -- current portion.................................... 3,258,456 3,250,536 2,747,843 Capital lease obligations -- current portion........................ 260,214 423,384 423,384 Deferred revenue.................................................... 500,000 625,000 625,000 ------------ ------------ ------------ Total current liabilities.................................... 5,716,117 6,548,073 6,045,380 Deferred rent obligation.............................................. 87,357 76,876 76,876 Capital lease obligations -- long-term portion........................ 542,725 682,867 682,867 ------------ ------------ ------------ Total liabilities............................................ 6,346,199 7,307,816 6,805,123 Mandatorily redeemable Series A preferred stock, $0.001 par value; 100,000 shares authorized, issued, and outstanding; aggregate redemption and liquidation value of $1,000,000 plus cumulative dividends........................................................... 1,736,438 1,766,438 1,766,438 Commitments and contingencies Stockholders' equity (deficit): Series B convertible preferred stock, $0.001 par value; 804,860 shares authorized; 804,846 shares issued and outstanding as of December 31, 1995 and March 31, 1996 (-0- shares pro forma); aggregate liquidation value of $1,500,235 as of March 31, 1996 ($-0- pro forma).................................................. 805 805 -- Series C convertible preferred stock, $0.001 par value; 1,702,727 shares authorized; 1,702,705 shares issued and outstanding as of December 31, 1995 and March 31, 1996 (-0- shares pro forma); aggregate liquidation value of $6,300,004 as of March 31, 1996 ($-0- pro forma).................................................. 1,703 1,703 -- Series D convertible preferred stock, $0.001 par value; 2,130,051 shares authorized; 2,116,999 shares issued and outstanding as of December 31, 1995 and March 31, 1996 (-0- shares pro forma); aggregate liquidation value of $10,585,000 as of March 31, 1996 ($-0- pro forma).................................................. 2,117 2,117 -- Series E convertible preferred stock, $0.001 par value; 4,000,000 shares authorized; 1,967,866 and 2,207,866 shares issued and outstanding as of December 31, 1995 and March 31, 1996, respectively (-0- shares pro forma); aggregate liquidation value of $11,039,330 as of March 31, 1996 ($-0- pro forma).............. 1,967 2,207 -- Common stock, $0.001 par value; 12,000,000 shares authorized (20,000,000 shares pro forma); 573,899 and 574,018 shares issued and outstanding as of December 31, 1995 and March 31, 1996, respectively (7,406,434 shares pro forma)......................... 574 574 7,406 Additional paid-in capital.......................................... 28,014,030 29,329,343 29,329,343 Deferred compensation............................................... (365,871) (366,914) (366,914) Deficit accumulated during development stage........................ (30,401,086) (33,217,519) (33,217,519) ------------ ------------ ------------ Total stockholders' equity (deficit)......................... (2,745,761) (4,247,684) (4,247,684) ============ ============ ============ $ 5,336,876 $ 4,826,570 $ 4,323,877 ============ ============ ============
See accompanying notes to consolidated condensed financial statements. F-23 77 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
PERIOD FROM THREE MONTHS FEBRUARY 18, 1988 ENDED MARCH 31, (INCEPTION) --------------------------- THROUGH MARCH 31, 1995 1996 1996 ----------- ----------- ----------------- Revenue earned under research and development contracts, substantially from related parties........................................ $ -- $ -- $ 2,390,187 Operating expenses: Research and development....................... 970,811 1,827,559 22,174,123 Purchased in-process research and development costs....................................... -- -- 2,500,000 Selling, general and administrative............ 491,527 896,185 11,822,590 ----------- ----------- ------------ Loss from operations................... (1,462,338) (2,723,744) (34,106,526) Interest income.................................. 60,761 36,939 606,767 Interest expense................................. (17,749) (134,845) (737,864) Other income..................................... 21,066 5,217 75,660 ----------- ----------- ------------ Loss before income taxes and extraordinary item................... (1,398,260) (2,816,433) (34,161,963) Income taxes..................................... -- -- (60,750) ----------- ----------- ------------ Loss before extraordinary item......... (1,398,260) (2,816,433) (34,222,713) Extraordinary gain on debt extinguishment........ -- -- 485,453 ----------- ----------- ------------ Net loss............................... (1,398,260) (2,816,433) (33,737,260) Less dividend on mandatorily redeemable Series A preferred stock................................ (30,000) (30,000) (766,438) ----------- ----------- ------------ Net loss attributable to common stockholders..... $(1,428,260) $(2,846,433) $ (34,503,698) =========== =========== ============ Net loss per share attributable to common stockholders................................... $ (0.19) $ (0.38) =========== =========== Weighted average shares used to compute net loss per share attributable to common stockholders................................... 7,450,212 7,450,241 =========== ===========
See accompanying notes to consolidated condensed financial statements. F-24 78 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
PERIOD FROM THREE MONTHS FEBRUARY 18, 1988 ENDED MARCH 31, (INCEPTION) ----------------------- THROUGH MARCH 31, 1995 1996 1996 ---------- ---------- ----------------- Cash flows from operating activities: Net loss........................................... $(1,398,260) $(2,816,433) $(33,737,260) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization................... 104,354 187,070 2,004,317 Loss on sale or disposal of equipment........... 61,718 -- 115,192 Extraordinary gain on debt extinguishment....... -- -- (485,453) Amortization of deferred compensation........... -- 44,391 245,505 Compensation paid by stock issuance............. 22,000 -- 47,421 Purchased in-process research and development costs......................................... -- -- 2,500,000 Changes in operating assets and liabilities: Other current assets.......................... (7,176) (159,019) (675,752) Organizational costs.......................... -- -- (123,074) Other assets.................................. (300) (17,341) (424,825) Accounts payable, accrued expenses and deferred revenue........................... (192,909) 676,706 2,776,222 Deferred rent obligation...................... (981) (10,481) 76,876 Note payable in exchange for expenses paid on behalf of the Company...................... -- -- 191,964 ----------- ----------- ------------ Net cash used in operating activities...... (1,411,554) (2,095,107) (27,488,867) ----------- ----------- ------------ Cash flows from investing activities: Proceeds from disposition of equipment............. -- -- 25,000 Purchase of equipment.............................. (106,550) -- (2,276,552) Investment in Pepgen Corporation................... -- -- (1,000,000) ----------- ----------- ------------ Net cash used in investing activities...... (106,550) -- (3,251,552) ----------- ----------- ------------ Cash flows from financing activities: Proceeds from the sale of stock.................... 18,900 1,300,119 29,579,524 Expenses paid related to sale of stock............. (779) -- (870,006) Prepaid license fee................................ -- -- 500,000 Principal payments on notes payable................ (7,026) (7,920) (924,846) Principal payments on capital lease obligations.... (21,000) (66,688) (233,513) Proceeds from notes payable........................ -- -- 2,692,035 Capital contributions.............................. -- -- 75,500 Joint ventures' capital contributions.............. -- -- 1,610,779 Proceeds from capital lease obligations............ -- 152,642 152,642 ----------- ----------- ------------ Net cash (used in) provided by financing activities............................... (9,905) 1,378,153 32,582,115 ----------- ----------- ------------ Net (decrease) increase in cash and cash equivalents........................................ (1,528,009) (716,954) 1,841,696 Cash and cash equivalents at beginning of period..... 4,477,924 2,558,650 -- ----------- ----------- ------------ Cash and cash equivalents at end of period........... $2,949,915 $1,841,696 $ 1,841,696 =========== =========== ============ Supplemental disclosure of cash flow activities: Cash paid for interest............................. $ 17,749 $ 95,822 $ 574,000 Cash paid for income taxes......................... -- -- 60,100 Supplemental disclosure of noncash activities: Acquisition of equipment through obligations under capital leases.................................. -- 217,358 1,187,122 Accrued liabilities converted to notes payable..... -- -- 363,091 Accrued liabilities converted to common stock...... -- -- 38,978 Notes payable converted to common stock............ -- -- 458,760 Notes payable converted to Series B convertible preferred stock................................. -- -- 50,000 Note payable issued upon investment in Pepgen Corporation..................................... -- -- 1,000,000 Options issued upon investment in Pepgen Corporation..................................... -- -- 500,000 Dividend on mandatorily redeemable Series A preferred stock................................. 30,000 30,000 766,438 Deferred compensation attributable to stock grants.......................................... -- 45,425 612,416
See accompanying notes to consolidated condensed financial statements. F-25 79 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) MARCH 31, 1995 AND 1996 The accompanying unaudited consolidated condensed financial statements have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the interim periods presented. Operating results for the three months ended March 31, 1996, are not necessarily indicative of the results to be expected for the year. Certain information in footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted pursuant to such rules and regulations. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and the notes thereto for the year ended December 31, 1995. (1) THE COMPANY AND BASIS OF PRESENTATION Calypte Biomedical Corporation (the Company) was incorporated on November 11, 1989 and is a development stage enterprise. The Company's primary activities have been to obtain funding and to perform research and development. The Company is in the process of applying for approvals to market and sell its product in both domestic and foreign markets. The accompanying consolidated condensed financial statements include the results of operations of the Company and its wholly owned subsidiary, Calypte, Inc., and Calypte Biomedical Company (the Joint Venture). All significant intercompany accounts and transactions have been eliminated in consolidation. The Company accounts for its 49% interest in Pepgen Corporation (Pepgen) under the equity method (Note 7). (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Pro Forma Financial Information Pro forma stockholders' equity (deficit) of the Company as of March 31, 1996 gives effect to the conversion of 6,832,416 shares of Series B, C, D, and E convertible preferred stock into 6,832,416 shares of common stock and gives effect to the reincorporation of the Company into a Delaware company and authorization for the Company to issue up to 20 million shares of common stock. Pro forma financial information also gives effect, as of March 31, 1996, to repayment of $502,693 of current notes payable which were repaid in April 1996. Net Loss Per Share Attributable to Common Stockholders Except as noted below, net loss per share attributable to common stockholders is computed using the weighted average number of shares of common stock outstanding. Common equivalent shares from stock options and warrants are excluded from the computation as their effect is antidilutive, except that, pursuant to the Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 83, common stock issued for consideration below the assumed IPO price and warrants exercised, warrants granted and stock options granted with exercise prices below the IPO price during the 12-month period preceding the date of the initial F-26 80 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) MARCH 31, 1995 AND 1996 filing of the registration statement, even when antidilutive, have been included in the calculation of common equivalent shares, using the treasury stock method based on the assumed IPO price, as if they were outstanding for all periods presented. Furthermore, common equivalent shares from convertible preferred stock that will be converted upon the completion of the Company's IPO are included using the "as if converted" method. In accordance with paragraph 23 of Accounting Principles Board Opinion No. 15, pro forma net loss per share has been presented to reflect the use of proceeds from the Company's IPO to repay the mandatorily redeemable Series A preferred stock and to repay certain debt obligations as of the beginning of the period presented. The pro forma weighted average shares for the three months ended March 31, 1996 were 7,951,828 and pro forma net loss was $2,681,587 which resulted in pro forma net loss per share of $0.34 for the three months ended March 31, 1996. (3) NOTES PAYABLE -- CURRENT PORTION Notes payable consisted of the following:
DECEMBER 31, MARCH 31, 1995 1996 ------------ ---------- Prime plus 3.5%; 11.75% as of March 31, 1996; note payable to a bank; secured by property and equipment; due July 5, 1996...................... $2,000,000 $2,000,000 10% note payable to a former related party; secured by property and equipment; due August 1, 1996.... 247,843 247,843 12% note payable; secured by equipment; due April 1996............................................. 10,613 2,693 4% note payable to Pepgen, due the earlier of: 60 days following either FDA approval of the Company's urine-based HIV-1 test or completion of an IPO; or April 23, 1996 (extended to October 31, 1996 in May 1996)............................ 1,000,000 1,000,000 ---------- ---------- Notes payable -- current portion......... $3,258,456 $3,250,536 ========== ==========
In December 1995, the Company entered into a line of credit agreement with a bank to borrow up to $2,000,000 at an interest rate of prime plus 3.5%. The agreement requires the Company to maintain a balance of cash and cash equivalents of not less than $700,000 as of the last day of each month during the term of the agreement. In addition, borrowings under the line of credit agreement are secured by the Company's assets. In March 1996, the Company extended the due date of the line of credit such that the line of credit is due July 5, 1996. In connection with the extension, the Company made a $500,000 principal payment in April 1996 and the available line of credit was reduced to $1,500,000. The note payable to Pepgen Corporation (Pepgen) relates to the Company's September 1995 investment in Pepgen. (4) LEASE COMMITMENTS In 1993, and as amended in 1995, the Company obtained two equipment lease lines of credit which aggregated $2,300,000 and were collateralized by the related equipment acquired with the borrowings. The Company's ability to draw additional funds on these lines of credit expired in December 1995. However, drawdowns subsequent to the expiration have been allowed under one of these lease lines. Lease payments under the lines of credit are based on the total delivered equipment cost multiplied by a monthly rate factor of approximately F-27 81 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) MARCH 31, 1995 AND 1996 3.5% (approximate effective interest rate of 18% per annum). Through March 31, 1996, total borrowings under these equipment lease lines of credit were approximately $1,340,000 to be repaid through 1998. (5) STOCKHOLDERS' EQUITY Automatic Conversion of Convertible Preferred Stock Series B, C, D, and E convertible preferred stock are automatically convertible into shares of common stock immediately upon the closing of the Company's IPO at a per share price of not less than $7.50 and which results in aggregate cash proceeds to the Company of at least $8,000,000. Convertible Preferred Stock Warrants On February 6, 1996, 18,000 warrants issued in conjunction with the Series D convertible preferred stock offerings during 1993 and 1994 expired unexercised. Warrants to purchase 2,800 shares of the Company's Series D convertible preferred stock at an exercise price of $6.00 per share remain outstanding and unexercised as of March 31, 1996. These warrants expire in 1997. In conjunction with the Series E convertible preferred stock offerings in November 1994 and in May, June and September 1995, the Company issued stock warrants for the purchase of 1,079,100, 414,000, 430,046 and 41,000 shares, respectively, of the Company's Series E convertible preferred stock. The warrants issued in November 1994 are exercisable at $5.00 per share and expire in November 1997. The warrants issued in May, June and September 1995 are exercisable at $7.50 per share and expire upon the earlier of one year after the date of issue, 60 days following receipt by the Company of FDA approval on its urine-based HIV-1 test, or 60 days following the closing date of the Company's IPO. During the three months ended March 31, 1996, the Company received proceeds of $1,000,000 and $300,000 from the exercise of 200,000 of the $5.00 warrants and 40,000 of the $7.50 warrants, respectively. As of March 31, 1996, there were 879,100 of the $5.00 warrants outstanding and 845,046 of the $7.50 warrants outstanding. (6) INCENTIVE STOCK PLAN Under the Company's Incentive Stock Plan (the Stock Plan), 1,490,992 shares are authorized for issuance and in December 1995, 1,250,000 additional shares of common stock were authorized by the Company's Board of Directors for issuance under the Stock Plan. Under the Stock Plan, employees or consultants may be granted options that allow for the purchase of shares of the Company's common stock. The following table summarizes activity under the Stock Plan for the three months ended March 31, 1996:
OPTIONS EXERCISE PRICE --------- -------------- Outstanding as of December 31, 1995................. 1,285,414 $ 0.20 - 5.00 Granted........................................... 7,400 1.00 Exercised......................................... (119) 1.00 Canceled.......................................... (134) 1.00 --------- Outstanding as of March 31, 1996.................... 1,292,561 0.20 - 5.00 ======== Exercisable as of March 31, 1996.................... 630,780 0.20 - 5.00 ========
As of March 31, 1996, 1,321,907 shares of common stock were available for grant under the Stock Plan. F-28 82 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) MARCH 31, 1995 AND 1996 (7) INVESTMENT IN PEPGEN CORPORATION During 1995, the Company purchased a 49% equity interest in Pepgen for $1.0 million paid at closing, $1.0 million payable to Pepgen pursuant to a promissory note (Note 3) and options to purchase the Company's common stock valued at $500,000. The options were granted to Pepgen stockholders for the purchase of an aggregate of 475,000 shares of the Company's common stock at a price of $7.50 per share, of which 100,000 of such shares were immediately exercisable upon signing of the agreement and the remaining 375,000 shares become exercisable upon attainment of certain milestones. The options expire in 2005. In addition, Calypte has the right of first negotiation to purchase the remaining 51% of Pepgen at fair market value, and the Company is entitled to elect two of the seven Board members of Pepgen. Other than the payment of the $1.0 million dollar promissory note, Calypte does not have any ongoing commitments to fund Pepgen. The Company uses the equity method to account for its investment in Pepgen. Upon completion of this transaction, the Company wrote-off its entire investment in Pepgen as purchased in-process research and development costs. (8) LEGAL MATTERS The Company is subject to litigation from time to time in the ordinary course of business. Although the amount of any liability with respect to such litigation cannot be determined, in the opinion of management such liability, if any, will not have a material adverse effect on the Company's financial condition or results of operations. (9) SUBSEQUENT EVENTS Series E Stock Warrants From March 31, 1996 to May 10, 1996, the Company received an additional $131,000 and $1,740,000 from the exercise of an additional 26,200 of the $5.00 warrants and 231,976 of the $7.50 warrants, respectively. As of May 10, 1996, there were 852,900 of the $5.00 warrants and 613,070 of the $7.50 warrants outstanding. Royalty and License Agreement In April 1996, the Company signed an agreement with a corporation for the joint development of a diagnostic product. As part of the agreement, the Company granted a license to the corporation to make, use and sell the product. The Company will receive royalty payments from the corporation based on a percentage of net sales of the licensed product. Authorization of Initial Public Offering On May 16, 1996, the Board of Directors authorized the Company's management to file a registration statement with the SEC permitting the Company to sell shares of its common stock to the public. F-29 83 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) PRO FORMA FINANCIAL INFORMATION During 1995, the Company acquired a 49% interest in Pepgen Corporation (Pepgen) for $2.5 million. The $2.5 million was comprised of $1.0 million cash, a $1.0 million note payable and options granted to Pepgen shareholders to purchase 475,000 shares of the Company's common stock valued at $500,000. Other than the payment of the $1.0 million note payable, Calypte does not have any ongoing commitments to fund Pepgen. The Company uses the equity method to account for its investment in Pepgen. Upon completion of the investment, the Company wrote off its entire investment in Pepgen as purchased in-process research and development costs. The following Unaudited Pro Forma Consolidated Condensed Statement of Operations gives the effect to the investment as if it had occurred on January 1, 1995. No other unaudited pro forma consolidated condensed financial information is presented since the transaction is already included in the audited Consolidated Balance Sheet of the Company as of December 31, 1995 and in the unaudited Consolidated Condensed Statement of Operations of the Company for the three-month period ended March 31, 1996. The Unaudited Pro Forma Consolidated Condensed Statement of Operations does not purport to present the results of operations of Calypte Biomedical Corporation had the transaction assumed therein occurred on the date specified, nor is it indicative of the results of operations that may be achieved in the future. The Unaudited Pro Forma Consolidated Condensed Statement of Operations is based on certain assumptions and the adjustment described in Note(1) to the Unaudited Pro Forma Consolidated Condensed Statement of Operations included herein and should be read in conjunction with Management's Discussion and Analysis of Financial Conditions and Results of Operations and the Consolidated Financial Statements of the Company and the related Notes thereto and the Financial Statements of Pepgen and the related Notes thereto included herein. F-30 84 CALYPTE BIOMEDICAL CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1995
CALYPTE PRO FORMA CALYPTE HISTORICAL ADJUSTMENT PRO FORMA ----------- ---------- ----------- Revenue earned under research and development contracts, substantially from related parties..... $ -- $ -- $ -- Operating expenses: Research and development.......................... 5,017,545 -- 5,017,545 Purchased in-process research and development costs.......................................... 2,500,000 -- 2,500,000 Selling, general and administrative............... 2,862,049 -- 2,862,049 ------------- -------- ------------- Loss from operations...................... (10,379,594) -- (10,379,594) Interest income..................................... 194,944 -- 194,944 Interest expense.................................... (116,842) (30,000)(1) (146,842) Other income........................................ 11,707 -- 11,707 ------------- -------- ------------- Loss before income taxes.................. (10,289,785) (30,000) (10,319,785) Income taxes........................................ (1,600) -- (1,600) ------------- -------- ------------- Net loss.................................. (10,291,385) (30,000) (10,321,385) Less dividend on mandatorily redeemable Series A preferred stock................................... (120,000) -- (120,000) ------------- -------- ------------- Net loss attributable to common stockholders........ $(10,411,385) $(30,000) $(10,441,385) ============= ======== ============= Net loss per share attributable to common stockholders...................................... $ (1.40) $ (1.40) ============= ============= Weighted average shares used to compute net loss per share attributable to common stockholders......... 7,450,692 7,450,692 ============= =============
- --------------- (1) For purposes of the accompanying unaudited pro forma financial statement, additional interest expense has been provided on the $1 million Pepgen note payable at the rate of 4% for the period January 1 through September 30, 1995, the assumed transaction date for purposes of the pro forma financial statement. F-31 85 INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders Pepgen Corporation: We have audited the consolidated balance sheets of Pepgen Corporation and subsidiary (a development stage enterprise) (the Company) as of December 31, 1993 and 1994, and the related consolidated statements of operations, shareholders' equity (deficiency) and cash flows for the period from July 8, 1992 (inception) through December 31, 1992, for each of the years in the two-year period ended December 31, 1994, and for the period from July 8, 1992 (inception) through December 31, 1994. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Pepgen Corporation and subsidiary (a development stage enterprise) as of December 31, 1993 and 1994, and the results of their operations and their cash flows for the period from July 8, 1992 (inception) through December 31, 1992, for each of the years in the two-year period ended December 31, 1994, and for the period from July 8, 1992 (inception) through December 31, 1994, in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in note 1 to the consolidated financial statements, the Company's losses from operations and accumulated deficit during the development stage raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in note 1 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. KPMG Peat Marwick LLP San Francisco, California November 15, 1995 F-32 86 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED BALANCE SHEETS ASSETS
DECEMBER 31, ----------------------- 1993 1994 --------- --------- Current assets: Cash............................................................... $ 11,691 $ 1,905 Other current assets............................................... 12,794 1,711 --------- --------- Total current assets....................................... 24,485 3,616 Intangible assets, net of accumulated amortization of $1,573 in 1993 and $17,024 in 1994................................................ 105,716 113,758 Organization costs, net of accumulated amortization of $6,576 in 1993 and $12,822 in 1994................................................ 24,648 18,402 --------- --------- $ 154,849 $ 135,776 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY) Current liabilities: Accounts payable................................................... $ 28,552 $ 24,816 Accrued salary..................................................... 8,030 105,000 Accrued consulting fees............................................ 3,000 24,700 Convertible notes payable to shareholder........................... -- 80,000 --------- --------- Total current liabilities.................................. 39,582 234,516 Convertible notes payable to shareholder............................. 55,000 -- --------- --------- Total liabilities.......................................... 94,582 234,516 --------- --------- Commitments and subsequent events Shareholders' equity (deficiency): Convertible preferred stock, no par value, 20,000,000 shares authorized, 763,300 shares issued and outstanding in 1993 and 1994, aggregate liquidation value of $381,650................... 381,650 381,650 Common stock, no par value, 40,000,000 shares authorized, 3,960,000 shares issued and outstanding in 1993 and 1994.................. 4,500 4,500 Deficit accumulated during the development stage................... (325,883) (484,890) --------- --------- Total shareholders' equity (deficiency).................... 60,267 (98,740) --------- --------- $ 154,849 $ 135,776 ========= =========
See accompanying notes to consolidated financial statements. F-33 87 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED STATEMENTS OF OPERATIONS
PERIOD FROM PERIOD FROM JULY 8, 1992 JULY 8, 1992 (INCEPTION) YEARS ENDED DECEMBER (INCEPTION) THROUGH 31, THROUGH DECEMBER 31, ----------------------- DECEMBER 31, 1992 1993 1994 1994 ------------ --------- --------- ------------ Revenue earned under research, development and licensing agreements... $ -- $ -- $ 100,000 $ 100,000 Operating expenses: Research and development............... 9,000 110,375 91,728 211,103 General and administrative............. 62,434 142,474 166,479 371,387 --------- --------- --------- Total operating expenses....... 71,434 252,849 258,407 582,490 Loss before income taxes....... (71,434) (252,849) (158,207) (482,490) Provision for income taxes............... 800 800 800 2,400 --------- --------- --------- Net loss....................... $(72,234) $(253,649) $(159,007) $ (484,890) ========= ========= =========
See accompanying notes to consolidated financial statements. F-34 88 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY) PERIOD FROM JULY 8, 1992 (INCEPTION) THROUGH DECEMBER 31, 1994
DEFICIT CONVERTIBLE ACCUMULATED PREFERRED STOCK COMMON STOCK DURING THE ------------------ ------------------ DEVELOPMENT SHARES AMOUNT SHARES AMOUNT STAGE TOTAL ------- -------- --------- ------ ----------- -------- Net loss for the period from July 8, 1992 (inception) through December 31, 1992.......................... -- $ -- -- $ -- $ (72,234) $(72,234) ------- -------- --------- ------ -------- -------- Balances as of December 31, 1992.... -- -- -- -- (72,234) (72,234) Issuance of common shares for cash.............................. -- -- 3,900,000 3,900 -- 3,900 Issuance of convertible preferred shares for cash................... 700,000 350,000 -- -- -- 350,000 Issuance of common shares on conversion of note payable and accrued interest.................. -- -- 60,000 600 -- 600 Issuance of convertible preferred shares on conversion of note payable and accrued interest...... 63,300 31,650 -- -- -- 31,650 Net loss............................ -- -- -- -- (253,649) (253,649) ------- -------- --------- ------ -------- -------- Balances as of December 31, 1993.... 763,300 381,650 3,960,000 4,500 (325,883) 60,267 Net loss............................ -- -- -- -- (159,007) (159,007) ------- -------- --------- ------ -------- -------- Balances as of December 31, 1994.... 763,300 $381,650 3,960,000 $4,500 $(484,890) $(98,740) ======= ======== ========= ====== ======== ========
See accompanying notes to consolidated financial statements. F-35 89 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED STATEMENTS OF CASH FLOWS
PERIOD FROM PERIOD FROM JULY 8, 1992 JULY 8, 1992 (INCEPTION) (INCEPTION) THROUGH YEARS ENDED DECEMBER 31 THROUGH DECEMBER 31, ----------------------- DECEMBER 31, 1992 1993 1994 1994 ------------ --------- --------- ------------ Cash flows from operating activities: Net loss.................................. $(72,234) $(253,649) $(159,007) $ (484,890) Adjustments to reconcile net loss to net cash used in operating activities: Amortization........................... 2,582 7,817 21,697 32,096 Purchased research and development cost................................. -- 49,315 -- 49,315 (Increase) decrease in other current assets............................... -- (12,794) 11,083 (1,711) Increase in intangible assets.......... (50,453) (56,836) (23,493) (130,782) Increase in organization costs......... (3,989) (27,235) -- (31,224) Increase (decrease) in accounts payable and accrued liabilities.............. 63,568 (23,986) 114,934 154,516 --------- ---------- ---------- ---------- Net cash used in operating activities...................... (60,526) (317,368) (34,786) (412,680) --------- ---------- ---------- ---------- Cash flows used in investing activities -- loans to and acquisition of PepTech....... -- (49,315) -- (49,315) --------- ---------- ---------- ---------- Cash flows from financing activities: Proceeds from issuance of notes payable to shareholder............................ 55,000 55,000 80,000 190,000 Principal repayments on notes payable to shareholder............................ -- (25,000) (55,000) (80,000) Proceeds from issuance of common stock.... -- 3,900 -- 3,900 Proceeds from issuance of convertible preferred stock........................ -- 350,000 -- 350,000 Change in bank overdraft.................. 5,526 (5,526) -- -- --------- ---------- ---------- ---------- Net cash provided by financing activities... 60,526 378,374 25,000 463,900 --------- ---------- ---------- ---------- Net (decrease) increase in cash............. -- 11,691 (9,768) 1,905 Cash at beginning of period................. -- -- 11,691 -- --------- ---------- ---------- ---------- Cash at end of period....................... $ -- $ 11,691 $ 1,905 $ 1,905 ========= ========== ========== ========== Supplemental disclosure of cash flow information: Cash paid during the year for income taxes.................................. $ 800 $ 800 $ 800 $ 2,400 Supplemental disclosure of noncash financing activities: Conversion of note payable and accrued interest to shareholder to common and convertible preferred stock............ -- 32,250 -- 32,250
See accompanying notes to consolidated financial statements. F-36 90 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993 AND 1994 (1) THE COMPANY Pepgen Corporation (the Company) was incorporated in California on July 8, 1992 as a biopharmaceutical company and is currently conducting research. The Company is in the development stage and has experienced losses since inception; the Company's accumulated deficit during the development stage, (July 8, 1992 (inception) through December 31, 1994) was $484,890, including a loss of $159,007 for the year ended December 31, 1994. Cash flows used in operations were $34,786 in 1994. The Company's ability to continue as a going concern is dependent upon management's ability to raise additional equity capital or obtain debt financing to fund future operations. Management is actively seeking additional financing and, during 1995, entered into an agreement with another development stage enterprise to obtain such financing (Note 9). The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern and, accordingly, do not give effect to adjustments that would be necessary should the Company be required to realize its assets and satisfy its liabilities in other than the normal course of business. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, PepTech, Inc. (PepTech). All intercompany transactions and balances have been eliminated in consolidation. Organization Costs Organization costs are stated at cost and are being amortized over five years using the straight-line method. Research and Development Research and development costs are expensed as incurred (Note 3). Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when it is more likely than not that deferred tax assets will not be realized. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, at the date of financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-37 91 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993 AND 1994 Intangible Assets Intangible assets consist of license fees and patent support costs. Such fees and costs are capitalized and amortized over their estimated useful life of ten years using the straight-line method. Amortization commences once final approval of the related patent has been obtained. Such fees and costs are charged to operations when it is determined that the patent will not be obtained or when the Company determines that it will not pursue research or development of the subject technology. (3) ACQUISITION OF PEPTECH On July 16, 1993, the Company acquired all of the outstanding capital stock of PepTech for $25,000 cash, the cancellation of notes receivable from PepTech totaling $20,000, and other expenses of $4,315. The acquisition was accounted for as a purchase. The sole shareholder and employee of PepTech is the principal researcher with respect to certain technology and compounds pursuant to which the Company has obtained license rights. PepTech has obtained a research grant, and has applied for additional grants related to such technology and compounds. At the date of acquisition, PepTech had no tangible assets or liabilities. Accordingly, the entire purchase price was charged to operations at acquisition as purchased research and development expense. (4) NOTES PAYABLE TO SHAREHOLDER Notes payable to shareholder (President) consist of the following at December 31:
1993 1994 ------- -------- Promissory notes to shareholder, uncollateralized, due December 31, 1995..................................... $55,000 $ 80,000 Less current portion.................................... -- (80,000) -------- ------- Long term portion....................................... $55,000 $ -- ======== =======
During 1994, the Company issued convertible promissory notes totaling $80,000 to a shareholder and officer, payable on December 31, 1995. Of the total, $60,000 of these notes bear interest at 10% per annum while $20,000 are non-interest bearing. These notes, including accrued interest, are convertible at the option of the holder, in whole or in part, into shares of fully-paid and nonassessable convertible preferred stock of the Company upon issuance of preferred stock by the Company for proceeds of not less than $1,000,000 (the New Preferred Stock), at a rate per share equal to the then fair market value. Shares issued upon conversion would have the same rights, preferences and privileges, and be subject to all of the same restrictions, as the New Preferred Stock. In connection with the issuance of the convertible promissory notes, the noteholder obtained an option to purchase up to 160,000 shares of common stock for the price of $.01 per share at the time of issuance of the New Preferred Stock. The Company must provide the holder notice of at least 20 days prior to the issuance of the New Preferred Stock. Should the noteholder not give the Company notice of his election to convert, the conversion feature and common stock option will expire on the earlier of the issuance of New Preferred Stock or December 31, 1995. Subsequent to December 31, 1994 the Company issued to the President and another shareholder additional convertible promissory notes in the amount of $127,000. These notes have the same terms as those issued in 1994, including the option to purchase up to 254,000 shares of common stock at a price of $.01 per share. Also, during 1995 the $20,000 non-interest bearing notes existing at December 31, 1994 and $100,000 of the notes issued in 1995 were repaid with all related conversion and stock option features (for the purchase of 240,000 F-38 92 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993 AND 1994 shares) expiring unexercised. The remaining balance of notes payable, including accrued interest, all to the President, were converted into a new note payable on November 15, 1995 which bears interest at 6.25% per annum. All conversion and stock option features related to the notes expired unexercised. During 1994, the Company issued convertible promissory notes totaling $55,000 to a shareholder and officer with the same terms as the notes issued in 1993. The 1993 notes were prepaid in 1994 and the conversion feature and related option expired. (5) SHAREHOLDERS' EQUITY (DEFICIENCY) The Company has two classes of stock: convertible preferred stock and common stock. As of December 31, 1994, preferred stock consists of only Series A, for which the Company has designated 8,000,000 of the 20,000,000 authorized shares. The preferences, privileges, and restrictions granted or imposed on the preferred stock are: Dividend Rights Holders of Series A preferred stock are entitled to dividends at an annual rate of 8% per annum of the original $.50 per share price (Original Purchase Price), if declared, prior to the payment of any dividend on common stock. The right to such dividends is not cumulative. No shares of common stock shall receive any dividend at a rate which is greater than the rate at which the dividends are simultaneously paid in respect of the preferred stock. No dividends have been declared through December 31, 1994. Conversion Rights Each share of Series A preferred stock is, at any time, at the option of the holder, convertible into shares of fully-paid and nonassessable common stock. Each share of preferred stock is convertible into the number of shares of common stock that results from dividing the conversion price of preferred stock in effect at the time of conversion into the Original Purchase Price for each share of preferred stock being converted. The conversion price is subject to adjustment from time to time. Automatic Conversion Upon either the voluntary conversion of at least 70% of the originally issued shares of Series A preferred stock or the completion of a qualified initial public offering in which the Company receives proceeds of at least $5,000,000 at a price of at least $3.00 per share, subject to adjustment, each share of preferred stock shall automatically be converted into shares of common stock at the conversion price for preferred stock then in effect. Liquidation Rights In the event of any liquidation, dissolution, or winding up of the Company, the holders of Series A preferred stock shall be entitled to an amount equal to the Original Purchase Price per share, plus all declared but unpaid dividends, if any. If insufficient funds are available to pay the full preference amount, then the amount available shall be distributed ratably among the holders of the Series A preferred stock. After payment of the liquidation preference to all preferred shareholders, remaining assets of the Company shall be distributed ratably to all common shareholders. F-39 93 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993 AND 1994 Voting Rights Holders of Series A preferred stock are entitled to the number of votes per share that would be equivalent to the number of shares of common stock into which the shares of Series A preferred stock is convertible. Stock Options During 1993, the Board of Directors of the Company approved the 1993 Flexible Stock Incentive Plan (the Plan). Under the Plan, the Company may grant nonqualified and incentive stock options to directors, officers, employees and consultants of the Company to acquire up to 2,300,000 common shares of the Company, which the Company has reserved. The exercise price of the options shall equal the fair market value of the stock at the date of grant. The term of any stock option may not exceed ten years from the date of grant. All options are nonassignable. In 1994, the Company granted to its President and founding shareholder options to purchase of 100,000 shares of common stock at $.001 per share, the common stock's then fair market value. Subsequent to December 31, 1994, the Company granted additional options to its President and founding shareholder to purchase another 100,000 common shares of stock at $.001 per share, the then fair market value of the common stock. During 1995 all of these outstanding options were exercised. In 1995 the Board of Directors of the Company approved the 1995 Stock Option Plan (the 1995 Plan). Under the 1995 Plan, the Company may grant nonqualified and incentive stock options to directors, officers, employees and consultants of the Company to acquire up to 30% of the fully diluted number of common shares of the Company. The exercise price of the option shall equal the fair market value of the stock at the date of grant. The term of any stock option may not exceed ten years from the date of grant. All options are nonassignable. (6) RESEARCH, DEVELOPMENT AND LICENSING AGREEMENTS In 1992, the Company entered into a licensing agreement with a university to obtain the right to utilize certain patents in exchange for a $57,000 cash payment, future milestone payments of up to $250,000 and future royalty payments or sales on products covered by the technology under license. In 1992, the Company entered into an agreement with a university to perform certain research and development work. Under this agreement, the Company paid eight quarterly cash installments of $9,000 over the research period, which expired in October 1994. In 1993, the Company entered into an agreement with an independent research group to perform certain research and development work. Under this agreement, the Company paid quarterly cash installments of $8,000 over the research period, which expired in May 1995. As of December 31, 1994, $13,300 was accrued under this agreement. During 1993, the Company entered into a licensing agreement with an independent research group to obtain the right to utilize certain patents and proprietary rights in exchange for a $15,000 cash payment, future milestone payments of up to $125,000 and future royalty payments on sales of products covered by the technology under license. During 1994, the Company entered into an agreement with a pharmaceutical company whereby consideration, totaling $100,000, was received by the Company in exchange for the rights to evaluate the Company's material over a defined period of time which is dependent on the achievement of certain technical milestones and to enter into a worldwide, exclusive licensing agreement with the Company for the acquisition of the related F-40 94 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993 AND 1994 patent, should it be obtained. The agreement was extended for an additional month for an additional $25,000 in 1995. In 1995, the Company entered into a research and development agreement with an international company for the right to evaluate certain of the Company's research, and an exclusive right to negotiate a license for patent rights in certain countries. The Company received a $400,000 nonrefundable payment, and will receive another $600,000 over the term of the agreement which expires in 1996. In connection with the agreement, the Company paid an $80,000 finders fee to another party. (7) COMMITMENTS Consulting Agreement In August 1993, the Company entered into a consulting agreement with one of its founding shareholders. This agreement was terminated in August 1994. The total amount earned and accrued as of December 31, 1994 was $24,700. Employment Agreement In July 1992, the Company entered into a five-year employment agreement with its President, Chief Executive Officer and one of its founding shareholders. The total amount earned in 1994 and 1993 was $108,000 and $95,000, respectively, of which $116,000 was accrued at December 31, 1994. (8) INCOME TAXES The provision for income taxes for all periods presented in the accompanying consolidated statements of operations represent minimum California franchise taxes. The significant tax effected components of temporary differences and carryforwards of December 31, 1993 and 1994 are as follows:
1993 1994 --------- --------- Deferred tax assets: Capitalized research and development............... $ 10,300 $ 17,000 Accrued expenses................................... 15,800 62,000 Net operating loss carryforwards................... 84,200 94,000 Depreciation and amortization...................... 38,000 40,800 Other.............................................. 2,800 8,000 --------- -------- Total deferred tax assets.................. 151,100 221,800 Valuation allowance................................ (151,100) (221,800) --------- -------- Net deferred tax asset..................... $ -- $ -- ========= ========
The Company has established a valuation allowance to offset all deferred tax assets at December 31, 1993 and 1994 as it is considered more likely than not that the Company will not receive future benefit. The Company had a net operating loss carryforward as of December 31, 1994 available to offset future taxable income for federal tax purposes of approximately $268,200, which expires from 2002 to 2009. The Company's utilization of its net operating loss and credit carryforwards to offset taxable income will be subject to annual limitations pursuant to Section 382 of the Internal Revenue Code due to cumulative changes in stock ownership. F-41 95 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1993 AND 1994 (9) SUBSEQUENT EVENT Subsequent to December 31, 1994, the Company and its shareholders entered into a Master Stock Purchase Agreement (the Agreement) with Calypte Biomedical Corporation, a development stage enterprise (Calypte), that provided for the issuance of 3,041,406 of new shares of convertible preferred stock to Calypte in exchange for cash of $45,875 and a note receivable in the amount of $1,000,000. The Agreement also provided for the acquisition by Calypte of all 763,300 outstanding shares of the Company's convertible preferred stock from the existing preferred shareholders for $954,125 in cash and for the issuance of options for the purchase of Calypte common stock to the existing common shareholders of the Company. After completion of the above transaction, Calypte owned 49% of the Company's outstanding stock. The convertible preferred stock acquired by Calypte is convertible into common stock of the Company, at the option of the holder, at any time, at an initial ratio of one share of common stock for one share of convertible preferred stock and carries other conversion, voting, and dividend rights similar to those held by the previous convertible preferred stock shareholders. The convertible preferred stock has a liquidation preference aggregating $2,000,000 in the event of an involuntary or voluntary liquidation. Concurrent with the above transaction, the Company issued warrants to Calypte that provide Calypte with the right to purchase up to 5,435,294 shares of the Company's convertible preferred stock at a price of $0.01 per share. The warrants may be exercised only to the extent that currently outstanding or new options issued under the Company's 1995 Stock Option Plan are exercised for the purchase of the Company's common stock or as a result of the Company granting stock awards to any management employee of the Company for no consideration at a ratio of 99.5% of the newly issued common shares. The $1,000,000 note receivable from Calypte bears interest at 4% per annum and is payable at the earlier of (a) six months from the date of issuance or (b) 60 days following either Calypte receiving FDA approval on its HIV-1 urine testing product or the closing of the sale of Calypte's common stock in a public offering. Other terms of the Agreement provide Calypte with certain rights with regard to the appointment of directors and the right of first negotiation to purchase the remaining 51% of the Company at fair market value. Also, concurrent with the Agreement, the Company entered into a separate agreement that provides for payments to the former convertible preferred shareholders and to the current common shareholders upon the receipt of licensing fees from certain prospects identified as of the date of the Agreement. The aggregate obligation to these current and former shareholders consists of 20% of the net licensing fees, as defined, received prior to October 1996 from any of the prospects identified in the Agreement. F-42 96 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED BALANCE SHEET (UNAUDITED) ASSETS
DECEMBER 31, 1995 ----------- Current assets -- Cash and cash equivalents................................... $ 193,320 Intangible assets, net of accumulated amortization of $20,808................. 209,778 Organization costs, net of accumulated amortization of $19,067................ 12,157 --------- $ 415,255 ========= LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable and accrued liabilities.................................... $ 210,565 Note payable to shareholder................................................. 98,523 --------- Total liabilities................................................... 309,088 --------- Shareholders' equity: Convertible preferred stock, no par value, 20,000,000 shares authorized, 3,804,706 shares issued and outstanding.................................. 1,427,525 Common stock, no par value, 40,000,000 shares authorized, 4,160,000 shares issued and outstanding................................................... 4,700 Amounts due from shareholder................................................ (1,011,667) Deficit accumulated during the development stage............................ (314,391) --------- Total shareholders' equity.......................................... 106,167 --------- $ 415,255 =========
See accompanying notes to unaudited consolidated financial statements. F-43 97 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
PERIOD FROM JULY 8, 1992 (INCEPTION) YEAR ENDED THROUGH DECEMBER 31, DECEMBER 31, 1995 1995 ------------ ------------ Revenue earned under research, development and licensing agreements and grants....................................... $ 481,385 $ 581,385 Operating expenses: Research and development.................................... 36,868 247,971 General and administrative.................................. 256,225 627,612 --------- --------- Total operating expenses............................ 293,093 875,583 --------- --------- Income (loss) from operations....................... 188,292 (294,198) Other income (expense): Interest income............................................. 12,598 12,598 Interest expense............................................ (17,351) (17,351) --------- --------- Income (loss) before income taxes................... 183,539 (298,951) Provision for income taxes.................................... 13,040 15,440 --------- --------- Net income (loss)................................... $ 170,499 $ (314,391) ========= =========
See accompanying notes to unaudited consolidated financial statements. F-44 98 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY) (UNAUDITED) PERIOD FROM JULY 8, 1992 (INCEPTION) THROUGH DECEMBER 31, 1995
DEFICIT CONVERTIBLE ACCUMULATED PREFERRED STOCK COMMON STOCK AMOUNTS DUE DURING THE ---------------------- ------------------ FROM DEVELOPMENT SHARES AMOUNT SHARES AMOUNT SHAREHOLDER STAGE TOTAL --------- ---------- --------- ------ ----------- ----------- --------- Net loss for the period from July 8, 1992 (inception) through December 31, 1992................................. -- $ -- -- $ -- $ -- $ (72,234) $ (72,234) ------- ----- --------- ---------- ---------- ---------- -------- -------- Balances as of December 31, 1992....... -- -- -- -- -- (72,234) (72,234) Issuance of common shares for cash..... -- -- 3,900,000 $3,900 -- -- 3,900 Issuance of convertible preferred shares for cash...................... 700,000 350,000 -- -- -- -- 350,000 Issuance of common shares on conversion of note payable and accrued interest............................. -- -- 60,000 600 -- -- 600 Issuance of convertible preferred shares on conversion of note payable and accrued interest................. 63,300 31,650 -- -- -- -- 31,650 Net loss............................... -- -- -- -- -- (253,649) (253,649) ------- ----- --------- ---------- ---------- ---------- -------- -------- Balances as of December 31, 1993....... 763,300 381,650 3,960,000 4,500 -- (325,883) 60,267 Net loss............................... -- -- -- -- -- (159,007) (159,007) ------- ----- --------- ---------- ---------- ---------- -------- -------- Balances as of December 31, 1994....... 763,300 381,650 3,960,000 4,500 -- (484,890) (98,740) Exercise of stock options.............. -- -- 200,000 200 -- -- 200 Issuance of convertible preferred shares for cash and promissory note................................. 3,041,406 1,045,875 -- -- (1,000,000 ) -- 45,875 Interest earned on promissory note..... -- -- -- -- (11,667 ) -- (11,667) Net income............................. -- -- -- -- -- (170,499) (170,499) ------- ----- --------- ---------- ---------- ---------- -------- -------- Balances as of December 31, 1995....... 3,804,706 $1,427,525 4,160,000 $4,700 $(1,011,667) $(314,391) $ 106,167 ========= ========== ========== ============ ========== ======== ========
See accompanying notes to unaudited consolidated financial statements. F-45 99 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
PERIOD FROM JULY 8, 1992 (INCEPTION) YEAR ENDED THROUGH DECEMBER 31, DECEMBER 31, 1995 1995 ------------ ------------ Cash flows from operating activities: Net income (loss)................................................ $ 170,499 $ (314,391) --------- --------- Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Noncash interest on shareholder note payable.................. 11,523 11,523 Amortization.................................................. 10,029 39,875 Purchased research and development cost....................... -- 49,315 (Increase) decrease in other current assets................... (9,956) (11,667) Increase in intangible assets................................. (99,805) (230,587) Increase in organization costs................................ -- (31,225) Increase in accounts payable and accrued liabilities.......... 56,050 212,817 --------- --------- Net cash provided by (used in) operating activities......... 138,340 (274,340) --------- --------- Cash used in investing activities -- acquisition of PepTech:....... -- (49,315) --------- --------- Cash flows from financing activities: Proceeds from issuance of notes payable to shareholders.......... 127,000 317,000 Principal repayments of notes payable to shareholders............ (120,000) (200,000) Proceeds from exercise of stock options.......................... 200 200 Proceeds from issuance of common stock........................... -- 3,900 Proceeds from issuance of convertible preferred stock............ 45,875 395,875 --------- --------- Net cash provided by financing activities..................... 53,075 516,975 --------- --------- Net increase in cash.......................................... 191,415 193,320 Cash and cash equivalents, beginning of period..................... 1,905 -- --------- --------- Cash and cash equivalents, end of period........................... $ 193,320 $ 193,320 ========= ========= Supplemental disclosure of noncash financing activities: Promissory note due from shareholder received in exchange for preferred stock............................................... $1,000,000 $1,000,000 Interest earned on promissory note due from shareholder.......... 11,667 11,667 Interest expense on shareholder note payable converted to new shareholder note payable...................................... 11,523 11,523 Refinance of shareholder notes payable........................... 87,000 87,000 Conversion of note payable and accrued interest to common and preferred stock............................................... -- 32,250 Supplemental disclosures of cash flow information: Cash paid during the year for: Income taxes.................................................. 800 3,200 Interest...................................................... 5,828 5,828
See accompanying notes to unaudited consolidated financial statements. F-46 100 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DECEMBER 31, 1995 (1) THE COMPANY Pepgen Corporation (the "Company") was incorporated in California on July 8, 1992 as a biopharmaceutical company. The Company is in the development stage, has a working capital deficit and has an accumulated deficit during the development stage of $314,391 at December 31, 1995. Moreover, the recoverability of the carrying value of the Company's assets is entirely dependent upon the Company's ability to develop products related to its patents, obtain regulatory approvals and successfully market its products. Revenues to date have been primarily from research and development agreements in an effort to develop the Company's products. The Company's planned principal operations have not yet commenced. The Company is actively seeking additional funding; however, the outcome of these activities is uncertain. These matters raise a substantial doubt about the Company's ability to continue as a going concern. The accompanying consolidated financial statements have been prepared on a basis of accounting principles applicable to a going concern and, accordingly, they do not give effect to adjustments that would be necessary should the Company be required to realize its assets and satisfy its liabilities in other than the normal course of business. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, PepTech, Inc. (PepTech). All intercompany transactions have been eliminated in consolidation. Intangible Assets Intangible assets consist of license fees and patent support costs. Such fees and costs are capitalized and amortized over their estimated useful life of ten years using the straight-line method. Amortization commences once final approval of the related patent has been obtained. Such fees and costs are charged to operations when it is determined that the patent will not be obtained or when the Company determines that it will not pursue research or development of the subject technology. Organization Costs Organization costs are stated at cost and are being amortized over their estimated useful lives of five years using the straight-line method. Research and Development Research and development costs are expensed as incurred. Income Taxes Deferred income taxes are recognized for temporary differences between financial statement and income tax bases of assets and liabilities using enacted rates in effect for the years in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities. F-47 101 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) DECEMBER 31, 1995 Cash and Cash Equivalents Cash and cash equivalents include cash on hand, and amounts on deposit with financial institutions that are readily convertible into cash with an acquired maturity date of 90 days or less. Fair Value of Financial Instruments Financial assets and liabilities have carrying values which approximate their fair values for all periods presented. (3) ACQUISITION OF PEPTECH On July 16, 1993, the Company acquired all of the outstanding capital stock of PepTech for $25,000 cash, the cancellation of notes receivable from PepTech totaling $20,000, and other expenses of $4,315. The sole shareholder and employee of PepTech is the principal researcher with respect to certain technology and compounds pursuant to which the Company has obtained license rights. Moreover, PepTech has obtained a research grant, and has applied for additional grants, related to such technology and compounds. At the date of acquisition, PepTech had no tangible assets or liabilities. Accordingly, the entire purchase price was charged to operations as purchased research and development expenses. (4) NOTE PAYABLE TO SHAREHOLDER Note payable to shareholder consists of the following at December 31, 1995: Promissory note to shareholder, uncollateralized, interest payable at 6.25% per annum, no stated repayment date.......... $ 98,523 Less current portion............................................ (98,523) -------- $ -- ========
(5) EQUITY In 1995, the Company entered into a Master Stock Purchase Agreement (the "Agreement") with a biomedical firm whereby, upon the completion of the events contemplated by the Agreement, as described below, the biomedical firm would acquire 49% of the fully-diluted common stock of the Company. Under the terms of the Agreement, the biomedical firm purchased all of the outstanding preferred shares from the existing shareholders for cash and certain options to purchase common stock in the biomedical firm, and an additional 3,041,406 preferred shares from the Company for total consideration to the Company of $1,045,875. Cash of $45,875 was paid at the closing and a promissory note in the amount of $1,000,000 was issued. This promissory note bears interest at 4% per annum and is payable at the earlier of: (a) October 1996 or (b) sixty days following either FDA approval of the biomedical firm's major product or completion of an initial public offering of the biomedical firm's common stock. The Company also issued warrants to purchase an additional 5,435,294 shares of the Company's preferred stock at $.001 per share. These warrants may be exercised only to the extent that currently outstanding or new options issued under the Company's 1995 Stock Option Plan are exercised for the purchase of the Company's common stock or as a result of the Company granting stock awards to any management employee of the Company for no consideration at a ratio of 99.5% of the newly issued common shares. F-48 102 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) DECEMBER 31, 1995 If payment of the promissory note is not made in accordance with its terms, the Company may repurchase or redeem the 3,041,406 shares of preferred stock for $45,875, and the warrants to purchase the additional shares of preferred stock shall expire. Preferred Stock The Company has authorized 20,000,000 shares of preferred stock of which 10,000,000 shares are designated as Series A Preferred Stock ("Series A preferred"). The other 10,000,000 shares are currently undesignated. Holders of Series A preferred stock are entitled to annual dividends at the rate of 8%, payable quarterly. The dividends are not cumulative and are only payable if declared by the Company's Board of Directors. Interest shall not be paid on any undeclared or unpaid dividends. No dividends may be paid to common stock shareholders until full annual dividends are declared and paid to the preferred shareholders. No dividends have been declared as of December 31, 1995. In the event of any liquidation, dissolution or wind up of the Company, either voluntary or involuntary, the Series A preferred holders are entitled to an aggregate liquidation value of $2,000,000. The Series A preferred shares are convertible, at the holder's option, at any time into an equal number of shares of the Company's common stock. The preferred shares will automatically convert into common shares upon the earlier of: (a) the closing of a firm commitment initial public offering with a price per common share of no less than $3.00 and aggregate gross proceeds of no less than $5,000,000, or (b) the voluntary conversion into common shares of at least 70% of the issued and outstanding Series A preferred shares. Series A preferred shareholders have voting rights in their equivalent number of common shares, as if converted. Under the terms of the Agreement, the biomedical firm is entitled to 49% of the voting interest in the Company at all times prior to the conversion of Series A preferred shares to common shares. (6) STOCK OPTIONS During 1995, the Company approved the 1995 Incentive and Non-Statutory Stock Option Plan (the Plan). This Plan replaced the 1993 Flexible Stock Incentive Plan. Under the Plan, the Company may grant nonqualified and incentive stock options to officers, employees and consultants of the Company to acquire up to 5,657,143 common shares of the Company. As of December 31, 1995, there were 1,885,695 options granted and outstanding under the Plan to the Company's Chief Executive Officer, Chairman and founding shareholder as part of his employment agreement (Note 7). These options are fully vested, are exercisable, and have an exercise price of $.02 per share, the estimated fair market value of the Company's common stock at the grant date. During 1995, the Company approved a resolution with respect to compensation of outside directors. Each outside director will be granted options to acquire 20,000 shares of common stock to be vested over four years, at the rate of 5,000 per year, at an exercise price of $.02 per share. As of December 31, 1995, no options had been granted to outside directors. In 1994, the Company granted options to acquire 100,000 shares of common stock to its President and founding shareholder at $.001 per share, the estimated fair market value of the Company's common stock at the grant date. In March 1995, the Company granted an additional 100,000 common stock options to its President at $.001 per share, the estimated fair market value of the Company's common stock at the grant F-49 103 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) DECEMBER 31, 1995 date. The options to acquire 200,000 shares of common stock were exercised in November 1995 for cash proceeds of $200. (7) COMMITMENTS AND CONTINGENCIES Research and Development Agreements In 1993, the Company entered into an agreement with an independent research group to perform certain research and development work. Under this agreement, the Company paid quarterly cash installments over the research period, which expired in May 1995. The amount paid under this agreement in 1995 was approximately $11,000. During 1994, the Company entered into an agreement with a major pharmaceutical company whereby consideration, totaling $100,000, was received by the Company in exchange for the rights to evaluate the Company's material over a defined period of time and to enter into a worldwide, exclusive licensing agreement with the Company for the acquisition of the related patent, should it be obtained. The agreement was extended for one additional month during 1995 for an additional $25,000. The agreement was mutually terminated subsequent to this one month extension. During 1995, the Company entered into an agreement with a major Japanese research firm whereby a non-refundable cash payment of $400,000 was received by the Company in 1995 for the right to use the Company's material in a research and development program over a defined period of time. The agreement provides for total consideration of $1,000,000 with the remainder to be paid upon the attainment of certain milestones by the research program. Upon completion of the research program, the Japanese firm has the option to pay the Company an additional $3,000,000 for the right to negotiate an exclusive licensing arrangement for the product in Japan and Korea. The negotiation period would be over three months and the option payment would be non-refundable regardless of the outcome of the negotiations. Federal Research Grant The Company is a recipient of a federal research grant amounting to $75,002. As of December 31, 1995, the Company received $56,385 of this grant. The grant expires on March 1, 1996. Employment Agreement In November 1995, the Company entered into an employment agreement with its Chief Executive Officer, Chairman and one of its founding shareholders. The agreement, which replaced a previous employment agreement, provides for minimum annual salary and benefits. In the event of involuntary termination, as defined, the Company is liable for twelve months of salary. The Company also granted the executive fully vested options to acquire 1,885,695 shares of common stock (Note 6). The agreement expires on December 31, 1996, unless renewed. The total amount earned by this executive in 1995 under employment agreements was $120,000. Corporate Partnership Agreement In March 1995, the Company entered into a twelve-month corporate partnership agreement with an agent whereby the Company would pay the agent a defined percentage of revenues or license fees received as a result of the agent locating a corporate partner in Japan or Korea. During the year ended December 31, 1995, the Company paid the agent $80,000 for services performed. F-50 104 PEPGEN CORPORATION AND SUBSIDIARY (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) DECEMBER 31, 1995 Net Licensing Fee Agreements In September 1995, the Company entered into net licensing agreements, whereby for a period of one year, the Company will pay ten percent of any net licensing fee, as defined, received by the Company to the common shareholders and an additional ten percent of any net licensing fee, as defined, to the previous holders of preferred stock (prior to the investment by the biomedical firm -- see Note 5). No amounts were earned or paid under these net licensing fee agreements for the year ended December 31, 1995. (8) INCOME TAXES The provision for income taxes consists of the following:
PERIOD FROM YEAR ENDED JULY 8, 1992 DECEMBER 31, (INCEPTION) THROUGH 1995 DECEMBER 31, 1995 ------------ ------------------- Current: Federal...................................... $ -- $ -- State........................................ 13,040 15,440 ------- ------- $ 13,040 $15,440 ======= =======
The Company's effective tax rate differs from the U.S. federal statutory rate due primarily to losses incurred for which benefits have not been realized, the change in the valuation allowance and the effect of state income tax. The tax effected amounts of temporary differences as of December 31, 1995 are as follows: Deferred tax assets: Capitalized research and development...................... $ 20,647 State income taxes........................................ 4,434 Accrued expenses.......................................... 85,875 Net operating loss carryforwards.......................... 17,014 Other..................................................... 5,291 --------- Total deferred tax assets......................... 133,261 Valuation allowance....................................... (133,261) --------- Net deferred tax asset............................ $ -- =========
The Company has a net operating loss carryforward as of December 31, 1995 available to offset future taxable income for federal tax purposes of approximately $50,000, which begins to expire in 2001. In general, Section 382 of the Internal Revenue Code includes provisions which limit the amount of net operating loss carryforwards and other tax attributes that may be used annually in the event that a 50% ownership change (as defined) takes place in any three-year period. The Company is currently evaluating whether any adjustments are required as a result of Section 382. (9) CONCENTRATION OF CREDIT RISK The Company maintains its cash accounts in a commercial bank. At December 31, 1995, cash on deposit was in excess of the federally insured limit of $100,000 by approximately $84,000. F-51 105 - ------------------------------------------------------ - ------------------------------------------------------ NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS. ------------------ TABLE OF CONTENTS
PAGE ---- Prospectus Summary..................... 3 Risk Factors........................... 5 The Company............................ 12 Use of Proceeds........................ 12 Dividend Policy........................ 12 Capitalization......................... 13 Dilution............................... 14 Selected Consolidated Financial Data... 15 Management's Discussion and Analysis of Financial Condition and Results of Operations........................... 16 Business............................... 19 Management............................. 35 Certain Transactions................... 42 Principal Stockholders................. 45 Description of Capital Stock........... 46 Shares Eligible for Future Sale........ 47 Underwriting........................... 49 Legal Matters.......................... 50 Experts................................ 51 Additional Information................. 51 Index to Consolidated Financial Statements........................... F-1
------------------ UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ 2,500,000 SHARES LOGO COMMON STOCK -------------------- PROSPECTUS -------------------- PACIFIC GROWTH EQUITIES, INC. , 1996 - ------------------------------------------------------ - ------------------------------------------------------ 106 APPENDIX--(DESCRIPTION OF GRAPHICS) INSIDE FRONT COVER [Graphic: The Manufacturing Process. This four panel graphic depicts the Registrant's manufacturing process. The first panel depicts a laboratory staff member holding a roller bottle containing a liquid. This person is standing in front of an incubator containing roller bottles.] Graphic Caption: Antigen production begins with the growth of proprietary cell lines. Cells are grown in complex media, rotated in roller-bottles, and incubated under controlled conditions. [Graphic: Second panel. The second panel depicts a laboratory staff member sitting in front of a laboratory hood under which are placed roller bottles. The person is sitting in front of the hood dipping a pipette into one of the roller bottles under the hood.] Graphic Caption: Cells are infected with a vector carrying the genetic information for the expression of HIV-1 envelope protein (rgp 160). Infected cells containing rgp 160 are harvested, frozen and used for antigen puri- fication. [Graphic: Third panel. The third panel depicts certain laboratory equipment.] Graphic Caption: Rgp 160 is purified in a sequential bioprocess incorporating proprietary manufacturing techniques. [Graphic: Fourth panel. This panel depicts the Company's test wells being coated with antigen.] Graphic Caption: Microwell plates are produced by automated filling of wells with diluted rgp 160, incubation, blocking and packaging with dessicant. GATEFOLD FOLLOWING INSIDE FRONT COVER [Graphic: The HIV-1 Virus and Calypte urine test. This graphic depicts in one panel the HIV-1 virus envelope structure and seven panels depicting the operation of the Company's urine HIV-1 test for a positive and a negative test.] Graphic Caption: Panel 1: The complex structure of HIV-1, the virus highly associated with AIDS. Gp 160 is glyco-protein from the envelope region of the HIV-1 virus. The same protein is manufactured in a recombinant form (rgp 160) for use in the Calypte HIV-1 urine assay. Graphic Caption: Panel 2: How the test works. Positive urine. Urine from HIV-1 positive subject which contains HIV-1 anti-bodies is added to a test well. Graphic Caption: Panel 3: Human HIV-1 antibodies in urine bind to the rgp 160 in the well. 107 Graphic Caption: Panel 4: Conjugate containing an enzyme is added to the well. The conjugate will bind only to the human HIV-1 antibody. After the well is washed, substrate reagent is added and color development occurs indicating the presence of human HIV-1 antibody in the well. Graphic Caption: Panel 5: The microwell plate coated with proprietary recombinant HIV-1 rgp 160 antigen being filled with urine. Graphic Caption: Panel 6: Negative Urine. Urine from HIV-1 negative subject which contains no HIV-1 antibodies is added to a test well. Graphic Caption: Panel 7: No antibodies are present in urine to bind to the rgp 160 in the well. Graphic Caption: Panel 8: Conjugate containing an enzyme is added to the well. The conjugate will not bind since the human HIV-1 antibody is not present. After the well is washed, substrate reagent is added and color development will not occur since no antibody and therefore no conjugate is present in the well. Page Caption: The Calypte HIV-1 urine-based test has not been approved by the FDA for marketing in the United States. The test cannot be sold in the United States unless and until such FDA approval is obtained, if at all. INSIDE BACK COVER [Graphic: The HIV-1 Urine EIA Test Kit. This graphic depicts the Company's test kit, including various bottles of reagents and packages of tests.] Graphic Caption: The Calypte FDA HIV-1 Urine EIA Test Kit. When used with the Western blot confirmatory test Calypte will provide the first and only complete urine-based HIV testing system. Page Caption: The Calypte HIV-1 urine-based test has not been approved by the FDA for marketing in the United States. The test cannot be sold in the United States unless and until such FDA approval is obtained, if at all. 108 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by the Company in connection with the sale of Common Stock being registered. All amounts are estimates except the SEC registration fee NASD filing fee and Nasdaq National Market listing fee.
AMOUNT TO BE PAID BY THE COMPANY ------------ SEC registration fee............................................ $ 9,914 NASD filing fee................................................. 3,375 Nasdaq National Market listing fee.............................. 50,000 Printing and engraving costs.................................... 125,000 Legal fees and expenses......................................... 400,000 Accounting fees and expenses.................................... 230,000 Directors' and officers' prospectus liability insurance......... 120,000 Blue Sky fees and expenses...................................... 15,000 Transfer Agent and Registrar fees............................... 15,000 Miscellaneous expenses.......................................... 51,711 -------- Total................................................. $1,020,000 ========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law permits a corporation to include in its charter documents, and in agreements between the corporation and its directors and officers, provisions expanding the scope of indemnification beyond that specifically provided by the current law. Article VIII of the Registrant's Certificate of Incorporation provides for the indemnification of directors to the fullest extent permissible under Delaware law. Article VI of the Registrant's Bylaws provides for the indemnification of officers, directors and third parties acting on behalf of the corporation if such person acted in good faith and in a manner reasonably believed to be in and not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, the indemnified party had no reason to believe his conduct was unlawful. The Registrant has entered into indemnification agreements with its directors and executive officers, in addition to indemnification provided for in the Registrant's Bylaws, and intends to enter into indemnification agreements with any new directors and executive officers in the future. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES Since May, 1993, the Registrant has issued and sold the following unregistered securities. 1. In August 1993, the Company issued and sold 2,500 shares of Common Stock to one consultant at a price of $0.80 per share. 2. In April 1994, the Company issued and sold 10,000 shares of Common Stock to one accredited investor at a price of $0.80 per share. 3. In September 1994, the Company issued and sold 1,250 shares of Common Stock to three employees at prices ranging from $0.50 to $1.00. 4. From December 28, 1992 to June 9, 1994, the Registrant issued and sold 2,116,999 shares of Series D Preferred Stock, convertible into 2,116,999 shares of Common Stock, to a total of 44 accredited investors for an aggregate purchase price of $10,584,996. 5. From November 10, 1994, to September 1, 1995, the Registrant issued to 72 accredited investors warrants to acquire 1,964,146 shares of Series E Preferred Stock exercisable at prices per share ranging from $5.00 to $7.50. II-1 109 6. On June 26, 1995, the Registrant issued to 2 accredited investors warrants to acquire 35,155 shares of Common Stock exercisable at prices per share ranging from $5.00 to $7.50. 7. From February 2, 1993 to June 23, 1994, the Registrant issued warrants to 2 accredited investors to acquire 2,800 shares of Series D Preferred Stock exercisable at prices per share ranging from $5.60 to $6.00. 8. On October 12, 1995, the Registrant issued to the 6 shareholders of Pepgen options to acquire 475,000 shares of Common Stock at $7.50. 9. From May 1, 1993 to June 21, 1996, the Registrant issued employees, officers, and consultants options to acquire 1,369,186 shares of Common Stock at exercise prices per share ranging from $0.22 to $5.00. 10. From November 30, 1994 to June 21, 1996 the Registrant issued and sold a total of 2,660,437 shares of Series E Preferred Stock, convertible into 2,660,437 shares of Common Stock, to a total of 72 accredited investors for an aggregate purchase price of $15,420,080. 11. From May 1993 to May 1996, the Company has issued to those individuals referred to in 9 above 39,527 shares of Common Stock upon exercise of options at prices ranging from $0.20 to $1.00 per share. The sales of the securities in paragraphs 2, 4, 5, 6, 7, 8 and 10 were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act, or Regulation D or Regulation S promulgated thereunder. The sales of securities in paragraphs 1, 3, 9, and 11 were deemed to be exempt from registration under the Securities Act in reliance on Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving a public offering or transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided under such Rule 701. With respect to the grants of stock options, an exemption from registration was unnecessary in that none of the transactions involved a "sale" of securities as such term is used in Section 2(3) of the Securities Act. The recipients of the securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates and instruments issued in such transactions. All recipients received adequate information about the Registrant or had access, through employment or other relationships to such information. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) EXHIBITS 1.1 Form of Underwriting Agreement among the Registrant and the Underwriters therein represented by Pacific Growth Equities, Inc. 3.1* Restated Articles of Incorporation of Calypte Biomedical Corporation, a California corporation, as currently in effect. 3.2 Form of Restated Certificate of Incorporation of the Company to be filed after the closing of the offering made under this Registration Statement. 3.3* Bylaws of the Registrant, as currently in effect. 4.1* Registrant's specimen common stock certificate. 5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation. 10.1* Form of Indemnification Agreement between the Company and each of its directors and officers. 10.2* Incentive Stock Plan. 10.3* 1995 Director Option Plan. 10.4* 1995 Employee Stock Purchase Plan. 10.5* Lease Agreement between the Registrant and Charles A. Grant and Mark Greenberg, dated as of November 30, 1990. 10.6* Second Lease Extension Agreement between Registrant and Charles A. Grant and Mark Greenberg, dated as of May 14, 1991.
II-2 110 10.7* Lease Extension Agreement between Registrant and Charles A. Grant and Mark Greenberg, dated as of February 5, 1992. 10.8* Lease Extension Agreement between Registrant Charles A. Grant and Mark Greenberg, dated as of April 15, 1993. 10.9* Standard Form Lease 1255-1275 Harbor Bay Parkway Harbor Bay Business Park between Commercial Center Bank and the Registrant, dated as of August 22, 1992. 10.10* Employment Agreement between the Registrant and John P. Davis, dated as of April 10, 1995 as amended. 10.11 Amendment No. 1 to Employment Agreement between the Registrant and John P. Davis, dated as of April 22, 1996. 10.12* Employment Agreement between the Registrant and Howard B. Urnovitz, dated as of January 25, 1995. 10.13 Employment Agreement between the Registrant and John J. DiPietro, dated as of September 26, 1995. 10.14* Business Consultant Agreement between the Registrant and Cynthia Green, dated as of May 1, 1993. 10.15+* License Agreement between the Registrant and New York University, dated as of August 13, 1993. 10.16* First Amendment to License Agreement between the Registrant and New York University, dated as of January 11, 1995. 10.17* Second Amendment to License Agreement between the Registrant and New York University, dated as of October 15, 1995. 10.18+* Third Amendment to License Agreement between the Registrant and New York University, dated as of January 31, 1996. 10.19+* Research Agreement between the Registrant and New York University, dated August 12, 1993. 10.20+* First Amendment to Research Agreement between the Registrant and New York University, dated as of January 11, 1995. 10.21+* Sublicense Agreement between the Registrant and Cambridge Biotech Corporation, dated as of March 31, 1992. 10.22+* Master Agreement between the Registrant and Cambridge Biotech Corporation, dated as of April 12, 1996. 10.23+* Sub-License Agreement between the Registrant and Cambridge Biotech Corporation, dated as of April 12, 1996. 10.24+* Agreement between the Registrant and Repligen Corporation, dated as of March 8, 1993. 10.25+* Non-Exclusive License Agreement between the Registrant and The Texas A&M University System, dated as of September 12, 1993. 10.26+* Non-Exclusive License Agreement between the Registrant and The Board of Trustees of the Leland Stanford Junior University, dated as of March 1, 1993. 10.27+* Distribution Agreement between the Registrant and Otsuka Pharmaceutical Co., Ltd., dated as of August 7, 1994. 10.28+* Distribution Agreement between the Registrant and Seradyn, Inc., dated as of April 10, 1995. 10.29+* Distribution Agreement between the Registrant and Travenol Laboratories (Israel), Ltd., dated as of December 31, 1994. 10.30+* Manufacturing/Packing Agreement between the Registrant and Biomira (formerly ADI) Diagnostics Inc., dated as of September 27, 1994. 10.31 Loan and Bridge Security Agreement between the Registrant and Silicon Valley Bank, dated as of December 8, 1995. 10.32* First Amendment to Loan and Security Agreement between the Registrant and Silicon Valley Bank, dated as of March 5, 1996.
II-3 111 10.33 Form of Option Agreement for Stockholders of Pepgen Corporation dated as of October 12, 1995. 10.34 $1.0 Million Promissory Note delivered to Pepgen Corporation, dated as of October 12, 1995. 10.35 Equipment Lease Agreement between the Registrant and Phoenix Leasing, dated as of August 20, 1993. 10.36 Equipment Lease Agreement between the Registrant and Meir Mitchell/GATX, dated as of August 20, 1993. 11.1 Statement of Computation of Net Income Per Share. 21.1 Subsidiaries of the Registrant. 23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors. 23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel to the Registrant (included in Exhibit 5.1). 23.3* Consent of Arnold White & Durkee. 24.1* Power of Attorney (see page II-5). 27.1* Financial Data Schedule.
- --------------- * Previously filed. + Confidential treatment requested as to certain portions of this exhibit. (b) FINANCIAL STATEMENT SCHEDULES Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto. ITEM 17. UNDERTAKINGS The undersigned Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. Insofar as indemnification by the Registrant for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions referenced in Item 14 of this Registration Statement or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of Prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of Prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4 112 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant, Calypte Biomedical Corporation, a corporation organized under the laws of the State of California, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Berkeley, State of California, on the 25th day of June, 1996. CALYPTE BIOMEDICAL CORPORATION By: */s/ John P. Davis ------------------------------------ John P. Davis President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE - --------------------------------------------- --------------------------- ---------------- */s/ William A. Boeger, III Chairman of Board of June 25, 1996 - --------------------------------------------- Directors William A. Boeger, III */s/ John P. Davis President, Chief Executive June 25, 1996 - --------------------------------------------- Officer and Director John P. Davis (Principal Executive Officer) Chief Science Officer and - --------------------------------------------- Director Howard B. Urnovitz, Ph.D. /s/ John J. DiPietro Vice President of Finance, June 25, 1996 - --------------------------------------------- Chief Financial Officer and John J. DiPietro Secretary (Principal Accounting Officer) - --------------------------------------------- Director Kuo-Yu (Frank) Chiang */s/ David Collins Director June 25, 1996 - --------------------------------------------- David Collins */s/ Julius R. Krevans, M.D. Director June 25, 1996 - --------------------------------------------- Julius R. Krevans, M.D. */s/ Mark Novitch, M.D. Director June 25, 1996 - --------------------------------------------- Mark Novitch, M.D. Director - --------------------------------------------- Roger Quy, Ph.D. Director - --------------------------------------------- Hideji Nonomura By: /s/ John J. DiPietro - --------------------------------------------- John J. DiPietro Attorney-in-fact
II-5 113 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION ----- ------------------------------------------------------------------------------- 1.1 Form of Underwriting Agreement among the Registrant and the Underwriters therein represented by Pacific Growth Equities, Inc. 3.1* Restated Articles of Incorporation of Calypte Biomedical Corporation, a California corporation, as currently in effect. 3.2 Form of Restated Certificate of Incorporation of the Company to be filed after the closing of the offering made under this Registration Statement. 3.3* Bylaws of the Registrant, as currently in effect. 4.1* Registrant's specimen common stock certificate. 5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation. 10.1* Form of Indemnification Agreement between the Company and each of its directors and officers. 10.2* Incentive Stock Plan. 10.3* 1995 Director Option Plan. 10.4* 1995 Employee Stock Purchase Plan. 10.5* Lease Agreement between the Registrant and Charles A. Grant and Mark Greenberg, dated as of November 30, 1990. 10.6* Second Lease Extension Agreement between Registrant and Charles A. Grant and Mark Greenberg, dated as of May 14, 1991. 10.7* Lease Extension Agreement between Registrant and Charles A. Grant and Mark Greenberg, dated as of February 5, 1992. 10.8* Lease Extension Agreement between Registrant Charles A. Grant and Mark Greenberg, dated as of April 15, 1993. 10.9* Standard Form Lease 1255-1275 Harbor Bay Parkway Harbor Bay Business Park between Commercial Center Bank and the Registrant, dated as of August 22, 1992. 10.10* Employment Agreement between the Registrant and John P. Davis, dated as of April 10, 1995 as amended. 10.11 Amendment No. 1 to Employment Agreement between the Registrant and John P. Davis, dated as of April 22, 1996. 10.12* Employment Agreement between the Registrant and Howard B. Urnovitz, dated as of January 25, 1995. 10.13 Employment Agreement between the Registrant and John J. DiPietro, dated as of September 26, 1995. 10.14* Business Consultant Agreement between the Registrant and Cynthia Green, dated as of May 1, 1993. 10.15+* License Agreement between the Registrant and New York University, dated as of August 13, 1993. 10.16* First Amendment to License Agreement between the Registrant and New York University, dated as of January 11, 1995. 10.17* Second Amendment to License Agreement between the Registrant and New York University, dated as of October 15, 1995. 10.18+* Third Amendment to License Agreement between the Registrant and New York University, dated as of January 31, 1996. 10.19+* Research Agreement between the Registrant and New York University, dated August 12, 1993. 10.20+* First Amendment to Research Agreement between the Registrant and New York University, dated as of January 11, 1995.
114
EXHIBIT NO. DESCRIPTION ----- ------------------------------------------------------------------------------- 10.21+* Sublicense Agreement between the Registrant and Cambridge Biotech Corporation, dated as of March 31, 1992. 10.22+* Master Agreement between the Registrant and Cambridge Biotech Corporation, dated as of April 12, 1996. 10.23+* Sub-License Agreement between the Registrant and Cambridge Biotech Corporation, dated as of April 12, 1996. 10.24+* Agreement between the Registrant and Repligen Corporation, dated as of March 8, 1993. 10.25+* Non-Exclusive License Agreement between the Registrant and The Texas A&M University System, dated as of September 12, 1993. 10.26+* Non-Exclusive License Agreement between the Registrant and The Board of Trustees of the Leland Stanford Junior University, dated as of March 1, 1993. 10.27+* Distribution Agreement between the Registrant and Otsuka Pharmaceutical Co., Ltd., dated as of August 7, 1994. 10.28+* Distribution Agreement between the Registrant and Seradyn, Inc., dated as of April 10, 1995. 10.29+* Distribution Agreement between the Registrant and Travenol Laboratories (Israel), Ltd., dated as of December 31, 1994. 10.30+* Manufacturing/Packing Agreement between the Registrant and Biomira (formerly ADI) Diagnostics Inc., dated as of September 27, 1994. 10.31 Loan and Bridge Security Agreement between the Registrant and Silicon Valley Bank, dated as of December 8, 1995. 10.32* First Amendment to Loan and Security Agreement between the Registrant and Silicon Valley Bank, dated as of March 5, 1996. 10.33 Form of Option Agreement for Stockholders of Pepgen Corporation dated as of October 12, 1995. 10.34 $1.0 Million Promissory Note delivered to Pepgen Corporation, dated as of October 12, 1995. 10.35 Equipment Lease Agreement between the Registrant and Phoenix Leasing, dated as of August 20, 1993. 10.36 Equipment Lease Agreement between the Registrant and Meir Mitchell/GATX, dated as of August 20, 1993. 11.1 Statement of Computation of Net Income Per Share. 21.1 Subsidiaries of the Registrant. 23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors. 23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel to the Registrant (included in Exhibit 5.1). 23.3* Consent of Arnold White & Durkee. 24.1* Power of Attorney (see page II-5). 27.1* Financial Data Schedule.
- --------------- * Previously filed. + Confidential treatment requested as to certain portions of this exhibit. EX-1.1 2 FORM OF UNDERWRITING AGREEMENT 1 Exhibit 1.1 2,500,000 SHARES* CALYPTE BIOMEDICAL CORPORATION COMMON STOCK FORM UNDERWRITING AGREEMENT June ___, 1996 Pacific Growth Equities, Inc. 353 Sacramento Street, 16th Floor San Francisco, California 94111 As Representative of the several Underwriters Ladies and Gentlemen: 1. INTRODUCTORY. Calypte Biomedical Corporation, a Delaware corporation (the "Company"), proposes to issue and sell to the several underwriters identified on Exhibit A hereto (the "Underwriters") for whom you are acting as Representative an aggregate of 2,500,000 shares (the "Firm Common Shares") of the Company's authorized but unissued Common Stock ("Common Stock"). In addition, the Company proposes to grant to the Underwriters an option to purchase up to 375,000 additional shares of Common Stock (the "Optional Common Shares"), as provided in Section 4 hereof. The Firm Common Shares and, to the extent such option is exercised, the Optional Common Shares are hereinafter collectively referred to as the "Common Shares." You have advised the Company that the Underwriters propose to make a public offering of the Common Shares on the effective date of the registration statement hereinafter referred to, or as soon thereafter as in your judgment is advisable. The Company hereby confirms its agreement with respect to the purchase of the Common Shares by the Underwriters as follows: 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to you that: (a) The Company has prepared a registration statement on Form S-1 (File No. __________) with respect to the Common Shares in conformity with the requirements of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations (the "Rules - -------- *Plus an option to purchase up to 375,000 additional shares of Common Stock to cover overallotments, if any. 1. 2 and Regulations") of the Securities and Exchange Commission (the "Commission") thereunder, and has filed such registration statement with the Commission. The Company has prepared and has filed or proposes to file prior to the effective date of such registration statement an amendment or amendments thereto, which have been or will be similarly prepared. The Company has delivered to you two signed copies of such registration statement and amendments, together with two copies of each exhibit filed therewith. Conformed copies of such registration statement and amendments (but without exhibits) and of the related preliminary prospectus have been delivered to you in such reasonable quantities as you have requested. The Company will next file with the Commission one of the following: (i) prior to effectiveness of such registration statement, a further amendment thereto, including the form of final prospectus, (ii) a final prospectus in accordance with Rules 430A and 424(b) of the Rules and Regulations or (iii) a term sheet (the "Term Sheet") as described in and in accordance with Rules 434 and 424(b) of the Rules and Regulations. As filed, such amendment and form of final prospectus, such final prospectus or such Term Sheet shall include all Rule 430A Information (as defined below) and, except to the extent you shall agree in writing to a modification, shall be in all substantive respects in the form furnished to you prior to the date and time that this Agreement was executed and delivered by the parties hereto, or, to the extent not completed at such date and time, shall contain only such specific additional information and other changes (beyond those contained in the latest Preliminary Prospectus) as the Company shall have previously advised you in writing would be included or made therein. The term "Registration Statement" as used in this Agreement shall mean such registration statement at the time such registration statement becomes effective and, in the event any post-effective amendment thereto becomes effective prior to the First Closing Date (as hereinafter defined), shall also mean such registration statement as so amended; provided, however, that such term shall also include all Rule 430A Information deemed to be included in such registration statement at the time such registration statement becomes effective as provided by Rule 430A of the Rules and Regulations and any registration statement filed pursuant to Rule 462(b) of the Rules and Regulations. The term "Preliminary Prospectus" shall mean each preliminary prospectus referred to in the preceding paragraph and any preliminary prospectus included in the Registration Statement at the time it becomes effective that omits Rule 430A Information. The term "Prospectus" shall mean either (i) the prospectus relating to the Common Shares in the form in which it is first filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations or, (ii) if a Term Sheet is not used and no filing pursuant to Rule 424(b) of the Rules and Regulations is required, the form of final prospectus included in the Registration Statement at the time such registration statement becomes effective, or (iii) if a Term Sheet is used, the Term Sheet in the form in which it is first filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations, together with the Preliminary Prospectus included in the Registration Statement at the time it becomes effective. The term "Rule 430A Information" means information with respect to the Common Shares and the offering thereof permitted to be omitted from the Registration Statement when it becomes effective pursuant to Rule 430A of the Rules and Regulations. (b) The Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus, and each Preliminary Prospectus has conformed in all material respects 2. 3 to the requirements of the Act and the Rules and Regulations and, as of its date, has not included any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and at the time the Registration Statement becomes effective, and at all times subsequent thereto up to and including each Closing Date hereinafter mentioned, the Registration Statement and the Prospectus, and any amendments or supplements thereto, will contain all material statements and information required to be included therein by the Act and the Rules and Regulations and will in all material respects conform to the requirements of the Act and the Rules and Regulations, and neither the Registration Statement nor the Prospectus, nor any amendment or supplement thereto, will include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, no representation or warranty contained in this subsection 2(b) shall be applicable to information contained in or omitted from any Preliminary Prospectus, the Registration Statement, the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Underwriter directly or through you, as Representative, specifically for use in the preparation thereof. (c) The Company does not own or control, directly or indirectly, any corporation, association, partnership or entity other than Pepgen Corporation (the "Subsidiary"). The Company and the Subsidiary have been duly incorporated or otherwise formed and each is validly existing as a corporation in good standing under the laws of the jurisdiction of its formation with full power and authority (corporate and other) to own and lease its property and conduct its business as described in the Prospectus. Each of the Company and the Subsidiary: (i) is in possession of and operating in compliance with all authorizations, licenses, permits, consents, certificates and orders material to the conduct of its respective business, all of which are valid and in full force and effect; and (ii) is duly qualified to do business and in good standing as a foreign corporation in each jurisdiction in which the ownership or leasing of properties or the conduct of its business requires such qualification, except for jurisdictions in which the failure to so qualify would not have a material adverse effect upon the Company. No proceeding has been instituted in any such jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or curtail, any such power and authority or qualification. (d) The Company has an authorized and outstanding capital stock as set forth under the heading "Capitalization" in the Prospectus; the issued and outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable, were issued in compliance with all federal and state securities laws, were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities, and conform to the description thereof contained in the Prospectus. Except as disclosed in or contemplated by the Prospectus and the financial statements of the Company, and the related notes thereto, included in the Prospectus, the Company does not have outstanding any options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of its capital stock or any such options, rights, convertible securities or obligations. The description of the Company's stock option, stock bonus and other stock plans or arrangements, 3. 4 and the options or other rights granted and exercised thereunder, set forth in the Prospectus accurately and fairly presents the information required to be shown with respect to such plans, arrangements, options and rights. The Prospectus accurately describes the Company's direct and indirect beneficial ownership of the equity securities of the Subsidiary, and there are no outstanding options to purchase or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of equity securities of the Subsidiary or any such options, rights, convertible securities or obligations. (e) The Common Shares have been duly authorized and, when issued, delivered and paid for in the manner set forth in this Agreement, will be duly authorized, validly issued, fully paid and nonassessable and will conform to the description thereof contained in the Prospectus. No preemptive rights or other rights to subscribe for or purchase exist with respect to the issuance and sale of the Common Shares by the Company pursuant to this Agreement. No person has any right that has not lapsed or been waived to require the Company to register the sale of any securities owned by such person under the Act in the public offering contemplated by this Agreement. No further approval or authority of the stockholders or the Board of Directors of the Company will be required for the issuance and sale of the Common Shares as contemplated herein. (f) The Company has full legal right, power and authority to enter into this Agreement and perform the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding obligation of the Company in accordance with its terms. The making and performance of this Agreement by the Company and the consummation of the transactions herein contemplated will not violate any provisions of the certificate of incorporation or bylaws, or other organizational documents, of the Company, and will not conflict with, result in the breach or violation of, or constitute, either by itself or upon notice or the passage of time or both, a default under any agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which the Company is a party or by which the Company or any of its properties may be bound or affected, any statute or any authorization, judgment, decree, order, rule or regulation of any court or any regulatory body, administrative agency or other governmental body applicable to the Company or any of its properties. No consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body is required for the execution and delivery of this Agreement or the consummation of the transactions contemplated by this Agreement, except for compliance with the Act, the Blue Sky laws applicable to the public offering of the Common Shares by the Underwriters and the clearance of such offering with the National Association of Securities Dealers, Inc. (the "NASD"). (g) KPMG Peat Marwick LLP, who have expressed their opinion as to the financial statements and schedules filed with the Commission as a part of the Registration Statement and included in the Prospectus and in the Registration Statement, are independent accountants for the Company as required by the Act and the Rules and Regulations. 4. 5 (h) The financial statements and schedules of the Company (together with the related notes thereto) included in the Registration Statement and the Prospectus present fairly the financial position of the Company as of the respective dates of such financial statements and schedules, and the results of operations and cash flows of the Company for the respective periods covered thereby. Such statements, schedules and related notes have been prepared in accordance with generally accepted accounting principles applied on a consistent basis as certified, except as otherwise disclosed therein, by the independent accountants named in subsection 2(g). No other financial statements, schedules or information are required to be included in the Registration Statement. The selected financial data set forth in the Prospectus under the captions "Capitalization" and "Selected Consolidated Financial Data" fairly present the information set forth therein on the basis stated in the Registration Statement. (i) Except as disclosed in the Prospectus, and except as to defaults that individually or in the aggregate would not be material to the Company, neither the Company nor the Subsidiary is in violation or default of any provision of its certificate of incorporation or bylaws, or other organizational documents, nor is the Company or the Subsidiary in breach of or default as to any provision of any agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which the Company or the Subsidiary is a party or by which the Company or the Subsidiary or any of their respective properties are bound; and there does not exist any state of facts that constitutes an event of default on the part of the Company or the Subsidiary as defined in such documents or that, with notice or lapse of time or both, would constitute such an event of default. (j) There are no contracts or other documents required to be described in the Registration Statement or to be filed as exhibits to the Registration Statement by the Act or by the Rules and Regulations that have not been described or filed as required. The descriptions of all contracts referenced in the Prospectus are accurate and complete; all such contracts are in full force and effect on the date hereof; and neither the Company or, to the best of the Company's knowledge, any other party, is in breach of or default under any of such contracts. (k) Except as disclosed in the Prospectus, there are no legal or governmental actions, suits or proceedings pending or, to the best of the Company's knowledge, threatened to which the Company or the Subsidiary is or may be a party or of which property owned or leased by the Company or the Subsidiary is or may be the subject, or related to environmental or discrimination matters, which actions, suits or proceedings might, individually or in the aggregate, prevent or adversely affect the transactions contemplated by this Agreement, or result in a material adverse change in the condition (financial or otherwise), properties, business, results of operations or prospects of the Company. No labor disturbance by the employees of the Company or the Subsidiary exists or is imminent that might be expected to affect adversely such condition, properties, business, results of operations or prospects. Neither the Company nor the Subsidiary is a party or subject to the provisions of any material injunction, judgment, decree or order of any court, regulatory body, administrative agency or other governmental body. 5. 6 (l) The Company or the Subsidiary, as applicable, has good and marketable title to all the properties and assets reflected as owned in the Company's financial statements included in the Prospectus or the Registration Statement and all properties and assets necessary for the conduct of its business, in each case subject to no lien, mortgage, pledge, charge or encumbrance of any kind except (i) those, if any, reflected in such financial statements (or elsewhere in the Prospectus), or (ii) those that are not material in amount and do not adversely affect the use made and proposed to be made of such property by the Company or the Subsidiary. Except as disclosed in the Prospectus, the Company or the Subsidiary, as applicable, holds its leased properties under valid and binding leases, with such exceptions as are not materially significant in relation to the business of the Company. Except as disclosed in the Prospectus, the Company or the Subsidiary, as applicable, owns or leases all such properties as are necessary to its operations as now conducted or as proposed to be conducted. (m) Since the respective dates as of which information is given in the Registration Statement and Prospectus, and except as described in or specifically contemplated by the Prospectus: (i) neither the Company nor the Subsidiary has incurred any material liabilities or obligations, indirect, direct or contingent, or entered into any material verbal or written agreement or other transaction that is not in the ordinary course of business or that could result in a material reduction in the future earnings of the Company; (ii) neither the Company nor the Subsidiary has sustained any material loss or interference with its business or property from fire, flood, windstorm, accident or other calamity, whether or not covered by insurance; (iii) the Company has not paid or declared any dividends or other distributions with respect to its capital stock and neither the Company nor the Subsidiary has defaulted on the payment of principal or interest on any outstanding debt obligations; (iv) there has not been any change in the capital stock (other than upon the sale of the Common Shares hereunder and upon the exercise of options and warrants or pursuant to employee benefit plans described in the Registration Statement) or indebtedness material to the Company; and (v) there has not been any material adverse change in the condition (financial or otherwise), business, properties, results of operations or prospects of the Company or the Subsidiary. (n) Except as disclosed in or specifically contemplated by the Prospectus, the Company and the Subsidiary each has sufficient trademarks, trade names, patent rights, mask works, copyrights, licenses, approvals and governmental authorizations to conduct its respective business as described in the Prospectus; the expiration of any trademarks, trade names, patent rights, mask works, copyrights, licenses, approvals or governmental authorizations would not have a material adverse effect on the condition (financial or otherwise), business, results of operations or prospects of the Company; and the Company has no knowledge of any infringement by it or the Subsidiary of any trademark, trade name rights, patent rights, mask works, copyrights, licenses, trade secret or other similar rights of any others, and there is no claim being made against the Company or the Subsidiary regarding trademark, trade name, patent, copyright, license, trade secret or other infringement that could have a material adverse effect on the condition (financial or otherwise), business, results of operations or prospects of the Company. 6. 7 (o) Neither the Company nor the Subsidiary has been advised, and neither has any reason to believe, that the Company or the Subsidiary is not conducting its business in compliance with all applicable laws, rules and regulations of the jurisdictions in which it is conducting business and proposes to conduct business, including, without limitation, all applicable statutes or regulations relating to: the development, testing, manufacture, labelling, advertising, sale or use of diagnostic medical products; the control of exports from the United States; and local, state and federal environmental laws and regulations, except as disclosed in the Prospectus and except where failure to be so in compliance would not materially adversely affect the condition (financial or otherwise), business, results of operations or prospects of the Company. (p) The Company and the Subsidiary have filed all necessary federal, state and foreign income and franchise tax returns and has paid all taxes shown as due thereon; and the Company has no knowledge of any tax deficiency that has been or might be asserted or threatened against the Company or the Subsidiary that could materially and adversely affect the business, operations or properties of the Company. (q) Neither the Company nor the Subsidiary is or will be after completion of the offering described in the Prospectus, an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (r) The Company has not distributed and will not distribute prior to the later to occur of (i) competition of the distribution of the Common Shares, or (ii) the expiration of any time period within which a dealer is required under the Securities Act to deliver a Prospectus relating to the Common Shares any offering material in connection with the offering and sale of the Common Shares other than the Prospectus, the Registration Statement and the other materials permitted by the Act. (s) The Company and the Subsidiary maintain insurance of the types and in the amounts generally deemed adequate for their respective businesses, including, but not limited to, product liability insurance, insurance covering real and personal property owned or leased by the Company or the Subsidiary against theft, damage, destruction, acts of vandalism and all other risks customarily insured against, all of which insurance is in full force and effect. (t) Neither the Company nor the Subsidiary has, at any time during the last five years, directly or indirectly (i) made any unlawful contribution to any candidate for foreign office, or failed to disclose fully any contribution in violation of law, or (ii) made any payment to any federal or state governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States or any jurisdiction thereof. 7. 8 (u) Neither the Company nor the Subsidiary has taken, nor will either take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Common Shares. (v) The Common Stock has been duly authorized for quotation on the Nasdaq National Market. (w) The Company is not aware of any state of facts that might reasonably be expected to result in any supplier to the Company or the Subsidiary failing to deliver or delaying delivery of goods, services, or other products to the Company or the Subsidiary, except for failures or delays that would not materially adversely affect the financial condition or results of operations of the Company. (x) Neither the Company nor the Subsidiary has received any notice, whether written or oral, from any distributor of the Company or the Subsidiary of termination of a distribution agreement between the Company or the Subsidiary and such distributor, and the Company is not aware of the revocation or impending revocation of any governmental permit necessary for the sale of the Company's or the Subsidiary's products in any state or country in which any such distributor has authority to sell such products. 3. REPRESENTATIONS AND WARRANTIES OF THE UNDERWRITERS. The Representative on behalf of the several Underwriters represents and warrants to the Company that the information set forth (i) on the cover page of the Prospectus with respect to price, underwriting discounts and commissions and terms of offering and (ii) under "Underwriting" in the Prospectus was furnished to the Company by and on behalf of the Underwriters for use in connection with the preparation of the Registration Statement and the Prospectus and is correct in all material respects. The Representative represents and warrants that it has been authorized by each of the other Underwriters as the Representative to enter into this Agreement on behalf of such other Underwriter and to act for such other Underwriter in the manner herein provided. 4. PURCHASE, SALE AND DELIVERY OF COMMON SHARES. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the Underwriters the 2,500,000 Firm Common Shares. The Underwriters agree, severally and not jointly, to purchase from the Company that number of Firm Common Shares set forth opposite such Underwriter's name on Exhibit A. The purchase price per share to be paid by the Underwriters shall be equal to the initial price to the public per share less an amount per share equal to the per share underwriting discount. The initial price to the public, which shall be a fixed price, and the underwriting discount will be determined by separate agreement among the Company and the Underwriters in substantially the form set forth as Exhibit B hereto. It shall be a condition to this Agreement and the obligation of the Company to sell and deliver the Firm Common Shares hereunder, and of you to purchase the Firm Common Shares in the manner described herein, that you shall purchase and pay for all the Firm Common Shares agreed to be purchased hereunder upon tender to you of all such Firm Common Shares in accordance with the terms hereof. 8. 9 Delivery of certificates for the Firm Common Shares to be purchased by the Underwriters and payment therefor shall be made at the offices of Pacific Growth Equities, Inc., 353 Sacramento Street, 16th Floor, San Francisco, California (or such other place as may be agreed upon by the Company and the Underwriters) at such time and date, not later than the third full business day following the first date that any of the Common Shares are released by you for sale to the public, as you shall designate by at least 48 hours prior notice to the Company (the "First Closing Date"); provided, however, that if the Prospectus is at any time prior to the First Closing Date recirculated to the public, the First Closing Date shall occur upon the later of the third full business day following the first date that any of the Common Shares are released by you for sale to the public or the date that is 48 hours after the date that the Prospectus has been so recirculated. Delivery of certificates for the Firm Common Shares shall be made by or on behalf of the Company to you for the respective accounts of the several Underwriters, against payment by the Underwriters of the purchase price therefor by certified or official bank or investment bank checks payable in next day funds to the order of the Company. The certificates for the Firm Common Shares shall be registered in such names and denominations as you shall have requested at least two full business days prior to the First Closing Date, and shall be made available for checking and packaging on the business day preceding the First Closing Date at a location in New York, New York, as may be designated by you. Time shall be of the essence, and delivery at the time and place specified in this Agreement is a further condition to the obligations of the Underwriters. In addition, on the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company hereby grants an option to the several Underwriters to purchase, severally and not jointly, up to an aggregate of 375,000 Optional Common Shares at the purchase price per share to be paid for the Firm Common Shares, for use solely in covering any over-allotments made by you for the account of the Underwriters in the sale and distribution of the Firm Common Shares. The option granted hereunder may be exercised at any time (but not more than once) within 30 days after the first date that any of the Common Shares are released by you for sale to the public, upon notice by you to the Company setting forth the aggregate number of Optional Common Shares as to which the Underwriters are exercising the option, the names and denominations in which the certificates for such shares are to be registered and the time and place at which such certificates will be delivered. Such time of delivery (which may not be earlier than the First Closing Date), being herein referred to as the "Second Closing Date," shall be determined by you, but if at any time other than the First Closing Date shall not be earlier than three nor later than five full business days after delivery of such notice of exercise. The number of Optional Common Shares to be purchased by each Underwriter shall be determined by multiplying the number of Optional Common Shares to be sold by the Company pursuant to such notice of exercise by a fraction, the numerator of which is the number of Firm Common Shares to be purchased by such Underwriter as set forth opposite its name in Exhibit A and the denominator of which is 375,000 (subject to such adjustments to eliminate any fractional share purchases as you in your discretion may make). Certificates for the Optional Common Shares will be made available for checking and packaging on the business day preceding the Second Closing Date at a location in New 9. 10 York, New York, as may be designated by you. The manner of payment for and delivery of the Optional Common Shares shall be the same as for the Firm Common Shares as specified in the two preceding paragraphs. At any time before lapse of the option, you may cancel such option by giving written notice of such cancellation to the Company. If the option is cancelled or expires unexercised in whole or in part, the Company will deregister under the Act the number of Optional Common Shares as to which the option has not been exercised. You have advised the Company that each Underwriter has authorized you to accept delivery of its Common Shares, to make payment and to take receipt therefor. You, individually and not as the Representative of the Underwriters, may (but shall not be obligated to) make payment for any Common Shares to be purchased by any Underwriter whose funds shall not have been received by you by the First Closing Date or the Second Closing Date, as the case may be, for the account of such Underwriter, but any such payment shall not relieve such Underwriter from any of its obligations under this Agreement. Subject to the terms and conditions hereof, the Underwriters propose to make a public offering of the Common Shares as soon after the effective date of the Registration Statement as in your judgment is advisable and at the public offering price set forth on the cover page of and on the terms set forth in the Prospectus. 5. COVENANTS OF THE COMPANY. The Company covenants and agrees that: (a) The Company will use its best efforts to cause the Registration Statement and any amendment thereof, if not effective at the time and date this Agreement is executed and delivered by the parties hereto, to become effective. If the Registration Statement has become or becomes effective pursuant to Rule 430A of the Rules and Regulations, or the filing of the Prospectus is otherwise required under Rule 424(b) of the Rules and Regulations, the Company will file the Prospectus, properly completed, pursuant to the applicable paragraph of Rule 424(b) of the Rules and Regulations within the time period prescribed and will provide evidence satisfactory to you of such timely filing. The Company will promptly advise you in writing (i) of the receipt of any comments of the Commission, (ii) of any request of the Commission for amendment of or supplement to the Registration Statement (either before or after it becomes effective), any Preliminary Prospectus or the Prospectus or for additional information, (iii) when the Registration Statement shall have become effective, and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of the institution of any proceedings for that purpose. If the Commission shall enter any such stop order at any time, the Company shall use its best efforts to obtain the lifting of such order at the earliest possible moment. The Company shall not file any amendment or supplement to the Registration Statement (either before or after it becomes effective), any Preliminary Prospectus or the Prospectus of which you have not been furnished with a copy a reasonable time prior to such filing or to which you reasonably object or which is not in compliance with the Act and the Rules and Regulations. 10. 11 (b) The Company shall prepare and file with the Commission, promptly upon your request, any amendments or supplements to the Registration Statement or the Prospectus that in your judgment may be necessary or advisable to enable the Underwriters to continue the distribution of the Common Shares and shall use its best efforts to cause the same to become effective as promptly as possible. The Company shall fully and completely comply with the provisions of Rule 430A of the Rules and Regulations with respect to information omitted from the Registration Statement in reliance upon such Rule. (c) If at any time within the nine-month period referred to in Section 10(a)(3) of the Act during which a prospectus relating to the Common Shares is required to be delivered under the Act any event occurs, as a result of which the Prospectus, including any amendments or supplements, would include an untrue statement of a material fact, or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or if it is necessary at any time to amend the Prospectus, including any amendments or supplements, to comply with the Act or the Rules and Regulations, the Company shall promptly advise you thereof and shall promptly prepare and file with the Commission, at its own expense, an amendment or supplement which will correct such statement or omission or an amendment or supplement which will effect such compliance and shall use its best efforts to cause the same to become effective as soon as possible. In case any Underwriter is required to deliver a prospectus after such nine-month period, the Company, upon request, but at the expense of such Underwriter, shall promptly prepare such amendment or amendments to the Registration Statement and such Prospectus or Prospectuses as may be necessary to permit compliance with the requirements of Section 10(a)(3) of the Act. (d) As soon as practicable, but not later than 45 days after the end of the first quarter ending after one year following the "effective date of the Registration Statement" (as defined in Rule 158(c) of the Rules and Regulations), the Company shall make generally available to its security holders an earnings statement (which need not be audited) covering a period of 12 consecutive months beginning after the effective date of the Registration Statement which will satisfy the provisions of the last paragraph of Section 11(a) of the Act. (e) During such period as a prospectus is required by law to be delivered in connection with sales by an Underwriter or a dealer, the Company, at its expense, but only for the nine-month period referred to in Section 10(a)(3) of the Act, shall furnish to you copies of the Registration Statement, the Prospectus, the Preliminary Prospectus and all amendments and supplements to any such documents in each case as soon as available and in such quantities as you may request, for the purposes contemplated by the Act. (f) The Company shall cooperate with you and your counsel in order to qualify or register the Common Shares for sale under (or obtain exemptions from the application of) the Blue Sky laws of such jurisdictions as you designate, shall comply with such laws and shall continue such qualifications, registrations and exemptions in effect so long as reasonably required for the distribution of the Common Shares. The Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any such jurisdiction where it is not presently qualified or where it would be subject to taxation as a 11. 12 foreign corporation. The Company shall advise you promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Common Shares for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company, with your cooperation, shall use its best efforts to obtain the withdrawal thereof. (g) During the period of five years hereafter, the Company shall furnish to you and, upon your request, each of the other Underwriters: (i) as soon as practicable after the end of each fiscal year, copies of the Annual Report of the Company containing the balance sheet of the Company as of the close of such fiscal year and statements of income, stockholders' equity and cash flows for the year then ended and the opinion thereon of the Company's independent public accountants; (ii) as soon as practicable after the filing thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Report on Form 8-K or other report filed by the Company with the Commission, including the Report on Form SR required by Rule 463 of the Securities Act, the NASD or any securities exchange; and (iii) as soon as available, copies of any report or communication of the Company mailed generally to holders of its Common Stock. (h) During the period of 180 days after the first date any of the Common Shares are released by you for sale to the public, without your prior written consent (which consent may be withheld in your sole discretion), the Company shall not, other than upon the exercise of outstanding stock options and warrants disclosed in the Prospectus and other than the grant of options to employees under option plans described in the Prospectus and consistent with past practice, issue, offer, sell, grant options to purchase or otherwise dispose of any of the Company's equity securities or any other securities convertible into or exchangeable with its Common Stock or other equity security. (i) The Company shall apply the net proceeds of the sale of the Common Shares sold by it substantially in accordance with its statements under the caption "Use of Proceeds" in the Prospectus. (j) The Company shall use its best efforts to qualify or register its Common Stock for sale in non-issuer transactions under (or obtain exemptions from the application of) the Blue Sky laws of the State of California (and thereby permit market making transactions and secondary trading in the Company's Common Stock in California), shall comply with such Blue Sky laws and shall continue such qualifications, registrations and exemptions in effect for a period of five years after the date hereof. (k) Prior to the Second Closing Date, the Company shall not repurchase or otherwise acquire any of the Company's Common Stock or declare or pay any dividend or make any other distribution upon its Common Stock. (l) For a period of five years after the date hereof, the Company shall use its best efforts to maintain the listing of the Common Stock on the Nasdaq National Market. 12. 13 (m) If at any time during the 25-day period after the Registration Statement becomes effective any rumor, publication or event relating to or affecting the Company shall occur as a result of which in your opinion the market price for the shares has been or is likely to be materially affected (regardless of whether such rumor, publication or event necessitates a supplement to or amendment of the Prospectus), the Company will, after written notice from you advising the Company to the effect set forth above, forthwith prepare, consult with you concerning the substance of, and disseminate a press release or other public statement, reasonably satisfactory to you, responding to or commenting on such rumor, publication or event. You may, in your sole discretion, waive in writing the performance by the Company of any one or more of the foregoing covenants or extend the time for their performance. 6. PAYMENT OF EXPENSES. Whether or not the transactions contemplated hereunder are consummated or this Agreement becomes effective or is terminated, the Company agrees to pay all costs, fees and expenses incurred by it in connection with the performance of its obligations hereunder and in connection with the transactions contemplated hereby, including without limiting the generality of the foregoing, (i) all expenses incident to the issuance and delivery of the Common Shares (including all printing and engraving costs), (ii) all fees and expenses of the registrar and transfer agent of the Common Stock, (iii) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Common Shares to the Underwriters, (iv) all fees and expenses of the Company's counsel and the Company's independent accountants, (v) all costs and expenses incurred in connection with the preparation, printing, filing, shipping and distribution of the Registration Statement, each Preliminary Prospectus and the Prospectus (including all exhibits and financial statements) and all amendments and supplements provided for herein, this Agreement, the Agreement among Underwriters, the Selected Dealers Agreement, the Underwriters' Questionnaire, the Underwriters' Power of Attorney, and the Blue Sky Memorandum, (vi) all filing fees, attorneys' fees and expenses incurred by the Company or the Underwriters in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Common Shares for offer and sale under the Blue Sky laws, and (vii) the filing fee of the NASD. Except as provided in this Section 6, Section 8 and Section 10 hereof, the Underwriters shall pay all of their expenses, including the fees and disbursements of their counsel (excluding those relating to qualification, registration or exemption under the Blue Sky laws and the Blue Sky Memorandum referred to above). 7. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The obligations of the Underwriters to purchase and pay for the Firm Common Shares on the First Closing Date and the Optional Common Shares on the Second Closing Date shall be subject to the accuracy of the representations and warranties on the part of the Company herein set forth as of the date hereof and as of the First Closing Date or the Second Closing Date, as the case may be, to the accuracy of the statements of Company officers made pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder, and to the following additional conditions: 13. 14 (a) The Registration Statement shall have become effective not later than 5:00 P.M., Washington, D.C. Time, on the date of this Agreement, or at such later time as shall have been consented to by you; if the filing of the Prospectus, or any supplement thereto, is required pursuant to Rule 424(b) of the Rules and Regulations, the Prospectus shall have been filed in the manner and within the time period required by Rule 424(b) of the Rules and Regulations; and prior to such Closing Date, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or shall be pending or, to the knowledge of the Company or you, shall be contemplated by the Commission; and any request of the Commission for inclusion of additional information in the Registration Statement, or otherwise, shall have been complied with to your satisfaction. (b) You shall be satisfied that since the respective dates as of which information is given in the Registration Statement and Prospectus, (i) there shall not have been any change in the capital stock of the Company other than pursuant to the exercise of outstanding options and warrants disclosed in the Prospectus or any material change in the indebtedness of the Company or the Subsidiary, (ii) except as set forth or contemplated by the Registration Statement or the Prospectus, no material verbal or written agreement or other transaction shall have been entered into by the Company or the Subsidiary, that is not in the ordinary course of business or that could result in a material reduction in the future earnings of the Company, (iii) no loss or damage (whether or not insured) to the property of the Company or the Subsidiary shall have been sustained that materially and adversely affects or may affect the condition (financial or otherwise), business, results of operations or prospects of the Company, (iv) no legal or governmental action, suit or proceeding affecting the Company that is material to the Company or that affects or may affect the transactions contemplated by this Agreement shall have been instituted or threatened, and (v) there shall not have been any material change in the condition (financial or otherwise), business, management, results of operations or prospects of the Company that makes it impractical or inadvisable in the judgment of the Representative to proceed with the public offering or purchase of the Common Shares contemplated hereby. (c) There shall have been furnished to you as representative of the Underwriters on each Closing Date, in form and substance satisfactory to you: (i) An opinion of Wilson, Sonsini, Goodrich & Rosati, counsel for the Company, addressed to the Underwriters and dated the First Closing Date, or the Second Closing Date, as the case may be, as set forth in Exhibit C-1 hereto. In rendering such opinions, such counsel may rely (i) as to matters of local law, on opinions of local counsel, (ii) as to matters of patent and other intellectual property matters on the opinion of [ ], and (iii) as to matters of fact, on certificates of officers of the Company or governmental officials, provided that such counsel's opinion states that such counsel is doing so and that the Underwriters are justified in relying on such opinions or certificates and that copies of such opinions of local counsel or certificates are attached to such counsel's opinion. 14. 15 (ii) An opinion of [ ], special patent counsel for the Company, addressed to the Underwriters and dated the First Closing Date, or the Second Closing Date, as the case may be, as set forth in Exhibit C-2 hereto. (iii) An opinion of [ ], counsel for regulatory matters for the Company, addressed to the Underwriters and dated the First Closing Date, or the Second Closing Date, as the case may be, as set forth in Exhibit C-3 hereto. In rendering such opinions, such counsel may rely as to matters of local law on opinions of local counsel, and as to matters of fact on certificates of officers of the Company or governmental officials, provided that such counsel's opinion states that such counsel is so doing and that the Underwriters are justified in relying on such opinions of local counsel or certificates and that copies of such opinions of local counsel or certificates are attached to such counsel's opinion. (iv) Such opinion or opinions of Cooley Godward Castro Huddleson & Tatum, counsel for the Underwriters, dated the First Closing Date or the Second Closing Date, as the case may be, with respect to the incorporation of the Company, the sufficiency of all corporate proceedings and other legal matters relating to this Agreement, the validity of the Common Shares, the Registration Statement and the Prospectus and other related matters as you may reasonably require, and the Company shall have furnished to such counsel such documents and shall have exhibited to them such papers and records as they may reasonably request for the purpose of enabling them to pass upon such matters. In connection with such opinions, such counsel may rely on representations or certificates of officers of the Company and governmental officials. (v) A certificate of the Company executed by the Chief Executive Officer or President and the chief financial or accounting officer of the Company, dated the First Closing Date or the Second Closing Date, as the case may be, to the effect that: (1) The representations and warranties of the Company set forth in Section 2 of this Agreement are true and correct as of the date of this Agreement and as of the First Closing Date or the Second Closing Date, as the case may be, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied on or prior to such Closing Date; (2) The Commission has not issued any order preventing or suspending the use of the Prospectus or any Preliminary Prospectus filed as a part of the Registration Statement or any amendment thereto; no stop order suspending the effectiveness of the Registration Statement has been issued; and to the best of the knowledge of the respective signers, no proceedings for that purpose have been instituted or are pending or contemplated under the Act; (3) Each of the respective signers of the certificate has carefully examined the Registration Statement and the Prospectus; in his opinion and to the best of his knowledge, the Registration Statement and the Prospectus and any amendments or supplements 15. 16 thereto contain all statements required to be stated therein regarding the Company or the Subsidiary; and neither the Registration Statement nor the Prospectus nor any amendment or supplement thereto includes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (4) Since the initial date on which the Registration Statement was filed, no agreement, written or oral, transaction or event has occurred that should have been set forth in an amendment to the Registration Statement or in a supplement to or amendment of any prospectus which has not been disclosed in such a supplement or amendment; (5) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, and except as disclosed in or contemplated by the Prospectus, there has not been any material adverse change or a development involving a material adverse change in the condition (financial or otherwise), business, properties, results of operations, management or prospects of the Company or the Subsidiary; no legal or governmental action, suit or proceeding is pending or threatened against the Company or the Subsidiary that is material to the Company, whether or not arising from transactions in the ordinary course of business, or that may adversely affect the transactions contemplated by this Agreement; since such dates and except as so disclosed, neither the Company nor the Subsidiary has entered into any verbal or written agreement or other transaction that is not in the ordinary course of business or that could result in a material reduction in the future earnings of the Company; neither the Company nor the Subsidiary has incurred any material liability or obligation, direct, contingent or indirect, made any change in its capital stock, made any material change in its short-term debt or funded debt or repurchased or otherwise acquired any of its capital stock; and the Company has not declared or paid any dividend, or made any other distribution, upon its outstanding capital stock payable to stockholders of record on a date prior to such Closing Date; and (6) Since the respective dates as of which information is given in the Registration Statement and the Prospectus and except as disclosed in or contemplated by the Prospectus, neither the Company nor the Subsidiary has sustained any material loss or damage by strike, fire, flood, windstorm, accident or other calamity (whether or not insured). (vi) On the date Preliminary Prospectuses are first circulated, the date immediately preceding the date this Agreement is executed, the First Closing Date, and the Second Closing Date (if applicable), a letter addressed to you as representative of the Underwriters from KPMG Peat Marwick LLP, independent accountants, dated the date of its delivery as specified above, in form and substance satisfactory to you. (vii) On or before the First Closing Date, each director of the Company, each officer of the Company, and each person who owns beneficially 1% or more of the outstanding shares of Common Stock (calculated without regard to the offering contemplated hereby) or options to purchase 1% or more of the outstanding shares of Common Stock (calculated without regard to the offering contemplated hereby) as of the date hereof, in form and substance satisfactory to you, confirming that for a period of 180 days after the first date any of the 16. 17 Common Shares are released by you for sale to the public, such person will not directly or indirectly sell or offer to sell or otherwise dispose of or transfer any shares of Common Stock or any right to acquire such shares without your prior written consent, which consent may be withheld in your sole discretion. All such opinions, certificates, letters and documents shall be deemed in compliance with the provisions hereof only if they are satisfactory to you and to Cooley Godward Castro Huddleson & Tatum, counsel for the Underwriters. The Company shall furnish you with such manually signed or conformed copies of such opinions, certificates, letters and documents as you request. Any certificate signed by any officer of the Company and delivered to you as representative of the Underwriters or to counsel for the Underwriters shall be deemed to be a representation and warranty by the Company to the Underwriters as to the statements made therein. If any condition to the Underwriters' obligations hereunder to be satisfied prior to or at the First Closing Date is not so satisfied, this Agreement at your election will terminate upon notification by you to the Company without liability on the part of the Underwriters or the Company except for the expenses to be paid or reimbursed by the Company pursuant to Sections 6 and 8 hereof and except to the extent provided in Section 10 hereof. 8. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. Notwithstanding any other provisions hereof, if this Agreement shall be terminated by you pursuant to Section 7, or if the sale to the Underwriters of the Common Shares at the First Closing is not consummated because of any refusal, inability or failure on the part of the Company to perform any agreement herein or to comply with any provision hereof, the Company agrees to reimburse you upon demand for all out-of-pocket expenses that shall have been reasonably incurred by you in connection with the proposed purchase and the sale of the Common Shares, including but not limited to fees and disbursements of counsel, printing expenses, travel expenses, postage, telegraph charges and telephone charges relating directly to the offering contemplated hereby. Any such termination shall be without liability of any party to any other party except that the provisions of this Section, Section 6 and Section 10 shall at all times be effective and shall apply. 9. EFFECTIVENESS OF REGISTRATION STATEMENT. You and the Company shall use your and its best efforts to cause the Registration Statement to become effective, to prevent the issuance of any stop order suspending the effectiveness of the Registration Statement and, if such stop order be issued, to obtain as soon as possible the lifting thereof. 10. INDEMNIFICATION. (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of the Act against any losses, claims, damages, liabilities or expenses, joint or several, to which any Underwriter or any such controlling person may become subject, under the Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected 17. 18 with the written consent of the Company), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state in any of them a material fact required to be stated therein or necessary to make the statements in any of them not misleading, or arise out of or are based in whole or in part on any inaccuracy in the representations and warranties of the Company contained herein or any failure of the Company to perform its obligations hereunder or under law; and will reimburse each Underwriter and each such controlling person for any legal and other expenses as such expenses are reasonably incurred by such Underwriter or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto in reliance upon and in conformity with the information furnished to the Company pursuant to Section 3 hereof. In addition to its other obligations under this Section 10(a), the Company agrees that, as an interim measure during the pendency of any claim, action, investigation, inquiry or other proceeding arising out of or based upon any statement or omission, or any alleged statement or omission, or any inaccuracy in the representations and warranties of the Company herein or failure to perform its obligations hereunder, all as described in this Section 10(a), it will reimburse each Underwriter on a quarterly basis for all reasonable legal or other expenses incurred in connection with investigating or defending any such claim, action, investigation, inquiry or other proceeding, notwithstanding the absence of a judicial determination as to the propriety and enforceability of the Company's obligation to reimburse each Underwriter for such expenses and the possibility that such payments might later be held to have been improper by a court of competent jurisdiction. To the extent that any such interim reimbursement payment is so held to have been improper, each Underwriter that received such improper payment shall promptly return it to the Company together with interest, compounded daily, determined on the basis of the prime rate (or other commercial lending rate for borrowers of the highest credit standing) announced from time to time by Bank of America NT&SA, San Francisco, California (the "Prime Rate"). Any such interim reimbursement payments that are not made to an Underwriter within 30 days of a request for reimbursement, shall bear interest at the Prime Rate from the date of such request. This indemnity agreement will be in addition to any liability that the Company may otherwise have. (b) Each Underwriter will severally indemnify and hold harmless the Company, each of its directors, each of its officers who signed the Registration Statement and each person, if any, who controls the Company within the meaning of the Act, against any losses, claims, damages, liabilities or expenses to which the Company, or any such director, officer or controlling person may become subject, under the Act, the Exchange Act, or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Underwriter), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as 18. 19 contemplated below) arise out of or are based upon any untrue or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, any Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with the information furnished to the Company pursuant to Section 3 hereof; and will reimburse the Company, or any such director, officer or controlling person for any legal and other expense reasonably incurred by the Company, or any such director, officer or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. In addition to its other obligations under this Section 10(b), each Underwriter severally agrees that, as an interim measure during the pendency of any claim, action, investigation, inquiry or other proceeding arising out of or based upon any statement or omission, or any alleged statement or omission, described in this Section 10(b) which relates to information furnished to the Company pursuant to Section 3 hereof, it will reimburse the Company on a quarterly basis for all reasonable legal or other expenses incurred in connection with investigating or defending any such claim, action, investigation, inquiry or other proceeding, notwithstanding the absence of a judicial determination as to the propriety and enforceability of the Underwriters' obligation to reimburse the Company for such expenses and the possibility that such payments might later be held to have been improper by a court of competent jurisdiction. To the extent that any such interim reimbursement payment is so held to have been improper, the Company shall promptly return it to the Underwriters together with interest, compounded daily, determined on the basis of the Prime Rate. Any such interim reimbursement payments that are not made to the Company within 30 days of a request for reimbursement, shall bear interest at the Prime Rate from the date of such request. This indemnity agreement will be in addition to any liability that such Underwriter may otherwise have. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability it may have to any indemnified party for contribution or otherwise under the indemnity agreement contained in this Section to the extent it is not prejudiced as a proximate result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with all other indemnifying parties similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be a conflict between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties 19. 20 which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed counsel in connection with the assumption of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel, approved by the Representative in the case of paragraph (a), representing the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party. (d) If the indemnification provided for in this Section is required by its terms but is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party under paragraphs (a), (b) or (c) in respect of any losses, claims, damages, liabilities or expenses referred to herein, then each applicable indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any losses, claims, damages, liabilities or expenses referred to herein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Underwriters from the offering of the Common Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Underwriters in connection with the statements or omissions or inaccuracies in the representations and warranties herein which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The respective relative benefits received by the Company and the Underwriters shall be deemed to be in the same proportion, in the case of the Company as the total price paid to the Company for the Common Shares sold by it to the Underwriters (net of underwriting commissions but before deducting expenses) bears to the total price to the public set forth on the cover of the Prospectus, and in the case of the Underwriters as the underwriting discounts and commissions received by them bears to the total price to the public set forth on the cover of the Prospectus. The relative fault of the Company and the Underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact or the inaccurate or the alleged inaccurate representation and/or warranty relates to information supplied by the Company or the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in subparagraph (c) of this Section, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The 20. 21 provisions set forth in subparagraph (c) of this Section with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this subparagraph (d); provided, however, that no additional notice shall be required with respect to any action for which notice has been given under subparagraph (c) for purposes of indemnification. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section were determined solely by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section, the Underwriters shall not be required to contribute any amount in excess of the amount of the total underwriting commissions received by the Underwriters in connection with the Common Shares underwritten by them and distributed to the public. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section are several in proportion to their respective underwriting commitments and not joint. (e) It is agreed that any controversy arising out of the operation of the interim reimbursement arrangements set forth in Sections 10(a) and 10(b) hereof, including the amounts of any requested reimbursement payments and the method of determining such amounts, shall be settled by arbitration conducted under the provisions of the Code of Arbitration Procedure of the NASD. Any such arbitration must be commenced by service of a written demand for arbitration or written notice of intention to arbitrate, therein electing the arbitration tribunal. In the event the party demanding arbitration does not make such designation of an arbitration tribunal in such demand or notice, then the party responding to said demand or notice is authorized to do so. Such an arbitration would be limited to the operation of the interim reimbursement provisions contained in Sections 10(a) and 10(b) hereof and would not resolve the ultimate propriety or enforceability of the obligation to reimburse expenses which is created by the provisions of such Sections 10(a) and 10(b) hereof. 11. DEFAULT OF UNDERWRITERS. It shall be a condition to this Agreement and the obligation of the Company to sell and deliver the Common Shares hereunder, and of the Underwriters to purchase the Common Shares in the manner as described herein, that, except as hereinafter in this paragraph provided, the Underwriters shall purchase and pay for all the Common Shares agreed to be purchased hereunder upon tender to the Underwriters of all such shares in accordance with the terms hereof. If any Underwriter defaults in its obligations to purchase Common Shares hereunder on either the First or Second Closing Date and the aggregate number of Common Shares which such defaulting Underwriter or Underwriters agreed but failed to purchase on such Closing Date does not exceed 10% of the total number of Common Shares which the Underwriters are obligated to purchase on such Closing Date, the nondefaulting Underwriters shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Common Shares which such defaulting Underwriter or Underwriters agreed but failed to purchase on such Closing Date. If any Underwriter or Underwriters so default and the aggregate number of Common Shares with respect to which such default occurs is more than the above percentage and arrangements satisfactory to you and the Company for the purchase of such Common Shares by other persons are not made within 48 hours after such 21. 22 default, this Agreement will terminate without liability on the part of the Company except for the expenses to be paid by the Company pursuant to Sections 6 and 8 hereof and except to the extent provided in Section 10 hereof. In the event Common Shares to which a default relates are to be purchased by another party or parties, the Underwriters or the Company shall have the right to postpone the First or Second Closing Date, as the case may be, for not more than five business days in order that the necessary changes in the Registration Statement, Prospectus and any other documents, as well as any other arrangements, may be effected. As used in this Agreement, the term "Underwriters" includes any person substituted for an Underwriter under this Section. Nothing herein will relieve a defaulting Underwriter from liability for its default. 12. EFFECTIVE DATE. This Agreement shall become effective immediately as to Sections 6, 8, 10, 13 and 14 and, as to all other provisions, (i) if at the time of execution of this Agreement the Registration Statement has not become effective, at 2:00 P.M., California time, on the first full business day following the effectiveness of the Registration Statement, or (ii) if at the time of execution of this Agreement the Registration Statement has been declared effective, at 2:00 P.M., California time, on the first full business day following the date of execution of this Agreement; but this Agreement shall nevertheless become effective at such earlier time after the Registration Statement becomes effective as you may determine on and by notice to the Company or by release of any of the Common Shares for sale to the public. For the purposes of this Section, the Common Shares shall be deemed to have been so released upon the release for publication of any newspaper advertisement relating to the Common Shares or upon the release by you of telegrams (i) advising the Underwriters that the Common Shares are released for public offering, or (ii) offering the Common Shares for sale to securities dealers, whichever may occur first. 13. TERMINATION. Without limiting the right to terminate this Agreement pursuant to any other provision hereof: (a) This Agreement may be terminated by the Company by notice to you or by you by notice to the Company at any time prior to the time this Agreement shall become effective as to all its provisions, and any such termination shall be without liability on the part of the Company to any Underwriter (except for the expenses to be paid or reimbursed by the Company pursuant to Sections 6 and 8 hereof and except to the extent provided in Section 10 hereof) or of any Underwriter to the Company (except to the extent provided in Section 10 hereof). (b) This Agreement may also be terminated by you prior to the First Closing Date by notice to the Company (i) if additional material governmental restrictions, not in force and effect on the date hereof, shall have been imposed upon trading in securities generally or minimum or maximum prices shall have been generally established on the New York Stock Exchange or on the American Stock Exchange or in the over the counter market by the NASD, or trading in securities generally shall have been suspended on either such Exchange or in the over the counter market by the NASD, or a general banking moratorium shall have been established by federal, New York or California authorities, (ii) if an outbreak of major hostilities 22. 23 or other national or international calamity or any substantial change in political, financial or economic conditions shall have occurred or shall have accelerated or escalated to such an extent, as, in your judgment, to affect adversely the marketability of the Common Shares or securities in general, (iii) if any adverse event shall have occurred or shall exist which makes untrue or incorrect in any material respect any statement or information contained in the Registration Statement or Prospectus or which is not reflected in the Registration Statement or Prospectus but should be reflected therein in order to make the statements or information contained therein not misleading in any material respect, or (iv) if there shall be any action, suit or proceeding pending or threatened, or there shall have been any development or prospective development involving particularly the business or properties or securities of the Company or the transactions contemplated by this Agreement, which, in the reasonable judgment of the Representative, may materially and adversely affect the Company's business or earnings and makes it impracticable or inadvisable to offer or sell the Common Shares. Any termination pursuant to this subsection (b) shall without liability on the part of any Underwriter to the Company or on the part of the Company to any Underwriter (except for expenses to be paid or reimbursed by the Company pursuant to Sections 6 and 8 hereof and except to the extent provided in Section 10 hereof). (c) This Agreement shall also terminate at 5:00 P.M., California time, on the tenth full business day after the Registration Statement shall have become effective if the initial public offering price of the Common Shares shall not then as yet have been determined as provided in Section 4 hereof. Any termination pursuant to this subsection (c) shall be without liability on the part of any Underwriter to the Company or on the part of the Company to any Underwriter (except for expenses to be paid or reimbursed by the Company pursuant to Sections 6 and 8 hereof and except to the extent provided in Section 10 hereof.) 14. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The respective indemnities, agreements, representations, warranties and other statements of the Company, of its officers and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company or any of its or their partners, officers or directors or any controlling person, as the case may be, and will survive delivery of and payment for the Common Shares sold hereunder and any termination of this Agreement. 15. NOTICES. All communications hereunder shall be in writing and, if sent to the Underwriters shall be mailed, delivered or telegraphed and confirmed to you at 353 Sacramento Street, 16th Floor, San Francisco, California 94111, Attention: Mitchell Stevko, with a copy to Cooley Godward Castro Huddleson & Tatum, Five Palo Alto Square, 3000 El Camino Real, Palo Alto, California 94306-2155, Attention: Alan C. Mendelson; and if sent to the Company shall be mailed, delivered or telegraphed and confirmed to the Company at 1440 Fourth Street, 23. 24 Berkeley, California 94710, Attention: John P. Davis, with a copy to Wilson, Sonsini, Goodrich & Rosati, PC, 650 Page Mill Road, Palo Alto, California 94304-1050, Attention: Aron J. Alter. The Company or you may change the address for receipt of communications hereunder by giving notice to the others. 16. SUCCESSORS. This Agreement will inure to the benefit of and be binding upon the parties hereto, including any substitute Underwriters pursuant to Section 11 hereof, and to the benefit of the officers and directors and controlling persons referred to in Section 10, and in each case their respective successors, personal representatives and assigns, and no other person will have any right or obligation hereunder. No such assignment shall relieve any party of its obligations hereunder. The term "successors" shall not include any purchaser of the Common Shares as such from any Underwriter merely by reason of such purchase. 17. REPRESENTATION OF UNDERWRITERS. You will act as Representative for the several Underwriters in connection with all dealings hereunder, and any action under or in respect of this Agreement taken by you, as Representative, will be binding upon all the Underwriters. 18. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable. 19. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the internal laws (and not the laws pertaining to conflicts of laws) of the State of California. 20. GENERAL. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may be executed in several counterparts, each one of which shall be an original, and all of which shall constitute one and the same document. In this Agreement, the masculine, feminine and neuter genders and the singular and the plural include one another. The section headings in this Agreement are for the convenience of the parties only and will not affect the construction or interpretation of this Agreement. This Agreement may be amended or modified, and the observance of any term of this Agreement may be waived, only by a writing signed by the Company and you. 24. 25 If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us the enclosed copies hereof, whereupon it will become a binding agreement among the Company and the Underwriters, all in accordance with its terms. Very truly yours, CALYPTE BIOMEDICAL CORPORATION By: --------------------------- The foregoing Underwriting Agreement is hereby confirmed and accepted by us in San Francisco, California as of the date first above written. PACIFIC GROWTH EQUITIES, INC. By: ------------------------------------- Acting on Behalf of the several Underwriters 25. 26 EXHIBIT A NUMBER OF FIRM COMMON NAME OF UNDERWRITER SHARES TO BE PURCHASED TOTAL: 2,500,000 27 EXHIBIT B PRICE DETERMINATION AGREEMENT Referring to Section 4 of the Underwriting Agreement dated __________ ___, 1996, among the Company and Pacific Growth Equities, Inc., acting as the representative for the Underwriters as therein defined, with respect to the purchase and sale of the Common Shares, we hereby confirm our agreement that the initial public offering price of the Common Shares shall be $____ per share; that the underwriting discount shall be $______ per share; and that the purchase price to be paid by the Underwriters for the Common Shares to be purchased from the Company shall be $______ per share. This Agreement may be executed in various counterparts which together shall constitute one and the same Agreement. PACIFIC GROWTH EQUITIES, INC. By ------------------------------- Acting on Behalf of the several Underwriters CALYPTE BIOMEDICAL CORPORATION By ------------------------------- 28 EXHIBIT C-1 OPINION OF WILSON, SONSINI, GOODRICH& ROSATI, PC (1) Each of the Company and the entities listed on Appendix A hereto (each, a "Subsidiary") has been duly incorporated (or otherwise formed) and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation, and the Company and each Subsidiary is duly qualified to do business as a foreign corporation and is in good standing in all other jurisdictions where the ownership or leasing of properties or the conduct of its business requires such qualification, except for jurisdictions in which the failure so to qualify would not have a material adverse effect on the Company, and each has full corporate power and authority to own its properties and conduct its business as described in the Registration Statement; (2) All of the outstanding shares of common stock of each entity listed on Appendix A hereto are owned by the Company or one or more other corporations whose outstanding common stock is owned directly or indirectly by the Company. (3) The authorized, issued and outstanding capital stock of the Company is as set forth under the caption "Capitalization" in the Prospectus; all necessary and proper corporate proceedings have been taken in order to authorize validly such authorized Common Stock; all outstanding shares of Common Stock (including the Firm Common Shares and any Optional Common Shares) have been duly and validly issued, are fully paid and nonassessable, have been issued in compliance with federal and state securities laws, were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase any securities and conform to the description thereof contained in the Prospectus; (4) The certificates evidencing the Common Shares to be delivered hereunder are in due and proper form under Delaware law, and when duly countersigned by the Company's transfer agent and registrar, and delivered to you or upon your order against payment of the agreed consideration therefor in accordance with the provisions of the Underwriting Agreement, the Common Shares represented thereby will be duly authorized and validly issued, fully paid and nonassessable, will not have been issued in violation of or subject to any preemptive rights or, to such counsel's knowledge, other rights to subscribe for or purchase securities and will conform in all respects to the description thereof contained in the Prospectus; (5) Except as disclosed in or specifically contemplated by the Prospectus, to our knowledge, there are no outstanding options, warrants or other rights calling for the issuance of, and no commitments, plans or arrangements to issue, any shares of capital stock of the Company or any security convertible into or exchangeable for capital stock of the Company; 1. 29 (6) The Company has full right, power and authority to enter into the Underwriting Agreement and to sell and deliver the Common Shares to the several Underwriters; the Underwriting Agreement has been duly and validly authorized by all necessary corporate action by the Company, has been duly and validly executed and delivered by and on behalf of the Company, and is a valid and binding agreement of the Company in accordance with its terms, except as enforceability may be limited by general equitable principles, bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and except as to those provisions relating to indemnity or contribution for liabilities arising under the Act as to which no opinion need be expressed; and no approval, authorization, order, consent, registration, filing, qualification, license or permit of or with any court, regulatory, administrative or other governmental body is required for the execution and delivery of the Underwriting Agreement by the Company or the consummation of the transactions contemplated by the Underwriting Agreement, except such as have been obtained and are in full force and effect under the Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act") and such as may be required under applicable Blue Sky laws in connection with the purchase and distribution of the Common Shares by the Underwriters and the clearance of such offering with the NASD; (7) The execution and performance of the Underwriting Agreement and the consummation of the transactions herein contemplated will not conflict with, result in the breach of, or constitute, either by itself or upon notice or the passage of time or both, a default under, any agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which to our knowledge the Company or any Subsidiary is a party or by which the Company, any Subsidiary or any property of the Company or any Subsidiary may be bound or affected that is material to the Company, or violate any of the provisions of the certificate of incorporation or bylaws of the Company or any Subsidiary or, so far as is known to us, violate any statute, judgment, decree, order, rule or regulation of any court or governmental body having jurisdiction over the Company, any Subsidiary or any property of the Company or any Subsidiary; (8) Neither the Company nor the Subsidiary is in violation of its certificate of incorporation or bylaws, or to the best of our knowledge, in breach of or default with respect to any provision of any agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument known to us to which the Company or any Subsidiary is a party or by which it or any of its properties may be bound or affected, except where such default would not materially adversely affect the Company; and, to our knowledge, the Company and each Subsidiary are in compliance with all laws, rules, regulations, judgments, decrees, orders and statutes of any court or jurisdiction to which it is subject, except where noncompliance would not materially adversely affect the Company; (9) To the best of our knowledge, no holders of securities of the Company have rights that have not lapsed or been waived to the registration of shares of Common Stock or other securities, because of the filing of the Registration Statement by the Company or the offering contemplated hereby; 2. 30 (10) (a) The Registration Statement has become effective under the Act, and, to the best of our knowledge, no stop order suspending the effectiveness of the Registration Statement or preventing the use of the Prospectus has been issued and no proceedings for that purpose have been instituted or are pending or contemplated by the Commission; any required filing of the Prospectus and any supplement thereto pursuant to Rule 424(b) of the Rules and Regulations has been made in the manner and within the time period required by such Rule 424(b); (b) The Registration Statement, the Prospectus and each amendment or supplement thereto (except for the financial statements and schedules included therein as to which we express no opinion) comply as to form in all material respects with the requirements of the Act and the Rules and Regulations; (c) To the best of our knowledge, there are no franchises, leases, contracts, agreements or documents of a character required to be disclosed in the Registration Statement or Prospectus or to be filed as exhibits to the Registration Statement that are not disclosed or filed, as required; (d) To the best of our knowledge, there are no legal or governmental actions, suits or proceedings pending or threatened against the Company that are required to be described in the Prospectus that are not described as required; and (e) To the extent statements in the Prospectus or the Registration Statement constitute summaries of statutes, governmental rules or regulations, documents, legal matters, or proceedings, those statements are accurate in all material respects and fairly present the information required to be shown in Form S-1 with respect to such statutes, governmental rules or regulations, documents, legal matters, or proceedings or conclusions of law and the information purported to be included in such descriptions; provided, however, that our opinion as to the foregoing matters in this subparagraph (e) are limited to the Federal laws of the United States and the laws of the State of Delaware; (11) No transfer taxes are required to be paid in connection with the sale and delivery of the Common Shares to the Underwriters hereunder; (12) The Company is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended; and (13) The Common Shares have been duly authorized for listing on the Nasdaq National Market. In addition to the matters set forth above, counsel rendering the foregoing opinion shall also include a statement to the effect that nothing has come to the attention of such counsel that leads them to believe that the Registration Statement (except as to the financial statements and schedules and other financial and statistical data contained therein, as to which such counsel need 3. 31 not express any opinion or belief) at the Effective Date contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, that the Prospectus (except as to the financial statements and schedules and other financial and statistical data contained therein, as to which such counsel need not express any opinion or belief) as of its date or at the Closing Date (or any later date on which Optional Common Shares are purchased), contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 4. 32 EXHIBIT C-2 PATENT COUNSEL OPINION Such counsel are familiar with the technology used by the Company in its business and the manner of its use thereof and have read the Registration Statement and the Prospectus, including particularly the portions of the Registration Statement and the Prospectus referring to patents, trade secrets, trademarks, service marks or other proprietary information or materials and: (i) such counsel have no reason to believe that the Registration Statement or the Prospectus (A) contains any untrue statement of a material fact with respect to patents, trade secrets, trademarks, service marks or other proprietary information or materials owned or used by the Company, or the manner of its use thereof, or any allegation on the part of any person that the Company is infringing any patent rights, trade secrets, trademarks, service marks or other proprietary information or materials of any such person or (B) omits to state any material fact relating to patents, trade secrets, trademarks, service marks or other proprietary information or materials owned or used by the Company, or the manner of its use thereof, or any allegation of which such counsel have knowledge, that is required to be stated in the Registration Statement or the Prospectus or is necessary to make the statements therein not misleading; (ii) to the best of such counsel's knowledge and except as set forth in the Prospectus there are no legal or governmental proceedings pending relating to patent rights, trade secrets, trademarks, service marks or other proprietary information or materials of the Company, and to the best of such counsel's knowledge no such proceedings are threatened or contemplated by governmental authorities or others; (iii) such counsel do not know of any contracts or other documents, relating to governmental regulation affecting the Company or the Company's patents, trade secrets, trademarks, service marks or other proprietary information or materials, of a character required to be filed as an exhibit to the Registration Statement or required to be described in the Registration Statement or the Prospectus that are not filed or described as required; (iv) to the best of such counsel's knowledge, the Company is not infringing or otherwise violating any patents, trade secrets, trademarks, service marks or other proprietary information or materials, of others, and to the best of such counsel's knowledge there are no infringements by others of any of the Company's patents, trade secrets, trademarks, service marks or other proprietary information or materials which in the judgment of such counsel could affect materially the use thereof by the Company; and (v) to the best of such counsel's knowledge, the Company owns or possesses sufficient licenses or other rights to use all patents, trade secrets, trademarks, service marks or other proprietary information or materials necessary to conduct the business now being or proposed to be conducted by the Company as described in the Prospectus. 33 EXHIBIT C-3 REGULATORY COUNSEL OPINION Such counsel is familiar with the business of the Company and has read the Registration Statement and the Prospectus, including particularly the portions of the Registration Statement and the Prospectus referring to the Federal Drug Administration ("FDA") rules and regulations and the Company's compliance therewith and; (i) such counsel has no knowledge that the Registration Statement or the Prospectus (A) contains any untrue statement of a material fact with respect to FDA rules and regulations or the Company's compliance therewith, or (B) omits to state any material fact relating to FDA rules and regulations or the Company's compliance therewith that is required to be stated in the Registration Statement or the Prospectus or is necessary to make the statements therein not misleading; (ii) to the best of such counsel's knowledge there are no legal or governmental proceedings proceedings pending related to the Company and its business, and to the best of such counsel's knowledge no such proceedings are threatened or contemplated by governmental authorities or others; (iii) except as described in the Prospectus, the Company has received all governmental permits, consents, certificates, approvals and authorizations necessary in order to conduct its business as described in the Registration Statement; (iv) such counsel does not know of any contracts or other documents of a character required to be described in the Registration Statement or the Prospectus that are not so described. EX-3.2 3 FORM OF RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.2 [This Restated Certificate of Incorporation will be filed at the close of the IPO] RESTATED CERTIFICATE OF INCORPORATION OF CALYPTE BIOMEDICAL CORPORATION The following Restated Certificate of Incorporation of Calypte Biomedical Corporation (i)restates the provisions of the Certificate of Incorporation of Calypte Biomedical Corporation filed with the Secretary of State of the State of Delaware on January _, 1996, and (ii) supersedes the original Certificate of Incorporation and all prior restatements thereof and amendments thereto in their entirety. ARTICLE I The name of the corporation is Calypte Biomedical Corporation (the "Corporation"). ARTICLE II The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE III The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. ARTICLE IV The Corporation is authorized to issue two classes of shares of stock to be designated, respectively, Common Stock, $0.001 par value, and Preferred Stock $0.001 par value. The total number of shares that the Corporation is authorized to issue is 25,000,000 shares. The number of shares of Common Stock authorized is 20,000,000. The number of shares of Preferred authorized is 5,000,000. The Preferred Stock may be issued from time to time in one or more series pursuant to a resolution or resolutions providing for such issue duly adopted by the board of directors (authority to do so being hereby expressly vested in the board). The board of directors is further authorized to determine or alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock and to fix the number of shares of any series of Preferred Stock and the designation of any such series of Preferred Stock. The board of directors, within the limits and 2 restrictions stated in any resolution or resolutions of the board of directors originally fixing the number of shares constituting any series, may increase or decrease (but not below the number of shares in any such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series. The authority of the board of directors with respect to each such class or series shall include, without limitation of the foregoing, the right to determine and fix: (a) the distinctive designation of such class or series and the number of shares to constitute such class or series; (b) the rate at which dividends on the shares of such class or series shall be declared and paid, or set aside for payment, whether dividends at the rate so determined shall be cumulative or accruing, and whether the shares of such class or series shall be entitled to any participating or other dividends in addition to dividends at the rate so determined, and if so, on what terms; (c) the right or obligation, if any, of the corporation to redeem shares of the particular class or series of Preferred Stock and, if redeemable, the price, terms and manner of such redemption; (d) the special and relative rights and preferences, if any, and the amount or amounts per share, which the shares of such class or series of Preferred Stock shall be entitled to receive upon any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; (e) the terms and conditions, if any, upon which shares of such class or series shall be convertible into, or exchangeable for, shares of capital stock of any other class or series, including the price or prices or the rate or rates of conversion or exchange and the terms of adjustment, if any; (f) the obligation, if any, of the corporation to retire, redeem or purchase shares of such class or series pursuant to a sinking fund or fund of a similar nature or otherwise, and the terms and conditions of such obligation; (g) voting rights, if any, on the issuance of additional shares of such class or series or any shares of any other class or series of Preferred Stock; (h) limitations, if any, on the issuance of additional shares of such class or series or any shares of any other class or series of Preferred Stock; and (i) such other preferences, powers, qualifications, special or relative rights and privileges thereof as the board of directors of the corporation, acting in accordance with this Restated Certificate of Incorporation, may deem advisable and are not inconsistent with law and the provisions of this Restated Certificate of Incorporation. -2- 3 ARTICLE V The Corporation reserves the right to amend, alter, change, or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon the stockholders herein are granted subject to this right. ARTICLE VI The Corporation is to have perpetual existence. ARTICLE VII 1. Limitation of Liability. To the fullest extent permitted by the General Corporation Law of the State of Delaware as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. 2. Indemnification. The Corporation may indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or his or her testator or intestate is or was a director, officer or employee of the Corporation, or any predecessor of the Corporation, or serves or served at any other enterprise as a director, officer or employee at the request of the Corporation or any predecessor to the Corporation. 3 . Amendments. Neither any amendment nor repeal of this Article VII, nor the adoption of any provision of the Corporation's Certificate of Incorporation inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII, in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this Article VII, would accrue or arise, prior to such amendment, repeal, or adoption of an inconsistent provision. ARTICLE VIII In the event any shares of Preferred Stock shall be redeemed or converted pursuant to the terms hereof, the shares so converted or redeemed shall not revert to the status of authorized but unissued shares, but instead shall be canceled and shall not be re-issuable by the Corporation. -3- 4 ARTICLE IX Holders of stock of any class or series of this corporation shall not be entitled to cumulate their votes for the election of directors or any other matter submitted to a vote of the stockholders, unless such cumulative voting is required pursuant to Sections 2115 and/or 301.5 of the California Corporations Code, in which event each such holder shall be entitled to as many votes as shall equal the number of votes which (except for this provision as to cumulative voting) such holder would be entitled to cast for the election of directors with respect to his shares of stock multiplied by the number of directors to be elected by him, and the holder may cast all of such votes for a single director or may distribute them among the number of directors to be voted for, or for any two or more of them as such holder may see fit, so long as the name of the candidate for director shall have been placed in nomination prior to the voting and the stockholder, or any other holder of the same class or series of stock, has given notice at the meeting prior to the voting of the intention to cumulate votes. ARTICLE X 1. Number of Directors. The number of directors which constitutes the whole Board of Directors of the corporation shall be designated in the Bylaws of the corporation. 2. Election of Directors. Elections of directors need not be by written ballot unless the Bylaws of the corporation shall so provide. ARTICLE XI In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend or repeal the Bylaws of the corporation. ARTICLE XII Immediately upon the closing of a public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, covering any of the corporation's securities (as that term is defined under the Securities Act of 1933, as then in effect), no action shall be taken by the stockholders of the corporation except at an annual or special meeting of the stockholders called in accordance with the Bylaws of the corporation and no action shall be taken by the stockholders by written consent. ARTICLE XIII Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation. -4- 5 This Restated Certificate of Incorporation has been duly adopted by the board of directors of the Corporation in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware, as amended. The Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Corporation's Certificate of Incorporation and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation. IN WITNESS WHEREOF, Calypte Biomedical Corporation has caused this certificate to be signed by John P. Davis, its President and Chief Executive Officer, this _____ day of _________________, 1996. ___________________________________________________ John P. Davis, President and Chief Executive Officer -5- EX-5.1 4 OPINION OF WILSON SONSINI GOODRICH & ROSATI 1 EXHIBIT 5.1 [WILSON SONSINI GOODRICH & ROSATI LETTERHEAD] Calypte Biomedical Corporation 1440 Fourth Street Berkeley, CA 94710 RE: REGISTRATION STATEMENT ON FORM S-1 (COMMISSION FILE NO. 333-4105) Ladies and Gentlemen: We have examined the Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission (the "Registration Statement"), in connection with the registration under the Securities Act of 1993, as amended, of 2,875,000 shares (including an over-allotment option granted by the Company to the underwriters to purchase 375,000 shares) of your Common Stock (the "Shares"), all of which are authorized. The Shares are to be sold to the underwriters for resale to the public as described in the Registration Statement and pursuant to the Underwriting Agreement being filed as an exhibit thereto. As your counsel, we have examined the proceedings proposed to be taken in connection with the sale and issuance of the Shares. It is our opinion that, upon completion of the proceedings being taken or contemplated by us, as your counsel, to be taken prior to the issuance of the Shares, and upon completion of the proceedings being taken in order to permit such transactions to be carried out in accordance with the securities laws of the various states, where required, the Shares, when issued and sold in the manner referred to in the Registration Statement, will be legally and validly issued, fully paid and nonassessable. We consent to the use of this opinion as an exhibit to the Registration Statement and further consent to the use of our name wherever appearing in the Registration Statement, including the Prospectus constituting a part thereof, and any amendment thereto. Very truly yours, WILSON SONSINI GOODRICH & ROSATI Professional Corporation /s/ Wilson Sonsini Goodrich & Rosati EX-10.11 5 AMENDMENT NO.1 TO EMPLOYMENT AGREEMENT W/ J. DAVIS 1 EXHIBIT 10.11 CALYPTE BIOMEDICAL MEMORANDUM Date: April 22, 1996 To: Jack Davis From: Bill Boeger Copy: John DiPietro Subject: Relocation Assistance - ------------------------------------------------------------------------------- I want to summarize the decision of the Calypte Board of Directors at its February 13th meeting with regard to assistance in your relocation from Connecticut to California. Based upon the decision of the Board, Section 5 of your Employment Agreement dated April 10, 1995 would be eliminated in its entirety and replaced with the following: Section 5. Moving Expenses. Executive shall be reimbursed for actual out-of-pocket moving expenses in connection with the relocation of the Executive and his family. Such expenses shall include all costs associated with the sale of the Executive's house in Connecticut, including real estate commissions, closing costs and legal fees, as well as the costs associated with the purchase of a new residence in California such as mortgage points, loan fees, legal fees and inspection fees; provided, however, that the total of such moving expenses paid by the Company shall not exceed $150,000 prior to "grossing up" for taxes. In addition, Executive shall be reimbursed for reasonable costs of moving personal property from Connecticut to California. Please give me a call if you have any questions. EX-10.13 6 EMPLOYMENT AGREEMENT W/ JOHN J. DIPIETRO 1 EXHIBIT 10.13 [CALYPTE BIOMEDICAL CORPORATION LETTERHEAD] September 26, 1995 Mr. John J. DePietro 6458 Oberlin Way San Jose, CA 95123 Dear John: As I mentioned today, everyone here was very impressed with you, and we are quite proud to offer you the position of Chief Financial Officer for Calypte Biomedical Corporation. This letter will summarize the details of that offer. Your position will be Chief Financial Officer and Vice President - Finances reporting to me in my capacity as President and CEO. Your starting salary will be $125,000 per year, and I intend to recommend to the Board a management incentive plan for Calypte for 1996 which will provide (if approved) bonus and cash compensation for all employees. The levels, and details, are yet to be determined. I implemented a similar plan at my last company, and people at your level could earn up to approximately 30% of their salary in bonus if they met their individual and company goals. Pending Board approval at our meeting tomorrow, you will be offered incentive stock options on 35,000 shares of Calypte stock, and it is our intention to make the option price of these shares $1.00 per share. This will be a 10-year option with a 5-year vesting schedule. The terms of your option grant will indicate that - in the event of a change in control of the company, the options will vest immediately. You will be extended an Employment Severance Agreement which will provide for the payment of one year's salary in the event your employment is involuntarily terminated for reasons other than cause at any time during the first 12 months of your employment. Thereafter, your severance agreement will call for severance payment of six months of salary in the event your employment is terminated for reasons other than cause. John, we are very excited about you joining our company, particularly, at this pivotal stage of our growth and development as an organization. You can play a crucial role in our IPO and we would expect to have you participate in our roadshow. In addition, you will have a corporate apartment (furnished) with all utilities, etc., paid for by Calypte, the expenses for which shall be increased sufficiently to reimburse you for the taxes owed on such expenses. 2 Sincerely, /s/ Jack Davis Jack Davis President JD/dm cc: Roxanne Barry Bill Boeger ACCEPTED AND AGREED TO this 6 th day of October, 1995. --- ------- /s/ John J. DiPietro - --------------------------------- John J. DiPietro EX-10.31 7 LOAN & BRIDGE AGREEMENT W/SILICON VALLEY BANK 1 EXHIBIT 10.31 ________________________________________________________________________________ CALYPTE BIOMEDICAL CORPORATION LOAN AND BRIDGE SECURITY AGREEMENT ________________________________________________________________________________ 2 TABLE OF CONTENTS
Page 1. DEFINITIONS AND CONSTRUCTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2. LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.1 Bridge Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.2 Interest Rates, Payments, and Calculations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.3 Crediting Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2.4 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.5 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 2.6 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3. CONDITIONS OF LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.1 Conditions Precedent to Initial Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4. CREATION OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.1 Grant of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.2 Delivery of Additional Documentation Required . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.3 Right to Inspect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 5.1 Due Organization and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 5.2 Due Authorization; No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 5.3 No Prior Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 5.4 Bona Fide Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 5.5 Merchantable Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 5.6 Name; Location of Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 5.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 5.8 No Material Adverse Change in Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 10 5.9 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 5.10 Regulatory Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 5.11 Environmental Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 5.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 5.13 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 5.14 Government Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 5.15 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 5.16 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 6.1 Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 6.2 Government Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 6.3 Financial Statements, Reports, Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 6.4 Inventory; Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 6.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 6.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 6.7 Principal Depository . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 6.8 Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 6.9 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
i 3 7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.1 Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.2 Change in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.3 Mergers or Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 7.4 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.5 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.6 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.7 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.8 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.9 Subordinated Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.10 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7.11 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.1 Payment Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.2 Covenant Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.3 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.4 Attachment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.5 Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.6 Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 8.7 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 8.8 Misrepresentations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 9. BANK'S RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 9.1 Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 9.2 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 9.3 Accounts Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 9.4 Bank Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 9.5 Bank's Liability for Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 9.6 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 9.7 Demand; Protest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 10. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 12. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 12.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 12.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 12.3 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 12.4 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 12.5 Amendments in Writing, Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 12.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 12.7 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 12.8 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ii 4 This LOAN AND SECURITY AGREEMENT is entered into as of December 8,1995, by and between SILICON VALLEY BANK ("Bank") and CALYPTE BIOMEDICAL CORPORATION ("Borrower"). RECITALS Borrower wishes to obtain credit from Bank, and Bank desires to extend credit to Borrower. This Agreement sets forth the terms on which Bank will advance credit to Borrower, and Borrower will repay the amounts owing to Bank. AGREEMENT The parties agree as follows: 1. DEFINITIONS AND CONSTRUCTION 1.1 Definitions. As used in this Agreement, the following terms shall have the following definitions: "Accounts" means all presently existing and hereafter arising accounts, contract rights, and all other forms of obligations owing to Borrower arising out of the sale or lease of goods (including, without limitation, the licensing of software and other technology) or the rendering of services by Borrower, whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrower and Borrower's Books relating to any of the foregoing. "Advance" means a cash advance under the Bridge Facility. "Affiliate" means, with respect to any Person, any Person that owns or controls directly or indirectly such Person, any Person that controls or is controlled by or is under common control with such Person, and each of such Person's senior executive officers, directors, and partners. "Bank Expenses" means all: reasonable costs or expenses (including reasonable attorneys' fees and expenses) incurred in connection with the preparation, negotiation, administration, and enforcement of the Loan Documents; and Bank's reasonable attorneys' fees and expenses incurred in amending, enforcing or defending the Loan Documents, whether or not suit is brought. "Borrower's Books" means all of Borrower's books and records including: ledgers; records concerning Borrower's assets or liabilities, the Collateral, business operations or financial condition; and all computer programs, or tape files, and the equipment, containing such information. "Bridge Facility" means the facility under which Borrower may request Bank to issue a cash advance, as specified in Section 2.1 hereof. "Business Day" means any day that is not a Saturday, Sunday, or other day on which banks in the State of California are authorized or required to close. "Closing Date" means the date of this Agreement. "Code" means the California Uniform Commercial Code. 1 5 "Collateral" means the property described on Exhibit A attached hereto. "Committed Line" means Two Million Dollars ($2,000,000). "Contingent Obligation" means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term "Contingent Obligation" shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement. "Daily Balance" means the amount of the Obligations owed at the end of a given day. "Equipment" means all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which Borrower has any interest. "Equity Event" means the sale of Borrower's equity securities pursuant to a registration statement filed under the Securities Act of 1933, as amended. "ERISA" means the Employment Retirement Income Security Act of 1974, as amended, and the regulations thereunder. "GAAP" means generally accepted accounting principles as in effect from time to time. "Indebtedness" means (a) all indebtedness for borrowed money or the deferred purchase price of property or services, including without limitation reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all capital lease obligations and (d) all Contingent Obligations. "Insolvency Proceeding" means any proceeding commenced by or against any person or entity under any provision of the United States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extension generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief. "Inventory" means all present and future inventory in which Borrower has any interest, including merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products intended for sale or lease or to be furnished under a contract of service, of every kind and description now or at any time hereafter owned by or in the custody or possession, actual or constructive, of Borrower, including such inventory as is temporarily out of its 2 6 custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above, and Borrower's Books relating to any of the foregoing. "Investment" means any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any loan, advance or capital contribution to any Person. "IRC" means the Internal Revenue Code of 1986, as amended, and the regulations thereunder. " Lien" means any mortgage, lien, deed of trust, security interest or other encumbrance. "Loan Documents" means, collectively, this Agreement, any note or notes executed by Borrower, and any other agreement entered into between Borrower and Bank in connection with this Agreement, all as amended or extended from time to time. "Material Adverse Effect" means a material adverse effect on (i) the business operations or condition (financial or otherwise) of Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the Obligations, or (iii) the Collateral or the priority of Bank's lien on the Collateral, taken as a whole. "Maturity Date" means March 5, 1996. "Negotiable Collateral" means all of Borrower's present and future letters of credit of which it is a beneficiary, notes, drafts, instruments, securities, documents of title, and chattel paper, and Borrower's Books relating to any of the foregoing. "Obligations" means all debt, principal, interest, Bank Expenses and other amounts owed to the Bank by Borrower pursuant to this Agreement or any other agreement, whether absolute or contingent, due or to become due, now existing or hereafter arising, including any interest that accrues after the commencement of an Insolvency Proceeding and including any debt, liability, or obligation owing from Borrower to others that Bank may have obtained by assignment or otherwise. "Periodic Payments" means all installments or similar recurring payments that Borrower may now or hereafter become obligated to pay to Bank pursuant to the terms and provisions of any instrument, or agreement now or hereafter in existence between Borrower and Bank. "Permitted Indebtedness" means: (a) Indebtedness of Borrower in favor of Bank arising under this Agreement or any other Loan Document; (b) Existing Indebtedness disclosed on the Schedule; (c) Subordinated Debt; (d) Indebtedness to trade creditors and with respect to surety bonds and similar obligations incurred in the ordinary course of business; (e) Indebtedness of any Subsidiary to Borrower and Contingent Obligations of any Subsidiary with respect to obligations of Borrower (provided that the primary obligations are not prohibited hereby); provided that the incurrence of such Indebtedness or 3 7 Contingent Obligations, as the case may be, does not result in a violation of Section 7.7 as a consequence of the provisos set forth in paragraph (d) of the definition of "Permitted Investments"; (f) Indebtedness of Borrower to any Subsidiary and Contingent Obligations of Borrower with respect to obligations of any Subsidiary (provided that the primary obligations are not prohibited hereby), and Indebtedness of any Subsidiary to any other Subsidiary and Contingent Obligations of any Subsidiary with respect to obligations of any other Subsidiary (provided that the primary obligations are not prohibited hereby); (g) Indebtedness secured by Permitted Liens; (h) Other Indebtedness not otherwise permitted by Section 7.4 not exceeding Fifty Thousand Dollars ($50,000) in the aggregate outstanding at any time; (i) Indebtedness by Borrower and its Subsidiaries consisting of guarantees (and other credit support) of the obligations of vendors and suppliers of Borrower or its Subsidiaries in respect of transactions entered into in the ordinary course of business provided that such guarantees (and other credit support) shall not at any time exceed Twenty-Five Thousand Dollars ($25,000); (j) Additional capital leases or indebtedness incurred solely to purchase equipment which is secured in accordance with clause (c) of "Permitted Liens" below and is not in excess of the lesser of the purchase price of such equipment or the fair market value of such equipment on the date of acquisition, provided that the outstanding principal amount of such Indebtedness shall not exceed One Hundred Thousand Dollars ($100,000); and (k) Extensions, refinancing, modifications, amendments and restatements of any of items of Permitted Indebtedness (a) through (i) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be. "Permitted Investment" means: (a) Investments existing on the Closing Date disclosed in the Schedule; (b) (i) marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing within one (1) year from the date of acquisition thereof, (ii) commercial paper maturing no more than one (1) year from the date of creation thereof and currently having the highest rating obtainable from either Standard & Poor's Corporation or Moody's Investors Service, Inc., and (iii) certificates of deposit maturing no more than one (1) year from the date of investment therein issued by Bank; (c) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (d) Investments (whether consisting of the purchase of securities, loans, capital contributions, or otherwise) of Subsidiaries in or to other Subsidiaries or in Borrower; (e) Investments consisting of receivables owing to Borrower or its Subsidiaries by Persons and advances to customers or suppliers, in each case, if created, acquired or made in the ordinary course of business; provided that this paragraph (f) shall not apply to Investments owing by Subsidiaries to Borrower; 4 8 (f) Investments consisting of (i) compensation of employees, officers and directors of Borrower or its Subsidiaries so long as the Board of Directors of Borrower determines that such compensation is in the best interests of Borrower, (ii) travel advances, employee relocation loans and other employee loans and advances in the ordinary course of business; (iii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries, (iv) other loans to officers and employees approved by the Board of Directors in an aggregate amount not in excess of Fifty Thousand Dollars ($50,000) outstanding at any time; (g) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers, arising in the ordinary course of business; (h) Investments pursuant to or arising under currency agreements or interest rate agreements; (i) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions to, customers and suppliers who are not Affiliates in the ordinary course of business; provided that this paragraph (i) shall not apply to Investments by Borrower in any Subsidiary; (j) Investments constituting acquisitions permitted under Section 7.3; (k) Investments consisting of deposit accounts of Borrower in which Bank has a Lien prior to any other Lien; (l) Investments consisting of deposit accounts of any Subsidiaries maintained in the ordinary course of business; (m) Investments accepted in connection with Transfers permitted by Section 7.1; and (n) Other Investments aggregating not in excess of Twenty-Five Thousand Dollars ($25,000) at any time. "Permitted Liens" means the following: (a) Any Liens existing as of the date hereof and disclosed in the Schedule or arising under this Agreement or the other Loan Documents; (b) Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings, provided the same have no priority over any of Bank's security interests; (C) Liens (i) upon or in any equipment acquired or held by Borrower or any of its Subsidiaries to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of financing the acquisition of such equipment, or (ii) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment; (d) Leases or subleases and license and sublicenses granted to others in the ordinary course of Borrower's or its Subsidiaries' business not interfering in any material respect with the business of Borrower and its Subsidiaries taken as a whole, and any interest or title of a lessor, licensor or under any lease or license; 5 9 (e) Liens on assets (including the proceeds thereof and accessions thereto) that existed at the time such assets were acquired by Borrower or any Subsidiary (including Liens on assets of any corporation that existed at the time it became or becomes a Subsidiary); (f) Liens on Equipment leased by Borrower or any Subsidiary pursuant to an operating lease in the ordinary course of business (including proceeds thereof and accessions thereto) incurred solely for the purpose of financing the lease of such Equipment; (g) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 8.7; (h) Easements, reservations, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances affecting real property not interfering in any material respect with the ordinary conduct of the business of Borrower and its Subsidiaries, taken as a whole; (i) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (j) Liens which constitute rights of set-off of a customary nature or bankers' Liens with respect to amounts on deposit, whether arising by operation of law or by contract, in connection with arrangements entered into with banks in the ordinary course of business; provided that with respect to Liens on amounts on deposit owned by Borrower, such Liens shall not be prior to the Lien of Bank; (k) Liens on insurance proceeds in favor of insurance companies granted solely as security for financed premiums; (l) Earn-out and royalty obligations existing on the date hereof or entered into in connection with an acquisition permitted by Section 7.3; and (m) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clauses (a) through (c) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase. "Person" means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or governmental agency. "Prime Rate" means the variable rate of interest, per annum, most recently announced by Bank, as its "prime rate," whether or not such announced rate is the lowest rate available from Bank. " Responsible Officer" means each of the Chief Executive Officer, the Chief Financial Officer and the Controller of Borrower. "Schedule" means the schedule of exceptions attached hereto, if any. "Subordinated Debt" means any debt incurred by Borrower that is subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank (and identified as being such by Borrower and Bank). 6 10 "Subsidiary" means any corporation or partnership in which (i) any general partnership interest or (ii) more than 50% of the stock of which by the terms thereof ordinary voting power to elect the Board of Directors, managers or trustees of the entity shall, at the time as of which any determination is being made, is owned by Borrower, either directly or through an Affiliate. 1.2 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP and all calculations made hereunder shall be made in accordance with GAAP. When used herein, the terms "financial statements" shall include the notes and schedules thereto. 2. LOAN AND TERMS OF PAYMENT 2.1 Bridge Facility. Subject to and upon the terms and conditions of this Agreement, Bank agrees to make one (1) Advance to Borrower in an aggregate amount not to exceed the Committed Line. Bank will credit the amount of the Advance to Borrower's deposit account. The Bridge Facility shall terminate on the Maturity Date, at which time the entire principal amount of the Advance, all accrued interest, and other amounts due under this Agreement shall be immediately due and payable. 2.2 Interest Rates, Payments, and Calculations. (a) Interest Rate. Except as set forth in Section 2.2(b), the Advance shall bear interest, on the average Daily Balance, at a rate equal to three and one half (3.5) percentage points above the Prime Rate. (b) Default Rate. All Obligations shall bear interest, from and after the occurrence of an Event of Default, at a rate equal to five (5) percentage points above the interest rate applicable immediately prior to the occurrence of the Event of Default. (c) Payments. Interest hereunder shall be due and payable on the fifth calendar day of each month during the term hereof. Bank shall, at its option, charge such interest, all Bank Expenses, and all Periodic Payments against any of Borrower's deposit accounts or against the Committed Line, in which case those amounts shall thereafter accrue interest at the rate then applicable hereunder. Any interest not paid when due shall be compounded by becoming a part of the Obligations, and such interest shall thereafter accrue interest at the rate then applicable hereunder. (d) Computation. In the event the Prime Rate is changed from time to time hereafter, the applicable rate of interest hereunder shall be increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is changed, by an amount equal to such change in the Prime Rate. All interest chargeable under the Loan Documents shall be computed on the basis of a three hundred sixty (360) day year for the actual number of days elapsed. 2.3 Crediting Payments. Prior to the occurrence of an Event of Default, Bank shall credit a wire transfer of funds, check or other item of payment to such deposit account or Obligation as Borrower specifies. After the occurrence of an Event of Default, the receipt by Bank of any wire transfer of funds, check, or other item of payment shall be immediately applied to conditionally reduce Obligations, but shall not be considered a payment on account unless such payment is of immediately available federal funds or unless and until such check or other item of payment is honored when presented for payment. Notwithstanding anything to the contrary contained herein, any payment (other than a wire transfer of immediately available funds) received by Bank after 12:00 noon California time shall be deemed to have been received by Bank as of the opening of business on the immediately following Business Day. Whenever any payment to Bank under the Loan Documents would otherwise be due (except by reason of acceleration) on a date that is not a Business Day, such 7 11 payment shall instead be due on the next Business Day, and additional fees or interest, as the case may be, shall accrue and be payable for the period of such extension. 2.4 Fees. Borrower shall pay to Bank the following: (a) Facility Fee. A Facility Fee equal to Twenty Thousand Dollars ($20,000), half of which has been paid and half of which shall be paid on the date hereof. The entire Facility Fee shall be fully earned and nonrefundable on the date hereof. An additional fee of Twenty Thousand Dollars ($20,000) shall be due on the Business Day following the Maturity Date, if all Obligations have not been satisfied in full by the Maturity Date. (b) Bank Expenses. Upon the date hereof, all Bank Expenses incurred through the date hereof, including reasonable attorneys' fees and expenses (not to exceed Four Thousand Dollars ($4,000)), and after the date hereof, all Bank Expenses upon receipt of an invoice therefor; 2.5 Additional Costs. In case any law, regulation, treaty or official directive or the interpretation or application thereof by any court or any governmental authority charged with the administration thereof or the compliance with any guideline or request of any central bank or other governmental authority (whether or not having the force of law): (a) subjects Bank to any tax with respect to payments of principal or interest or any other amounts payable hereunder by Borrower or otherwise with respect to the transactions contemplated hereby (except for taxes on the overall net income of Bank imposed by the United States of America or any political subdivision thereof); (b) imposes, modifies or deems applicable any deposit insurance, reserve, special deposit or similar requirement against assets held by, or deposits in or for the account of, or loans by, Bank; or (c) imposes upon Bank any other condition with respect to its performance under this Agreement, and the result of any of the foregoing is to increase the cost to Bank, reduce the income receivable by Bank or impose any expense upon Bank with respect to any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank the amount of such increase in cost, reduction in income or additional expense as and when such cost, reduction or expense is incurred or determined, upon presentation by Bank of a statement of the amount and setting forth Bank's calculation thereof, all in reasonable detail, which statement shall be deemed true and correct absent manifest error; provided, however, that the Borrower shall not be liable for any such amount attributable to any period prior to 180 day prior to the date of such certificate. 2.6 Term. Subject to Section 12.7, this Agreement shall become effective upon the date hereof and shall continue in full force and effect for a term ending on the Maturity Date. Notwithstanding termination, Bank's Lien on the Collateral shall remain in effect for so long as any Obligations (excluding Obligations under Sections 2.5 and 12.2 to the extent they remain inchoate at the time outstanding payment Obligations are paid in full) are outstanding. 3. CONDITIONS OF LOANS 3.1 Conditions Precedent to Initial Advance. The obligation of Bank to make the Advance is subject to the condition precedent that: 8 12 (a) after due diligence inquiry conducted by Bank at Borrower's expense, and upon completion of audits conducted by Bank at Borrower's expense, there shall have been no discovery of any facts that in Bank's sole discretion would have a Material Adverse Effect; and (b) Bank shall have received, in form and substance satisfactory to Bank, the following: (i) this Agreement; (ii) a certificate of the Secretary of Borrower with respect to incumbency and resolutions authorizing the execution and delivery of this Agreement; (iii) insurance certificate; (iv) financing statement (Form UCC-1); (v) payment of the fees and Bank Expenses then due specified in Section 2.5 hereof; and (vi) such other documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate. 4. CREATION OF SECURITY INTEREST 4.1 Grant of Security Interest. Borrower grants to Bank a continuing security interest in all presently existing and hereafter acquired or arising Collateral in order to secure prompt repayment of any and all Obligations and in order to secure prompt performance by Borrower of each of its covenants and duties under the Loan Documents. Except as set forth in the Schedule, such security interest constitutes a valid, first priority security interest in the presently existing Collateral, and will constitute a valid, first priority security interest in Collateral acquired after the date hereof, in each case, to the extent that a security interest in such Collateral can be perfected by the filing of a financing statement, in the case of Collateral consisting of instruments, documents, chattel paper or certificated securities, to the extent that Bank takes possession of such Collateral. 4.2 Delivery of Additional Documentation Required. Borrower shall from time to time execute and deliver to Bank, at the request of Bank, all Negotiable Collateral, all financing statements and other documents that Bank may reasonably request, in form satisfactory to Bank, to perfect and continue perfected Bank's security interests in the Collateral and in order to fully consummate all of the transactions contemplated under the Loan Documents. 4.3 Right to Inspect. Bank (through any of its officers, employees, or agents) shall have the right, upon reasonable prior notice, from time to time during Borrower's usual business hours, to inspect Borrower's Books and to make copies thereof and to check, test, and appraise the Collateral in order to verify Borrower's financial condition or the amount, condition of, or any other matter relating to, the Collateral. 5. REPRESENTATIONS AND WARRANTIES Borrower represents and warrants as follows: 5.1 Due Organization and Qualification. Borrower and each Subsidiary is a corporation duly existing and in good standing under the laws of its state of incorporation and qualified and licensed to do business in, and is in good standing in, any state in which the conduct of 9 13 its business or its ownership of property requires that it be so qualified except for states as to which any failure so to qualify would not have a Material Adverse Effect. 5.2 Due Authorization; No Conflict. The execution, delivery, and performance of the Loan Documents are within Borrower's powers, have been duly authorized, and are not in conflict with nor constitute a breach of any provision contained in Borrower's Certificate of Incorporation or Bylaws, nor will they constitute an event of default under any material agreement to which Borrower is a party or by which Borrower is bound. Borrower is not in default under any agreement to which it is a party or by which it is bound, which default would reasonably be expected to have a Material Adverse Effect. 5.3 No Prior Encumbrances. Borrower has good and indefeasible title to the Collateral, free and clear of Liens, except for Permitted Liens. 5.4 Bona Fide Accounts. The Accounts are bona fide existing obligations. The property giving rise to such Accounts has been delivered to the account debtor or to the account debtor's agent for immediate shipment to and unconditional acceptance by the account debtor. 5.5 Merchantable Inventory. All Inventory is in all material respects of good and marketable quality, free from all material defects. 5.6 Name; Location of Chief Executive Office. Except as disclosed in the Schedule, Borrower has not done business under any name other than that specified on the signature page hereof. The chief executive office of Borrower is located at the address indicated in Section 10 hereof. 5.7 Litigation. Except as set forth in the Schedule, there are no actions or proceedings pending (or, to Borrower's knowledge, threatened) by or against Borrower or any Subsidiary before any court or administrative agency in which a likely adverse decision would reasonably be expected to have a Material Adverse Effect or a material adverse effect on Borrower's interest or Bank's security interest in the Collateral. 5.8 No Material Adverse Change in Financial Statements. All consolidated financial statements related to Borrower and any Subsidiary that have been delivered by Borrower to Bank fairly present in all material respects Borrower's consolidated financial condition as of the date thereof and Borrower's consolidated results of operations for the period then ended. There has not been a material adverse change in the consolidated financial condition of Borrower since the date of the most recent of such financial statements submitted to Bank. 5.9 Solvency. Borrower is solvent and able to pay its debts (including trade debts) as they mature. 5.10 Regulatory Compliance. Borrower and each Subsidiary has met the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA. No event has occurred resulting from Borrower's failure to comply with ERISA that is reasonably likely to result in Borrower's incurring any liability that would reasonably be expected to have a Material Adverse Effect. Borrower is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940. Borrower is not engaged principally, or as one of the important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations G, T and U of the Board of Governors of the Federal Reserve System). Borrower has complied with all the provisions of the Federal Fair Labor Standards Act. Borrower has not violated any statutes, laws, ordinances or rules applicable to it, violation of which could have a Material Adverse Effect. 10 14 5.11 Environmental Condition. None of Borrower's or any Subsidiary's properties or assets has ever been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by previous owners or operators, in the disposal of, or to produce, store, handle, treat, release, or transport, any hazardous waste or hazardous substance other than in accordance with applicable law; to the best of Borrower's knowledge, none of Borrower's properties or assets has ever been designated or identified in any manner pursuant to any environmental protection statute as a hazardous waste or hazardous substance disposal site, or a candidate for closure pursuant to any environmental protection statute; no lien arising under any environmental protection statute has attached to any revenues or to any real or personal property owned by Borrower or any Subsidiary; and neither Borrower nor any Subsidiary has received a summons, citation, notice, or directive from the Environmental Protection Agency or any other federal, state or other governmental agency concerning any action or omission by Borrower or any Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste or hazardous substances into the environment. 5.12 Taxes. Borrower and each Subsidiary has filed or caused to be filed all material tax returns required to be filed, and has paid, or has made adequate provision for the payment of, all taxes reflected therein. 5.13 Subsidiaries. Borrower does not own any stock, partnership interest or other equity securities of any Person, except for Permitted Investments. 5.14 Government Consents. Borrower and each Subsidiary has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all governmental authorities that are necessary for the continued operation of Borrower's business as currently conducted except where the failure to obtain any such consent, approval or authorization, to make any such declaration or filing or to given any such notice would not reasonably be expected to have Material Adverse Effect. 5.15 Intellectual Property. To Borrower's knowledge, Borrower possesses and owns, free of any material infringement or other material claims by third parties, all trademarks, trade names, copyrights, patent rights, patents, licenses that are used in the conduct of its business as now operated. To Borrower's knowledge, there is no material infringement by others of any trademark, trade name, trade secret, service mark, patent, copyright, license or other intellectual property right of Borrower. 5.16 Full Disclosure. No representation, warranty or other statement made by Borrower in any certificate or written statement furnished to Bank by Borrower in connection with the transactions contemplated by this Agreement, taken as a whole, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained in such certificates or statements not misleading (it being recognized by Bank that the projections and forecasts provided by Borrower are not be viewed as facts and that actual results during the period or periods covered by any such projections and forecasts may differ from the projected or forecasted results). 6. AFFIRMATIVE COVENANTS Borrower covenants and agrees that, until payment in full of all outstanding Obligations, and for so long as Bank may have any commitment to make an Advance hereunder, Borrower shall do all of the following: 6.1 Good Standing. Borrower shall maintain or cause to be maintained its and each of its Subsidiaries' corporate existence and good standing in its jurisdiction of incorporation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a Material Adverse Effect. Borrower shall maintain, and shall cause each of its 11 15 Subsidiaries to maintain, in force all licenses, approvals and agreements, the loss of which would reasonably be expected to have a Material Adverse Effect. 6.2 Government Compliance. Borrower shall meet, and shall cause each Subsidiary to meet, the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA. Borrower shall comply, and shall cause each Subsidiary to comply, with all statutes, laws, ordinances and government rules and regulations to which it is subject, noncompliance with which could have a Material Adverse Effect or a material adverse effect on the Collateral or the priority of Bank's Lien on the Collateral. 6.3 Financial Statements, Reports, Certificates. Borrower shall deliver to Bank: (a) as soon as available, but in any event within thirty (30) days after the end of each month, a company prepared consolidated balance sheet and income statement covering Borrower's consolidated operations during such period, certified by a Responsible Officer; (b) as soon as available, but in any event within ninety (90) days after the end of Borrower's fiscal year, audited consolidated financial statements of Borrower prepared in accordance with GAAP, consistently applied, together with an unqualified opinion on such financial statements of an independent certified public accounting firm reasonably acceptable to Bank; (c) within five (5) days upon becoming available, copies of all statements, reports and notices sent or made available generally by Borrower to its security holders or to any holders of Subordinated Debt and, to the extent applicable, all reports on Form 8-K, 10-K and 10-Q (without exhibits) filed with the Securities and Exchange Commission; (d) promptly upon receipt of notice thereof, a report of any legal actions pending or threatened against Borrower or any Subsidiary that would reasonably be expected to result in damages or costs to Borrower or any Subsidiary of One Hundred Thousand Dollars ($100,000) or more; and (e) such budgets, sales projections, operating plans or other financial information as Bank may reasonably request from time to time. Borrower shall deliver to Bank with the monthly financial statements a Compliance Certificate signed by a Responsible Officer in substantially the form of Exhibit B hereto. 6.4 Inventory; Returns. Borrower shall keep all Inventory in good and marketable condition, free from all material defects. Returns and allowances, if any, as between Borrower and its account debtors shall be on the same basis and in accordance with the usual customary practices of Borrower, as they exist at the time of the execution and delivery of this Agreement. Borrower shall promptly notify Bank of all returns and recoveries and of all disputes and claims, where the return, recovery, dispute or claim involves more than Fifty Thousand Dollars ($50,000). 6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to make, due and timely payment or deposit of all material federal, state, and local taxes, assessments, or contributions required of it by law, and will execute and deliver to Bank, on demand, appropriate certificates attesting to the payment or deposit thereof; and Borrower will make, and will cause each Subsidiary to make, timely payment or deposit of all material tax payments and withholding taxes required of it by applicable laws, including, but not limited to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal income taxes, and will, upon request, furnish Bank with proof satisfactory to Bank indicating that Borrower or a Subsidiary has made such payments or deposits; provided that Borrower or a Subsidiary need not make any payment if the amount or validity of such payment is contested in good faith by appropriate proceedings and is reserved against (to the extent required by GAAP) by Borrower. 6.6 Insurance. (a) Borrower, at its expense, shall keep the Collateral insured against loss or damage by fire, theft, explosion, sprinklers, and all other hazards and risks, and in such amounts, as ordinarily insured against by other owners in similar businesses conducted in the locations where 12 16 Borrower's business is conducted on the date hereof. Borrower shall also maintain insurance relating to Borrower's ownership and use of the Collateral in amounts and of a type that are customary to businesses similar to Borrower's. (b) All such policies of insurance shall be in such form, with such companies, and in such amounts as reasonably satisfactory to Bank. All such policies of property insurance shall contain a lender's loss payable endorsement, in a form satisfactory to Bank, showing Bank as an additional loss payee thereof and all liability insurance policies shall show the Bank as an additional insured, and shall specify that the insurer must give at least twenty (20) days notice to Bank before canceling its policy for any reason. Upon Bank's request, Borrower shall deliver to Bank certified copies of such policies of insurance and evidence of the payments of all premiums therefor. So long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy to the replacement or repair of destroyed or damaged property; provided, that after the occurrence and during the continuance of an Event of Default, all proceeds payable under any such casualty policy shall, at the option of Bank, be payable to Bank for application to the Obligations. 6.7 Principal Depository. Borrower shall maintain its principal depository and operating accounts with Bank. 6.8 Cash and Cash Equivalents. Beginning November 30, 1995, Borrower shall maintain as of the last day of each month during the term of this Agreement a balance of cash and cash equivalents of not less than Seven Hundred Thousand Dollars ($700,000). 6.9 Further Assurances. At any time and from time to time Borrower shall execute and deliver such further instruments and take such further action as may reasonably be requested by Bank to effect the purposes of this Agreement. 7. NEGATIVE COVENANTS Borrower covenants and agrees that, without the prior written consent of Bank, which Bank may grant or withhold in its sole discretion, so long as any credit hereunder shall be available and until payment in full of the outstanding Obligations or for so long as Bank may have any commitment to make any Advances, Borrower will not do any of the following: 7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, other than: (i) Transfers of Inventory in the ordinary course of business; (ii) Transfers of non-exclusive licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries; or (iii) Transfers of worn-out or obsolete Equipment and (iv) Transfers which constitute liquidation of Investments permitted under Section 7.7. 7.2 Change in Business. Engage in any business, or permit any of its Subsidiaries to engage in any business, other than the businesses currently engaged in by Borrower and any business substantially similar or related thereto (or incidental thereto), or suffer a material change in Borrower's ownership, other than the sale by Borrower of equity securities of Borrower. Borrower will not, without thirty (30) days prior written notification to Bank, relocate its chief executive office. 7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with or into any other business organization, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person; provided, however, that this Section 7.3 shall not apply to transactions among Borrower and its Subsidiaries in which Borrower is the surviving entity or among its Subsidiaries, provided no Event of Default exists before or immediately after giving effect to such transactions. 13 17 7.4 Indebtedness. Create, incur, assume or be or remain liable with respect to any Indebtedness, or permit any Subsidiary so to do, other than Permitted Indebtedness. 7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien with respect to any of its property (including, without limitation, intellectual property), or assign or otherwise convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries so to do, except for Permitted Liens. 7.6 Distributions. Pay any dividends or make any other distribution or payment on account of or in redemption, retirement or purchase of any capital stock except for repurchases of stock from former employees of Borrower in accordance with the terms of repurchase or similar agreements between Borrower and such employees in an aggregate amount in any fiscal year not to exceed Fifty Thousand Dollars ($50,000). 7.7 Investments. Directly or indirectly acquire or own, or make any Investment in or to any Person, or permit any of its Subsidiaries so to do, other than Permitted Investments. 7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower except (i) for transactions that are in the ordinary course of Borrower's business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm's length transaction with a nonaffiliated Person, (ii) transactions with a Subsidiary that are upon fair and reasonable terms and transactions constituting Permitted Investments, and (iii) transactions with Affiliates who in addition to being Affiliates are also customers of the Borrower and who receive, as customers, terms more favorable than the general public. 7.9 Subordinated Debt. Make any payment in respect of any Subordinated Debt, or permit any of its Subsidiaries to make any such payment, except in compliance with the terms of such Subordinated Debt, or amend any provision contained in any documentation relating to the Subordinated Debt without Bank's prior written consent. 7.10 Inventory. Store the Inventory with a bailee, warehouseman, or similar party unless Bank has received a pledge of the warehouse receipt covering such Inventory. Except for Inventory sold in the ordinary course of business and except for such other locations as Bank may approve in writing, Borrower shall keep the Inventory only at the location set forth in Section 10 hereof or in the Schedule and such other locations of which Borrower gives Bank prior written notice and as to which Borrower signs and files a financing statement where needed to perfect Bank's security interest. 7.11 Compliance. Become an "investment company" or become controlled by an "investment company," within the meaning of the Investment Company Act of 1940, or become principally engaged in, or undertake as one of its important activities, the business of extending credit for the purpose of purchasing or carrying margin stock, or use the proceeds of any Advance for such purpose. Fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur, fail to comply with the Federal Fair Labor Standards Act or violate any law or regulation, which violation could have a Material Adverse Effect or a material adverse effect on the Collateral or the priority of Bank's Lien on the Collateral, or permit any of its Subsidiaries to do any of the foregoing. 14 18 8. EVENTS OF DEFAULT Any one or more of the following events shall constitute an Event of Default by Borrower under this Agreement: 8.1 Payment Default. If Borrower fails to pay the principal of, or any interest on, any Advances when due and payable; or fails to pay any portion of any other Obligations not constituting such principal or interest, including without limitation Bank Expenses, within thirty (30) days of receipt by Borrower of an invoice therefor; 8.2 Covenant Default. If Borrower fails to perform any obligation under any of Sections 6.7 or 6.8 or violates any of the covenants contained in Article 7 of this Agreement, or fails or neglects to perform, keep, or observe any other material term, provision, condition, covenant, or agreement contained in this Agreement, in any of the Loan Documents, or in any other present or future agreement between Borrower and Bank and as to any default under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure such default within thirty (30) days after Borrower receives notice thereof or any Responsible Officer of Borrower becomes aware thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional reasonable period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to have cured such default shall not be deemed an Event of Default (provided that no Advances will be required to be made during such cure period); 8.3 Material Adverse Change. If there occurs a material adverse change in Borrower's business or financial condition, or if there is a material impairment of the prospect of repayment of any portion of the Obligations or a material impairment of the value or priority of Bank's security interests in the Collateral, and Borrower fails to cure such default within ten (10) days after Borrower receives notice thereof. 8.4 Attachment. If any material portion of Borrower's assets is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes into the possession of any trustee, receiver or person acting in a similar capacity and such attachment, seizure, writ or distress warrant or levy has not been removed, discharged or rescinded within thirty (30) days, or if Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs, or if a judgment or other claim becomes a lien or encumbrance upon any material portion of Borrower's assets, or if a notice of lien, levy, or assessment is filed of record with respect to any of Borrower's assets by the United States Government, or any department, agency, or instrumentality thereof, or by any state, county, municipal, or governmental agency, and the same is not paid within thirty (30) days after Borrower receives notice thereof, provided that none of the foregoing shall constitute an Event of Default where such action or event is stayed or an adequate bond has been posted pending a good faith contest by Borrower (provided that no Advances will be required to be made during such cure period); 8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced against Borrower and is not dismissed or stayed within thirty (30) days (provided that no Advances will be made prior to the dismissal of such Insolvency Proceeding); 8.6 Other Agreements. If there is a default in any agreement to which Borrower is a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of Fifty Thousand Dollars ($50,000) or that would reasonably be expected to have a Material Adverse Effect; 15 19 8.7 Judgments. If a judgment or judgments for the payment of money in an amount, individually or in the aggregate, of at least One Hundred Thousand Dollars ($100,000) shall be rendered against Borrower and shall remain unsatisfied and unstayed for a period of forty-five (45) days (provided that no Advances will be made prior to the satisfaction or stay of such judgment); or 8.8 Misrepresentations. If any material misrepresentation or material misstatement exists now or hereafter in any warranty or representation set forth herein or in any certificate delivered to Bank by any Responsible Officer pursuant to this Agreement or to induce Bank to enter into this Agreement or any other Loan Document and, as to any such misrepresentation or misstatement that can be cured, Borrower fails to make that cure within ten (10) days after Borrower receives notice thereof. 9. BANK'S RIGHTS AND REMEDIES 9.1 Rights and Remedies. Upon the occurrence and during the continuance of an Event of Default, Bank may, at its election, without notice of its election and without demand, do any one or more of the following, all of which are authorized by Borrower: (a) Declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable (provided that upon the occurrence of an Event of Default described in Section 8.5 all Obligations shall become immediately due and payable without any action by Bank); (b) Cease advancing money or extending credit to or for the benefit of Borrower under this Agreement or under any other agreement between Borrower and Bank; (c) Settle or adjust disputes and claims directly with account debtors for amounts, upon terms and in whatever order that Bank reasonably considers advisable; (d) Without notice to or demand upon Borrower, make such payments and do such acts as Bank considers necessary or reasonable to protect its security interest in the Collateral. Borrower agrees to assemble the Collateral if Bank so requires, and to make the Collateral available to Bank as Bank may designate. Borrower authorizes Bank to enter the premises where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise any encumbrance, charge, or lien which in Bank's determination appears to be prior or superior to its security interest and to pay all expenses incurred in connection therewith. With respect to any of Borrower's owned premises, Borrower hereby grants Bank a license to enter into possession of such premises and to occupy the same, without charge, in order to exercise any of Bank's rights or remedies provided herein, at law, in equity, or otherwise; (e) Without notice to Borrower set off and apply to the Obligations any and all (i) balances and deposits of Borrower held by Bank, or (ii) indebtedness at any time owing to or for the credit or the account of Borrower held by Bank; (f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Collateral. Bank is hereby granted a license or other right, solely pursuant to the provisions of this Section 9.1, to use, without charge, Borrower's labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank's exercise of its rights under this Section 9.1, Borrower's rights under all licenses and all franchise agreements shall inure to Bank's benefit; 16 20 (g) Sell the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Borrower's premises) as Bank determines is commercially reasonable; (h) Bank may credit bid and purchase at any public sale; and (i) Any deficiency that exists after disposition of the Collateral as provided above will be paid immediately by Borrower. 9.2 Power of Attorney. Effective only upon the occurrence and during the continuance of an Event of Default, Borrower hereby irrevocably appoints Bank (and any of Bank's designated officers, or employees) as Borrower's true and lawful attorney to: (a) send requests for verification of Accounts or notify account debtors of Bank's security interest in the Accounts; (b) endorse Borrower's name on any checks or other forms of payment or security that may come into Bank's possession; (c) sign Borrower's name on any invoice or bill of lading relating to any Account, drafts against account debtors, schedules and assignments of Accounts, verifications of Accounts, and notices to account debtors; (d) make, settle, and adjust all claims under and decisions with respect to Borrower's policies of insurance; and (e) settle and adjust disputes and claims respecting the accounts directly with account debtors, for amounts and upon terms which Bank determines to be reasonable; provided Bank may exercise such power of attorney to sign the name of Borrower on any of the documents described in Section 4.2 regardless of whether an Event of Default has occurred. The appointment of Bank as Borrower's attorney in fact, and each and every one of Bank's rights and powers, being coupled with an interest, is irrevocable until all of the Obligations have been fully repaid and Bank's obligation to provide Advances hereunder is terminated. 9.3 Accounts Collection. Upon the occurrence and during the continuation of an Event of Default, Bank may notify any Person owing funds to Borrower of Bank's security interest in such funds. Borrower shall collect all amounts owing to Borrower for Bank, receive in trust all payments as Bank's trustee, and immediately deliver such payments to Bank in their original form as received from the account debtor, with proper endorsements for deposit. 9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish any required proof of payment due to third persons or entities, as required under the terms of this Agreement, then Bank may do any or all of the following: (a) make payment of the same or any part thereof; or (b) obtain and maintain insurance policies of the type discussed in Section 6.6 of this Agreement, and take any action with respect to such policies as Bank deems prudent. Any amounts so paid or deposited by Bank shall constitute Bank Expenses, shall be immediately due and payable, and shall bear interest at the then applicable rate hereinabove provided, and shall be secured by the Collateral. Any payments made by Bank shall not constitute an agreement by Bank to make similar payments in the future or a waiver by Bank of any Event of Default under this Agreement. 9.5 Bank's Liability for Collateral. So long as Bank complies with its obligations under Section 9207 of the Code, Bank shall not in any way or manner be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto occurring or arising in any manner or fashion from any cause; (c) any diminution in the value thereof; or (d) any act or default of any carrier, warehouseman, bailee, forwarding agency, or other person whomsoever. Subject to the foregoing, all risk of loss, damage or destruction of the Collateral shall be borne by Borrower. 9.6 Remedies Cumulative. Bank's rights and remedies under this Agreement, the Loan Documents, and all other agreements shall be cumulative. Bank shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by Bank of one right or remedy shall be deemed an election, and no waiver by Bank of any Event of Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank shall constitute a 17 21 waiver, election, or acquiescence by it. No waiver by Bank shall be effective unless made in a written document signed on behalf of Bank 9.7 Demand; Protest. Borrower waives demand, protest, notice of protest, notice of dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees at any time held by Bank on which Borrower may in any way be liable. 10. NOTICES Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other agreement entered into in connection herewith shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by a recognized overnight delivery service, certified mail, postage prepaid, return receipt requested, or by telefacsimile to Borrower or to Bank, as the case may be, at its addresses set forth below: If to Borrower: Calypte Biomedical Corporation 1440 Fourth Street Berkeley, CA 94710 Attn: Mr. Jack Davis FAX: (510) 526-5381 If to Bank: Silicon Valley Bank 3003 Tasman Drive Santa Clara, CA 95054 Attn: Ms. Mitzi Lazich FAX: (408) 727-8728 The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other. 11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of California, without regard to principles of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive jurisdiction of the state and Federal courts located in the County of Santa Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. 12. GENERAL PROVISIONS 12.1 Successors and Assigns. (a) This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of each of the parties; provided, however, that neither this 18 22 Agreement nor any rights hereunder may be assigned by Borrower without Bank's prior written consent, which consent may be granted or withheld in Bank's sole discretion. Bank shall have the right without the consent of or notice to Borrower to sell, transfer, negotiate, or grant participations in all or any part of, or any interest in Bank's obligations, rights and benefits hereunder. (b) Bank may sell, negotiate or grant participations to other financial institutions in all or part of the obligations of the Borrower outstanding under the Loan Agreements, without notice to or the approval of Borrower; provided that any such sale, negotiation or participation shall be in compliance with the applicable federal and state securities laws and the other requirements of this Section 12.1. Notwithstanding the sale, negotiation or grant of participations, Bank shall remain solely responsible for the performance of its obligations under this Agreement, Bank shall remain the holder of the Note for all purposes under this Agreement and Borrower shall continue to deal solely and directly with Bank in connection with this Agreement and the other Loan Documents. (c) The grant of a participation interest shall be on such terms as the Bank determines are appropriate, provided only that (i) the holder of such participation interest shall not have any of the rights of Bank under this Agreement except, if the participation agreement so provides, rights to demand the payment of costs of the type described in Section 2.7, provided that the aggregate amount that the Borrower shall be required to pay under Section 2.7 with respect to any ratable share of the Committed Line or any Advance (including amounts paid to participants) shall not exceed the amount that Borrower would have had to pay if no participation agreements had been entered into, and (ii) the consent of the holder of such a participation interest shall not be required for amendments or waivers of provisions of the Loan Agreement other than those which (A) increase the amount of the Committed Line, (B) extend the term of this Agreement, (C) decrease the rate of interest or the amount of any fee or any other amount payable to Bank under this Agreement, (D) reduce the principal amount payable under this Agreement, or (E) extend the date fixed for the payment of principal or interest or any other amount payable under this Agreement. (d) The Bank may assign, from time to time, all or any portion of its pro rata share of the Committed Line and the Note to an Affiliate of the Bank or, subject to the prior written approval of Borrower (which approval will not be unreasonably withheld), to any other financial institution; provided, that (i) the amount the Committed Line being assigned pursuant to each such assignment shall in no event be less than One Million Dollars ($1,000,000) and shall be an integral multiple of Two Hundred Fifty Thousand Dollars ($250,000) and (ii) the parties to each such assignment shall execute and deliver to Borrower an assignment agreement in a form reasonably acceptable to each. Upon such execution and delivery, from and after the effective date specified in such assignment agreement (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such assignment agreement, have the rights and obligations of a Bank hereunder and (y) Bank shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such assignment agreement, relinquish its rights and be released from its obligations under this Agreement (other than pursuant to this Section 12.1(d), and, in the case of an assignment agreement covering all or the remaining portion of Bank's rights and obligations under this Agreement, Bank shall cease to be a party hereto. In the event of an assignment hereunder, the parties agree to amend this Agreement to the extent necessary to reflect the mechanical changes which are necessary to document such assignment and which are standard for a multi-bank credit facility. Each party shall bear its own expenses (including without limitation attorneys' fees and costs) with respect to such an amendment. 12.2 Indemnification. Borrower shall defend, indemnify and hold harmless Bank and its officers, employees, and agents against: (a) all obligations, demands, claims, and liabilities claimed or asserted by any other party in connection with the transactions contemplated by this Agreement; and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank as a result of or in any way arising out of, following, or consequential to transactions between Bank and 19 23 Borrower whether under this Agreement, or otherwise (including without limitation reasonable attorneys fees and expenses), except for losses caused by Bank's gross negligence or willful misconduct. 12.3 Time of Essence. Time is of the essence for the performance of all obligations set forth in this Agreement. 12.4 Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision. 12.5 Amendments in Writing, Integration. This Agreement cannot be amended or terminated orally. All prior agreements, understandings, representations, warranties, and negotiations between the parties hereto with respect to the subject matter of this Agreement, if any, are merged into this Agreement and the Loan Documents. 12.6 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement. 12.7 Survival. All covenants, representations and warranties made in this Agreement shall continue in full force and effect so long as any Obligations (excluding Obligations under Sections 2.6 and 12.2 to the extent they remain inchoate at the time that outstanding payment Obligations are paid in full) remain outstanding. The obligations of Borrower to indemnify Bank with respect to the expenses, damages, losses, costs and liabilities described in Section 12.2 shall survive until all applicable statute of limitations periods with respect to actions that may be brought against Bank have run, provided that so long as the obligations set forth in the first sentence of this Section 12.7 have been satisfied, and Bank has no commitment to make any Advances or to make any other loans to Borrower, Bank shall release all security interests granted hereunder and redeliver all Collateral held by it in accordance with applicable law. 12.8 Confidentiality. In handling any confidential information Bank shall exercise the same degree of care that it exercises with respect to its own proprietary information of the same types to maintain the confidentiality of any non-public information thereby received or received pursuant to this Agreement except that disclosure of such information may be made (i) to the subsidiaries or affiliates of Bank in connection with their present or prospective business relations with Borrower, (ii) to prospective transferees or purchasers of any interest in the Loans, provided that they have entered into a comparable confidentiality agreement in favor of Borrower and have delivered a copy to Borrower, (iii) as required by law, regulations, rule or order, subpoena, judicial order or similar order, (iv) as may be required in connection with the examination, audit or similar investigation of Bank, and (v) as Bank may deem appropriate in connection with the exercise of any remedies under this Agreement. Confidential information hereunder shall not include information that either: (a) is in the public domain or in the knowledge or possession of Bank when disclosed to Bank, or becomes part of the public domain after disclosure to Bank through no fault of Bank; or (b) is disclosed to the Bank by a third party, provided the Bank does not have actual knowledge that such third party is prohibited from disclosing such information. Notwithstanding any provision of this Agreement to the contrary, neither Borrower nor any of its Subsidiaries will be required to disclose, permit the inspection, examination, copying or making extracts of, or discussions of; any document, information or other matter that (i) prior to the occurrence of an Event of Default constitutes nonfinancial trade secrets, or (ii) in respect to which disclosure to the Banks (or designated representative) is then prohibited by (a) law, or (b) an agreement binding upon Borrower or any Subsidiary that was not entered into by Borrower or such Subsidiary for the primary purpose of concealing information from Banks. 20 24 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. CALYPTE BIOMEDICAL CORPORATION By:______________________________ Title:______________________________ SILICON VALLEY BANK By:______________________________ Title:______________________________ 21 25 EXHIBIT A The Collateral shall consist of all right, title and interest of Borrower in and to the following: (a) All goods and equipment now owned or hereafter acquired, including, without limitation, all machinery, fixtures, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located; (b) All inventory, now owned or hereafter acquired, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products including such inventory as is temporarily out of Borrower's custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above, and Borrower's Books relating to any of the foregoing; (c) All contract rights and general intangibles now owned or hereafter acquired, including, without limitation, goodwill, trademarks, service marks, trade styles, trade names, patents, patent applications, leases, license agreements, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, computer programs, computer discs, computer tapes, literature, reports, catalogs, design rights, income tax refunds, payments of insurance and rights to payment of any kind; (d) All now existing and hereafter arising accounts, contract rights, royalties, license rights and all other forms of obligations owing to Borrower arising out of the sale or lease of goods, the licensing of technology or the rendering of services by Borrower, whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrower and Borrower's Books relating to any of the foregoing; (e) All documents, cash, deposit accounts, securities (other than securities of foreign Subsidiaries), letters of credit, certificates of deposit, instruments and chattel paper now owned or hereafter acquired and Borrower's Books relating to the foregoing; (f) All copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished, now owned or hereafter acquired; all trade secret rights, including all rights to unpatented. inventions, know-how, operating manuals, license rights and agreements and confidential information, now owned or hereafter acquired; all claims for damages by way of any past, present and future infringement of any of the foregoing; and (g) Any and all claims, rights and interests in any of the above and all substitutions for, additions and accessions to and proceeds thereof. 22 26 EXHIBIT B COMPLIANCE CERTIFICATE TO: SILICON VALLEY BANK FROM: CALYPTE BIOMEDICAL CORPORATION The undersigned authorized officer of Calypte Biomedical Corporation hereby certifies that in accordance with the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is in complete compliance for the period ending _____________ with all required covenants except as noted below and (ii) all representations and warranties of Borrower stated in the Agreement are true and correct in all material respects as of the date hereof. Attached herewith are the required documents supporting the above certification. The Officer further certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes. PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN
REPORTING COVENANT REQUIRED COMPLIES Monthly financial statements Monthly within 30 days Yes No Annual (CPA Audited) FYE within 90 days Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES Maintain on a Monthly Basis: Minimum Cash and Cash Equivalents $700,000 $ Yes No ----------
COMMENTS REGARDING EXCEPTIONS: See Attached. BANK USE ONLY Received by:_________________ Sincerely, AUTHORIZED SIGNER ______________________________ Date:________________________ SIGNATURE Verified:____________________ AUTHORIZED SIGNER ______________________________ Date:________________________ TITLE ______________________________ Compliance Status: Yes No DATE
23 27 SCHEDULE OF PERMITTED INDEBTEDNESS 24 28 DISBURSEMENT REQUEST AND AUTHORIZATION Borrower: Calypte Biomedical Corporation Bank: Silicon Valley Bank =============================================================================== LOAN TYPE. This is a Variable Rate Bridge Loan of a principal amount up to $2,000,000 PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business. SPECIFIC PURPOSE. The specific purpose of this loan is: Short Term Working Capital. DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be disbursed until all of Bank's conditions for making the loan have been satisfied. Please disburse the loan proceeds as follows:
Bridge Loan Amount paid to Borrower directly: $2,000,000 Undisbursed Funds $0 Principal $2,000,000
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the following charges: Prepaid Finance Charges Paid in Cash: $ ---------- $10,000 Loan Fee Other Charges Paid in Cash: $__________ $ Outside Counsel Fees and Expenses (Estimate) ---------- Total Charges Paid in Cash $__________ ----------
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from Borrower's account numbered ______ the amount of any loan payment. If the funds in the account are insufficient to cover any payment, Bank shall not be obligated to advance funds to cover the payment. FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS AUTHORIZATION IS DATED AS OF DECEMBER _______1995. BORROWER: CALYPTE BIOMEDICAL CORPORATION ______________________________ Authorized Officer ================================================================================ 29 AGREEMENT TO PROVIDE INSURANCE GRANTOR: Calypte Biomedical Corporation BANK: Silicon Valley Bank ================================================================================ INSURANCE REQUIREMENTS. Calypte Biomedical Corporation ("Grantor") understands that insurance coverage is required in connection with the extending of a loan or the providing of other financial accommodations to Grantor by Bank. These requirements are set forth in the Loan Documents. The following minimum insurance coverages must be provided on the following described collateral (the "Collateral"): Collateral: All Inventory, Equipment and Fixtures. Type: All risks, including fire, theft and liability. Amount: Full insurable value. Basis: Replacement value. Endorsements: Loss payable clause to Bank with stipulation that coverage will not be cancelled or diminished without a minimum of twenty (20) days' prior written notice to Bank. INSURANCE COMPANY. Grantor may obtain insurance from any insurance company Grantor may choose that is reasonably acceptable to Bank. Grantor understands that credit may not be denied solely because insurance was not purchased through Bank. FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or before closing, evidence of the required insurance as provided above, with an effective date of December 8, 1995, or earlier. Grantor acknowledges and agrees that if Grantor fails to provide any required insurance or fails to continue such insurance in force, Bank may do so at Grantor's expense as provided in the Loan and Security Agreement. The cost of such insurance, at the option of Bank, shall be payable on demand or shall be added to the indebtedness as provided in the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS. AUTHORIZATION. For purposes of insurance coverage on the Collateral, Grantor authorizes Bank to provide to any person (including any insurance agent or company) all information Bank deems appropriate, whether regarding the Collateral, the loan or other financial accommodations, or both. GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED DECEMBER 8,1995. GRANTOR: ______________________________ X______________________________ Authorized Officer FOR BANK USE ONLY INSURANCE VERIFICATION DATE:______________________________ PHONE:_____________________________ AGENT'S NAME:__________________________________________________________________ INSURANCE COMPANY:_____________________________________________________________ POLICY NUMBER:_________________________________________________________________ EFFECTIVE DATES:_______________________________________________________________ COMMENTS:______________________________________________________________________ 30 CORPORATE RESOLUTIONS TO BORROW ================================================================================ BORROWER: CALYPTE BIOMEDICAL CORPORATION ================================================================================ I, the undersigned Secretary or Assistant Secretary of Calypte Biomedical Corporation (the "Corporation"), HEREBY CERTIFY that the Corporation is organized and existing under and by virtue of the laws of the State of California. I FURTHER CERTIFY that at a meeting of the Directors of the Corporation (or by other duly authorized corporate action in lieu of a meeting), duly called and held, at which a quorum was present and voting, the following resolutions were adopted. BE IT RESOLVED, that ANY ONE (1) of the following named officers, employees, or agents of this Corporation, whose actual signatures are shown below:
NAMES POSITIONS ACTUAL SIGNATURES --------- --------- ----------------- JACK DAVIS PRESIDENT & CEO - -------------------- -------------------- -------------------- JOHN DI PIETRO CFO & VP FINANCE & SECRETARY - -------------------- -------------------- -------------------- - -------------------- -------------------- -------------------- - -------------------- -------------------- -------------------- - -------------------- -------------------- --------------------
acting for and on behalf of this Corporation and as its act and deed be, and they hereby are, authorized and empowered: BORROW MONEY. To borrow from time to time from Silicon Valley Bank ("Bank"), on such terms as may be agreed upon between the officers, employees, or agents and Bank, such sum or sums of money as in their judgment should be borrowed, without limitation, including such sums as are specified in that certain Loan and Security Agreement dated as of December 8, 1995 (the "Loan Agreement"). EXECUTE NOTES. To execute and deliver to Bank the Loan Agreement and any promissory note or notes of the Corporation, on Lender's forms, at such rates of interest and on such terms as may be agreed upon, evidencing the sums of money so borrowed or any indebtedness of the Corporation to Bank, and also to execute and deliver to Lender one or more renewals, extensions, modifications, refinancings, consolidations, or substitutions for one or more of the notes, or any portion of the notes. GRANT SECURITY. To grant a security interest to Bank in the Collateral described in the Loan Agreement, which security interest shall secure all of the Corporation's Obligations, as described in the Loan Agreement. NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts, trade acceptances, promissory notes, or other evidences of indebtedness payable to or belonging to the Corporation or in which the Corporation may have an interest, and either to receive cash for the same or to cause such proceeds to be credited to the account of the Corporation with Bank, or to cause such other disposition of the proceeds derived therefrom as they may deem advisable. 1 31 LETTERS OF CREDIT. To execute letters of credit applications and other related documents pertaining to Bank's issuance of letters of credit. FURTHER ACTS. In the case of lines of credit, to designate additional or alternate individuals as being authorized to request advances thereunder, and in all cases, to do and perform such other acts and things, to pay any and all fees and costs, and to execute and deliver such other documents and agreements as they may in their discretion deem reasonably necessary or proper in order to carry into effect the provisions of these Resolutions. BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these resolutions and performed prior to the passage of these resolutions are hereby ratified and approved, that these Resolutions shall remain in full force and effect and Bank may rely on these Resolutions until written notice of their revocation shall have been delivered to and received by Bank. Any such notice shall not affect any of the Corporation's agreements or commitments in effect at the time notice is given. I FURTHER CERTIFY that the officers, employees, and agents named above are duly elected, appointed, or employed by or for the Corporation, as the case may be, and occupy the positions set forth opposite their respective names; that the foregoing Resolutions now stand of record on the books of the Corporation; and that the Resolutions are in full force and effect and have not been modified or revoked in any manner whatsoever. IN WITNESS WHEREOF, I have hereunto set my hand on December __, 1995 and attest that the signatures set opposite the names listed above are their genuine signatures. CERTIFIED TO AND ATTESTED BY: X______________________________ ================================================================================ 2 32 INVOICE FOR FEES AND EXPENSES BORROWER: CALYPTE BIOMEDICAL CORPORATION LOAN OFFICER: Mitzi Lazich DATE: December 7, 1995 Loan Fees: $20,000.00 Credit Reports: 35.00 UCC Search: 150.00 UCC Filing Fee: 20.00 ---------- Total Fees: $20,205.00* Less Payment Received: 10,000.00 ---------- TOTAL FEES DUE: $10,205.00
*This is an estimate only, the actual expenses may vary. PLEASE INDICATE THE METHOD OF PAYMENT: ( ) A check for the total amount is attached ( ) Debit DDA #____________ for the total amount ( ) Loan proceeds CALYPTE BIOMEDICAL CORPORATION ______________________________ ____________________ Authorized Signer Date SILICON VALLEY BANK ______________________________ ____________________ Julie Schneider Date 33 STATE OF CALIFORNIA UNIFORM COMMERCIAL CODE--FINANCING STATEMENT--FORM UCC-1 This financing Statement is presented for filing and will remain effective, with certain exceptions, for five years from the date of filing, pursuant to Section 9403 of the California Uniform Commercial Code. - ---------------------------------------------------------------------------------------------------------------------------------- 1. DEBTOR 1A. SOCIAL SECURITY OR FEDERAL TAX NO. CALYPTE BIOMEDICAL CORPORATION - ---------------------------------------------------------------------------------------------------------------------------------- 1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE 1440 FOURTH STREET BERKELEY, CA 94710 - ---------------------------------------------------------------------------------------------------------------------------------- 2. ADDITIONAL DEBTOR 2A. SOCIAL SECURITY OR FEDERAL TAX NO. - ---------------------------------------------------------------------------------------------------------------------------------- 2b. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE - ---------------------------------------------------------------------------------------------------------------------------------- 3. DEBTOR'S TRADE NAMES OR STYLES 3A. FEDERAL TAX NUMBER - ---------------------------------------------------------------------------------------------------------------------------------- 4. SECURED PARTY 4A. FEDERAL TAX NO. SILICON VALLEY BANK 3003 TASMAN DRIVE 94-2875288 SANTA CLARA, CA 95054 - ---------------------------------------------------------------------------------------------------------------------------------- 5. ASSIGNEE OF SECURED PARTY 5A. FEDERAL TAX NO. - ---------------------------------------------------------------------------------------------------------------------------------- 6. This FINANCING STATEMENT covers the following type of property: SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF BY THIS REFERENCE. - ---------------------------------------------------------------------------------------------------------------------------------- 7A. [X] PRODUCTS OF COLLATERAL ARE ALSO COVERED 7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH INSTRUCTION 5(a) ITEM: [ ] (1) [ ] (2) [ ] (3) [ ] (4) - ---------------------------------------------------------------------------------------------------------------------------------- 8. [ ] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC SECTION 9105 (1) (o) - ---------------------------------------------------------------------------------------------------------------------------------- 9. DATE: 12-07-1995 C 10. THIS SPACE FOR USE OF FILING OFFICER [SIG] O (DATE, TIME, FILE NUMBER AND FILING OFFICER) D SIGNATURE(S) OF DEBTOR(S) E - --------------------------------------------------------------------- CALYPTE BIOMEDICAL CORPORATION 1 - ------------------------------------------------------------- 2 3 SIGNATURE(S) OF SECURED PARTY(IES) 4 - ------------------------------------------------------------- SILICON VALLEY BANK 5 ============================================================= 6 11. Return copy to: 7 / / SILICON VALLEY BANK 8 DOCUMENTATION/NC 661 3003 TASMAN DRIVE 9 SANTA CLARA, CA 95054 / / 0 ============================================================= FORM UCC-1 ==================================================================================================================================
34 STATE OF CALIFORNIA UNIFORM COMMERCIAL CODE--FINANCING STATEMENT--FORM UCC-1 This financing Statement is presented for filing and will remain effective, with certain exceptions, for five years from the date of filing, pursuant to Section 9403 of the California Uniform Commercial Code. - ---------------------------------------------------------------------------------------------------------------------------------- 1. DEBTOR 1A. SOCIAL SECURITY OR FEDERAL TAX NO. CALYPTE BIOMEDICAL CORPORATION - ---------------------------------------------------------------------------------------------------------------------------------- 1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE 1440 FOURTH STREET BERKELEY, CA 94710 - ---------------------------------------------------------------------------------------------------------------------------------- 2. ADDITIONAL DEBTOR 2A. SOCIAL SECURITY OR FEDERAL TAX NO. - ---------------------------------------------------------------------------------------------------------------------------------- 2b. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE - ---------------------------------------------------------------------------------------------------------------------------------- 3. DEBTOR'S TRADE NAMES OR STYLES 3A. FEDERAL TAX NUMBER - ---------------------------------------------------------------------------------------------------------------------------------- 4. SECURED PARTY 4A. FEDERAL TAX NO. SILICON VALLEY BANK 3003 TASMAN DRIVE 94-2875288 SANTA CLARA, CA 95054 - ---------------------------------------------------------------------------------------------------------------------------------- 5. ASSIGNEE OF SECURED PARTY 5A. FEDERAL TAX NO. - ---------------------------------------------------------------------------------------------------------------------------------- 6. This FINANCING STATEMENT covers the following type of property: SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF BY THIS REFERENCE. - ---------------------------------------------------------------------------------------------------------------------------------- 7A. [X] PRODUCTS OF COLLATERAL ARE ALSO COVERED 7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH INSTRUCTION 5(a) ITEM: [ ] (1) [ ] (2) [ ] (3) [ ] (4) - ---------------------------------------------------------------------------------------------------------------------------------- 8. [ ] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC SECTION 9105 (1) (o) - ---------------------------------------------------------------------------------------------------------------------------------- 9. DATE: 12-07-1995 C 10. THIS SPACE FOR USE OF FILING OFFICER [SIG] O (DATE, TIME, FILE NUMBER AND FILING OFFICER) D SIGNATURE(S) OF DEBTOR(S) E - --------------------------------------------------------------------- CALYPTE BIOMEDICAL CORPORATION 1 - ------------------------------------------------------------- 2 3 SIGNATURE(S) OF SECURED PARTY(IES) 4 - ------------------------------------------------------------- SILICON VALLEY BANK 5 ============================================================= 6 11. Return copy to: 7 / / SILICON VALLEY BANK 8 DOCUMENTATION/NC 661 3003 TASMAN DRIVE 9 SANTA CLARA, CA 95054 / / 0 ============================================================= FORM UCC-1 ==================================================================================================================================
35 STATE OF CALIFORNIA UNIFORM COMMERCIAL CODE--FINANCING STATEMENT--FORM UCC-1 This financing Statement is presented for filing and will remain effective, with certain exceptions, for five years from the date of filing, pursuant to Section 9403 of the California Uniform Commercial Code. - ---------------------------------------------------------------------------------------------------------------------------------- 1. DEBTOR 1A. SOCIAL SECURITY OR FEDERAL TAX NO. CALYPTE BIOMEDICAL CORPORATION - ---------------------------------------------------------------------------------------------------------------------------------- 1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE 1440 FOURTH STREET BERKELEY, CA 94710 - ---------------------------------------------------------------------------------------------------------------------------------- 2. ADDITIONAL DEBTOR 2A. SOCIAL SECURITY OR FEDERAL TAX NO. - ---------------------------------------------------------------------------------------------------------------------------------- 2b. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE - ---------------------------------------------------------------------------------------------------------------------------------- 3. DEBTOR'S TRADE NAMES OR STYLES 3A. FEDERAL TAX NUMBER - ---------------------------------------------------------------------------------------------------------------------------------- 4. SECURED PARTY 4A. FEDERAL TAX NO. SILICON VALLEY BANK 3003 TASMAN DRIVE 94-2875288 SANTA CLARA, CA 95054 - ---------------------------------------------------------------------------------------------------------------------------------- 5. ASSIGNEE OF SECURED PARTY 5A. FEDERAL TAX NO. - ---------------------------------------------------------------------------------------------------------------------------------- 6. This FINANCING STATEMENT covers the following type of property: SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF BY THIS REFERENCE. - ---------------------------------------------------------------------------------------------------------------------------------- 7A. [X] PRODUCTS OF COLLATERAL ARE ALSO COVERED 7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH INSTRUCTION 5(a) ITEM: [ ] (1) [ ] (2) [ ] (3) [ ] (4) - ---------------------------------------------------------------------------------------------------------------------------------- 8. [ ] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC SECTION 9105 (1) (o) - ---------------------------------------------------------------------------------------------------------------------------------- 9. DATE: 12-07-1995 C 10. THIS SPACE FOR USE OF FILING OFFICER [SIG] O (DATE, TIME, FILE NUMBER AND FILING OFFICER) D SIGNATURE(S) OF DEBTOR(S) E - --------------------------------------------------------------------- CALYPTE BIOMEDICAL CORPORATION 1 - ------------------------------------------------------------- 2 3 SIGNATURE(S) OF SECURED PARTY(IES) 4 - ------------------------------------------------------------- SILICON VALLEY BANK 5 ============================================================= 6 11. Return copy to: 7 / / SILICON VALLEY BANK 8 DOCUMENTATION/NC 661 3003 TASMAN DRIVE 9 SANTA CLARA, CA 95054 / / 0 ============================================================= FORM UCC-1 ==================================================================================================================================
36 STATE OF CALIFORNIA UNIFORM COMMERCIAL CODE--FINANCING STATEMENT--FORM UCC-1 This financing Statement is presented for filing and will remain effective, with certain exceptions, for five years from the date of filing, pursuant to Section 9403 of the California Uniform Commercial Code. - ---------------------------------------------------------------------------------------------------------------------------------- 1. DEBTOR 1A. SOCIAL SECURITY OR FEDERAL TAX NO. CALYPTE BIOMEDICAL CORPORATION - ---------------------------------------------------------------------------------------------------------------------------------- 1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE 1440 FOURTH STREET BERKELEY, CA 94710 - ---------------------------------------------------------------------------------------------------------------------------------- 2. ADDITIONAL DEBTOR 2A. SOCIAL SECURITY OR FEDERAL TAX NO. - ---------------------------------------------------------------------------------------------------------------------------------- 2b. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE - ---------------------------------------------------------------------------------------------------------------------------------- 3. DEBTOR'S TRADE NAMES OR STYLES 3A. FEDERAL TAX NUMBER - ---------------------------------------------------------------------------------------------------------------------------------- 4. SECURED PARTY 4A. FEDERAL TAX NO. SILICON VALLEY BANK 3003 TASMAN DRIVE 94-2875288 SANTA CLARA, CA 95054 - ---------------------------------------------------------------------------------------------------------------------------------- 5. ASSIGNEE OF SECURED PARTY 5A. FEDERAL TAX NO. - ---------------------------------------------------------------------------------------------------------------------------------- 6. This FINANCING STATEMENT covers the following type of property: SEE EXHIBIT "A" ATTACHED HERETO AND MADE A PART HEREOF BY THIS REFERENCE. - ---------------------------------------------------------------------------------------------------------------------------------- 7A. [X] PRODUCTS OF COLLATERAL ARE ALSO COVERED 7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH INSTRUCTION 5(a) ITEM: [ ] (1) [ ] (2) [ ] (3) [ ] (4) - ---------------------------------------------------------------------------------------------------------------------------------- 8. [ ] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC SECTION 9105 (1) (o) - ---------------------------------------------------------------------------------------------------------------------------------- 9. DATE: 12-07-1995 C 10. THIS SPACE FOR USE OF FILING OFFICER [SIG] O (DATE, TIME, FILE NUMBER AND FILING OFFICER) D SIGNATURE(S) OF DEBTOR(S) E - --------------------------------------------------------------------- CALYPTE BIOMEDICAL CORPORATION 1 - ------------------------------------------------------------- 2 3 SIGNATURE(S) OF SECURED PARTY(IES) 4 - ------------------------------------------------------------- SILICON VALLEY BANK 5 ============================================================= 6 11. Return copy to: 7 / / SILICON VALLEY BANK 8 DOCUMENTATION/NC 661 3003 TASMAN DRIVE 9 SANTA CLARA, CA 95054 / / 0 ============================================================= FORM UCC-1 ==================================================================================================================================
37 SILICON VALLEY BANK FUNDS TRANSFER AGREEMENT SECURITY PROCEDURE SERVICE ADDENDUM The following contains a description of the security procedures offered by Silicon Valley Bank ("Bank") to authenticate a Client's Payment Order instructions. Except as otherwise specified, these security procedures are not designed to detect, and Bank has no obligation to detect, Client error in the transmission or content of instructions for the Payment Order. TELEPHONE-INITIATED PAYMENT ORDERS DOMESTIC AND INTERNATIONAL REPETITIVE PAYMENT ORDERS- PRIMARY SECURITY PROCEDURE All repetitive Payment Orders, including repetitive Payment Orders to beneficiaries located outside the United States, may be telephone-initiated. Bank's Primary Security Procedure is to require Client to provide the signature of an Authorized Representative (as listed in the Authorized Representative Addendum) on Client's Repetitive Transfer Request form other standard form used by Bank to document repetitive transfer services. Upon receiving the signed Repetitive Transfer Request, Bank will verify the signature of the Authorized Representative against the signature specimen on file with Bank and perform a Call-Back to a different Authorized Representative to verify the repetitive transfer information. In addition, Bank will provide Client with a Repetitive Payment Identification Code to be used when Client's Authorized Representative initiates a Payment Order instruction by telephone. Bank will perform a Call-Back on every repetitive Payment Order to a different Authorized Representative when a Repetitive Payment Order is initiated. Client shall maintain the highest level of security of the code utilized in connection with the Security Procedures. Client shall promptly notify Bank of any compromise of security or unauthorized disclosure or use and shall promptly thereafter confirm such information in writing to Bank. Client will be responsible for any liability, loss, or damage resulting from such breach of security or unauthorized disclosure or use. REPETITIVE PAYMENT ORDERS- SECONDARY SECURITY PROCEDURE The Secondary Procedure is identical to the Primary Procedure described above except that the Client chooses not to use the added precaution of a Call-Back. Client waives Call-Back verification for all Repetitive Payment Orders. By initialing above, Client acknowledges that payment orders will be verified by a security procedure which is a higher-risk procedure and Client agrees to assume all liability for unauthorized payment orders confirmed in accordance with the higher-risk security procedure. WRITTEN PAYMENT ORDERS DOMESTIC AND INTERNATIONAL NON-REPETITIVE PAYMENT ORDERS-PRIMARY SECURITY PROCEDURE All non-repetitive Payment Orders, including non-repetitive Payment Orders to beneficiaries located outside the United States, must be written. All repetitive Payment Orders, at the election of Client, may be in writing. Written transfers (signed by an Authorized Representative as listed in this Authorized Representative Addendum) shall be in a form acceptable to Bank and delivered in person or by fax. Bank will perform a signature comparison to verify that the individual whose signature appears on the written transfer request is an Authorized Representative. In addition, Bank will telephone a second Authorized Representative to authenticate the transfer request. 1 38 SILICON VALLEY BANK FUNDS TRANSFER AGREEMENT SECURITY PROCEDURE SERVICE ADDENDUM This Addendum must be signed by an individual or individuals, authorized by the corporate resolution or bylaws to sign Funds Transfer Agreements. Calypte Biomedical Corporation ______________________________________________ (Print Name of Client) _________________________ _________________________ (BY) Jack Davis (BY) John DiPietro President & CEO VP & CFO _________________________ _________________________ (TITLE) (TITLE) 12/19/95 12/19/95 _________________________ _________________________ (Date) (Date) 2 EX-10.33 8 FORM OF OPTION AGREEMENT W/ PEPGEN CORPORATION 1 EXHIBIT 10.33 THIS OPTION AND THE SECURITIES SUBJECT TO THIS OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO THESE SECURITIES OR (II) THERE IS AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT AN EXEMPTION THEREFROM IS AVAILABLE. OPTION TO PURCHASE COMMON STOCK OF CALYPTE BIOMEDICAL CORPORATION ISSUANCE DATE: OCTOBER 12,1995 EXPIRATION DATE: OCTOBER 12,2005 OR EARLIER This certifies that Cal-Wood Investment Ltd. or permitted assigns, is entitled, subject to the terms set forth below, to purchase from Calypte Biomedical Corporation, a California corporation, (the "Company") up to 7,221 shares (which number is subject to adjustment as provided herein) of fully paid and nonassessable Common Stock of the Company at the purchase price of $7.50 per share, subject to adjustment as provided herein, (the "Purchase Price") at any time or from time to time through October 12, 2005 or earlier per terms set forth below. Such price and number of shares are subject to adjustment as provided in Section 2 of this Option. 1. Definitions As used in this Option, the following terms, unless the context otherwise requires, have the following meanings: (a) "Company" includes any corporation which shall succeed to or assume obligations of the Company under this Option. (b) "Stock", when used with reference to shares of stock of the Company, means shares of Common Stock of the Company, as presently defined in the Company's Restated Articles of Incorporation, and stock of any other class into which those shares many hereafter be changed. (c) "Shares" shall mean the shares of Stock purchasable hereunder and shall include all shares into which the Shares purchasable hereunder may be converted or changed. (d) "Optionholder", "holder of Option", "holder", or similar terms when the context refers to a holder of the Option, mean any person who shall at the time be the register holder of this Option. 2. Milestones (a) The Optionholder may exercise the Option to purchase common stock subject to the attainment of the Milestones set forth in the schedule below. The 1 2 achievement of a Milestone is a condition precedent to the availability of an Option to purchase the respective number of common stock at the Exercise Price.:
MILESTONES NUMBER OF SHARES SUBJECT TO OPTIONS 1. Upon the Effective Date of the Agreement 1,520 for the purchase of Pepgen Securities 2. Upon signing of a Research and 1,520 Development Contract with proceeds of $1 million USD or greater 3. Upon signing of a licensing agreement 1,520 with proceeds of $5 million USD or greater 4. Upon filing of an Investigation of New 381 Drug ("IND") application with the US Food and Drug Administration ("USFDA"), or with similar agencies in Europe or Japan 5. Upon filing of a New Drug Application 760 ("NDA") with the USFDA or with similar agencies in Europe or Japan 6. Upon first commercial sales of an 1,520 Company product based on an NDA
(b) Upon the achievement of a Milestone set forth in paragraph 2 above thereby giving rise to the Option to exercise the number of shares indicated next to the Milestone as provided for herein, the Optionholder shall have thereafter thirty-six (36) months in which to exercise said Options ("Option Period"). Failure to remit to the Company the Exercise Price within said Option Period shall constitute an irrevocable waiver of the right to exercise said Option granted hereunder. Payment of the Exercise Price for all options exercised pursuant to this Agreement is due on transfer of the Company's Common Stock. Optionholder shall not be eligible to own any fractional shares of the Company's Common Stock and calculation of the option eligibility of the Optionholder shall at all times be rounded down to the nearest whole number of shares. (c) Notwithstanding any provision to the contrary, this Agreement and the Option granted hereunder shall automatically terminate and expire ten (10) years after the Effective Date. At such point in time, any Milestones not yet achieved which would have given rise to an Option as set forth herein and any rights related thereto shall also terminate. In no event shall any part of the option be exercisable after the expiration of the ten (10) years (referenced above) from the Effective Date. 3. Adjustment of Purchase Price and Number of Shares The number and kind of securities purchasable upon the exercise of this Option and the Purchase Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: 2 3 (a) Reclassification. In case of any reclassification or change of outstanding securities of the class issuable upon exercise of this Option (other than upon any consolidation or merger of the Company with or into another corporation unless this corporation is the surviving corporation, or upon the sale of all or substantially all of the assets of the Company) then, and in any such case, the holder of this Option, upon the exercise hereof at any time after the consummation of such reclassification or change shall be entitled to receive in lieu of each share of Stock theretofore issuable upon exercise of this Option, the kind and amount of shares of stock, other securities, money and property received upon such reclassification or change by a holder of one share of Stock. The provisions of this subsection (a) shall similarly apply to successive reclassification or changes. (b) Subdivision or Combination of Stock. If the Company at any time while this Option remains outstanding and unexpired shall subdivide or combine its Stock, the Purchase Price shall be proportionately decreased in the case of a subdivision or increased in the case of a combination. (c) Stock Dividends. If the Company at any time while this Option is outstanding shall pay a dividend with respect to Stock payable in Stock, or make any other distribution of Stock with respect to Stock (except any distribution specifically provided for in the foregoing subsections (a) or (b), then the Purchase Price shall be adjusted, effective from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by a fraction, (a) the numerator of which shall be the total number of shares of Stock outstanding immediately prior to such dividend or distribution, and (b) the denominator of which shall be the total number of shares of Stock outstanding immediately after such dividend or distribution. (d) Non-Cash Dividends. If the Company at any time while this Option is outstanding shall pay a dividend with respect to Stock payable in securities other than Stock or other non-cash property, or make any other distribution of such securities or property with respect to Stock (except any distribution specifically provided for in the foregoing subsections (a) or (b)), then this Option shall represent the right to acquire upon exercise of this Option such securities or property which a holder of Stock would have been entitled to receive upon such dividend or distribution, without the payment by the holder of this Option of any additional consideration for such securities or property. (e) Adjustment of Number of Shares. Upon each adjustment in the Purchase Price, the number of Shares shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment in the Purchase Price by a fraction, the numerator of which shall be the Purchase Price immediately prior to such adjustment and the denominator of which shall be the Purchase Price immediately thereafter. (f) Notice of Adjustments. Whenever the Purchase Price shall be adjusted pursuant to Section 2 hereof, the Company shall issue a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Purchase Price or Prices after giving effect to such adjustment, and the securities or other property for which this Option may then be exercised, and shall cause a copy of such certificate to be mailed (by first class mail, postage prepaid) to the holder of this Option. 3 4 4. Exercise Provisions (a) Manner of Exercise. This Option may be exercised in part or in whole only by the holder of this Option surrendering to the Company at its principal office in California, this Option, together with the exercise form attached to this Option duly executed by the holder together with payment to the Company in the amount obtained by multiplying the Purchase Price by the number of shares of Stock designated in the exercise form. Payment may be in cash or by bank check payable to the order of the Company. (b) Partial Exercise. On any partial exercise, the Company shall promptly issue and deliver to the holder of this Option a new Option or Options of like tenor in the name of that holder providing for the right to purchase that number of shares of Stock as to which this Option has not been exercised. (c) Net Exercise Rights. Notwithstanding the payment provisions set forth in this Section 4, the holder may elect to receive shares of Option Stock equal to the value (as determined below) of this Option by surrender of this Option at the principal office of the Company together with notice of such election, in which event the Company shall issue to the holder the number of shares of Common Stock determined by use of the following formula: X = Y(A-B) A Where: X = the number of shares of Common Stock to be issued to the holder. Y = the number of shares of Common Stock subject to this Option A = the Fair Market Value (as defined below) of one (1) share of Common Stock. B = the per share Purchase Price pursuant to this Option. For purpose of this Section 7, fair market value of a share as of a particular date shall mean: (i) If the Company's registration statement under the Act, covering its initial underwritten public offering of stock, has been declared effective by the Securities and Exchange Commission, then the fair market value of a share shall be calculated on the basis of the closing market price (last trade regular way if the Stock is traded on the New York or American Stock Exchange, and if not so traded, the last sale price or mean of the bid and asked prices as reported by NASDAQ) as of the date of exercise. (ii) If such a registration statement has not been declared effective, or if it has been declared effective but the offering is not consummated in accordance with the terms of the underwriting agreement between the Company and its underwriters relating to such registration statement, then as determined in good faith by the Company's Board of Directors upon a review of relevant factors. 5. Delivery of Stock Certificates Within a reasonable time after full or partial exercise of this Option, the Company at its expense will cause to be issued in the name of and delivered to the holder of this Option, a certificate or certificates for the number of fully paid and nonassessable shares of Stock to 4 5 which that holder shall be entitled upon such exercise, together with any other securities and property to which that holder is entitled upon such exercise under the terms of this Option. No fractional shares will be issued upon exercise of rights to purchase under this Option. If upon any exercise of this Option a fraction of a share results, the Company will pay the cash value of that fractional share, calculated on the basis of the closing market price (last trade regular way if the Stock is traded on the New York or American Stock Exchange, and if not so traded, the last sale price or mean of the bid and asked prices as reported by NASDAQ) as of the date of exercise, or, if the Stock is not publicly traded, then on the basis of the Company's good faith determination of the fair market value of the Stock. 6. Compliance with Securities Act, Disposition of Shares of Common Stock, Registration Rights (a) Compliance with Securities Act. The holder of this Option, by acceptance hereof, agrees that this Option and the Shares to be issued upon exercise hereof are being acquired for investment and that he will not offer, sell or otherwise dispose of this Option or any Shares to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended (the "Act"). Upon exercise of this Option, the holder hereof shall confirm in writing, in a form satisfactory to the Company, that the Shares are being acquired for investment and not with a view toward distribution or resale (unless sale of the Shares has been registered under the Act). Any proposed transferee of this Option or the Shares (except a transferee of the Shares in a registered public offering) will be required to agree to the provisions of this Section 6. Certificates representing all Shares (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO THESE SECURITIES OR (II) THERE IS AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT AN EXEMPTION THEREFROM IS AVAILABLE. (b) Notice of Proposed Transfers. Prior to any proposed transfer of this Option or any of the Shares, unless there is in effect a registration statement under the Securities Act covering the proposed transfer, the holder thereof shall give written notice (the "Notice") to the Company of such holder's intention to make such transfer. The Notice shall describe the manner and circumstances of the proposed transfer in sufficient detail. If requested by the Company prior to the transfer being effected, the holder shall provide to the Company a written opinion of legal counsel who shall be reasonably satisfactory in form and substance to the Company's counsel, to the effect that the proposed transfer of the Option or the Shares may be effected without registration under the Securities Act. The holder of such securities shall be entitled to transfer such securities in accordance with the terms of the Notice only after the Company has consented in writing to such transfer. Each option or stock certificate evidencing the securities so transferred shall bear the appropriate restrictive legend set forth above, except that such certificate shall not bear such restrictive legend if in the opinion of counsel for the Company such legend is not required in order to establish compliance with any provisions of the securities laws. Transfer of the Option is further restricted by Section 7(f) hereof. 5 6 7. Miscellaneous Provisions (a) Reservation of Stock. The Company convenants that it will at all times reserve and keep available, solely for issuance upon exercise of this Option, all shares of Stock or other securities from time to time issuable upon exercise of this Option. (b) Modification. This Option and any of its terms may be changed, waived, or terminated by a written instrument signed by the Company and the holders of the Options representing the right to acquire a majority of the shares of Stock then subject to issuance upon the exercise of the Options. (c) Replacement. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Option and, in the case of loss, theft, or destruction, on delivery of any indemnity agreement or bond reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this Option, the Company at its expense will execute and deliver, in lieu of this Option, a new Option of like tenor. (d) Option Agent. The Company may, on written notice to the holder of this Option, appoint an agent having an office in California for the purposes of issuing Stock or other securities upon the exercise of this Option and of replacing or exchanging this Option, and after that appointment any such issuance, replacement, or exchange shall be made at that office by that agent. (e) No Rights as Shareholder. No holder of this Option, as such, shall be entitled to vote or receive dividends or be considered a shareholder of the Company for any purpose, nor shall anything in this Option be construed to confer on any holder of this Option as such, any rights of a shareholder of the Company or any right to vote, to give or withhold consent to any corporate action, to receive notice of meeting of shareholders, to receive dividends or subscription rights or otherwise. (f) Nontransferability. This Option may not be transferred or assigned without the prior written consent of the Company except, subject to Section 6(a) and (b), in its entirety to single purchaser who agrees to be bound by all the terms hereof including this paragraph. (g) Notices. Notices hereunder to the holder of this Option shall be sent by certified or registered mail to the address given to the Company by such holder and shall be deemed given when so mailed. (h) Governing Law. This Option shall be governed by the laws of the State of California as applied to contracts entered into in California between California residents. CALYPTE BIOMEDICAL CORPORATION By: [SIG] ---------------------------- Jack Davis 6 7 FORM OF EXERCISE (To be signed upon exercise of Option) To: Calypte Biomedical Corporation The undersigned holder of the attached Option hereby irrevocably elects to exercise the right to purchase________________ shares of_____ _______________Stock of Calypte Biomedical Corporation and herewith makes payment of $____________________ for those shares, and requests that the certificate for those shares be issued in the name of the undersigned and delivered to the address below the signature of the undersigned. The undersigned hereby affirms the statements and convenants in Section 6 of the Option. Dated:____________________ (Signature must conform in all respects to name of holder as specified on the face of the attached Option). ______________________________ Signature ______________________________ Address ______________________________ 7 8 THIS OPTION AND THE SECURITIES SUBJECT TO THIS OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO THESE SECURITIES OR (II) THERE IS AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT AN EXEMPTION THEREFROM IS AVAILABLE. OPTION TO PURCHASE COMMON STOCK OF CALYPTE BIOMEDICAL CORPORATION ISSUANCE DATE: OCTOBER 12,1995 EXPIRATION DATE: OCTOBER 12, 2005 OR EARLIER This certifies that Frederick M. Haney or permitted assigns, is entitled, subject to the terms set forth below, to purchase from Calypte Biomedical Corporation, a California corporation, (the "Company") up to 29,972 shares (which number is subject to adjustment as provided herein) of fully paid and nonassessable Common Stock of the Company at the purchase price of $7.50 per share, subject to adjustment as provided herein, (the "Purchase Price") at any time or from time to time through October 12, 2005 or earlier per terms set forth below. Such price and number of shares are subject to adjustment as provided in Section 2 of this Option. 1. Definitions As used in this Option, the following terms, unless the context otherwise requires, have the following meanings: (a) "Company" includes any corporation which shall succeed to or assume obligations of the Company under this Option. (b) "Stock", when used with reference to shares of stock of the Company, means shares of Common Stock of the Company, as presently defined in the Company's Restated Articles of Incorporation, and stock of any other class into which those shares many hereafter be changed. (c) "Shares" shall mean the shares of Stock purchasable hereunder and shall include all shares into which the Shares purchasable hereunder may be converted or changed. (d) "Optionholder", "holder of Option", "holder", or similar terms when the context refers to a holder of the Option, mean any person who shall at the time be the register holder of this Option. 2 . Milestones (a) The Optionholder may exercise the Option to purchase common stock subject to the attainment of the Milestones set forth in the schedule below. The 1 9 achievement of a Milestone is a condition precedent to the availability of an Option to purchase the respective number of common stock at the Exercise Price:
MILESTONES NUMBER OF SHARES SUBJECT TO OPTIONS 1. Upon the Effective Date of the Agreement 6,310 for the purchase of Pepgen Securities 2. Upon signing of a Research and 6,310 Development Contract with proceeds of $1 million USD or greater 3. Upon signing of a licensing agreement 6,310 with proceeds of $5 million USD or greater 4. Upon filing of an Investigation of New 1,577 Drug ("IND") application with the US Food and Drug Administration ("USFDA"), or with similar agencies in Europe or Japan 5. Upon filing of a New Drug Application 3,155 ("NDA") with the USFDA or with similar agencies in Europe or Japan 6. Upon first commercial sales of an 6,310 Company product based on an NDA
(b) Upon the achievement of a Milestone set forth in paragraph 2 above thereby giving rise to the Option to exercise the number of shares indicated next to the Milestone as provided for herein, the Optionholder shall have thereafter thirty-six (36) months in which to exercise said Options ("Option Period"). Failure to remit to the Company the Exercise Price within said Option Period shall constitute an irrevocable waiver of the right to exercise said Option granted hereunder. Payment of the Exercise Price for all options exercised pursuant to this Agreement is due on transfer of the Company's Common Stock. Optionholder shall not be eligible to own any fractional shares of the Company's Common Stock and calculation of the option eligibility of the Optionholder shall at all times be rounded down to the nearest whole number of shares. (c) Notwithstanding any provision to the contrary, this Agreement and the Option granted hereunder shall automatically terminate and expire ten (10) years after the Effective Date. At such point in time, any Milestones not yet achieved which would have given rise to an Option as set forth herein and any rights related thereto shall also terminate. In no event shall any part of the option be exercisable after the expiration of the ten (10) years (referenced above) from the Effective Date. 3. Adjustment of Purchase Price and Number of Shares The number and kind of securities purchasable upon the exercise of this Option and the Purchase Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: 2 10 (a) Reclassification. In case of any reclassification or change of outstanding securities of the class issuable upon exercise of this Option (other than upon any consolidation or merger of the Company with or into another corporation unless this corporation is the surviving corporation, or upon the sale of all or substantially all of the assets of the Company) then, and in any such case, the holder of this Option, upon the exercise hereof at any time after the consummation of such reclassification or change shall be entitled to receive in lieu of each share of Stock theretofore issuable upon exercise of this Option, the kind and amount of shares of stock, other securities, money and property received upon such reclassification or change by a holder of one share of Stock. The provisions of this subsection (a) shall similarly apply to successive reclassification or changes. (b) Subdivision or Combination of Stock. If the Company at any time while this Option remains outstanding and unexpired shall subdivide or combine its Stock, the Purchase Price shall be proportionately decreased in the case of a subdivision or increased in the case of a combination. (c) Stock Dividends. If the Company at any time while this Option is outstanding shall pay a dividend with respect to Stock payable in Stock, or make any other distribution of Stock with respect to Stock (except any distribution specifically provided for in the foregoing subsections (a) or (b)), then the Purchase Price shall be adjusted, effective from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by a fraction, (a) the numerator of which shall be the total number of shares of Stock outstanding immediately prior to such dividend or distribution, and (b) the denominator of which shall be the total number of shares of Stock outstanding immediately after such dividend or distribution. (d) Non-Cash Dividends. If the Company at any time while this Option is outstanding shall pay a dividend with respect to Stock payable in securities other than Stock or other non-cash property, or make any other distribution of such securities or property with respect to Stock (except any distribution specifically provided for in the foregoing subsections (a) or (b), then this Option shall represent the right to acquire upon exercise of this Option such securities or property which a holder of Stock would have been entitled to receive upon such dividend or distribution, without the payment by the holder of this Option of any additional consideration for such securities or property. (e) Adjustment of Number of Shares. Upon each adjustment in the Purchase Price, the number of Shares shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment in the Purchase Price by a fraction, the numerator of which shall be the Purchase Price immediately prior to such adjustment and the denominator of which shall be the Purchase Price immediately thereafter. (f) Notice of Adjustments. Whenever the Purchase Price shall be adjusted pursuant to Section 2 hereof, the Company shall issue a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Purchase Price or Prices after giving effect to such adjustment, and the securities or other property for which this Option may then be exercised, and shall cause a copy of such certificate to be mailed (by first class mail, postage prepaid) to the holder of this Option. 3 11 4. Exercise Provisions (a) Manner of Exercise. This Option may be exercised in part or in whole only by the holder of this Option surrendering to the Company at its principal office in California, this Option, together with the exercise form attached to this Option duly executed by the holder together with payment to the Company in the amount obtained by multiplying the Purchase Price by the number of shares of Stock designated in the exercise form. Payment may be in cash or by bank check payable to the order of the Company. (b) Partial Exercise. On any partial exercise, the Company shall promptly issue and deliver to the holder of this Option a new Option or Options of like tenor in the name of that holder providing for the right to purchase that number of shares of Stock as to which this Option has not been exercised. (c) Net Exercise Rights. Notwithstanding the payment provisions set forth in this Section 4, the holder may elect to receive shares of Option Stock equal to the value (as determined below) of this Option by surrender of this Option at the principal office of the Company together with notice of such election, in which event the Company shall issue to the holder the number of shares of Common Stock determined by use of the following formula: X = Y(A-B) A Where: X = the number of shares of Common Stock to be issued to the holder. Y = the number of shares of Common Stock subject to this Option A = the Fair Market Value (as defined below) of one (1) share of Common Stock. B = the per share Purchase Price pursuant to this Option. For purpose of this Section 7, fair market value of a share as of a particular date shall mean: (i) If the Company's registration statement under the Act, covering its initial underwritten public offering of stock, has been declared effective by the Securities and Exchange Commission, then the fair market value of a share shall be calculated on the basis of the closing market price (last trade regular way if the Stock is traded on the New York or American Stock Exchange, and if not so traded, the last sale price or mean of the bid and asked prices as reported by NASDAQ) as of the date of exercise. (ii) If such a registration statement has not been declared effective, or if it has been declared effective but the offering is not consummated in accordance with the terms of the underwriting agreement between the Company and its underwriters relating to such registration statement, then as determined in good faith by the Company's Board of Directors upon a review of relevant factors. 5. Delivery of Stock Certificates Within a reasonable time after full or partial exercise of this Option, the Company at its expense will cause to be issued in the name of and delivered to the holder of this Option, a certificate or certificates for the number of fully paid and nonassessable shares of Stock to 4 12 which that holder shall be entitled upon such exercise, together with any other securities and property to which that holder is entitled upon such exercise under the terms of this Option. No fractional shares will be issued upon exercise of rights to purchase under this Option. If upon any exercise of this Option a fraction of a share results, the Company will pay the cash value of that fractional share, calculated on the basis of the closing market price (last trade regular way if the Stock is traded on the New York or American Stock Exchange, and if not so traded, the last sale price or mean of the bid and asked prices as reported by NASDAQ) as of the date of exercise, or, if the Stock is not publicly traded, then on the basis of the Company's good faith determination of the fair market value of the Stock. 6. Compliance with Securities Act; Disposition of Shares of Common Stock, Registration Rights (a) Compliance with Securities Act. The holder of this Option, by acceptance hereof, agrees that this Option and the Shares to be issued upon exercise hereof are being acquired for investment and that he will not offer, sell or otherwise dispose of this Option or any Shares to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended (the "Act"). Upon exercise of this Option, the holder hereof shall confirm in writing, in a form satisfactory to the Company, that the Shares are being acquired for investment and not with a view toward distribution or resale (unless sale of the Shares has been registered under the Act). Any proposed transferee of this Option or the Shares (except a transferee of the Shares in a registered public offering) will be required to agree to the provisions of this Section 6. Certificates representing all Shares (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO THESE SECURITIES OR (II) THERE IS AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT AN EXEMPTION THEREFROM IS AVAILABLE. (b) Notice of Proposed Transfers. Prior to any proposed transfer of this Option or any of the Shares, unless there is in effect a registration statement under the Securities Act covering the proposed transfer, the holder thereof shall give written notice (the "Notice") to the Company of such holder's intention to make such transfer. The Notice shall describe the manner and circumstances of the proposed transfer in sufficient detail. If requested by the Company prior to the transfer being effected, the holder shall provide to the Company a written opinion of legal counsel who shall be reasonably satisfactory in form and substance to the Company's counsel, to the effect that the proposed transfer of the Option or the Shares may be effected without registration under the Securities Act. The holder of such securities shall be entitled to transfer such securities in accordance with the terms, of the Notice only after the Company has consented in writing to such transfer. Each option or stock certificate evidencing the securities so transferred shall bear the appropriate restrictive legend set forth above, except that such certificate shall not bear such restrictive legend if in the opinion of counsel for the Company such legend is not required in order to establish compliance with any provisions of the securities laws. Transfer of the Option is further restricted by Section 7(f) hereof. 5 13 7. Miscellaneous Provisions (a) Reservation of Stock. The Company convenants that it will at all times reserve and keep available, solely for issuance upon exercise of this Option, all shares of Stock or other securities from time to time issuable upon exercise of this Option. (b) Modification. This Option and any of its terms may be changed, waived, or terminated by a written instrument signed by the Company and the holders of the Options representing the right to acquire a majority of the shares of Stock then subject to issuance upon the exercise of the Options. (c) Replacement. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Option and, in the case of loss, theft, or destruction, on delivery of any indemnity agreement or bond reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this Option, the Company at its expense will execute and deliver, in lieu of this Option, a new Option of like tenor. (d) Option Agent. The Company may, on written notice to the holder of this Option, appoint an agent having an office in California for the purposes of issuing Stock or other securities upon the exercise of this Option and of replacing or exchanging this Option, and after that appointment any such issuance, replacement, or exchange shall be made at that office by that agent. (e) No Rights as Shareholder. No holder of this Option, as such, shall be entitled to vote or receive dividends or be considered a shareholder of the Company for any purpose, nor shall anything in this Option be construed to confer on any holder of this Option as such, any rights of a shareholder of the Company or any right to vote, to give or withhold consent to any corporate action, to receive notice of meeting of shareholders, to receive dividends or subscription rights or otherwise. (f) Nontransferability. This Option may not be transferred or assigned without the prior written consent of the Company except, subject to Section 6(a) and (b), in its entirety to single purchaser who agrees to be bound by all the terms hereof including this paragraph. (g) Notices. Notices hereunder to the holder of this Option shall be sent by certified or registered mail to the address given to the Company by such holder and shall be deemed given when so mailed. (h) Governing Law. This Option shall be governed by the laws of the State of California as applied to contracts entered into in California between California residents. CALYPTE BIOMEDICAL CORPORATION By: [SIG] ------------------------------ Jack Davis 6 14 FORM OF EXERCISE (To be signed upon exercise of Option) To: Calypte Biomedical Corporation The undersigned holder of the attached Option hereby irrevocably elects to exercise the right to purchase_______________ shares of____________________ Stock of Calypte Biomedical Corporation and herewith makes payment of $______ ____________ for those shares, and requests that the certificate for those shares be issued in the name of the undersigned and delivered to the address below the signature of the undersigned. The undersigned hereby affirms the statements and convenants, in Section 6 of the Option. Dated:______________________________ (Signature must conform in all respects to name of holder as specified on the face of the attached Option). ______________________________ Signature ______________________________ Address ______________________________ 7 15 THIS OPTION AND THE SECURITIES SUBJECT TO THIS OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO THESE SECURITIES OR (II) THERE IS AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT AN EXEMPTION THEREFROM IS AVAILABLE OPTION TO PURCHASE COMMON STOCK OF CALYPTE BIOMEDICAL CORPORATION ISSUANCE DATE: OCTOBER 12,1995 EXPIRATION DATE: OCTOBER 12, 2005 OR EARLIER This certifies that Fuller W. Bazer or permitted assigns, is entitled, subject to the terms set forth below, to purchase from Calypte Biomedical Corporation, a California corporation, (the "Company") up to 95,950 shares (which number is subject to adjustment as provided herein) of fully paid and nonassessable Common Stock of the Company at the purchase price of $7.50 per share, subject to adjustment as provided herein, (the "Purchase Price") at any time or from time to time through October 12, 2005 or earlier per terms set forth below. Such price and number of shares are subject to adjustment as provided in Section 2 of this Option. 1. Definitions As used in this Option, the following terms, unless the context otherwise requires, have the following meanings: (a) "Company" includes any corporation which shall succeed to or assume obligations of the Company under this Option. (b) "Stock", when used with reference to shares of stock of the Company, means shares of Common Stock of the Company, as presently defined in the Company's Restated Articles of Incorporation, and stock of any other class into which those shares many hereafter be changed. (c) "Shares" shall mean the shares of Stock purchasable hereunder and shall include all shares into which the Shares purchasable hereunder may be converted or changed. (d) "Optionholder", "holder of Option", "holder", or similar terms when the context refers to a holder of the Option, mean any person who shall at the time be the register holder of this Option. 2 . Milestones (a) The Optionholder may exercise the Option to purchase common stock subject to the attainment of the Milestones set forth in the schedule below. The 1 16 achievement of a Milestone is a condition precedent to the availability of an Option to purchase the respective number of common stock at the Exercise Price.:
MILESTONES NUMBER OF SHARES SUBJECT TO OPTIONS 1. Upon the Effective Date of the Agreement 20,200 for the purchase of Pepgen Securities 2. Upon signing of a Research and 20,200 Development Contract with proceeds of $1 million USD or greater 3. Upon signing of a licensing agreement 20,200 with proceeds of $5 million USD or greater 4. Upon filing of an Investigation of New 5,050 Drug ("IND") application with the US Food and Drug Administration ("USFDA"), or with similar agencies in Europe or Japan 5. Upon filing of a New Drug Application 10,100 ("NDA") with the USFDA or with similar agencies in Europe or Japan 6. Upon first commercial sales of an 20,200 Company product based on an NDA
(b) Upon the achievement of a Milestone set forth in paragraph 2 above thereby giving rise to the Option to exercise the number of shares indicated next to the Milestone as provided for herein, the Optionholder shall have thereafter thirty-six (36) months in which to exercise said Options ("Option Period"). Failure to remit to the Company the Exercise Price within said Option Period shall constitute an irrevocable waiver of the right to exercise said Option granted hereunder. Payment of the Exercise Price for all options exercised pursuant to this Agreement is due on transfer of the Company's Common Stock. Optionholder shall not be eligible to own any fractional shares of the Company's Common Stock and calculation of the option eligibility of the Optionholder shall at all times be rounded down to the nearest whole number of shares. (c) Notwithstanding any provision to the contrary, this Agreement and the Option granted hereunder shall automatically terminate and expire ten (10) years after the Effective Date. At such point in time, any Milestones not yet achieved which would have given rise to an Option as set forth herein and any rights related thereto shall also terminate. In no event shall any part of the option be exercisable after the expiration of the ten (10) years (referenced above) from the Effective Date. 3. Adjustment of Purchase Price and Number of Shares The number and kind of securities purchasable upon the exercise of this Option and the Purchase Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: 2 17 (a) Reclassification. In case of any reclassification or change of outstanding securities of the class issuable upon exercise of this Option (other than upon any consolidation or merger of the Company with or into another corporation unless this corporation is the surviving corporation, or upon the sale of all or substantially all of the assets of the Company) then, and in any such case, the holder of this Option, upon the exercise hereof at any time after the consummation of such reclassification or change shall be entitled to receive in lieu of each share of Stock theretofore issuable upon exercise of this Option, the kind and amount of shares of stock, other securities, money and property received upon such reclassification or change by a holder of one share of Stock. The provisions of this subsection (a) shall similarly apply to successive reclassification or changes. (b) Subdivision or Combination of Stock. If the Company at any time while this Option remains outstanding and unexpired shall subdivide or combine its Stock, the Purchase Price shall be proportionately decreased in the case of a subdivision or increased in the case of a combination. (c) Stock Dividends. If the Company at any time while this Option is outstanding shall pay a dividend with respect to Stock payable in Stock, or make any other distribution of Stock with respect to Stock (except any distribution specifically provided for in the foregoing subsections (a) or (b)), then the Purchase Price shall be adjusted, effective from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by a fraction, (a) the numerator of which shall be the total number of shares of Stock outstanding immediately prior to such dividend or distribution, and (b) the denominator of which shall be the total number of shares of Stock outstanding immediately after such dividend or distribution. (d) Non-Cash Dividends. If the Company at any time while this Option is outstanding shall pay a dividend with respect to Stock payable in securities other than Stock or other non-cash property, or make any other distribution of such securities or property with respect to Stock (except any distribution specifically provided for in the foregoing subsections (a) or (b)), then this Option shall represent the right to acquire upon exercise of this Option such securities or property which a holder of Stock would have been entitled to receive upon such dividend or distribution, without the payment by the holder of this Option of any additional consideration for such securities or property. (e) Adjustment of Number of Shares. Upon each adjustment in the Purchase Price, the number of Shares shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment in the Purchase Price by a fraction, the numerator of which shall be the Purchase Price immediately prior to such adjustment and the denominator of which shall be the Purchase Price immediately thereafter. (f) Notice of Adjustments. Whenever the Purchase Price shall be adjusted pursuant to Section 2 hereof, the Company shall issue a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Purchase Price or Prices after giving effect to such adjustment, and the securities or other property for which this Option may then be exercised, and shall cause a copy of such certificate to be mailed (by first class mail, postage prepaid) to the holder of this Option. 3 18 4. Exercise Provisions (a) Manner of Exercise. This Option may be exercised in part or in whole only by the holder of this Option surrendering to the Company at its principal office in California, this Option, together with the exercise form attached to this Option duly executed by the holder together with payment to the Company in the amount obtained by multiplying the Purchase Price by the number of shares of Stock designated in the exercise form. Payment may be in cash or by bank check payable to the order of the Company. (b) Partial Exercise. On any partial exercise, the Company shall promptly issue and deliver to the holder of this Option a new Option or Options of like tenor in the name of that holder providing for the right to purchase that number of shares of Stock as to which this Option has not been exercised. (c) Net Exercise Rights. Notwithstanding the payment provisions set forth in this Section 4, the holder may elect to receive shares of Option Stock equal to the value (as determined below) of this Option by surrender of this Option at the principal office of the Company together with notice of such election, in which event the Company shall issue to the holder the number of shares of Common Stock determined by use of the following formula: X = Y(A-B) A Where: X = the number of shares of Common Stock to be issued to the holder. Y = the number of shares of Common Stock subject to this Option A = the Fair Market Value (as defined below) of one (1) share of Common Stock. B = the per share Purchase Price pursuant to this Option. For purpose of this Section 7, fair market value of a share as of a particular date shall mean: (i) If the Company's registration statement under the Act, covering its initial underwritten public offering of stock, has been declared effective by the Securities and Exchange Commission, then the fair market value of a share shall be calculated on the basis of the closing market price (last trade regular way if the Stock is traded on the New York or American Stock Exchange, and if not so traded, the last sale price or mean of the bid and asked prices as reported by NASDAQ) as of the date of exercise. (ii) If such a registration statement has not been declared effective, or if it has been declared effective but the offering is not consummated in accordance with the terms of the underwriting agreement between the Company and its underwriters relating to such registration statement, then as determined in good faith by the Company's Board of Directors upon a review of relevant factors. 5. Delivery of Stock Certificates Within a reasonable time after full or partial exercise of this Option, the Company at its expense will cause to be issued in the name of and delivered to the holder of this Option, a certificate or certificates for the number of fully paid and nonassessable shares of Stock to 4 19 which that holder shall be entitled upon such exercise, together with any other securities and property to which that holder is entitled upon such exercise under the terms of this Option. No fractional shares will be issued upon exercise of rights to purchase under this Option. If upon any exercise of this Option a fraction of a share results, the Company will pay the cash value of that fractional share, calculated on the basis of the closing market price (last trade regular way if the Stock is traded on the New York or American Stock Exchange, and if not so traded, the last sale price or mean of the bid and asked prices as reported by NASDAQ) as of the date of exercise, or, if the Stock is not publicly traded, then on the basis of the Company's good faith determination of the fair market value of the Stock. 6. Compliance with Securities Act; Disposition of Shares of Common Stock, Registration Rights (a) Compliance with Securities Act. The holder of this Option, by acceptance hereof, agrees that this Option and the Shares to be issued upon exercise hereof are being acquired for investment and that he will not offer, sell or otherwise dispose of this Option or any Shares to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended (the "Act"). Upon exercise of this Option, the holder hereof shall confirm in writing, in a form satisfactory to the Company, that the Shares are being acquired for investment and not with a view toward distribution or resale (unless sale of the Shares has been registered under the Act). Any proposed transferee of this Option or the Shares (except a transferee of the Shares in a registered public offering) will be required to agree to the provisions of this Section 6. Certificates representing all Shares (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO THESE SECURITIES OR (II) THERE IS AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT AN EXEMPTION THEREFROM IS AVAILABLE. (b) Notice of Proposed Transfers. Prior to any proposed transfer of this Option or any of the Shares, unless there is in effect a registration statement under the Securities Act covering the proposed transfer, the holder thereof shall give written notice (the "Notice") to the Company of such holder's intention to make such transfer. The Notice shall describe the manner and circumstances of the proposed transfer in sufficient detail. If requested by the Company prior to the transfer being effected, the holder shall provide to the Company a written opinion of legal counsel who shall be reasonably satisfactory in form and substance to the Company's counsel, to the effect that the proposed transfer of the Option or the Shares may be effected without registration under the Securities Act. The holder of such securities shall be entitled to transfer such securities in accordance with the terms of the Notice only after the Company has consented in writing to such transfer. Each option or stock certificate evidencing the securities so transferred shall bear the appropriate restrictive legend set forth above, except that such certificate shall not bear such restrictive legend if in the opinion of counsel for the Company such legend is not required in order to establish compliance with any provisions of the securities laws. Transfer of the Option is further restricted by Section 7(f) hereof. 5 20 7. Miscellaneous Provisions (a) Reservation of Stock. The Company covenants that it will at all times reserve and keep available, solely for issuance upon exercise of this Option, all shares of Stock or other securities from time to time issuable upon exercise of this Option. (b) Modification. This Option and any of its terms may be changed, waived, or terminated by a written instrument signed by the Company and the holders of the Options representing the right to acquire a majority of the shares of Stock then subject to issuance upon the exercise of the Options. (c) Replacement. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Option and, in the case of loss, theft, or destruction, on delivery of any indemnity agreement or bond reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this Option, the Company at its expense will execute and deliver, in lieu of this Option, a new Option of like tenor. (d) Option Agent. The Company may, on written notice to the holder of this Option, appoint an agent having an office in California for the purposes of issuing Stock or other securities upon the exercise of this Option and of replacing or exchanging this Option, and after that appointment any such issuance, replacement, or exchange shall be made at that office by that agent. (e) No Rights as Shareholder. No holder of this Option, as such, shall be entitled to vote or receive dividends or be considered a shareholder of the Company for any purpose, nor shall anything in this Option be construed to confer on any holder of this Option as such, any rights of a shareholder of the Company or any right to vote, to give or withhold consent to any corporate action, to receive notice of meeting of shareholders, to receive dividends or subscription rights or otherwise. (f) Nontransferability. This Option may not be transferred or assigned without the prior written consent of the Company except, subject to Section 6(a) and (b), in its entirety to single purchaser who agrees to be bound by all the terms hereof including this paragraph. (g) Notices. Notices hereunder to the holder of this Option shall be sent by certified or registered mail to the address given to the Company by such holder and shall be deemed given when so mailed. (h) Governing Law. This Option shall be governed by the laws of the State of California as applied to contracts entered into in California between California residents. CALYPTE BIOMEDICAL CORPORATION By: /s/ JACK DAVIS ----------------------------- Jack Davis 6 21 FORM OF EXERCISE (To be signed upon exercise of Option) To: Calypte Biomedical Corporation The undersigned holder of the attached Option hereby irrevocably elects to exercise the right to purchase ______________ shares of ____________ Stock of Calypte Biomedical Corporation and herewith makes payment of $ ________ for those shares, and requests that the certificate for those shares be issued in the name of the undersigned and delivered to the address below the signature of the undersigned. The undersigned hereby affirms the statements and covenants in Section 6 of the Option. Dated: - ------------------------ (Signature must conform in all respects to name of holder as specified on the face of the attached Option). Signature --------------------------------- Address --------------------------------- --------------------------------- 7 22 THIS OPTION AND THE SECURITIES SUBJECT TO THIS OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO THESE SECURITIES OR (II) THERE IS AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT AN EXEMPTION THEREFROM IS AVAILABLE. OPTION TO PURCHASE COMMON STOCK OF CALYPTE BIOMEDICAL CORPORATION ISSUANCE DATE: OCTOBER 12,1995 EXPIRATION DATE: OCTOBER 12,2005 OR EARLIER This certifies that Howard M. Johnson or permitted assigns, is entitled, subject to the terms set forth below, to purchase from Calypte Biomedical Corporation, a California corporation, (the "Company") up to 119,937 shares (which number is subject to adjustment as provided herein) of fully paid and nonassessable Common Stock of the Company at the purchase price of $7.50 per share, subject to adjustment as provided herein, (the "Purchase Price") at any time or from time to time through October 12, 2005 or earlier per terms set forth below. Such price and number of shares are subject to adjustment as provided in Section 2 of this Option. 1. Definitions As used in this Option, the following terms, unless the context otherwise requires, have the following meanings: (a) "Company" includes any corporation which shall succeed to or assume obligations of the Company under this Option. (b) "Stock", when used with reference to shares of stock of the Company, means shares of Common Stock of the Company, as presently defined in the Company's Restated Articles of Incorporation, and stock of any other class into which those shares many hereafter be changed. (c) "Shares" shall mean the shares of Stock purchasable hereunder and shall include all shares into which the Shares purchasable hereunder may be converted or changed. (d) "Optionholder", "holder of Option", "holder", or similar terms when the context refers to a holder of the Option, mean any person who shall at the time be the register holder of this Option. 2. Milestones (a) The Optionholder may exercise the Option to purchase common stock subject to the attainment of the Milestones set forth in the schedule below. The 1 23 achievement of a Milestone is a condition precedent to the availability of an Option to purchase the respective number of common stock at the Exercise Price.:
MILESTONES NUMBER OF SHARES SUBJECT TO OPTIONS 1. Upon the Effective Date of the Agreement 25,250 for the purchase of Pepgen Securities 2. Upon signing of a Research and 25,250 Development Contract with proceeds of $1 million USD or greater 3. Upon signing of a licensing agreement 25,250 with proceeds of $5 million USD or greater 4. Upon filing of an Investigation of New 6,312 Drug ("IND") application with the US Food and Drug Administration ("USFDA"), or with similar agencies in Europe or Japan 5. Upon filing of a New Drug Application 12,625 ("NDA") with the USFDA or with similar agencies in Europe or Japan 6. Upon first commercial sales of an 25,250 Company product based on an NDA
(b) Upon the achievement of a Milestone set forth in paragraph 2 above thereby giving rise to the Option to exercise the number of shares indicated next to the Milestone as provided for herein, the Optionholder shall have thereafter thirty-six (36) months in which to exercise said Options ("Option Period"). Failure to remit to the Company the Exercise Price within said Option Period shall constitute an irrevocable waiver of the right to exercise said Option granted hereunder. Payment of the Exercise Price for all options exercised pursuant to this Agreement is due on transfer of the Company's Common Stock. Optionholder shall not be eligible to own any fractional shares of the Company's Common Stock and calculation of the option eligibility of the Optionholder shall at all times be rounded down to the nearest whole number of shares. (c) Notwithstanding any provision to the contrary, this Agreement and the Option granted hereunder shall automatically terminate and expire ten (10) years after the Effective Date. At such point in time, any Milestones not yet achieved which would have given rise to an Option as set forth herein and any rights related thereto shall also terminate. In no event shall any part of the option be exercisable after the expiration of the ten (10) years (referenced above) from the Effective Date. 3. Adjustment of Purchase Price and Number of Shares The number and kind of securities purchasable upon the exercise of this Option and the Purchase Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: 2 24 (a) Reclassification. In case of any reclassification or change of outstanding securities of the class issuable upon exercise of this Option (other than upon any consolidation or merger of the Company with or into another corporation unless this corporation is the surviving corporation, or upon the sale of all or substantially all of the assets of the Company) then, and in any such case, the holder of this Option, upon the exercise hereof at any time after the consummation of such reclassification or change shall be entitled to receive in lieu of each share of Stock theretofore issuable upon exercise of this Option, the kind and amount of shares of stock, other securities, money and property received upon such reclassification or change by a holder of one share of Stock. The provisions of this subsection (a) shall similarly apply to successive reclassification or changes. (b) Subdivision or Combination of Stock. If the Company at any time while this Option remains outstanding and unexpired shall subdivide or combine its Stock, the Purchase Price shall be proportionately decreased in the case of a subdivision or increased in the case of a combination. (c) Stock Dividends. If the Company at any time while this Option is outstanding shall pay a dividend with respect to Stock payable in Stock, or make any other distribution of Stock with respect to Stock (except any distribution specifically provided for in the foregoing subsections (a) or (b)), then the Purchase Price shall be adjusted, effective from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by a fraction, (a) the numerator of which shall be the total number of shares of Stock outstanding immediately prior to such dividend or distribution, and (b) the denominator of which shall be the total number of shares of Stock outstanding immediately after such dividend or distribution. (d) Non-Cash Dividends. If the Company at any time while this Option is outstanding shall pay a dividend with respect to Stock payable in securities other than Stock or other non-cash property, or make any other distribution of such securities or property with respect to Stock (except any distribution specifically provided for in the foregoing subsections (a) or (b)), then this Option shall represent the right to acquire upon exercise of this Option such securities or property which a holder of Stock would have been entitled to receive upon such dividend or distribution, without the payment by the holder of this Option of any additional consideration for such securities or property. (e) Adjustment of Number of Shares. Upon each adjustment in the Purchase Price, the number of Shares shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment in the Purchase Price by a fraction, the numerator of which shall be the Purchase Price immediately prior to such adjustment and the denominator of which shall be the Purchase Price immediately thereafter. (f) Notice of Adjustments. Whenever the Purchase Price shall be adjusted pursuant to Section 2 hereof, the Company shall issue a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Purchase Price or Prices after giving effect to such adjustment, and the securities or other property for which this Option may then be exercised, and shall cause a copy of such certificate to be mailed (by first class mail, postage prepaid) to the holder of this Option. 3 25 4. Exercise Provisions (a) Manner of Exercise. This Option may be exercised in part or in whole only by the holder of this Option surrendering to the Company at its principal office in California, this Option, together with the exercise form attached to this Option duly executed by the holder together with payment to the Company in the amount obtained by multiplying the Purchase Price by the number of shares of Stock designated in the exercise form. Payment may be in cash or by bank check payable to the order of the Company. (b) Partial Exercise. On any partial exercise, the Company shall promptly issue and deliver to the holder of this Option a new Option or Options of like tenor in the name of that holder providing for the right to purchase that number of shares of Stock as to which this Option has not been exercised. (c) Net Exercise Rights. Notwithstanding the payment provisions set forth in this Section 4, the holder may elect to receive shares of Option Stock equal to the value (as determined below) of this Option by surrender of this Option at the principal office of the Company together with notice of such election, in which event the Company shall issue to the holder the number of shares of Common Stock determined by use of the following formula: X = Y(A-B) A Where: X the number of shares of Common Stock to be issued to the holder. Y = the number of shares of Common Stock subject to this Option A = the Fair Market Value (as defined below) of one (1) share of Common Stock. B = the per share Purchase Price pursuant to this Option. For purpose of this Section 7, fair market value of a share as of a particular date shall mean: (i) If the Company's registration statement under the Act, covering its initial underwritten public offering of stock, has been declared effective by the Securities and Exchange Commission, then the fair market value of a share shall be calculated on the basis of the closing market price (last trade regular way if the Stock is traded on the New York or American Stock Exchange, and if not so traded, the last sale price or mean of the bid and asked prices as reported by NASDAQ) as of the date of exercise. (ii) If such a registration statement has not been declared effective, or if it has been declared effective but the offering is not consummated in accordance with the terms of the underwriting agreement between the Company and its underwriters relating to such registration statement, then as determined in good faith by the Company's Board of Directors upon a review of relevant factors. 5. Delivery of Stock Certificates Within a reasonable time after full or partial exercise of this Option, the Company at its expense will cause to be issued in the name of and delivered to the holder of this Option, a certificate or certificates for the number of fully paid and nonassessable shares of Stock to 4 26 which that holder shall be entitled upon such exercise, together with any other securities and property to which that holder is entitled upon such exercise under the terms, of this Option. No fractional shares will be issued upon exercise of rights to purchase under this Option. If upon any exercise of this Option a fraction of a share results, the Company will pay the cash value of that fractional share, calculated on the basis of the closing market price (last trade regular way if the Stock is traded on the New York or American Stock Exchange, and if not so traded, the last sale price or mean of the bid and asked prices as reported by NASDAQ) as of the date of exercise, or, if the Stock is not publicly traded, then on the basis of the Company's good faith determination of the fair market value of the Stock. 6. Compliance with Securities Act; Disposition of Shares of Common Stock; Registration Rights (a) Compliance with Securities Act. The holder of this Option, by acceptance hereof, agrees that this Option and the Shares to be issued upon exercise hereof are being acquired for investment and that he will not offer, sell or otherwise dispose of this Option or any Shares to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended (the "Act"). Upon exercise of this Option, the holder hereof shall confirm in writing, in a form satisfactory to the Company, that the Shares are being acquired for investment and not with a view toward distribution or resale (unless sale of the Shares has been registered under the Act). Any proposed transferee of this Option or the Shares (except a transferee of the Shares in a registered public offering) will be required to agree to the provisions of this Section 6. Certificates representing all Shares (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO THESE SECURITIES OR (II) THERE IS AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT AN EXEMPTION THEREFROM IS AVAILABLE. (b) Notice of Proposed Transfers. Prior to any proposed transfer of this Option or any of the Shares, unless there is in effect a registration statement under the Securities Act covering the proposed transfer, the holder thereof shall give written notice (the "Notice") to the Company of such holder's intention to make such transfer. The Notice shall describe the manner and circumstances of the proposed transfer in sufficient detail. If requested by the Company prior to the transfer being effected, the holder shall provide to the Company a written opinion of legal counsel who shall be reasonably satisfactory in form and substance to the Company's counsel, to the effect that the proposed transfer of the Option or the Shares may be effected without registration under the Securities Act. The holder of such securities shall be entitled to transfer such securities in accordance with the terms of the Notice only after the Company has consented in writing to such transfer. Each option or stock certificate evidencing the securities so transferred shall bear the appropriate restrictive legend set forth above, except that such certificate shall not bear such restrictive legend if in the opinion of counsel for the Company such legend is not required in order to establish compliance with any provisions of the securities laws. Transfer of the Option is further restricted by Section 7(f) hereof. 5 27 7. Miscellaneous Provisions (a) Reservation of Stock. The Company covenants that it will at all times reserve and keep available, solely for issuance upon exercise of this Option, all shares of Stock or other securities from time to time issuable upon exercise of this Option. (b) Modification. This Option and any of its terms may be changed, waived, or terminated by a written instrument signed by the Company and the holders of the Options representing the right to acquire a majority of the shares of Stock then subject to issuance upon the exercise of the Options. (c) Replacement. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Option and, in the case of loss, theft, or destruction, on delivery of any indemnity agreement or bond reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this Option, the Company at its expense will execute and deliver, in lieu of this Option, a new Option of like tenor. (d) Option Agent. The Company may, on written notice to the holder of this Option, appoint an agent having an office in California for the purposes of issuing Stock or other securities upon the exercise of this Option and of replacing or exchanging this Option, and after that appointment any such issuance, replacement, or exchange shall be made at that office by that agent. (e) No Rights as Shareholder. No holder of this Option, as such, shall be entitled to vote or receive dividends or be considered a shareholder of the Company for any purpose, nor shall anything in this Option be construed to confer on any holder of this Option as such, any rights of a shareholder of the Company or any right to vote, to give or withhold consent to any corporate action, to receive notice of meeting of shareholders, to receive dividends or subscription rights or otherwise. (f) Nontransferability. This Option may not be transferred or assigned without the prior written consent of the Company except, subject to Section 6(a) and (b), in its entirety to single purchaser who agrees to be bound by all the terms hereof including this paragraph. (g) Notices. Notices hereunder to the holder of this Option shall be sent by certified or registered mail to the address given to the Company by such holder and shall be deemed given when so mailed. (h) Governing Law. This Option shall be governed by the laws of the State of California as applied to contracts entered into in California between California residents. CALYPTE BIOMEDICAL CORPORATION By: /s/ JACK DAVIS ----------------------------------- Jack Davis 6 28 FORM OF EXERCISE (To be signed upon exercise of Option) To: Calypte Biomedical Corporation The undersigned holder of the attached Option hereby irrevocably elects to exercise the right to purchase _______________ shares of _____________ Stock of Calypte Biomedical Corporation and herewith makes payment of $ ________ for those shares, and requests that the certificate for those shares be issued in the name of the undersigned and delivered to the address below the signature of the undersigned. The undersigned hereby affirms the statements and covenants in Section 6 of the Option. Dated: - --------------------------------- (Signature must conform in all respects to name of holder as specified on the face of the attached Option). ------------------------------------------ Signature ------------------------------------------ Address ------------------------------------------ 7 29 THIS OPTION AND THE SECURITIES SUBJECT TO THIS OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO THESE SECURITIES OR (II) THERE IS AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT AN EXEMPTION THEREFROM IS AVAILABLE. OPTION TO PURCHASE COMMON STOCK OF CALYPTE BIOMEDICAL CORPORATION ISSUANCE DATE: OCTOBER 12,1995 EXPIRATION DATE: OCTOBER 12, 2005 OR EARLIER This certifies that C. P. Liu or permitted assigns, is entitled, subject to the terms set forth below, to purchase from Calypte Biomedical Corporation, a California corporation, (the "Company") up to 221,920 shares (which number is subject to adjustment as provided herein) of fully paid and nonassessable Common Stock of the Company at the purchase price of $7.50 per share, subject to adjustment as provided herein, (the "Purchase Price") at any time or from time to time through October 12, 2005 or earlier per terms set forth below. Such price and number of shares are subject to adjustment as provided in Section 2 of this Option. 1. Definitions As used in this Option, the following terms, unless the context otherwise requires, have the following meanings: (a) "Company" includes any corporation which shall succeed to or assume obligations of the Company under this Option. (b) "Stock", when used with reference to shares of stock of the Company, means shares of Common Stock of the Company, as presently defined in the Company's Restated Articles of Incorporation, and stock of any other class into which those shares many hereafter be changed. (c) "Shares" shall mean the shares of Stock purchasable hereunder and shall include all shares into which the Shares purchasable hereunder may be converted or changed. (d) "Optionholder", "holder of Option", "holder", or similar terms when the context refers to a holder of the Option, mean any person who shall at the time be the register holder of this Option. 2. Milestones (a) The Optionholder may exercise the Option to purchase common stock subject to the attainment of the Milestones set forth in the schedule below. The 1. 30 achievement of a Milestone is a condition precedent to the availability of an Option to purchase the respective number of common stock at the Exercise Price.:
MILESTONES NUMBER OF SHARES SUBJECT TO OPTIONS 1. Upon the Effective Date of the Agreement 46,720 for the purchase of Pepgen Securities 2. Upon signing of a Research and 46,720 Development Contract with proceeds of $1 million USD or greater 3. Upon signing of a licensing agreement 46,720 with proceeds of $5 million USD or greater 4. Upon filing of an Investigation of New 11,680 Drug ("IND") application with the US Food and Drug Administration ("USFDA"), or with similar agencies in Europe or Japan 5. Upon filing of a New Drug Application 23,360 ("NDA") with the USFDA or with similar agencies in Europe or Japan 6. Upon first commercial sales of an 46,720 Company product based on an NDA
(b) Upon the achievement of a Milestone set forth in paragraph 2 above thereby giving rise to the Option to exercise the number of shares indicated next to the Milestone as provided for herein, the Optionholder shall have thereafter thirty-six (36) months in which to exercise said Options ("Option Period"). Failure to remit to the Company the Exercise Price within said Option Period shall constitute an irrevocable waiver of the right to exercise said Option granted hereunder. Payment of the Exercise Price for all options exercised pursuant to this Agreement is due on transfer of the Company's Common Stock. Optionholder shall not be eligible to own any fractional shares of the Company's Common Stock and calculation of the option eligibility of the Optionholder shall at all times be rounded down to the nearest whole number of shares. (c) Notwithstanding any provision to the contrary, this Agreement and the Option granted hereunder shall automatically terminate and expire ten (10) years after the Effective Date. At such point in time, any Milestones not yet achieved which would have given rise to an Option as set forth herein and any rights related thereto shall also terminate. In no event shall any part of the option be exercisable after the expiration of the ten (10) years (referenced above) from the Effective Date. 3. Adjustment of Purchase Price and Number of Shares The number and kind of securities purchasable upon the exercise of this Option and the Purchase Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: 2 31 (a) Reclassification. In case of any reclassification or change of outstanding securities of the class issuable upon exercise of this Option (other than upon any consolidation or merger of the Company with or into another corporation unless this corporation is the surviving corporation, or upon the sale of all or substantially all of the assets of the Company) then, and in any such case, the holder of this Option, upon the exercise hereof at any time after the consummation of such reclassification or change shall be entitled to receive in lieu of each share of Stock theretofore issuable upon exercise of this Option, the kind and amount of shares of stock, other securities, money and property received upon such reclassification or change by a holder of one share of Stock. The provisions of this subsection (a) shall similarly apply to successive reclassification or changes. (b) Subdivision or Combination of Stock. If the Company at any time while this Option remains outstanding and unexpired shall subdivide or combine its Stock, the Purchase Price shall be proportionately decreased in the case of a subdivision or increased in the case of a combination. (c) Stock Dividends. If the Company at any time while this Option is outstanding shall pay a dividend with respect to Stock payable in Stock, or make any other distribution of Stock with respect to Stock (except any distribution specifically provided for in the foregoing subsections (a) or (b)), then the Purchase Price shall be adjusted, effective from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by a fraction, (a) the numerator of which shall be the total number of shares of Stock outstanding immediately prior to such dividend or distribution, and (b) the denominator of which shall be the total number of shares of Stock outstanding immediately after such dividend or distribution. (d) Non-Cash Dividends. If the Company at any time while this Option is outstanding shall pay a dividend with respect to Stock payable in securities other than Stock or other non-cash property, or make any other distribution of such securities or property with respect to Stock (except any distribution specifically provided for in the foregoing subsections (a) or (b)), then this Option shall represent the right to acquire upon exercise of this Option such securities or property which a holder of Stock would have been entitled to receive upon such dividend or distribution, without the payment by the holder of this Option of any additional consideration for such securities or property. (e) Adjustment of Number of Shares. Upon each adjustment in the Purchase Price, the number of Shares shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment in the Purchase Price by a fraction, the numerator of which shall be the Purchase Price immediately prior to such adjustment and the denominator of which shall be the Purchase Price immediately thereafter. (f) Notice of Adjustments. Whenever the Purchase Price shall be adjusted pursuant to Section 2 hereof, the Company shall issue a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated and the Purchase Price or Prices after giving effect to such adjustment, and the securities or other property for which this Option may then be exercised, and shall cause a copy of such certificate to be mailed (by first class mail, postage prepaid) to the holder of this Option. 3 32 4. Exercise Provisions (a) Manner of Exercise. This Option may be exercised in part or in whole only by the holder of this Option surrendering to the Company at its principal office in California, this Option, together with the exercise form attached to this Option duly executed by the holder together with payment to the Company in the amount obtained by multiplying the Purchase Price by the number of shares of Stock designated in the exercise form. Payment may be in cash or by bank check payable to the order of the Company. (b) Partial Exercise. On any partial exercise, the Company shall promptly issue and deliver to the holder of this Option a new Option or Options of like tenor in the name of that holder providing for the right to purchase that number of shares of Stock as to which this Option has not been exercised. (c) Net Exercise Rights. Notwithstanding the payment provisions set forth in this Section 4, the holder may elect to receive shares of Option Stock equal to the value (as determined below) of this Option by surrender of this Option at the principal office of the Company together with notice of such election, in which event the Company shall issue to the holder the number of shares of Common Stock determined by use of the following formula: X = Y(A-B) A Where: X = the number of shares of Common Stock to be issued to the holder. Y = the number of shares of Common Stock subject to this Option A = the Fair Market Value (as defined below) of one (1) share of Common Stock. B = the per share Purchase Price pursuant to this Option. For purpose of this Section 7, fair market value of a share as of a particular date shall mean: (i) If the Company's registration statement under the Act, covering its initial underwritten public offering of stock, has been declared effective by the Securities and Exchange Commission, then the fair market value of a share shall be calculated on the basis of the closing market price (last trade regular way if the Stock is traded on the New York or American Stock Exchange, and if not so traded, the last sale price or mean of the bid and asked prices as reported by NASDAQ) as of the date of exercise. (ii) If such a registration statement has not been declared effective, or if it has been declared effective but the offering is not consummated in accordance with the terms of the underwriting agreement between the Company and its underwriters relating to such registration statement, then as determined in good faith by the Company's Board of Directors upon a review of relevant factors. 5. Delivery of Stock Certificates Within a reasonable time after full or partial exercise of this Option, the Company at its expense will cause to be issued in the name of and delivered to the holder of this Option, a certificate or certificates for the number of fully paid and nonassessable shares of Stock to 4 33 which that holder shall be entitled upon such exercise, together with any other securities and property to which that holder is entitled upon such exercise under the terms of this Option. No fractional shares will be issued upon exercise of rights to purchase under this Option. If upon any exercise of this Option a fraction of a share results, the Company will pay the cash value of that fractional share, calculated on the basis of the closing market price (last trade regular way if the Stock is traded on the New York or American Stock Exchange, and if not so traded, the last sale price or mean of the bid and asked prices as reported by NASDAQ) as of the date of exercise, or, if the Stock is not publicly traded, then on the basis of the Company's good faith determination of the fair market value of the Stock. 6. Compliance with Securities Act; Disposition of Shares of Common Stock; Registration Rights (a) Compliance with Securities Act. The holder of this Option, by acceptance hereof, agrees that this Option and the Shares to be issued upon exercise hereof are being acquired for investment and that he will not offer, sell or otherwise dispose of this Option or any Shares to be issued upon exercise hereof except under circumstances which will not result in a violation of the Securities Act of 1933, as amended (the "Act"). Upon exercise of this Option, the holder hereof shall confirm in writing, in a form satisfactory to the Company, that the Shares are being acquired for investment and not with a view toward distribution or resale (unless sale of the Shares has been registered under the Act). Any proposed transferee of this Option or the Shares (except a transferee of the Shares in a registered public offering) will be required to agree to the provisions of this Section 6. Certificates representing all Shares (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, OR TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO THESE SECURITIES OR (II) THERE IS AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT AN EXEMPTION THEREFROM IS AVAILABLE. (b) Notice of Proposed Transfers. Prior to any proposed transfer of this Option or any of the Shares, unless there is in effect a registration statement under the Securities Act covering the proposed transfer, the holder thereof shall give written notice (the "Notice") to the Company of such holder's intention to make such transfer. The Notice shall describe the manner and circumstances of the proposed transfer in sufficient detail. If requested by the Company prior to the transfer being effected, the holder shall provide to the Company a written opinion of legal counsel who shall be reasonably satisfactory in form and substance to the Company's counsel, to the effect that the proposed transfer of the Option or the Shares may be effected without registration under the Securities Act. The holder of such securities shall be entitled to transfer such securities in accordance with the terms of the Notice only after the Company has consented in writing to such transfer. Each option or stock certificate evidencing the securities so transferred shall bear the appropriate restrictive legend set forth above, except that such certificate shall not bear such restrictive legend if in the opinion of counsel for the Company such legend is not required in order to establish compliance with any provisions of the securities laws. Transfer of the Option is further restricted by Section 7(f) hereof. 5 34 7. Miscellaneous Provisions (a) Reservation of Stock. The Company covenants, that it will at all times reserve and keep available, solely for issuance upon exercise of this Option, all shares of Stock or other securities from time to time issuable upon exercise of this Option. (b) Modification. This Option and any of its terms may be changed, waived, or terminated by a written instrument signed by the Company and the holders of the Options representing the right to acquire a majority of the shares of Stock then subject to issuance upon the exercise of the Options. (c) Replacement. On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Option and, in the case of loss, theft, or destruction, on delivery of any indemnity agreement or bond reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this Option, the Company at its expense will execute and deliver, in lieu of this Option, a new Option of like tenor. (d) Option Agent. The Company may, on written notice to the holder of this Option, appoint an agent having an office in California for the purposes of issuing Stock or other securities upon the exercise of this Option and of replacing or exchanging this Option, and after that appointment any such issuance, replacement, or exchange shall be made at that office by that agent. (e) No Rights as Shareholder. No holder of this Option, as such, shall be entitled to vote or receive dividends or be considered a shareholder of the Company for any purpose, nor shall anything in this Option be construed to confer on any holder of this Option as such, any rights of a shareholder of the Company or any right to vote, to give or withhold consent to any corporate action, to receive notice of meeting of shareholders, to receive dividends or subscription rights or otherwise. (f) Nontransferability. This Option may not be transferred or assigned without the prior written consent of the Company except, subject to Section 6(a) and (b), in its entirety to single purchaser who agrees to be bound by all the terms hereof including this paragraph. (g) Notices. Notices hereunder to the holder of this Option shall be sent by certified or registered mail to the address given to the Company by such holder and shall be deemed given when so mailed. (h) Governing Law. This Option shall be governed by the laws of the State of California as applied to contracts entered into in California between California residents. CALYPTE BIOMEDICAL CORPORATION By: /s/ JACK DAVIS ------------------------------------- Jack Davis 6 35 FORM OF EXERCISE (To be signed upon exercise of Option) To: Calypte Biomedical Corporation The undersigned holder of the attached Option hereby irrevocably elects to exercise the right to purchase _______________ shares of _____________ Stock of Calypte Biomedical Corporation and herewith makes payment of $_________ for those shares, and requests that the certificate for those shares be issued in the name of the undersigned and delivered to the address below the signature of the undersigned. The undersigned hereby affirms the statements and covenants in Section 6 of the Option. Dated: - --------------------------------- (Signature must conform in all respects to name of holder as specified on the face of the attached Option). ------------------------------------------- Signature ------------------------------------------- Address ------------------------------------------- 7 36 Milestones
Pepgen Shares Held % Held 1 2 3 4 5 6 Total - ------------------------------------------------------------------------------------------------------------------------ Chih-Ping Liu 1,850,000 46.72% 46,720 46,720 46,720 11,680 23,360 46,720 221,920 - ------------------------------------------------------------------------------------------------------------------------ Howard M. Johnson 1,000,000 25.25% 25,250 25,250 25,250 6,312 12,625 25,250 119,937 - ------------------------------------------------------------------------------------------------------------------------ Fuller W. Bazer 800,000 20.20% 20,200 20,200 20,200 5,050 10,100 20,200 95,950 - ------------------------------------------------------------------------------------------------------------------------ Cal-Wood Investments Ltd 60,000 1.52% 1,520 1,520 1,520 381 760 1,520 7,221 - ------------------------------------------------------------------------------------------------------------------------ Frederick M. Haney 250,000 6.31% 6,310 6,310 6,310 1,577 3,155 6,310 29,972 - ------------------------------------------------------------------------------------------------------------------------ Total 3,960,000 100.00% 100,000 100,000 100,000 25,000 50,000 100,000 475,000 ========================================================================================================================
EX-10.34 9 $1.0 MILLION PROMISSORY NOTE TO PEPGEN CORP. 1 EXHIBIT 10.34 SECURED NONRECOURSE PROMISSORY NOTE S1,000,000 Oakland, California October 12, 1995 FOR VALUE RECEIVED, the undersigned, CALYPTE BIOMEDICAL CORPORATION, a California corporation ("Maker"), promises to pay to the order of PEPGEN CORPORATION, a California corporation (together with any successors or assigns, "Payee"), having its address at 1440 Fourth Street, Berkeley, California 94710, the principal sum of One Million Dollars (S1,000,000) plus interest on the unpaid principal calculated at the rate of four percent (4%) per annum. This Note is made pursuant and subject to the provisions of that certain Master Stock Purchase Agreement between Maker, Payee and former preferred shareholders of Payee, dated September 19, 1995 (the "Purchase Agreement"), including but not limited to the provisions of Section 1.2(b) thereof pertaining to the redemption of the preferred stock in Payee purchased by Maker with the proceeds under this Note. All principal and accrued interest under this Note shall be due and payable in full not later than sixty (60) days following the earlier to occur of: (i) approval by the United States Food and Drug Administration of Payee's HIV screening assay, or (ii) completion of an initial Public Offering of Payee's stock, as that term is defined in Section 1.2(b) of the Purchase Agreement. All payments shall be payable to Payee at its address set forth above, or at such other place as Payee may designate from time to time in writing to Maker. All payments shall be applied first to the payment of interest due, then to the payment of other sums payable hereunder, and finally to the principal amount then remaining unpaid. This Note may be prepaid in whole or in part at any time without penalty or premium. Maker shall be deemed in default hereunder in the event (i) Maker shall fail to make payment of principal and accrued interest as and when due hereunder, or (ii) Maker shall fail to perform any other term, covenant or agreement Maker is obligated to perform or observe contained in this Note or the Pledge Agreement (as defined below). If an event of default is not cured within ten (10) days following written notice from Payee, then all sums owed hereunder shall, at the option of Payee, become immediately due and payable. Maker hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever hereunder. Maker agrees to pay all costs incurred by Payee in the collection or enforcement of this Note, including reasonable attorneys' fees. 2 This Note shall be secured by Maker's pledge of shares of stock in Payee pursuant to the terms and conditions of that certain Security and Pledge Agreement of even date herewith between Maker and Payee (the "Pledge Agreement"). Notwithstanding any provision to the contrary in this Note or the Pledge Agreement, this Note is nonrecourse. The holder hereof shall have no recourse to any assets or properties of Maker other than the collateral that is pledged by Maker pursuant to the Pledge Agreement. All references herein to Maker shall be deemed to include its successors and assigns and all obligations hereunder shall be binding upon its successors and assigns. This Note shall not be assigned by the holder thereof without the written consent of Maker. This Note shall be interpreted and enforced in accordance with the laws of the State of California, and shall be deemed to have been executed and delivered in the State of California. "Maker" CALYPTE BIOMEDICAL CORPORATION, a California Corporation By: /s/ JACK DAVIS ------------------------------ Name: Jack Davis ------------------------------ Its: President ------------------------------ 2 3 SECURITY AND PLEDGE AGREEMENT THIS SECURITY AND PLEDGE AGREEMENT ("Agreement") is made and entered into as of September 19, 1995, by and among PEPGEN CORPORATION, a California corporation ("Pledgee"), CALYPTE BIOMEDICAL CORPORATION, a California corporation ("Pledgor") and WENDEL, ROSEN, BLACK & DEAN ("Pledge Holder"). RECITALS A. Pledgor and Pledgee entered into that certain Master Stock Purchase Agreement, dated September 19, 1995, whereby Pledgor purchased from Pledgee 3,041,406 shares of Series A Preferred Stock of Pledgee (the "Shares"). B. The purchase price for the Shares was paid in part by delivery of Pledgor's Secured Nonrecourse Promissory Note, dated of or about even date herewith, in the principal sum of One Million Dollars ($1,000,000), a copy of which is attached hereto as Exhibit A (the "Note"). C. Pledgor has agreed to secure its obligations under the Note with a pledge of the Shares, subject to the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the above recitals of fact and the mutual covenants and obligations set forth herein, the parties hereby agree as follows: AGREEMENT 1. Appointment and Powers of Pledge Holder. Pledgor and Pledgee appoint Pledge Holder for the purposes set forth in this Agreement. Each of Pledgor and Pledgee hereby constitutes and appoints Pledge Holder as its attorney-in-fact for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument which Pledge Holder may reasonably deem necessary or appropriate to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest, that being Pledge Holder's rights and duties under this Agreement. 2. Pledge. As security for payment and performance of the Note, Pledgor hereby pledges and grants to Pledgee a security interest in (i) the Shares, and (ii) any warrants, options, or additional shares of Pledgee at any time and from time to time receivable or otherwise distributable in respect of, in exchange for or in substitution for any of the Shares, together with any proceeds thereof (collectively, the "Collateral"). Pledgor herewith deposits with Pledge Holder the Shares as represented by certificate no. PA-15, accompanied by stock powers executed in blank with respect thereto, which Shares and stock powers are to be held by Pledge Holder for use in accordance with the terms and provisions of this Agreement. Pledge 1 4 Holder may, but need not, have the Shares registered in its name as Pledge Holder pursuant to this Agreement. 3. Remedy Upon Default. In the event of default by Pledgor under the Note and its failure to be cured in accordance with the terms thereof, Pledgee's sole and exclusive remedy shall be to retain the Collateral in satisfaction of Pledgor's obligations to Pledgee hereby secured. Pledgee shall exercise this remedy by providing written notice thereof to Pledge Holder. Upon receipt of such notice from Pledgee, Pledge Holder shall deliver to Pledgee the Shares, any accompanying stock powers, and any other Collateral held by Pledge Holder. Pledgee acknowledges that: (i) Pledgor's obligations under the Note are non-recourse; and (ii) the foregoing remedy constitutes Pledgee's only remedy in the event of default by Pledgor under the Note. 4. Waiver of Law. Except as otherwise expressly specified in this Agreement, ail of the provisions of law governing the retention of pledged property and prescribing the conditions, demands, and notice of mailing with respect thereto are hereby expressly waived by Pledgor. 5. Nonwaiver. Should Pledge Holder postpone any action to be taken hereunder, or accept a payment on a date beyond the due date of the Note, such action shall not constitute a waiver of any of the rights of Pledgee hereunder or under the Note. 6. Assignment. This Agreement may be assigned by Pledgee only in connection with an assignment of the Note as may be permitted thereunder. 7. Enforcement. Should Pledgee be required to bring an action in law or in equity against Pledgor for the enforcement of any of the provisions of this Agreement, for the recovery of damages for breach of this Agreement or to resolve a controversy arising hereunder, then the losing party shall pay the costs of the prevailing party arising out of such action, including reasonable attorneys' fees. 8. Voting; Dividends. Voting rights to the Collateral are to be retained by Pledgor during the existence of this Agreement and so long as no default occurs under the Note. Upon any default under the Note, Pledgee shall, in addition to any other remedies permitted hereunder, be entitled to vote all shares held by Pledge Holder until such time as the default is cured by payment of the amount in default. Pledgor grants Pledgee an irrevocable proxy right to vote the Collateral in such case, which proxy is coupled with an interest, that being Pledgee's rights hereunder. Any and all cash dividends declared and paid on the Collateral during the term of this Agreement shall be paid to Pledgor, so long as Pledgor is not in default under the Note. 9. Release of Collateral. Upon payment of any portion of the principal sum under the Note, Pledge Holder shall deliver to Pledgor that percentage of the Collateral equal to the percentage of the principal of the Note represented by that particular payment. When all sums of principal and interest under the Note have been paid full, all Collateral held by Pledge Holder 2 5 shall be delivered to Pledgor, and this Agreement shall be terminated. The Collateral shall be released by Pledge Holder only after written notice from Pledgee or such other holder of the Note (or upon adequate proof submitted by Pledgor) that payment of principal and/or interest, as applicable, has been made as required hereunder. 10. Release of Pledge Holder. Pledgor and Pledgee hereby release Pledge Holder from any liability arising from Pledge Holder's performance hereunder, except liability for acts of gross negligence or willful misconduct. Without limiting the preceding sentence, Pledge Holder shall not be liable for failure of any of the conditions of the pledge or for failure to ascertain the terms or conditions, or comply with, any of the provisions of any agreement or other document referred to in this Agreement nor shall Pledge Holder be liable for the wrongful assertion by either Pledgor or Pledgee of its or their rights and/or remedies hereunder. Pledge Holder shall not be liable for forgeries or impersonations. Should any controversy arise between the parties hereto, or with any third person, Pledge Holder shall not be required to determine the same or take any action, but may await the settlement of such controversy by appropriate legal proceedings. Pledgor and Pledgee hereby agree to and shall indemnify, protect, defend and hold harmless Pledge Holder and its partners, agents, employees, directors, officers, and principals from all liabilities, obligations, losses, damages, actions, suits, costs and expenses (including, without limitation, attorneys' fees) of whatever kind or nature imposed on, incurred by, or asserted against Pledge Holder which are in any way related to or arise out of the execution and delivery of this Agreement or any action taken hereunder by Pledge Holder. 11. Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed to have been duly given to any party if delivered by hand, telexed, telecopied or mailed (certified or registered mail), with postage prepaid, to the parties at the addresses set forth on the signature pages hereof, or such other address as a party shall furnish to the others in writing. 12. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts thereof, individually or taken together, shall bear the signatures of all the parties reflected hereon as signatories. 13. Binding Effect. All powers, rights and privileges hereinabove given are to apply to and bind the heirs, executors and administrators of the parties hereto. 14. Further Cooperation. Each party to this Agreement agrees to execute and deliver such further documents and do such further acts and things as may be reasonably necessary to effectuate the purposes of this Agreement. 15. Governing Law. This Agreement shall be construed in accordance with and governed by the internal laws of the State of California. 3 6 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. PLEDGOR: PLEDGEE: CALYPTE BIOMEDICAL CORPORATION, PEPGEN CORPORATION, a California corporation a California corporation By: /s/ JACK DAVIS By: /s/ C.P. LIN --------------------------- --------------------------- Name: Jack Davis Name: C. P. Lin ------------------------- ------------------------- Title: President Title: President ------------------------ ------------------------ Address: 1440 Fourth Street Address: 19481 Pompano Lane, #104 Berkeley, CA 94710 Huntington Beach, CA 92648 PLEDGE HOLDER: WENDEL, ROSEN, BLACK & DEAN By: /s/ PETER PANG --------------------------- Name: Peter Pang --------------------------- Address: 1111 Broadway, 24th Floor Oakland, CA 94607 4 7 EXHIBIT A TO SECURITY AND PLEDGE AGREEMENT (to follow] 5 EX-10.35 10 EQUIPMENT LEASE W/ PHOENIX LEASING 1 EXHIBIT 10.35 MASTER EQUIPMENT LEASE AGREEMENT Agreement No.____________________ Dated as of August 20, 1993 between PHOENIX LEASING INCORPORATED 2401 Kerner Boulevard San Rafael, California 94901 as Lessor and CALYPTE BIOMEDICAL CORPORATION, a California corporation 1440 Fourth Street Berkeley, CA 94710 as Lessee LESSOR'S COMMITMENT: $1,150,000 Rent Factor: 12 months at 1.5% Initial Lease Term: 42 months followed by 30 months at 3.5% Minimum Funding Amount: $75,000 Maximum No. of Fundings: One per month Minimum Renewal Percentage: 1.3% Minimum Purchase Option Percentage: 10% (Does not apply to Tenant Improvements) Commitment Termination Date: June 30, 1994 Eligible Equipment: Scientific laboratory and test equipment; manufacturing equipment; and up to $200,000 of tenant improvements. The terms and information set forth on this cover page are a part of the MASTER EQUIPMENT LEASE AGREEMENT, dated as of the date first written above (this "Lease"), entered into by and between PHOENIX LEASING INCORPORATED ("Lessor") and the Lessee set forth above, the terms and conditions of which are as follows: 2 LESSOR'S OBLIGATIONS UNDER THIS LEASE AND EACH SCHEDULE ARE SUBJECT TO THE PRIOR SATISFACTION OF THE CONDITIONS SET FORTH ON RIDER I HERETO. 1. DEFINITIONS: Unless otherwise defined in this Lease (which term shall include the cover page, any Rider, any Exhibit or any Schedule hereto), capitalized terms shall have the following meanings: "Commitment Termination Date" means the date set forth opposite such term on the cover page of this Lease, or such earlier date on which Lessor terminates its commitment to fund pursuant to the terms of this Lease. "Delivery Date" means, with respect to any Schedule, the date first set forth on such Schedule. "Eligible Equipment" means Equipment of the types listed following such term on the cover page of this Lease to the extent acceptable to Lessor. "Environmental Law" means the Resource Conservation and Recovery Act of 1987, the Comprehensive Environmental Response, Compensation and Liability Act, and any other Federal, state or local statute, law, ordinance, code, rule, regulation, order or decree (in each case having the force of law) regulating or imposing liability or standards of conduct concerning, any Hazardous Materials or other hazardous, toxic or dangerous waste, constituent, or other substance, whether solid, liquid or gas, as now or at any time hereafter in effect. "Equipment" means all equipment, fixtures and personal property listed in any Schedule together with all replacement parts, additions, accessions and accessories to such equipment, fixtures and personal property. "Event of Default" shall have the meaning set forth in Section 12 hereof "Hazardous Materials" means any hazardous substance, pollutant or contaminant defined as such in any Environmental Law. "Initial Lease Term" means the period of months set forth opposite such term on the cover page of this Lease. "Initial Rent Factor" means the Rent Factor set forth on the cover page of this Lease calculated using the Initial Implicit Rate. "Interim Rental Payment" shall have the meaning set forth Section 3(a) of this Lease. "Lessor's Commitment" means the maximum amount that Lessor may be obligated to fund under the Lease, which amount is set forth opposite such term on the cover page of this Lease. "Lessor's Cost" with respect to a Unit of Equipment means the total cost to Lessor of purchasing such Unit of Equipment, as indicated on the applicable Schedule. "Maximum Number of Fundings" means the number of fundings under this Lease specified opposite such term on the cover page hereof. "Minimum Funding Amount" means the amount set forth opposite such term on the cover page of this Lease. "Minimum Purchase Option Percentage" means the percentage of Lessor's Cost set forth opposite such term on the cover page of this Lease. "Minimum Renewal Percentage" means the percentage set forth opposite such term on the cover page of this Lease. 1 3 "Rent Commencement Date" means the date, with respect to any Schedule, set forth in Section 3(a) of such Schedule, which shall be the first day of the calendar quarter immediately following the Delivery Date for such Schedule. "Rent Factor" means the percentages set forth opposite such term on the cover page of this Lease. "Rental Payment" means, for any Schedule, the monthly rent payment for the Units identified in such Schedule. "Schedule" or "Schedule No." means a schedule in the form of Exhibit E to this Lease identifying this Lease and incorporating this Lease by reference, which is executed by both parties hereto. "Stipulated Loss Value" shall have the meaning set forth in Section 11(e). "Term" means the Initial Lease Term, together with any renewal or extension thereof. "Treasury Base Rate" means the interest rate set forth opposite such term on the cover page of this Lease. "Treasury Constant Maturity" means the period of months set forth opposite such term on the cover page of this Lease. "Unit" means an item of Equipment. 2. LEASE: Lessor agrees to lease to Lessee and Lessee agrees to lease from Lessor the Equipment described in each Schedule on the terms and subject to the conditions specified herein and therein. Lessor's obligation to fund Schedules under this Lease shall terminate on the Commitment Termination Date. Lessor may, in its sole discretion, terminate its commitment herein to fund the Lessor's Commitment or any unfunded portion thereof at any time if: (a) there is any material adverse change to the general affairs, management, results of operations, condition (financial or otherwise) or prospects of Lessee, whether or not arising from transactions in the ordinary course of business, (b) there is any material adverse deviation by Lessee from the business plan of Lessee presented to and not disapproved in writing by Lessor, since the date first written on the cover page of this Lease, (c) any Event of Default exists, or (d) if any term or condition in any Schedule is not satisfied by the Delivery Date of such Schedule. This Lease shall constitute a "Finance Lease" under Division 10 of the California Uniform Commercial Code ("UCC"); provided, however, that the characterization of this Lease as a "Finance Lease' is for purposes of Division 10 of the UCC only, and shall not affect the accounting treatment of this Lease. This Lease, and Lessee's obligation to pay all rent and other sums hereunder, shall be absolute and unconditional, and shall not be subject to, and Lessee hereby waives any right of or to, abatement, reduction, set-off, defense or counterclaim. Lessee waives any and all rights and remedies conferred upon Lessee by UCC Sections 10508 through 10522, including (without limitation) Lessee's rights to (i) cancel or repudiate this Lease, (ii) reject or revoke acceptance of the leased property, (iii) recover damages from Lessor for breach of warranty or for any other reason, (iv) claim a security interest in any rejected property in Lessee's possession or control, (v) deduct from Rental Payments all or any part of any claimed damages resulting from Lessor's default under this Lease, (vi) accept partial delivery of the Equipment, (vii) "cover" by making any purchase or lease of other property in substitution for property due from Lessor, (viii) recover from the Lessor any general, special, incidental or consequential damages, for any reason whatsoever, and (ix) seek specific performance, replevin or the like for any of the Equipment. Lessee acknowledges that, at the time of each Schedule, it will have received and approved the terms of the agreements with the vendors under which Lessor will, subject to the terms and 2 4 conditions of this Lease, purchase the Units covered by such Schedule. The Units shall be leased for commercial purposes only, and not for consumer, personal, home or family purposes. This Lease describes the terms of, and is intended by the parties hereto to be, a true lease; provided, however, that the parties acknowledge that the terms and conditions of the Lease may, alternatively, create a secured financing or lease for security. If this Lease as supplemented by any Schedule constitutes a security agreement or lease for security, the Lessee hereby grants a security interest to Lessor in all of Lessee's right, title and interest in the Units described in Annex A to such Schedule and the proceeds thereof, to secure all of Lessee's obligations under this Lease and such Schedule. 3. TERM AND RENTALS: THIS LEASE SHALL BE EFFECTIVE UPON EXECUTION AND DELIVERY HEREOF by Lessee and Lessor. (a) The Initial Lease Term for each Schedule shall commence upon the Rent Commencement Date set forth in such Schedule. For the Initial Lease Term of such Schedule, Lessee agrees to pay Lessor aggregate rentals equal to the number of months in the Initial Lease Term of such Schedule multiplied by the amount of the Rental Payment specified in such Schedule. In addition, for the period from the Delivery Date of each Schedule until such Schedule's Rent Commencement Date, Lessee shall pay an interim rental ("Interim Rental Payment") equal to the product of (i) the total rental for the Initial Lease Term of such Schedule divided by 1,260 [42 x 30] and (ii) the actual number of days between the Delivery Date and the Rent Commencement Date, including the Delivery Date but excluding the Rent Commencement Date. Lessor will make reasonable efforts to send Lessee invoices for Rental Payments, but the failure to do so or the incorrectness of any invoice will not relieve Lessee of its obligation to pay all amounts, including Rental Payments, due under this Lease. The Interim Rental. Payment for each Schedule is due on the Delivery Date for such Schedule and the remaining Rental Payments are due commencing on the Rent Commencement Date and thereafter on the same date of each succeeding month of the Term, or as specified in the applicable Schedule. A late charge on any overdue payments shall accrue at the rate of 1.5% per month on the overdue amount, or the highest lawful rate, whichever is less. (b) It is not the intent of the parties to create rent or other payment obligations of Lessee which will be considered usurious under applicable law. However, if any such payment shall be found to be usurious by a court of competent jurisdiction, then Rental Payments or such other amounts shall automatically be reduced to the highest rate or amounts permitted by applicable law and the usurious portion of the Rental Payments or such other amounts shall be applied to the Lessee's remaining obligations under the Lease in a manner reasonably determined by Lessor. If Lessee retains possession of any Unit after the expiration or termination of this Lease, Rental Payments shall continue to be paid with respect to such Unit at the rate set forth in Section 3(a) of the Schedule relating to such Unit until all obligations of Lessee under this Lease relating to such Unit, including, without limitation, Rental Payments and payments due under Section 4 of this Lease, have been satisfied. This Lease may be terminated only as expressly provided herein. 4. LESSEE'S PURCHASE OF TENANT IMPROVEMENTS; OPTIONS AT END OF INITIAL LEASE TERM FOR NON-TENANT IMPROVEMENTS: 4A. Tenant Improvements. At the expiration of the Initial Lease Term of each Schedule covering tenant improvements, Lessee shall purchase all of the Units that are tenant 3 5 improvements under such Schedule for a purchase price equal to fifteen percent (15%) of Lessor's Cost of all such Units, plus any applicable sales or other transfer tax. 4B. Non-Tenant Improvements. (a) Provided that the Lease has not been terminated and that no Event of Default or event which, with notice or lapse of time or both, would become an Event of Default shall have occurred and be continuing, Lessee shall elect one of the following options in clauses (i) or (ii) below: (i) Lessee's Option to Renew: At the expiration of the Initial Lease Term of the first Schedule covering Units other than tenant improvements, Lessee may elect to renew the Lease with respect to all, but not less than all, of such Units under all Schedules to the Lease at their respective expiration dates for not less than twelve (12) months nor more than thirty-six (36) months for a rent equal to the "Fair Rental Value" (as defined in Section 4B(b) below) of such Units for such additional period, but in no event less than the Minimum Renewal Percentage of Lessor's Cost of such Units per month, which rent shall be paid monthly in advance. At the end of the renewal term, Lessee must purchase all of such Units for a purchase price equal to the Fair Market Value (as defined in Section 4B(b) below) plus any applicable sales or other transfer tax. (ii) Lessee's Option to Purchase: At the expiration of the Initial Lease Term of the first Schedule covering Units other than tenant improvements, Lessee may elect to purchase all, but not less than all, of such Units under all Schedules to the Lease at their respective expiration dates for a purchase price equal to the "Fair Market Value" (as defined in Section 4(b) below) thereof as of the end of the Initial Lease Term of the first Schedule covering Units other than tenant improvements, but in no event less than the Minimum Purchase Option Percentage of Lessor's Cost of all such Units nor greater than twenty-five percent (25%) of Lessor's Cost of all such Units, plus any applicable sales or other transfer tax. (iii) If neither of the foregoing options in clauses (i) or (ii) of this Section 4B(a) is duly exercised by Lessee, this Lease shall be renewed at the rental in effect immediately prior to the renewal with respect to all Units other than tenant improvements covered by the applicable Schedule from the expiration date of the Initial Lease Term of such Schedule on a month-to-month basis. Lessee may terminate any such extended term on 90 days' notice to Lessor and shall along with such notice elect one of the options in clauses (i) or (d) above. Either of the foregoing options in clauses (i) or (ii) shall be exercised by written notice delivered to Lessor not more than 180 days and not less than 120 days prior to the expiration of the Initial Lease Term of the Units which are subject to the first Schedule covering Units other than tenant improvements.. (b) Fair Market Value or Fair Rental Value, as the case may be, shall be determined on the basis of and shall be equal in amount to the value which would obtain in an arm's-length transaction between an informed and willing buyer-user or lessee-user (other than 4 6 a used equipment dealer) and an informed and willing seller or lessor under no compulsion to sell or lease, on the assumptions that: such Units (i) are being sold "in place and in use"; (ii) are free and clear of all liens and encumbrances; and (iii) are in the condition required upon the return of the Units under Section 9 of this Lease. In such determination, costs of removal from the location of current use shall not be a deduction from such value(s). (c) If the Lessor and Lessee have not agreed upon a determination of the Fair Market Value or Fair Rental Value of any Unit within 30 days after one of the parties has requested such determination, that determination shall be made by a certified independent appraiser approved by both Lessor and Lessee, such approvals not to be unreasonably withheld. The appraiser shall be furnished with a letter of instruction concerning the preparation of the appraisal, together with a copy of the Lease and Schedule and, to the extent available, related purchase orders and/or invoices. The appraiser shall be instructed to make such determination within 30 days following appointment. The determination made by the appraiser shall be final and binding on both Lessor and Lessee. The fees and expenses of any appraisal shall be paid by the Lessee, if such appraisal is needed for the Lessor's exercise of its remedies under Sections 12 and 13 hereof, and equally by the Lessor and Lessee otherwise. 4C. General. The purchase of the Units by Lessee pursuant to this Section 4 shall be "AS IS, WHERE IS", without recourse to or any warranty by Lessor, other than a warranty that the Units are free and clear of liens and encumbrances resulting from acts of Lessor. 5. WARRANTIES; INDEMNITY: (a) Lessee acknowledges that it has made the selection of each Unit based upon its own judgment. LESSOR MAKES NO EXPRESS OR IMPLIED WARRANTIES INCLUDING, WITHOUT LIMITATION, THOSE OF DESCRIPTION, INFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE WITH RESPECT TO THE EQUIPMENT AND HEREBY DISCLAIMS THE SAME. Lessor shall have no liability for any damages, whether direct or consequential, incurred by Lessee as a result of any defect or malfunction of a Unit. Lessee agrees to look solely to the manufacturer or vendor of any defective or malfunctioning Unit for the repair or replacement of such Unit and to continue to make all Rental Payments with respect to such Unit in spite of such defect or malfunction. Lessor hereby assigns to Lessee, for and during the Term, any warranty, guaranty or indemnity of the manufacturer or vendor issued to Lessor with respect to any Unit. (b) Lessee shall indemnify, reimburse and hold Lessor (including, without limitation, each of its partners) and each of their respective successors, assigns, officers, directors, shareholders, servants, agents and employees harmless from and against all liabilities, losses, damages, actions, suits, demands, claims of any kind and nature (including, without limitation, claims relating to environmental discharge, cleanup or compliance), and all costs and expenses whatsoever to the extent they may be incurred or suffered by such indemnified party in connection therewith (including, without limitation, reasonable attorneys' fees and expenses), fines, penalties (and other charges of applicable governmental authorities), licensing fees relating to any Unit, damage to or loss of use of property (including, without limitation, consequential or special damages to third parties or damages to Lessee's property), or bodily 5 7 injury to or death of any person (including, without limitation, any agent or employee of Lessee) (each a "Claim"), directly or indirectly relating to or arising out of the acquisition, use, lease or sublease, ownership, operation, possession, control, storage or condition of any Unit (regardless of whether such Unit is at the time in the possession of Lessee), the falsity of any non-tax representation or warranty of Lessee or Lessee's failure to comply with the terms of the Lease during the Term. The foregoing indemnity shall cover, without limitation, (i) any Claim in connection with a design or other defect (latent or patent) in any Unit, (ii) any Claim for infringement of any patent, copyright, trademark or other intellectual property right, (iii) any Claim resulting from the presence on or under or the escape, seepage, leakage, spillage, discharge, emission or release from any Unit of any Hazardous Materials, including, without limitation, any Claims asserted or arising under any Environmental Law, or (iv) any Claim for negligence or strict or absolute liability in tort; provided, however, that Lessee shall not indemnify Lessor for any liability incurred by Lessor as a direct and sole result of Lessor's gross negligence or willful misconduct. Such indemnities shall continue in full force and effect, notwithstanding the expiration or termination of this Lease. Upon Lessor's written demand, Lessee shall assume and diligently conduct, at its sole cost and expense, the entire defense of Lessor and its agents, employees, successors and assigns against any indemnified Claim described in this Section 5. Lessee shall not settle or compromise any Claim against or involving Lessor without first obtaining Lessor's written consent thereto, which consent shall not be unreasonably withheld. 6. TITLE, LOCATION AND RETURN: Lessor and Lessee hereby confirm their intent that the Equipment remain and be deemed personal property and that title thereto shall remain in Lessor. If requested by Lessor, Lessee will affix plates or markings on the Equipment indicating the interests of Lessor. Lessee may not remove the Equipment from its place of installation without Lessor's prior written consent, which consent shall not be unreasonably withheld. Lessor shall have the right to inspect the Equipment during regular business hours, with reasonable notice, and in compliance with Lessee's reasonable security procedures. If for any reason the Equipment is to be returned to Lessor on Lessor's demand hereunder, Lessee at its own risk and expense, will cause the Equipment to be delivered promptly to Lessor free of all Hazardous Materials and in the same condition as when delivered hereunder, ordinary wear and tear excepted, to such point in the United States as Lessor may designate and in such a manner as is consistent with the manufacturer's recommendations, if any, for transportation and packaging of such Equipment. All charges to cover Equipment transportation, deinstallation, storage until returned, packing, and handling and all other costs associated with a return of the Equipment to the location designated by Lessor shall be paid by Lessee. 7. SUBLEASE, ASSIGNMENT: Lessee acknowledges and agrees that Lessor may, subject to the terms of this Lease, sell, assign, grant a security interest in, or otherwise transfer all or any part of its rights, title and interest in this Lease and the Equipment. Upon Lessor's written notice, Lessee shall, if requested, pay directly to such assignee without abatement, deduction or set-off all amounts which become due hereunder. Lessee waives and agrees it will not assert against such assignee any counterclaim or set-off in any action for rent under the Lease. Such assignee shall have and be entitled to exercise any and all rights and remedies of Lessor hereunder, and all references herein to Lessor shall include Lessor's assignee. Lessee acknowledges that such a sale, assignment, grant or transfer would neither 6 8 materially change Lessee's duties nor materially increase the burdens or risks imposed on the Lessee under this Lease. LESSEE MAY NOT, WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, (i) SUBLEASE, TRANSFER, DISPOSE OF OR ASSIGN ITS RIGHTS IN RESPECT OF ANY UNIT OR ITS OBLIGATIONS UNDER THIS LEASE OR (ii) ASSIGN, GRANT A SECURITY INTEREST IN, OR OTHERWISE TRANSFER ALL OR ANY PART OF ITS RIGHTS, TITLE AND INTEREST IN AND TO THIS LEASE OR THE EQUIPMENT. 8. TAXES: Lessee agrees to pay if and when due, in addition to other amounts due hereunder and under each Schedule, all fees and assessments, and all sales, use, property, excise and other taxes and charges (including all interest and penalties) (collectively "Taxes"), now or hereafter imposed by any governmental body or agency upon any of the Equipment or upon the purchase, ownership, possession, leasing, operation, use, rentals or other payments, or disposition hereunder whether payable by Lessor or Lessee (exclusive of taxes on or measured by Lessor's net income). Lessee agrees to prepare and file promptly with the appropriate offices any and all tax and similar returns required to be filed with respect thereto, or, if requested by Lessor, to notify Lessor of such requirements and furnish Lessor with all information required by Lessor so that it may effect such filing, at Lessee's expense. Any Taxes paid by or imposed on, Lessor on behalf of Lessee shall become immediately due and payable on Lessor's demand. Lessor, as owner, shall be entitled to any and all depreciation and modified cost recovery deductions provided under the Internal Revenue Code of 1986, as amended from time to time and any other such tax benefits which may now or hereafter be available to an owner of such Equipment (collectively, "Tax Benefits"). If as a result of (i) the inaccuracy or breach of any of Lessee's representations, warranties and covenants herein or in any Schedule, or (ii) the acts or failure to act of Lessee or any person claiming an interest in the Equipment through the Lessee (other than a casualty or other event described in Section 11 with respect to which Stipulated Loss Value shall have been paid by Lessee), Lessor or any of its assigns shall lose, or shall not, in its reasonable opinion, have the right to claim, or there shall be disallowed, deferred or recaptured, any portion of the Tax Benefits with respect to a Unit (a "Loss of Tax Benefits") or there shall be included in Lessor's gross income any amounts other than Rental Payments in respect of the purchase price of any Unit (an "Inclusion"), then, on and after the next succeeding Rent Payment date after written notice to Lessee by Lessor, Lessee agrees as follows: The rent for the Equipment shall, on the Rent Payment date next succeeding Lessor's written notice to Lessee of Lessor's payment of any tax payment attributable to such Inclusion or of a Loss of Tax Benefits, be increased to such amount or amounts as shall, by the end of the original term of the last Schedule to this Lease, in the reasonable opinion of Lessor, after deduction of all fees, taxes, or other charges required to be paid by Lessor in respect of the receipt of all amounts payable by Lessee to Lessor under this Section 8 under the laws of any federal, state, or local government or taxing authority in the United States, cause Lessor's after-tax yield and cash flow in respect of the Equipment to equal those which would have been realized by Lessor if Lessor had not incurred such a Loss of Tax Benefits or had such an Inclusion. If any claim or contest regarding any tax indemnity covered by this Section 8 shall arise, such claim or contest shall be addressed or conducted, at Lessee's expense, in the manner reasonably specified by Lessor. 7 9 9. USE; MAINTENANCE: (a) Lessee, at its expense, shall make all necessary site preparations and cause the Equipment to be operated in accordance with any applicable manufacturer's manuals or instructions. So long as no Event of Default has occurred and is continuing, Lessee shall have the right to quietly possess and use the Equipment as provided herein without interference by Lessor. (b) Lessee, at its expense, shall maintain the Equipment in good condition, reasonable wear and tear excepted, and will comply with all laws, ordinances and regulations to which the use and operation of the Equipment may be or become subject. Such obligation shall extend to repair and replacement of any partial loss or damage to the Equipment, regardless of the cause. If maintenance is mandated by the manufacturer, Lessee shall obtain and keep in effect at all times during the Term maintenance service contracts with suppliers approved by Lessor, such approval not to be unreasonably withheld. All parts furnished in connection with such maintenance or repair shall immediately become part of the Equipment. All such maintenance, repair and replacement services shall be paid for and discharged by Lessee when due with the result that no lien will attach to the Equipment. Only qualified personnel of Lessee shall operate the Equipment. The Equipment shall be used only for the purposes for which it was designed. 10. INSURANCE: (a) Lessee shall obtain and maintain for the Term, at its own expense, (i) "all risk" insurance against loss or damage to the Equipment, (ii) commercial general liability insurance (including contractual liability, products liability and completed operations coverages) reasonably satisfactory to Lessor, and (iii) such other insurance against such other risks of loss and with such terms, as shall in each case be reasonably satisfactory to or reasonably required by Lessor (as to carriers, amounts and otherwise). (b) The amount of the "all risk" insurance shall be the greater of the replacement value of the Equipment (as new) or the "Stipulated Loss Value" specified in the applicable Schedules, which amount shall be determined to Lessor's reasonable satisfaction as of each anniversary date of this Lease with the amount so determined being put into effect on the next succeeding renewal or inception date of such insurance. (c) The deductible with respect to "all-risk" insurance required by clause (b) above and product liability insurance required by clause (a) above shall not exceed $25,000; otherwise there shall be no deductible with respect to any insurance required to be maintained hereunder. (d) The amount of commercial general liability insurance (other than products liability coverage and completed operations insurance) required by clause (a) above shall be at least $2,000,000 per occurrence. The amount of the products liability and completed operations insurance required by clause (a) above shall be at least (i) $1,000,000 per occurrence until the earlier of (A) the date Lessee commences commercial sales of its products, or (B) January 1, 1994, and (ii) thereafter, $5,000,000 per occurrence. (e) Each "all risk" policy shall: (i) name Lessor as sole loss payee with respect to the Equipment, (ii) provide for each insurer's waiver of its right of subrogation against Lessor and Lessee, and (iii) provide that such insurance (A) shall not be invalidated by any action of Lessee, or any breach by Lessee of any provision of any of its insurance policies, and (B) shall waive set-off, counterclaim or offset against Lessor. Each liability policy shall (w) name Lessor as an additional insured and (x) provide that such insurance shall have cross-liability and severability of interest endorsements (which shall not increase the aggregate policy limits of Lessee's insurance). All insurance policies (y) shall provide that Lessee's insurance shall be primary without a right of contribution of Lessor's insurance, if any, or any obligation on the part of Lessor to pay premiums of Lessee, and (z) shall contain a clause requiring the insurer to give 8 10 Lessor at least 30 days' prior written notice of its cancellation (other than cancellation for non-payment for which 10 days' notice shall be sufficient). Lessee shall on or prior to the Delivery Date of Schedule No. 1 and prior to each policy renewal, furnish to Lessor certificates of insurance or other evidence satisfactory to Lessor that such insurance coverage is in effect. Lessee further agrees to give Lessor prompt notice of any damage to, or loss of, the Equipment, or any part thereof. 11. LOSS; DAMAGE; DESTRUCTION AND SEIZURE: (a) Lessee shall bear the risk of the Units being lost, stolen, destroyed, damaged or seized by governmental authority for any reason whatsoever at any time until the latest to occur of (i) the expiration or termination of the Term or (ii) any storage period thereafter or (iii) the return of the subject Unit to Lessor (if authorized hereunder), and shall proceed diligently and cooperate fully to recover any and all damages, insurance proceeds or condemnation awards. (b) Except as described in Section 11(c) hereof, if during the Term or the storage period thereafter, any Unit shall be lost, stolen, destroyed, irreparably damaged. or seized by governmental authority for a period equal to at least the remainder of the Term, Lessor shall receive from the proceeds of insurance obtained pursuant to Section 10 hereof, from any award paid by the seizing governmental authority and, to the extent not received from the proceeds of such insurance or award or both, from Lessee, on or before the Rental Payment date next succeeding such loss, theft, destruction, damage or governmental seizure: (i) all accrued and unpaid rent in respect of such Unit including rent due on the rental payment date next succeeding the date of such loss or seizure if the rent is in arrears; (ii) the Stipulated Loss Value of such Unit, determined as of such Rental Payment date; (iii) all other sums, if any, that shall have become due and payable hereunder; and (iv) interest on the foregoing at the lower of the rate equal to 1.5% per month or the highest rate then permitted by applicable law from the due date(s) of such payment(s) to the date of payment. On receipt by Lessor of the amount specified hereinabove with respect to each such Unit so lost, stolen, destroyed, damaged or seized, (i) this Lease shall be deemed terminated as to such Unit and rent in respect of such Unit shall be deemed abated, as of the Rental Payment date next succeeding such loss, theft, damage, destruction or seizure; and (ii) so long as no default or Event of Default has occurred and is continuing hereunder, Lessor shall on demand, transfer title to such Unit, "AS IS, WHERE IS, WITHOUT RECOURSE, REPRESENTATION OR WARRANTY," to Lessee, or, if appropriate in Lessor's sole judgment, which judgment shall be exercised in a reasonable manner, and on prior notice to Lessee, to Lessee's insurance carrier. Any proceeds of insurance payable to Lessor pursuant to this Section 11 and Section 10 hereof received by Lessee shall be paid to Lessor promptly upon their receipt by Lessee. If any proceeds of insurance or awards received from governmental authorities are in excess of the amount owed under this Section 11(b), Lessor shall promptly remit to Lessee the amount in excess of the amount owed to Lessor. (c) So long as no Event of Default shall have occurred and be continuing, any proceeds of insurance obtained pursuant to Section 10 hereof received with respect to any Unit the repair of which is practical shall, at the election of Lessee, be applied either to the repair of such Unit or, upon Lessor's receipt of evidence of the repair of the Unit reasonably satisfactory to Lessor, to the reimbursement of Lessee for the cost of such repair. (d) Lessee shall promptly, but in any event within 30 days thereafter, notify Lessor in writing in reasonable detail of any loss, theft, destruction or seizure described in this Section 11. (e) The Stipulated Loss Value payable by Lessee under this Lease shall be that percentage of Lessor's Cost of the affected Unit(s) set forth in the table attached to the applicable Schedule as Annex B opposite the 9 11 Rental Payment date next following the event giving rise to Lessee's obligation to pay Stipulated Loss Value. Stipulated Loss Values and Rental Payments shall not be prorated. 12. EVENTS OF DEFAULT: An "Event of Default" shall occur if Lessee: (a) fails to pay/make any Rental Payment or other payment required hereunder when due and such failure continues for a period of 10 days; or (b) fails to perform or observe any other material covenant, condition or agreement hereunder or breaches any provision contained herein or in any other document furnished Lessor in connection herewith, and such failure or breach continues for a period of 30 days after written notice by Lessor; or (c) makes any representation or warranty herein or in any document furnished in connection herewith, which shall have been materially false or inaccurate when made; or (d) fails to maintain insurance under this Lease or otherwise required by the Lessor hereunder; or (e) shall admit in writing that it is unable to pay its debts as they become due, become insolvent or bankrupt or make an assignment for the benefit of its creditors or consents to the appointment of a trustee or receiver or insolvency proceedings shall be instituted by or against Lessee. 13. REMEDIES: Upon the occurrence of any Event of Default and at any time thereafter, provided such Event of Default is then continuing (which occurrence, for purposes of clause (a)(ii)(B) below is the day Lessee shall be deemed to tender possession of the Equipment to Lessor), (a) Lessor may, in its discretion, do any one or more of the following, all of which Lessor and Lessee expressly agree are commercially reasonable under the UCC and any other applicable law: (i) terminate this Lease; (ii) declare to be immediately due and payable: (A) all unpaid rent and sums then due and payable under this Lease (other than amounts payable under clause (B) hereof, if any,) plus (B) an amount equal to the greater of the then applicable Stipulated Loss Value (which value Lessee acknowledges has a reasonable discount rate implicit therein) or the then applicable fair market value of the Equipment as determined by Lessor (but in no event less than an amount equal to the Minimum Purchase Option Percentage of Lessor's Cost); (iii) require that Lessee return all Equipment to Lessor in accordance with Section 6 hereof; (iv) enter upon the premises where such Equipment is located and take immediate possession of and remove the same, all without liability to Lessor or its agents for such entry; (v) sell any or all of the Equipment at public or private sale, with or without notice to Lessee or advertisement, or otherwise dispose of, hold, use, operate, lease to others or keep idle such Equipment, all free and clear of any rights of Lessee and without any duty to account to Lessee for such action or inaction or for any proceeds with respect thereto subject to applicable law; (vi) exercise any other right or remedy which may be available under the UCC or other applicable law including the right to recover damages for the breach hereof. (b) In addition, Lessee shall be liable for, and reimburse Lessor for, all reasonable and necessary attorneys' fees and other expenses incurred by Lessor as a result of the foregoing defaults, or the exercise of Lessor's remedies, including without limitation placing any Equipment in the condition required by Section 9 hereof. No remedy referred to in this Section 13 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to Lessor at law or in equity. (c) There shall be no waiver by Lessor of any default unless in writing and such waiver shall not constitute a waiver of any other default by Lessee, or a waiver of any of Lessor's other rights. Lessee waives any rights now or hereafter conferred by statute or otherwise that may require Lessor to sell, re-lease or otherwise use or dispose any Unit in mitigation of the 10 12 Lessor's damages or that might otherwise limit or modify any of Lessor's rights or remedies under this Lease. 14. LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS: (a) Lessee warrants and represents the following as of the date hereof: (i) Lessee is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and is duly qualified and authorized to do business in the state where the Equipment will be located; (ii) Lessee has the full corporate power, authority and legal right and has obtained all necessary approvals, consents and given all notices to execute and deliver this Lease and perform the terms hereof and of each Schedule; (iii) there is no action, proceeding or patent claim pending or, insofar as Lessee knows, threatened against Lessee or any of its subsidiaries before any court or administrative agency which might have a materially adverse effect on the business, condition or operations of Lessee or such subsidiary; and (iv) this Lease has been and each Schedule will be duly executed and delivered by Lessee and constitute or will constitute the valid, binding and enforceable obligations of Lessee. (b) Lessee agrees that by its signature on each Schedule it shall be deemed to have warranted and represented the following as of the Delivery Date of such Schedule: (i) all of the Units being delivered on the Delivery Date of such Schedule are accurately described in Annex A attached to such Schedule, have been fully assembled and conform to all applicable performance criteria; (ii) the requirements of this Lease and of Lessor with respect to the identification of the Units have been met; and (iii) except as set forth in Annex C to the applicable Schedule, each of the representations and warranties set forth in clause (a) of this Section 14 remains true and correct. (c) Lessee covenants and agrees that it shall not, without Lessor's prior written consent, attempt, cause or permit another to sell, transfer, encumber, part with possession, or sublet, voluntarily or involuntarily, any Unit. 15. NOTICES. All notices (and financial information required to be delivered to Lessor under Section 16(c) of this Lease) shall be addressed as follows: If to Lessor: PHOENIX LEASING INCORPORATED 2401 Kerner Boulevard San Rafael, California 94901 Attn: Lease Administration If to Lessee, at the address set forth on the cover page of this Lease. 16. MISCELLANEOUS: (a) Any notices hereunder shall be in writing and shall be deemed given when delivered personally, by private courier, by facsimile transmission or sent by certified mail, postage prepaid, addressed to the other party at its address set forth herein or to such other address as either party may designate in writing. Such notices or demands shall be deemed given upon receipt in the case of personal delivery, mailing or facsimile transmission. (b) Lessee will promptly execute and deliver to Lessor such further reasonable documents (including, but not limited to, financing statements) and take such further reasonable action (such as obtaining landlord or mortgagee's waivers), as Lessor may request 11 13 in order to more effectively carry out the intent and purpose of this Lease or an assignment of Lessor's interest herein. (c) Lessee shall furnish to Lessor monthly and audited annual financial statements and such other financial information as Lessor may reasonably request from time to time. (d) This Lease constitutes the entire agreement on the subject matter hereof between the parties hereto (other than any document executed in connection herewith) and shall be binding upon and inure to the benefit of the parties hereto, their permitted successors and assigns. (e) Any provision of the Lease which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof; and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. (f) Time is of the essence with respect to the Lease. (g) The captions set forth herein are for convenience only and shall not define or limit any of the terms hereof. (h) The language in this Lease and the related documents is to be construed as to its fair meaning and not strictly for or against any party. (i) All payments shall be paid to the address designated by Lessor in the applicable Schedule or otherwise in a writing signed by Lessor. (j) Lessee's and Lessor's obligations hereunder shall survive the expiration and termination of the Term to the extent required for full performance and satisfaction thereof. (k) ALL MATTERS INVOLVING THE CONSTRUCTION, VALIDITY, PERFORMANCE AND ENFORCEMENT OF THIS LEASE WILL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. This Lease is being executed in the State of California and is to be performed in such State. Lessee agrees and consents that the Superior Court of the State of California for the County of Marin or the Federal District Court for the jurisdiction in that County shall have jurisdiction and shall be the venue for determination of all controversies, disputes and actions arising under this Lease. Nothing contained herein is intended to preclude Lessor from commencing any action under this Lease in any court having jurisdiction thereof. (1) This Lease may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and same instrument; provided, however, that to the extent, if any, that this Lease constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart of this Lease other than the original executed counterpart of this Lease, which shall be identified as such counterpart. 17. AMENDMENTS, MODIFICATIONS, WAIVERS: NONE OF THE PROVISIONS OF THIS LEASE MAY BE AMENDED, MODIFIED OR WAIVED EXCEPT IN A WRITING SIGNED BY LESSOR AND LESSEE. INITIALS___________(LESSOR) INITIALS___________ (LESSEE) 12 14 This Lease is hereby duly executed by the parties hereto as set forth below. LESSEE: LESSOR: CALYPTE BIOMEDICAL CORPORATION PHOENIX LEASING INCORPORATED BY: PAUL SIEGEL BY: N.H. NELSON ------------------------------- NAME (PRINT):PAUL SIEGEL NAME (PRINT): N. H. NELSON TITLE: CHIEF FINANCIAL OFFICER TITLE: VP DATE:05/19/93 DATE: 05/27/93 This Lease incorporates the following Riders as if set forth herein: Rider I;______________; ______________; ______________ INITIALS N.H.N. (LESSOR) INITIALS P.S. (LESSEE) Exhibit A - Warrant Exhibit B - Landlord Waiver Exhibit C - Purchase Order and Invoice Assignment Exhibit D - Bill of Sale Exhibit E - Form of Schedule Exhibit F - Security Deposit Pledge Agreement 13 15 RIDER I TO MASTER EQUIPMENT LEASE AGREEMENT NO.- DATED AUGUST 20, 1993 Conditions to Lessor's Obligations By their initials below and on the signature page of the Master Equipment Lease Agreement referenced in the upper right corner of this page, Lessor and Lessee agree that the Lease incorporates the following terms: 1. On or prior to the date of execution of the Lease by Lessor, Lessor shall have received in form and substance satisfactory to Lessor: (a) A Warrant substantially in the form of Exhibit A hereto. (b) A Security Deposit Pledge Agreement in the form of Exhibit F hereto. (c) A legal opinion of Lessee's legal counsel in form and substance reasonably satisfactory to Lessor. (d) Copies, certified by the Secretary or Assistant Secretary or Chief Financial Officer of Lessee, of: (A) the Articles of Incorporation and By-Laws of Lessee (as amended to the date of the Lease) and (B) the resolutions adopted by Lessee's board of directors authorizing the execution and delivery of this Lease, the Schedules, the Warrant and the other documents referred to herein and the performance by Lessee of its obligations hereunder and thereunder; (e) Unless the opinion of Lessor's legal counsel contains language to the same effect, a Good Standing Certificate (including franchise tax status) with respect to Lessee from Lessee's state of incorporation, dated a date reasonably close to the date of acceptance of the Lease by Lessor. (f) Evidence of the insurance coverage required by Section 10 of the Lease. (g) All necessary consents of shareholders and other third parties with respect to the subject matter of the Lease, the Schedules and the Warrant. (h) All other documents as Lessor shall have reasonably requested. 2. Prior to any funding on a Delivery Date, Lessee shall Have satisfied all of the conditions set forth in the applicable Schedule. Initials______________(Lessor) Initials______________(Lessee) RIDER I 16 EXHIBIT A WARRANT 17 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS WARRANT. CALYPTE BIOMEDICAL CORPORATION WARRANT TO PURCHASE 122,667 SHARES OF COMMON STOCK THIS CERTIFIES THAT, for value received, Phoenix Leasing Incorporated is entitled to subscribe for and purchase 122,667 shares of the fully paid and nonassessable Common Stock, $.001 par value (as adjusted pursuant to Section 4 hereof, the "Shares") of Calypte Biomedical Corporation, a California corporation (the "Company"), at the price of $.75 per share (such price and such other price as shall result, from time to time, from the adjustments specified in Section 4 hereof is herein referred to as the "Warrant Price"), subject to the provisions and upon the terms and conditions hereinafter set forth. As used herein, (a) the term "Common Stock" shall mean the Company's presently authorized Common Stock, and any stock into or for which such Common Stock may hereafter be converted or exchanged, (b) the term "Date of Grant" shall mean August 20, 1993, and (c) the term "Other Warrants" shall mean any other warrants issued by the Company in connection with the transaction with respect to which this Warrant was issued, and any warrant issued upon transfer or partial exercise of this Warrant. The term "Warrant" as used herein shall be deemed to include Other Warrants unless the context clearly requires otherwise. 1. Term. The purchase right represented by this Warrant is exercisable, in whole or in part, at any time and from time to time from the Date of Grant through the later of (i) ten (10) years after the Date of Grant or (ii) five (5) years after the closing of the Company's initial public offering of its Common Stock effected pursuant to a Registration Statement on Form S-1 (or its successor) filed under the Securities Act of 1933, as amended (the "Act"). 2. Method of Exercise; Payment; Issuance of New Warrant. Subject to Section I hereof, the purchase right represented by this Warrant may be exercised by the holder hereof, in whole or in part and from time to time, by either, at the election of the holder hereof, (a) the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A duly executed) at the principal office of the Company and by the payment to the Company, by 18 check, of an amount equal to the then applicable Warrant Price multiplied by the number of Shares then being purchased, or (b) if in connection with a registered public offering of the Company's securities, the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A-1 duly executed) at the principal office of the Company together with notice of arrangements reasonably satisfactory to the Company for payment to the Company either by check or from the proceeds of the sale of shares to be sold by the holder in such public offering of an amount equal to the then applicable Warrant Price per share multiplied by the number of Shares then being purchased. The person or persons in whose name(s) any certificate(s) representing shares of Common Stock shall be issuable upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the shares represented thereby (and such shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised. In the event of any exercise of the rights represented by this Warrant, certificates for the shares of stock so purchased shall be delivered to the holder hereof as soon as possible and in any event within thirty days after such exercise and, unless this Warrant has been fully exercised or expired, a new Warrant representing the portion of the Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof as soon as possible and in any event within such thirty-day period. 3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance pursuant to the terms and conditions herein, be fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof. During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of the issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Adjustment of Warrant Price and Number of Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: (a) Reclassification or Merger. In case of any reclassification, change or conversion of securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in case of any merger of the Company with or into another corporation (other than a merger with another corporation in which the Company is the acquiring and the surviving corporation and which does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant), or in case of any sale of all or substantially all of the assets of the Company, the Company, or such successor or purchasing corporation, as the case may be, shall duly execute and deliver to the holder of this Warrant a new Warrant (in form and substance satisfactory to the holder of this Warrant), so that the holder of this Warrant shall have the right to receive, at a total purchase price not 2 19 to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the shares of Common Stock theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification, change or merger by a holder of the number of shares of Common Stock then purchasable under this Warrant. Such new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 4. The provisions of this subparagraph (a) shall similarly apply to successive reclassifications, changes, mergers and transfers. (b) Subdivision or Combination of Shares. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its outstanding shares of Common Stock, the Warrant Price shall be proportionately decreased in the case of a subdivision or increased in the case of a combination, effective at the close of business on the date the subdivision or combination becomes effective. (c) Stock Dividends and Other Distributions. If the Company at any time while this Warrant is outstanding and unexpired shall (i) pay a dividend with respect to Common Stock payable in Common Stock, or (ii) make any other distribution with respect to Common Stock (except any distribution specifically provided for in the foregoing subparagraphs (a) and (b)) of Common Stock, then the Warrant Price shall be adjusted, from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by multiplying the Warrant Price in effect immediately prior to such date of determination by a fraction (i) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and (ii) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution. (d) Adjustment of Number of Shares. Upon each adjustment in the Warrant Price, the number of Shares of Common Stock purchasable hereunder shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment in the Warrant Price by a fraction, the numerator of which shall be the Warrant Price immediately prior to such adjustment and the denominator of which shall be the Warrant Price immediately thereafter. (e) Antidilution Rights. In the event that the "Conversion Price" (as defined in the Company's Restated Articles of Incorporation, as amended through the Date of Grant, a true and complete copy of which is attached hereto as Exhibit B (the "Charter")), for the Company's Series D Preferred Stock is reduced from time to time prior to December 16, 1993 pursuant to the antidilution rights applicable to the Series D Preferred Stock set forth in Section 6.C.(a)(i)(I) of Article III of the Charter (other than reductions covered by Sections 4(b) or (c) of this Warrant), then the same reduction shall forthwith be made to the Warrant Price, subject to proportionate adjustment to reflect any stock split or combination, stock dividend or similar event occurring after the Date of Grant. The intent of this Section 4(e) is to provide the holder of this Warrant with the same antidilution protection as would have 3 20 prevailed prior to December 16, 1993 if this Warrant had entitled the holder hereof to purchase shares of the Company's Series D Preferred Stock (rather than Common Stock), as such antidilution protection is set forth in the Charter. Such antidilution rights shall not be amended, modified or waived in any manner that is materially adverse to the holder hereof without such holder's prior written consent. The Company shall promptly provide the holder hereof with any restatement, amendment, modification or waiver of the Charter promptly after the same has been made. 5. Notice of Adjustments. Whenever the Warrant Price or the number of Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the Company shall make a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment the amount of the adjustment, the method by which such adjustment was calculated, and the Warrant Price and the number of Shares purchasable hereunder after giving effect to such adjustment, which shall be mailed (without regard to Section 13 hereof, by first class mail, postage prepaid) to the holder of this Warrant. 6. Fractional Shares. No fractional shares of Common Stock will be issued in connection with any exercise hereunder, but in lieu of such fractional shares the Company shall make a cash payment therefor based on the fair market value of the Common Stock on the date of exercise as reasonably determined in good faith by the Company's Board of Directors. 7. Compliance with Securities Act: Disposition of Warrant or Shares of Common Stock. (a) Compliance with Securities Act. The holder of this Warrant, by acceptance hereof, agrees that this Warrant, and the shares of Common Stock to be issued upon exercise hereof are being acquired for investment and that such holder will not offer, sell or otherwise dispose of this Warrant, or any shares of Common Stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Act. Upon exercise of this Warrant, unless the Shares being acquired are registered under the Act or an exemption from such registration is available, the holder hereof shall confirm in writing, by executing the form attached as Schedule 1 to Exhibit A hereto, that the shares of Common Stock so purchased are being acquired for investment and not with a view toward distribution or resale. This Warrant and all shares of Common Stock issued upon exercise of this Warrant (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form: "THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH RE- 4 21 GISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY." In addition, in connection with the issuance of this Warrant, the holder specifically represents to the Company by acceptance of this Warrant as follows: (1) The holder is aware of the Company's business affairs and financial condition, and has acquired information about the Company sufficient to reach an informed and knowledgeable decision to acquire this Warrant. The holder is acquiring this Warrant for its own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Act. (2) The holder understands that this Warrant has not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the holder's investment intent as expressed herein. In this connection, the holder understands that, in the view of the SEC, the statutory basis for such exemption may be unavailable if the holder's representation was predicated solely upon a present intention to hold the Warrant for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Warrant, or for a period of one year or any other fixed period in the future. (3) The holder further understands that this Warrant must be held indefinitely unless subsequently registered under the Act and any applicable state securities laws, or unless exemptions from registration are otherwise available. Moreover, the holder understands that, except as provided in Section 9 hereof, the Company is under no obligation to register this Warrant. (4) The holder is aware of the provisions of Rule 144 and 144A, promulgated under the Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly, from the issuer thereof (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions, if applicable, including, among other things: The availability of certain public information about the Company, the resale occurring not less than two years after the party has purchased and paid for the securities to be sold; the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934, as amended) and the amount of securities being sold during any three- month period not exceeding the specified limitations stated therein. (5) The holder further understands that at the time it wishes to sell this Warrant there may be no public market upon which to make such a sale, and that, even if such a public market then exists, the Company may not be satisfying the current public information re- 5 22 quirements of Rule 144 and 144A, and that, in such event, the holder may be precluded from selling this Warrant under Rule 144 and 144A even if the two-year minimum holding period had been satisfied. (6) The holder further understands that in the event all of the requirements of Rule 144 and 144A are not satisfied, registration under the Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 and 144A are not exclusive, the Staff of the SEC has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 and 144A will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. (b) Disposition of Warrant or Shares. With respect to any offer, sale or other disposition of this Warrant or any shares of Common Stock acquired pursuant to the exercise of this Warrant prior to registration of such Warrant or shares, the holder hereof and each subsequent holder of this Warrant agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder's counsel, if reasonably requested by the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state law then in effect) of this Warrant or such shares of Common Stock and indicating whether or not under the Act certificates for this Warrant or such shares of Common Stock to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with such law. Promptly upon receiving such written notice and reasonably satisfactory opinion, if so requested, the Company, as promptly as practicable, shall notify such holder that such holder may sell or otherwise dispose of this Warrant or such shares of Common Stock, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this subsection (b) that the opinion of counsel for the holder is not reasonably satisfactory to the Company, the Company shall so notify the holder promptly after such determination has been made and shall specify in detail the legal analysis supporting any such conclusion. Notwithstanding the foregoing, this Warrant or such shares of Common Stock may, as to such federal laws, be offered, sold or otherwise disposed of in accordance with Rule 144 or 144A under the Act, provided that the Company shall have been furnished with such information as the Company may reasonably request to provide a reasonable assurance that the provisions of Rule 144 or 144A have been satisfied. Each certificate representing this Warrant or the shares of Common Stock thus transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the holder, such legend is not required in order to ensure compliance with such laws. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. 6 23 (c) Excepted Transfers. Neither any restrictions of any legend described in this Warrant nor the requirements of Section 7(b) above shall apply to any transfer without any additional consideration of, or grant of a security interest in, this Warrant or any part hereof (i) to a partner of the holder if the holder is a partnership, (ii) by the holder to a partnership of which the holder is a general partner, or (iii) to any affiliate of the holder if the holder is a corporation; provided, however, in any such transfer, the transferee shall on the Company's request agree in writing to be bound by the terms of this Warrant as if an original signatory hereto. 8. Rights as Shareholders; Information. No holder of this Warrant, as such, shall be entitled to vote or receive dividends or be deemed the holder of Common Stock or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein. Notwithstanding the foregoing, the Company will transmit to the holder of this Warrant such information, documents and reports as are generally distributed to the holders of any class or series of the securities of the Company concurrently with the distribution thereof to the shareholders. 9. Registration Rights. The Company covenants and agrees as follows: 9.1 Definitions. For purposes of this Section 9: (a) The term "Registrable Shares" means (i) the Common Stock issuable or issued upon exercise or conversion of this Warrant or upon exercise or conversion of the Other Warrants, and (ii) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such Common Stock; (b) The term "Shareholder" means any person owning or having the right to acquire Registrable Shares or any assignee thereof in accordance with Paragraph 9.3 hereof; and (c) The term "Registration Rights" means Section 9 (other than Sections 9.1, 9.3 and 9.4) of the Agreement for the Purchase and Sale of Series D Preferred Stock dated as of December 16, 1992 by and among the Company and the investors who are signatories thereto (the "Purchase Agreement"). 9.2 Grant of Rights. The Company hereby grants to the Shareholders the rights set forth in the Registration Rights. A true and complete copy of the Registration 7 24 Rights is attached hereto as Exhibit C. The Company represents and warrants to the Shareholders that the Company has obtained all consents of parties to the Purchase Agreement and of any other persons that are required in order for the Registrable Shares to be included in the definition of "Registrable Securities" and for the Shareholders to be included in the definition of "Holders," as such terms are used in the Registration Rights. 9.3 Assignment of Registration Rights. Notwithstanding any provision of the Registration Rights, the rights to cause the Company to register Registrable Shares pursuant to the Registration Rights and this Section 9 may be assigned by a Shareholder to a transferee or assignee of such securities provided the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; and provided, further, that such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act. 9.4 No Conflicting Agreements. The Company represents and warrants to the Shareholders that the Company is not a party to any agreement that conflicts in any manner with the Shareholders' rights to cause the Company to register Registrable Shares pursuant to the Registration Rights and this Section 9. The Company covenants and agrees that it shall not, without the prior written consent of the Shareholders holding a majority of the outstanding Registrable Shares, amend, modify or restate the Registration Rights if the rights of the Shareholders would be subordinated, diminished or otherwise adversely affected in a different manner than other "Holders" of "Registrable Securities" (as defined in the Registration Rights). 9.5 Rights and Obligations Survive Exercise and Expiration of Warrant. The rights and obligations of the Company, of the holder of this Warrant and of the Registrable Shares contained in the Registration Rights and this Section 9 shall survive exercise, conversion and expiration of this Warrant. 10. Additional Rights. 10.1 Secondary Sales. The Company agrees that it will not interfere with the holder of this Warrant in obtaining liquidity if opportunities to make secondary sales of the Company's securities become available. To this end, the Company will promptly provide the holder of this Warrant with the same notice (if any) as it provides to other holders of the Company's securities of any offer to acquire from the Company's security holders more than five percent (5%) of the total voting power of the Company and will not interfere with the holder in arranging the sale of this Warrant to the person or persons making such offer. 10.2 Mergers. The Company will provide the holder of this Warrant with at least 30 days' notice of the terms and conditions of any proposed (i) sale, lease exchange, conveyance or other disposition of all or substantially all of its property or business, or (ii) 8 25 merger into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company), or any other transaction (including a merger or other reorganization) or series of related transactions, in which more than 50% of the voting power of the Company is disposed of. 10.3 Right to Convert Warrant into Common Stock: Net Issuance. (a) Right to Convert. In addition to and without limiting the rights of the holder under the terms of this Warrant, the holder shall have the right to convert this Warrant or any portion thereof (the "Conversion Right") into shares of Common Stock as provided in this Section 10.3 at any time or from time to time during the term of this Warrant. Upon exercise of the Conversion Right with respect to a particular number of shares subject to this Warrant (the "Converted Warrant Shares"), the Company shall deliver to the holder (without payment by the holder of any exercise price or any cash or other consideration) (X) that number of shares of fully paid and nonassessable Common Stock equal to the quotient obtained by dividing the value of this Warrant (or the specified portion hereof) on the Conversion Date (as defined in subsection (b) hereof), which value shall be determined by subtracting (A) the aggregate Warrant Price of the Converted Warrant Shares immediately prior to the exercise of the Conversion Right from (B) the aggregate fair market value of the Converted Warrant Shares issuable upon exercise of this Warrant (or the specified portion hereof) on the Conversion Date (as herein defined) by (Y) the fair market value of one share of Common Stock on the Conversion Date (as herein defined). Expressed as a formula, such conversion shall be computed as follows: X = B - A Y Where: X = the number of shares Common Stock that may be issued to holder Y = the fair market value (FMV) of one share of Common Stock A = the aggregate Warrant Price (i.e., Converted Warrant Shares x Warrant Price) B = the aggregate FMV (i.e., FMV x Converted Warrant Shares) No fractional shares shall be issuable upon exercise of the Conversion Right, and, if the number of shares to be issued determined in accordance with the foregoing formula is other than a whole number, the Company shall pay to the holder an amount in cash equal to the fair market value of the resulting fractional share on the Conversion Date (as hereinafter defined). 9 26 (b) Method of Exercise. The Conversion Right may be exercised by the holder by the surrender of this Warrant at the principal office of the Company together with a written statement specifying that the holder thereby intends to exercise the Conversion Right and indicating the number of shares subject to this Warrant which are being surrendered (referred to in subsection (a) hereof as the Converted Warrant Shares) in exercise of the Conversion Right. Such conversion shall be effective upon receipt by the Company of this Warrant together with the aforesaid written statement, or on such later date as is specified therein (the "Conversion Date"), and, at the election of the holder hereof, may be made contingent upon the closing of the sale of the Company's Common Stock to the public in a public offering pursuant to a Registration Statement under the Act (a "Public Offering"). Certificates for the shares issuable upon exercise of the Conversion Right and, if applicable, a new warrant evidencing the balance of the shares remaining subject to this Warrant, shall be issued as of the Conversion Date and shall be delivered to the holder within thirty (30) days following the Conversion Date. (c) Determination of Fair Market Value. For purposes of this Section 10.3, "fair market value" of a share of Common Stock as of a particular date (the "Determination Date") shall mean: (i) If the Conversion Right is exercised in connection with and contingent upon a Public Offering, and if the Company's Registration Statement relating to such Public Offering ("Registration Statement") has been declared effective by the SEC, then the initial "Price to Public" specified in the final prospectus with respect to such offering. (ii) If the Conversion Right is not exercised in connection with and contingent upon a Public Offering, then as follows: (A) If traded on a securities exchange, the fair market value of the Common Stock shall be deemed to be the average of the closing prices of the Common Stock on such exchange over the 30-day period ending five business days prior to the Determination Date; (B) If traded over-the-counter, the fair market value of the Common Stock shall be deemed to be the average of the closing bid prices of the Common Stock over the 30-day period ending five business days prior to the Determination Date; and (C) If there is no public market for the Common Stock, then fair market value shall be determined by mutual agreement of the holder of this Warrant and the Company, and if the holder and the Company are unable to so agree, by an investment banker of national reputation selected by the Company and reasonably acceptable to the holder of this Warrant. The fees and expenses of any such investment banker shall be borne equally by the Company and the holder of this Warrant. 10 27 11. Representations and Warranties. The Company represents and warrants to the holder of this Warrant as follows: (a) This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and the rules of law or principles at equity governing specific performance, injunctive relief and other equitable remedies; (b) The Shares have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and nonassessable; (c) The rights, preferences, privileges and restrictions granted to or imposed upon the Common Stock and the holders thereof are as set forth in the Charter, as amended to the Date of the Grant, a true and complete copy of which has been delivered to the original holder of this Warrant and is attached hereto as Exhibit B; (d) The execution and delivery of this Warrant are not, and the issuance of the Shares upon exercise of this Warrant in accordance with the terms hereof will not be, inconsistent with the Company's Charter or by-laws, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to the Company, and do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound or require the consent or approval of, the giving of notice to, the registration or filing with or the taking of any action in respect of or by, any Federal, state or local government authority or agency or other person, except for the filing of notices pursuant to federal and state securities laws, which filings will be effected by the time required thereby; and (e) There are no actions, suits, audits, investigations or proceedings pending or, to the knowledge of the Company, threatened against the Company in any court or before any governmental commission, board or authority which, if adversely determined, will have a material adverse effect on the ability of the Company to perform its obligations under this Warrant. 12. Modification and Waiver. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought 13. Notices. Any notice, request, communication or other document required or permitted to be given or delivered to the holder hereof or the Company shall be delivered, or shall be sent by certified or registered mail, postage prepaid, to each such holder at its address 11 28 as shown on the books of the Company or to the Company at the address indicated therefor on the signature page of this Warrant. 14. Binding Effect on Successors. This Warrant shall be binding upon any corporation succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company's assets, and all of the obligations of the Company relating to the Common Stock issuable upon the exercise or conversion of this Warrant shall survive the exercise, conversion and termination of this Warrant and all of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the holder hereof. The Company will, at the time of the exercise or conversion of this Warrant, in whole or in part, upon request of the holder hereof but at the Company's expense, acknowledge in writing its continuing obligation to the holder hereof in respect of any rights (including, without limitation, any right to registration of the shares of Registrable Securities) to which the holder hereof shall continue to be entitled after such exercise or conversion in accordance with this Warrant; provided, that the failure of the holder hereof to make any such request shall not affect the continuing obligation of the Company to the holder hereof in respect of such rights. 15. Lost Warrants or Stock Certificates. The Company covenants to the holder hereof that, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant or any stock certificate and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant or stock certificate, the Company will make and deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate. 16. Descriptive Headings. The descriptive headings of the several paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. 17. Governing Law. This Warrant shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of California., 18. Survival of Representations, Warranties and Agreements. All representations and warranties of the Company and the holder hereof contained herein shall survive the Date of Grant, the exercise or conversion of this Warrant (or any part hereof) or the termination or expiration of rights hereunder. All agreements of the Company and the holder hereof contained herein shall survive indefinitely until, by their respective terms, they are no longer operative. 19. Remedies. In case any one or more of the covenants and agreements contained in this Warrant shall have been breached, the holders hereof (in the case of a breach by the Company), or the Company (in the case of a breach by a holder), may proceed to protect and enforce their or its rights either by suit in equity and/or by action at law, including, but not limited to, an action for damages as a result of any such breach and/or an action for specific performance of any such covenant or agreement contained in this Warrant. 12 29 20. Value. The Company and the holder of this Warrant agree that the value of this Warrant and the Other Warrants on the Date of Grant is $100.00. 21. Acceptance. Receipt of this Warrant by the holder hereof shall constitute acceptance of and agreement to the foregoing terms and conditions. 22. No Impairment of Rights. The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment. CALYPTE BIOMEDICAL CORPORATION By___________________________ Title_________________________ Address: 1440 Fourth Street Berkeley, CA 94701 Date:____________________________, 199_ 13 30 EXHIBIT A NOTICE OF EXERCISE To: Calypte Biomedical Corporation 1. The undersigned hereby elects to purchase______________________ shares of Common Stock of Calypte Biomedical Corporation pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full. 2. Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name or names as are specified below: ______________________________ (Name) ______________________________ ______________________________ (Address) 3. The undersigned represents that the aforesaid shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares. In support thereof, the undersigned has executed an Investment Representation Statement attached hereto as Schedule 1. ______________________________ (Signature) (Date)______________________________ 14 31 EXHIBIT A-1 NOTICE OF EXERCISE To: Calypte Biomedical Corporation (the "Company") 1. Contingent upon and effective immediately prior to the closing (the "Closing") of the Company's public offering contemplated by the Registration Statement on Form S-______, filed ____________, 199__, the undersigned hereby elects to purchase ________ shares of Common Stock of the Company (or such lesser number of shares as may be sold on behalf of the undersigned at the Closing) pursuant to the terms of the attached Warrant. 2. Please deliver to the custodian for the selling shareholders a stock certificate representing such ________ shares. 3. The undersigned has instructed the custodian for the selling shareholders to deliver to the Company $________ or, if less, the net proceeds due the undersigned from the sale of shares in the aforesaid public offering. If such net proceeds are less than the purchase price for such shares, the undersigned agrees to deliver the difference to the Company prior to the Closing. --------------------------------------- (Signature) - -------------------- (Date) 15 32 Schedule 1 INVESTMENT REPRESENTATION STATEMENT Purchaser: Company: Calypte Biomedical Corporation Security: Common Stock Amount: Date: In connection with the purchase of the above-listed securities (the "Securities"), the undersigned (the "Purchaser") represents to the Company as follows: (a) The Purchaser is aware of the Company's business affairs and financial condition, and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. The Purchaser is purchasing the Securities for its own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Securities Act of 1933, as amended (the "Act"). (b) The Purchaser understand that the Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Purchaser's investment intent as expressed herein. In this connection, the Purchaser understands that, in the view of the Securities and Exchange Commission ("SEC"), the statutory basis for such exemption may be unavailable if the Purchaser's representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. (c) The Purchaser further understands that the Securities must be held indefinitely unless subsequently registered under the Act or unless an exemption from registration is otherwise available. Moreover, the Purchaser understands that the Company is under no obligation to register the Securities except as set forth in the Warrant under which the Securities are being acquired. In addition, the Purchaser understands that the certificate evidencing the Securities will be imprinted with the legend referred to in the Warrant under which the Securities are being purchased. (d) The Purchaser is aware of the provisions of Rule 144 and 144A, promulgated under the Act, which, in substance, permit limited public resale of "restricted securities" 16 33 acquired, directly Or indirectly, from the issuer thereof (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions, if applicable, including, among other things: The availability of certain public information about the Company, the resale occurring not less than two years after the party has purchased and paid for the securities to be sold; the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934, as amended) and the amount of securities being sold during any three-month period not exceeding the specified limitations stated therein. (e) The Purchaser further understands that at the time it wishes to sell the Securities there may be no public market upon which to make such a sale, and that, even if such a public market then exists, the Company may not be satisfying the current public information requirements of Rule 144 and 144A, and that, in such event, the Purchaser may be precluded from selling the Securities under Rule 144 and 144A even if the two-year minimum holding period had been satisfied. (f) The Purchaser further understands that in the event all of the requirements of Rule 144 and 144A are not satisfied, registration under the Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the SEC has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Purchaser: ---------------------------------- Date: ____________, 199__ 17 34 Exhibit B Restated Articles of Incorporation, as Amended 18 35 Exhibit C Section 9 of Series D Preferred Stock Agreement 19 36 Exhibit B LANDLORD WAIVER 37 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: PHOENIX LEASING INCORPORATED 2401 Kerner Boulevard San Rafael, California 94901 Attn: Lease Administration CONSENT TO REMOVAL OF PERSONAL PROPERTY KNOW ALL PERSONS BY THESE PRESENTS: (i) The undersigned has an interest as owner and landlord in the following described real property (the "Real Property"): That certain real property in the County of Alameda, State of California, with the street address of ___________ and more fully described as: SEE ATTACHMENT 1 ATTACHED HERETO FOR FULL LEGAL DESCRIPTION (ii) Calypte Biomedical Corporation, a California corporation ("Lessee"), has entered into or will enter into a Master Equipment Lease Agreement with Phoenix Leasing Incorporated ("Lessor") dated as of August 20, 1993 (the "Lease Agreement") and certain Schedules related thereto (collectively the "Lease"). (iii) Lessor, as a condition to entering into the Lease Agreement, requires that the undersigned consent to the removal by Lessor of the equipment and other assets covered by the Lease (hereinafter called "Equipment") from the Real Property, no matter how it is affixed thereto, and to the other matters set forth below. NOW, THEREFORE, for good and sufficient consideration, receipt of which is hereby acknowledged, the undersigned consents to the placing of the Equipment on the Real Property, and agrees with Lessor as follows: 1. Undersigned waives and releases each and every right which undersigned now has, under laws of California or by virtue of the lease for the Real Property now in effect, to levy 38 or distrain upon for rent, in arrears, in advance or both, or to claim or assert title to the Equipment that is already on said Real Property, or may hereafter be delivered or installed thereon. 2. The Equipment shall be considered to be personal property and shall not be considered part of the Real Property regardless of whether or by what means it is or may become attached or affixed to the Real Property. 3. The undersigned will permit Lessor to enter upon the Real Property for the purpose of exercising any right it may have under the terms of the Lease or otherwise, including, without limitation, the right to remove the Equipment; provided, however, that if Lessor, in removing the Equipment damages any improvements of the undersigned on the Real Property, Lessor will, at its expense, cause same to be repaired. 4. This agreement shall be binding upon the heirs, successors and assigns of the undersigned and shall inure to the benefit of Lessor and its successors and assigns. Upon any sale, transfer or other assignment of the Real Property, the undersigned shall notify the transferee of the existence of this agreement and that it is binding on the transferee. IN WITNESS WHEREOF, the undersigned has executed this instrument at ______________, this _____ day of ________, 19__. By: ---------------------------------- Title: ------------------------------- Date: -------------------------------- The foregoing Consent must be acknowledged before a Notary Public. [ATTACH NOTARY JURAT] 2 39 ATTACHMENT 1 LEGAL DESCRIPTION OF PREMISES [To Be Provided By Tenant] 40 State of ____________________) ) County of ___________________) On ________________________________________________, 19___ before me, the undersigned, personally appeared _________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature _____________________________ (Seal) State of ___________________) ) County of __________________) On ___________________________________________, 19__ before me, the undersigned, personally appeared ____________________________________________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature _____________________________ (Seal) 41 EXHIBIT C PURCHASE ORDER AND INVOICE ASSIGNMENT 42 PURCHASE ORDER AND INVOICE ASSIGNMENT THIS PURCHASE ORDER ASSIGNMENT, dated as of ____________, 199_ (this "Assignment"), between Calypte Biomedical Corporation ("Assignor") and Phoenix Leasing Incorporated ("Assignee"); WITNESSETH: WHEREAS, Assignor has submitted its Purchase Orders and Invoices listed in Schedule 1 hereto (collectively, the "Purchase Orders"), to ____________ (the "Vendor") concerning certain Units of equipment (the "Units") listed in Schedule 1 hereto to be subject to a Master Equipment Lease Agreement, dated as of August 20, 1993 (the "Lease"), between Assignor and Assignee (all terms used but not otherwise defined herein shall have the meaning given to them in the Lease): NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: 1. Assignor does hereby sell, assign, transfer and set over unto Assignee, all of the Assignor's rights to and interests in the Purchase Orders as and to the extent that the same relates to the Units. The assignment herein shall include, without limitation, the right of Assignee to purchase the Units pursuant to the Purchase Orders and to take title to the Units, all claims for damages in respect of the Units arising as a result of any default by Vendor under the Purchase Orders, together with any and all rights of Assignor to compel performance of the terms of the Purchase Orders in respect of the Units. 2. The exercise by Assignee of any of the rights assigned hereunder shall not release Assignor from any of its duties or obligations to Vendor under the Purchase Orders except to the extent that such exercise by Assignee shall constitute performance of such duties and obligations. 3. Upon satisfaction of the conditions set forth in the applicable Schedule to the Lease with respect to the Units, Assignee shall purchase such Unit by paying or causing to be paid, by check mailed or delivered to Vendor, on such date or thereafter as permitted by Vendor, an amount equal to the purchase price of the Unit, as such amount may be adjusted in accordance with the terms of the Purchase Orders and reflected on invoices prepared by Vendor to Assignee on or before the date of delivery and acceptance of the Unit. 4. Assignor agrees that it will, at any time and from time to time, upon the written consent of Assignee, promptly and duly exercise and deliver any and all such further instruments and documents and take such further action as Assignee may reasonably request 43 in order that Assignee may obtain the full benefits of this Agreement and of the rights and powers herein granted. 5. Assignor does hereby represent and warrant that the Purchase Orders are in full force and effect and that Assignor is not in default under any of them. Assignor does hereby further represent and warrant that Assignor has not assigned or pledged, and so long as this Assignment shall remain in effect, will not assign or pledge, the whole or any part of the rights hereby assigned or any of its rights with respect to the Units under the Purchase Orders to anyone other than Assignee. IN WITNESS WHEREOF, the parties hereto have caused this Purchase Order Assignment to be duly executed as of the day and year first above written. CALYPTE BIOMEDICAL CORPORATION PHOENIX LEASING INCORPORATED (Lessee) (Lessor) By By -------------------------------- ---------------------------------- Title Title ----------------------------- ------------------------------- Acknowledged and Consented to this ________ day of ___________________________, 199___. ___________________________________________ (Vendor) By: ------------------------------------ Title: --------------------------------- 44 SCHEDULE I TO PURCHASE ORDER AND INVOICE ASSIGNMENT 45 EXHIBIT D BILL OF SALE 46 BILL OF SALE For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, CALYPTE BIOMEDICAL CORPORATION ("Seller") does hereby sell, grant, transfer and deliver to Phoenix Leasing Incorporated ("Buyer"), all of Seller's right, title and interest in and to the property listed on Schedule I attached hereto (the "Equipment"), together with all warranties, guarantees and indemnities owned by Seller with respect to the Equipment (the "Equipment Warranties"), to have and to hold the Equipment and the Equipment Warranties forever. Seller covenants and warrants that: (1) it is the owner of, and has absolute title to, the Equipment and the Equipment Warranties, which, as of the date hereof, are free and clear of all claims, liens and encumbrances; (2) it has not made any prior sale, assignment, or transfer of the Equipment or the Equipment Warranties; (3) it has the present right, power and authority to sell the Equipment and the Equipment Warranties to Buyer; and (4) all action has been taken which is required to make this Bill of Sale a legal, valid and binding obligation of Seller. Seller shall forever warrant and defend the sale of the Equipment and the Equipment Warranties to Buyer, its successors and assigns, against all claims, liens and encumbrances and against any and every person or persons claiming any interest in the Equipment or the Equipment Warranties, except with respect to any claims, liens or encumbrances caused by any action of Buyer not contemplated under that certain Master Equipment Lease Agreement dated as of August 20, 1993 by and between Buyer and Seller (together with all Schedules thereto, the "Lease") or under any agreement, instrument or other document delivered in connection with the Lease. This Bill of Sale shall be binding on the successors and assigns of the Seller and shall inure to the benefit of the successors and assigns of Buyer. Executed as of ____________, 199__, at _____________________________________. CALYPTE BIOMEDICAL CORPORATION By: -------------------------------- Title: ----------------------------- 47 ANNEX A TO BILL OF SALE 48 EXHIBIT E SCHEDULE NO. ______ TRUE LEASE This Schedule No. ______ (this "Schedule"), dated ____________, 199 __ (such date being the "Delivery Date" for this Schedule), is a part of the Master Equipment Lease Agreement, dated as of August 20, 1993 (the "Lease"), between PHOENIX LEASING INCORPORATED ("Lessor") and CALYPTE BIOMEDICAL CORPORATION ("Lessee") and is incorporated therein by this reference. The terms used in this Schedule shall have the meanings given to them in the Lease unless otherwise defined herein. 1. Description and Cost of Units The Units subject to this Schedule are described in Annex A hereto. The Lessor's Cost for this Schedule is: $____________ 2. Acceptance; Obligations Lessee confirms that on the Delivery Date hereof (i) all of the Units described in Annex A attached hereto were duly accepted by Lessee and became subject to the Lease; and (ii) Lessee became obligated to make Rental Payments to Lessor and perform certain other obligations with respect to such Units as provided in the Lease and this Schedule. 3. Rent (a) Commencing on ____________, 19___ (the "Rent Commencement Date") and on the first day of each month thereafter, the rent for each Unit shall be paid by Lessee in advance by check (or if requested by Lessor, by wire transfer), to the location prescribed by Lessor in writing, in forty-two (42) consecutive installments, each of the first twelve (12) of which shall be calculated based upon a Rent Factor of 1.5% of the Lessor's Cost for this Schedule and each of the following thirty (30) of which shall be calculated based upon a Rent Factor of 3.5% of the Lessor's Cost for this Schedule, which rentals are: $__________ for each of the first 12 such installments, and $__________ for each of the following 30 such installments. (b) The Lease Term for the Units subject to this Schedule is 42 months and commences on the Rent Commencement Date. The Lease Term for the Units subject to this Schedule shall expire on: ____________, 199___ 49 (c) The Interim Rental Payment for the period from the Delivery Date of this Schedule through the Rent Commencement Date, which is due on the Delivery date, is: $__________. 4. Conditions. Lessor's obligations under the Lease and this Schedule are subject to the prior satisfaction of the following conditions on or before the Delivery Date of this Schedule: (a) Lessor shall have received, in form and substance satisfactory to Lessor: (i) All applicable waivers of landlords and/or mortgagees, substantially in the form of Exhibit B to the Lease. (ii) To the extent Lessor deems it necessary, a release or other arrangement with any other lessor or lender to the Company to insure that there will be no impairment of Lessor's interest in the Units subject to this or other Schedules. (iii) A sales tax exemption or other similar certificate from Lessee with respect to any Units included in this Schedule, but not placed in service by Lessee before the Delivery Date of this Schedule. (iv) Copies of invoices, purchase orders and cancelled checks relating to all Units being placed under the Lease pursuant to a sale/leaseback on the Delivery Date of this Schedule and/or a Purchase Order and Invoice Assignment from Lessee to Lessor substantially in the form of Exhibit C to the Lease, instead of copies of cancelled checks, for all Units to be purchased by Lessor directly from the vendor. (v) For all sales of Units by Lessee to Lessor, a Bill of Sale, substantially in the form of Exhibit D to the Lease. (vi) An executed copy of each manufacturer's service contract entered into by Lessee pursuant to Section 9 of the Lease. (vii) A Certificate of Acceptance covering the Units subject to this Schedule. (b) Lessee shall have filed or recorded, to the satisfaction of Lessor, all instruments and documents, including, but not limited to, Financing Statements on Form UCC-1 and Releases and Termination Statements on Form UCC-2, then deemed necessary by Lessor to preserve and protect its rights hereunder, under the Uniform Commercial Code (including the termination of any after-acquired property clause of third parties with respect to any Unit) and, if applicable, not less than ten days before the Delivery Date, a notice of the proposed transfer to Lessor by Lessee of title to the Units to be placed under the Lease on such Delivery Date shall have been published as and to the extent required by Section 3440 of the Civil Code of the State of California. 2 50 (c) Lessor shall have received all other documents and Lessee shall have performed all other acts as Lessor shall have reasonably requested to consummate the transaction contemplated by this Schedule. (d) Except with the prior consent of Lessor which shall not be unreasonably withheld, (i) Lessor's Cost for the Units subject to this Schedule shall be equal to or exceed the Minimum Funding Amount, (ii) Lessor's Cost for the Units subject to this Schedule when aggregated with Lessor's Cost for all Units under all previously funded Schedules shall not exceed the Lessor's Commitment set forth on the cover page of the Lease, and (iii) the funding contemplated by this Schedule when aggregated with all previous fundings under the Lease shall not exceed the Maximum Number of Fundings. (e) Except with the prior written consent of Lessor, the aggregate of Lessor's Cost of all Units subject to this Schedule and all Schedules previously made subject to the Lease which consist of tenant improvements, computer software, equipment manufactured specially for Lessee and/or delivery and installation costs shall not exceed 17.39% ($200,000 of Lessor's Cost if the entire Lessor's Commitment is funded) of the total Lessor's Cost of Equipment funded. (f) The Delivery Date of this Schedule shall not be later than the Commitment Termination Date. (g) On the Delivery Date of this Schedule no Event of Default or event, which with the passage of time or the giving of notice or both would constitute an Event of Default, shall exist. (h) Except with the prior written consent of Lessor which shall not be unreasonable withheld, all of the Units listed on Annex A shall consist of Eligible Equipment. 5. Representations and Warranties. Lessee hereby makes the representations and warranties set forth in Section 14 of the Lease. 6. Payments. Pursuant to Section 16(h) of the Lease, all payments shall be made to Lessor at 2401 Kerner Boulevard, San Rafael, California 94901 unless otherwise indicated in a writing signed by Lessor. 3 51 This Schedule is hereby duly executed by the parties hereto as of the date first written above. PHOENIX LEASING INCORPORATED By ----------------------------------- Title -------------------------------- LESSEE'S ADDRESS CALYPTE BIOMEDICAL CORPORATION FOR NOTICES: 1440 Fourth Street Berkeley, CA 94710 By: ATTN: Paul Siegel ---------------------------------- Chief Financial officer Title: ------------------------------- Annex A - Description of Units Annex B - Stipulated Loss Values Annex C - Exceptions to Representations and Warranties 4 52 ANNEX A DESCRIPTION OF UNITS Units are Located at Lessee's Offices at ____________________________, CA ________.
Major Equipment Description Manufacturer Identification Lessor's Category of Unit or Vendor or Serial No. Cost -------- ----------- ------------ ------------- -------- Subtotal By Equipment Category $_________
5 53 ANNEX B STIPULATED LOSS VALUES
Rental Stipulated Loss Value Payment Date Percentage of Lessor's Cost - ------------ --------------------------- Thereafter ________________ *
* If Lessee renews the Lease, the Stipulated Loss Value during any extended Term shall be an amount equal to the fair market value of the Units as at the end of the applicable initial lease term, as reasonably determined by Lessor, or in the event of disagreement between Lessor and Lessee, as determined by the independent appraiser selected under the provisions of Section 4(b) of the Lease; provided, however, that such Stipulated Loss Value shall not be less than 25% of Lessor's Cost of the Units. 6 54 ANNEX C EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES 7 55 EXHIBIT F SECURITY DEPOSIT PLEDGE AGREEMENT 56 SECURITY DEPOSIT PLEDGE AGREEMENT AGREEMENT made and entered into as of August 20, 1993, by and between Calypte Biomedical Corporation, a California corporation, with a principal place of business at 1440 Fourth Street, Berkeley, CA 94710 ("Pledgor") and Phoenix Leasing Incorporated, a California corporation, with its place of business at 2401 Kerner Boulevard, San Rafael, California 94901 ("Pledgee"). WITNESSETH In consideration of, and as an inducement for Pledgee (i) to enter into and advance funds under the Equipment Lease Agreement, dated as of August 20, 1993 (as amended from time to time, the "Lease"), with Pledgor and one or more Schedules in connection with the Lease (the "Schedules"), and (ii) to secure the payment of rentals and performance of all Pledgor's other obligations under this Agreement, the Lease and all exhibits and Schedules thereto (collectively, the "Obligations"), Pledgor shall deposit and pledge with Pledgee, on the Delivery Date of each Schedule, a cash collateral security deposit (the "Security Deposit") in the amount of six percent (6%) of Lessor's Cost under such Schedule (such terms and other terms not otherwise defined herein having the meaning therefor as set forth in the Lease or the Schedules). NOW THEREFORE, it is agreed: 1. Delivery of Deposit; Earnings. Pledgor shall, on or before the Delivery Date of each Schedule, deliver the Security Deposit for such Schedule to Pledgee to secure the due and punctual payment and performance of the Obligations. Pledgor will receive simple interest on the Security Deposit at a rate equal to four and one-half percent (4.5%) per annum (the "Earnings"), such Earnings to be paid to Pledgor when and if the Security Deposit is returned to Pledgor in accordance with the terms hereof. Pledgee may commingle the Security Deposit and Earnings with its own funds or otherwise deposit such Security Deposit in any bank selected by Pledgee. 2. Grant of Security. All funds held by the Pledgee, representing the Security Deposit and any Earnings, shall constitute collateral security for the performance by Pledgor of all its Obligations. Accordingly, Pledgor assigns, delivers, pledges and conveys to Pledgee, and grants to Pledgee a first priority, perfected security interest in and to the Security Deposit and all Earnings for the prompt and unconditional fulfillment of the Obligations. 1 57 3. Deposit Defaults. If any default or Event of Default under the Lease (each being a "Deposit Default") by Pledgor shall occur and be continuing, earnings accrued on the Security Deposit for Pledgor's benefit shall cease on notice of such Deposit Default to Pledgor. Pledgee may thereupon apply the Security Deposit and any Earnings (accrued to the date of such default notice), in such manner as Pledgee reasonably determines, towards the satisfaction of the Obligations, including the payment of all costs and expenses incurred by Pledgee as a result of any Deposit Default. 4. Enforcement. Pledgee shall have no duty to commence an action against or seek recourse from Pledgor in the event of a Deposit Default first before enforcing the provisions of this Agreement. The Obligations of Pledgor shall be absolute and unconditional, and shall remain in force and effect without regard to, and shall not be released or discharged or in any way affected by: (a) any amendment or modification of or supplement to the Lease or any exhibit or Schedule thereto, or to this Agreement; (b) any exercise or non-exercise of any right, remedy or privilege under or in respect to this Agreement, the Lease or any exhibit or Schedule thereto, or any other instrument provided for in any thereof, or any waiver, consent, indulgence or actions or inaction with respect to any such instrument; (c) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or similar proceeding of or against Pledgor; or (d) any payment received by Pledgee and subsequently refunded or returned to Pledgor or anyone on behalf of Pledgor. 5. Return of Security Deposit. So long as no Event of Default shall have occurred and be continuing under the Lease, at the end of the Term of each Schedule, the Security Deposit with respect to such Schedule shall be applied first to Pledgor's end-of-Term obligations to Pledgee with respect to such Schedule, and the balance (if any) of such Security Deposit with respect to such Schedule and Earnings attributable thereto (less any portion thereof applied or otherwise utilized pursuant to this Agreement) shall be delivered to Pledgor. 6. Further Assurances. Pledgor will promptly execute and deliver to Pledgee such further reasonable documents and take such further reasonable action as Pledgee may request in order to more effectively carry out the intent and purpose of this Agreement or an assignment of Pledgee's interest herein. 7. Notices. Notices required or permitted hereunder shall be given in accordance with the Lease. 2 58 8. Amendments and Supplements. No agreement shall be effective to amend, supplement or discharge this Agreement in whole or in part unless such agreement is in writing, signed by the parties hereto. 9. Assignability. This Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties hereto. Pledgor hereby acknowledges that Lessor's rights under this Agreement may be assigned at any time to any person having an interest in the Lease. 10. Governing Law. This Agreement shall be governed by and construed under the laws of the State of California. 11. Assignment. Pledgor shall not transfer or assign, in whole or in part, any of its rights under this Agreement. Pledgee shall have the absolute right to transfer or assign to any person, firm, partnership, corporation or other entity, for security or otherwise, any or all of Pledgee's obligations, benefits and interests under this Agreement without the consent of or notice to Pledgor. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. PHOENIX LEASING INCORPORATED, Pledgee By: ---------------------------------- Its: --------------------------------- CALYPTE BIOMEDICAL CORPORATION, Pledgor By: ---------------------------------- Its: --------------------------------- 3 59 referred to in clause (i), (ii) or (iii) of paragraph 5 immediately above. 7. Nothing herein shall affect your liability on the Note or the security given in respect thereof. Regardless of any deferral by Purdue Frederick made on the date hereof or hereafter agreed to by Purdue Frederick, if by November 30, 1994, you are not current in respect of principal and interest (including any adjustment with respect thereto provided for herein) on the Note, Purdue Frederick may exercise any or all rights it possesses as the holder of the Note. Please signify your acceptance of the terms hereof by signing the duplicate copy enclosed. Very truly yours, THE PURDUE FREDERICK COMPANY By HOWARD R. UDELL ----------------------------------- Title: Group V.P., General Counsel Accepted and Agreed to: CALYPTE BIOMEDICAL CORPORATION By ------------------------------- Title: 3 60 AMENDMENT TO MASTER EQUIPMENT LEASE AGREEMENT NO. 9893 THIS AMENDMENT TO MASTER EQUIPMENT LEASE ("Amendment") is entered into effective June 30, 1995 by and between Phoenix Leasing Incorporated as lessor ("Lessor") and Calypte Biomedical corporation as lessee ("Lessee"). WHEREAS, Lessor and Lessee entered into a Master Equipment Lease dated as of August 20, 1993 ("Lease"). WHEREAS, Lessor and Lessee now wish to amend the Lease. NOW, THEREFORE, for valuable consideration, the receipt of which is hereby acknowledged, the Lease is hereby amended as follows: 1. Initial Lease Term: Change from "42 months" to "36 months." 2. Rent Factor: Change to read "36 months at 3.2402%." 3. Commitment Termination Date: Change from "June 30, 1994" to "September 30, 1995." 4. Eligible Equipment: After the word "improvements" add the following: "only after Lessee receives FDA approval." Except as herein amended, the Lease shall remain in full force and effect. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date above written. PHOENIX LEASING INCORPORATED CALYPTE BIOMEDICAL CORPORATION BY: BY: ----------------------------- ---------------------------------- TITLE: Contract Administrator TITLE: President -------------------------- ------------------------------- 61 SCHEDULE NO. 1 TRUE LEASE This Schedule No. 1 (this "Schedule"), dated November 1, 1993 (such date being the "Delivery Date" for this Schedule), is a part of the Master Equipment Lease Agreement, dated as of August 20, 1993 (the "Lease"), between PHOENIX LEASING INCORPORATED ("Lessor") and CALYPTE BIOMEDICAL CORPORATION ("Lessee") and is incorporated therein by this reference. The terms used in this Schedule shall have the meanings given to them in the Lease unless otherwise defined herein. 1. Description and Cost of Units The Units subject to this Schedule are described in Annex A hereto. The Lessor's Cost for this Schedule is: $83,228.91 2. Acceptance: Obligations Lessee confirms that on the Delivery Date hereof (i) all of the Units described in Annex A attached hereto were duly accepted by, Lessee and became subject to the Lease; and (ii) Lessee became obligated to make Rental Payments to Lessor and perform certain other obligations with respect to such Units as provided in the Lease and this Schedule. 3. Rent (a) Commencing on November 1, 1993 (the "Rent Commencement Date") and on the first day of each month thereafter, the rent for each Unit shall be paid by Lessee in advance by check (or if requested by Lessor, by wire transfer), to the location prescribed by Lessor in writing, in forty-two (42) consecutive installments, each of the first twelve (12) of which shall be calculated based upon a Rent Factor of 1.5% of the Lessor's Cost for this Schedule and each of the following thirty (30) of which shall be calculated based upon a Rent Factor of 3.5% of the Lessor's Cost for this Schedule, which rentals are: $1,248.43 for each of the first 12 such installments, and $2,913.01 for each of the following 30 such installments. (b) The Lease Term for the Units subject to this Schedule is 42 months and commences on the Rent Commencement Date. The Lease Term for the Units subject to this Schedule shall expire on: April 31, 1997 (c) The Interim Rental Payment for the period from the Delivery Date of this Schedule through the Rent Commencement Date, which is due on the Delivery Date, is: $0.00. 1 62 4. Conditions. Lessor's obligations under the Lease and this Schedule are subject to the prior satisfaction of the following conditions on or before the Delivery Date of this Schedule: (a) Lessor shall have received, in form and substance satisfactory, to Lessor: (i) All applicable waivers of landlords and/or mortgagees, substantially in the form of Exhibit B to the Lease. (ii) To the extent Lessor deems it necessary, a release or other arrangement with any other lessor or lender to the Company to insure that there will be no impairment of Lessor's interest in the Units subject to this or other Schedules. (iii) A sales tax exemption or other similar certificate from Lessee with respect to any Units included in this Schedule, but not placed in service by Lessee before the Delivery Date of this Schedule. (iv) Copies of invoices, purchase orders and cancelled checks relating to all Units being placed under the Lease pursuant to a sale/leaseback on the Delivery Date of this Schedule and/or a Purchase Order and invoice Assignment from Lessee to Lessor substantially in the form of Exhibit C to the Lease, instead of copies of cancelled checks, for all Units to be purchased by Lessor directly from the vendor. (v) For all sales of Units by Lessee to Lessor, a Bill of Sale, substantially in the form of Exhibit D to the Lease. (vi) An executed copy of each manufacturer's service contract entered into by Lessee pursuant to Section 9 of the Lease. (vii) A Certificate of Acceptance covering the Units subject to this Schedule. (b) Lessee shall have filed or recorded, to the satisfaction of Lessor, all instruments and documents, including, but not limited to, Financing Statements on Form UCC-1 and Releases and Termination Statements on Form UCC-2, then deemed necessary by Lessor to preserve and protect its rights hereunder, under the Uniform Commercial Code (including the termination of any after-acquired property clause of third parties with respect to any Unit) and, if applicable, not less than ten days before the Delivery Date, a notice of the proposed transfer to Lessor by Lessee of title to the Units to be placed under the Lease on such Delivery Date shall have been published as and to the extent required by Section 3440 of the Civil Code of the State of California. (c) Lessor shall have received all other documents and Lessee shall have performed all other acts as Lessor shall have reasonably requested to consummate the transaction contemplated by this Schedule. (d) Except with the prior consent of Lessor which shall not be unreasonably withheld, (i) Lessor's Cost for the Units subject to this Schedule shall be equal to or exceed the Minimum Funding Amount, (ii) Lessor's Cost for the Units subject to this Schedule when aggregated with Lessor's Cost for all 2 63 Units under all previously funded Schedules shall not exceed the Lessor's Commitment set forth on the cover page of the Lease, and (iii) the funding contemplated by this Schedule when aggregated with all previous fundings under the Lease shall not exceed the Maximum Number of Fundings. (e) Except with the prior written consent of Lessor, the aggregate of Lessor's Cost of all Units subject to this Schedule and all Schedules previously made subject to the Lease which consist of tenant improvements, computer software, equipment manufactured specially for Lessee and/or delivery and installation costs shall not exceed 17.39% ($200,000 of Lessor's Cost if the entire Lessor's Commitment is funded) of the total Lessor's Cost of Equipment funded. (f) The Delivery Date of this Schedule shall not be later than the Commitment Termination Date. (g) On the Delivery Date of this Schedule no Event of Default or event, which with the passage of time or the giving of notice or both would constitute an Event of Default, shall exist. (h) Except with the prior written consent of Lessor which shall not be unreasonably withheld, all of the Units listed on Annex A shall consist of Eligible Equipment. 5. Representations and Warranties. Lessee hereby makes the representations and warranties set forth in Section 14 of the Lease. 6. Payments. Pursuant to Section 16(h) of the Lease, all payments shall be made to Lessor at 2401 Kerner Boulevard, San Rafael, California 94901 unless otherwise indicated in a writing signed by Lessor. This Schedule is hereby duly executed by the parties hereto as of the date first written above. PHOENIX LEASING INCORPORATED By: ---------------------------------- Title: Contract Administrator ------------------------------- LESSEE'S ADDRESS FOR NOTICES: CALYPTE BIOMEDICAL CORPORATION 1440 Fourth Street By: PAUL SIEGEL Berkeley, CA 94710 ---------------------------------- Attn: Paul Siegel Title: Chief Financial Officer Chief Financial Officer ------------------------------- Annex A - Description of Units Annex B - Stipulated Loss Values Annex C - Exceptions to Representations and Warranties 3 64 PHOENIX-SCHED 1
- --------------------------------------------------------------------------------------------------------------------------------- CHECK - --------------------------------------------------------------------------------------------------------------------------------- DATE CHECK # INVOICE # PO # DEPT. CAR # ACQ DATE ASSET # ITEM COST - --------------------------------------------------------------------------------------------------------------------------------- 8/27/93 2569 1698 10537 300-610 R-027 8/11/93 1166 TABLE - LAB UTILITY 377.50 - --------------------------------------------------------------------------------------------------------------------------------- 8/27/93 2569 1698 10537 300-610 R-027 8/11/93 1169 TABLE - LAB UTILITY 377.50 - --------------------------------------------------------------------------------------------------------------------------------- 8/27/93 2569 1698 10537 300-610 R-027 8/11/93 1167 TABLE - LAB UTILITY 377.50 - --------------------------------------------------------------------------------------------------------------------------------- 8/27/93 2569 1698 10537 300-610 R-027 8/11/93 1168 TABLE - LAB UTILITY 377.50 - --------------------------------------------------------------------------------------------------------------------------------- 8/27/95 2543 1065 300-610 R-027 7/23/93 R-027 SOFTWALL CLEANROOMS 491.25 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2629 73222 10638 300 R-001a 8/18/93 1147 ELECTROPHORESIS 1,095.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2651 190666-01 10430 300 R-003 7/7/93 1131 FRACTION COLLECTOR 1,450.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2672 593376 10650 300 R-006b 8/23/93 1130 CONDUCTIVITY METER 2,093.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1137 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1138 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1139 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1140 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1141 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1142 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1143 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1144 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1145 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1146 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1136 CAGE 1,056.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2816 351223 10734 300 R-042 9/21/93 1133 COLUMN 2,250.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/29/93 2742 2614402 10691 300 R-018 9/3/93 1132 SONIC DISMEMBRATOR 2,516.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/29/93 2742 2683631 10711 300-610 R-001B 9/14/93 1148 TRANSMISSION DENSITOMETER 1,825.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2900 54367570 10770 400 M-001 9/29/93 1162 BALANCE - TOP LOADING 1,652.40 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2900 54367570 10770 400 M-001 9/29/93 1163 BALANCE - ANALYTICAL 1,940.40 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2900 54367570 10770 400 M-001 9/29/93 1164 PRINTER 636.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2900 54367570 10770 400 M-001 9/29/93 1165 PRINTER 636.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2855 66136 10667 400 M-034 9/13/93 1135 FEEZER - CHEST -50C 3,082.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2855 66012 10667 400 M-034 9/10/93 1134 FEEZER - CHEST -90C 5,000.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2829 97186 10722 300 R-041 9/27/93 1151 POWER SUPPLY 715.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2811 118385 10747 320 AS-024 9/22/93 1129 FILE - 4 DR LATERAL 564.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/24/93 2705 MACIIVX,SEIKO 10829 210 AS-002c 9/24/93 1127 MAC II VX 999.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/24/93 2705 MACIIVX,SEIKO 10829 210 AS-002c 9/24/93 1126 MONITOR - 14" COLOR 529.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2866 0-8762 10761 210 AS-001 9/28/93 1128 PRINTER - LASER 4,299.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2900 54367560 10770 400 M-001 9/30/93 1161 BALANCE 2,876.40 - --------------------------------------------------------------------------------------------------------------------------------- 79296 10792 400 M-044 10/7/93 SCULLERY SINK 2,856.72 - --------------------------------------------------------------------------------------------------------------------------------- 8WF1801 10812 300 R-002 10/9/93 1149 INTEGRATOR 1,595.00 - --------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 76.91 - --------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 76.91 - --------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 76.91 - --------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 76.91 - --------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 76.91 - --------------------------------------------------------------------------------------------------------------------------------- DESCRIPTION VENDOR - --------------------------------------------------------------- BEIGE W/DRAWERS 48X30X31" NORLAB HANSON - --------------------------------------------------------------- BEIGE W/DRAWERS 48X30X31" NORLAB HANSON - --------------------------------------------------------------- BEIGE W/DRAWERS 60X30X37" NORLAB HANSON - --------------------------------------------------------------- BEIGE W/DRAWERS 72X30X37" NORLAB HANSON - --------------------------------------------------------------- SUPPORT BARS ENVIROFLEX - --------------------------------------------------------------- LARGE FORMAT GEL BIO-RAD - --------------------------------------------------------------- RETRIEVER II, 117 VOLTS, 60HZ ISCO - --------------------------------------------------------------- W/CDC 104 CELL RADIOMETER - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 22.5'X10' SILICON VALLEY SHELVING - --------------------------------------------------------------- P90X500 AMICON - --------------------------------------------------------------- W/EXTENDER & COOLING CELL FISHER - --------------------------------------------------------------- FISHER - --------------------------------------------------------------- DELTA RANGE VWR - --------------------------------------------------------------- VWR - --------------------------------------------------------------- METTLER TOLEDO VWR - --------------------------------------------------------------- METTLER TOLEDO VWR - --------------------------------------------------------------- HARRIS - --------------------------------------------------------------- HARRIS - --------------------------------------------------------------- 100/120V BIORAD - --------------------------------------------------------------- PUTTY, LEGAL AC PAPER - --------------------------------------------------------------- 4/80 COMPUTERWARE - --------------------------------------------------------------- TRINITRON COMPUTERWARE - --------------------------------------------------------------- POSTSCRIPT LEVEL II LASER-LIFE - --------------------------------------------------------------- HIGH CAPACITY VWR - --------------------------------------------------------------- STAINLESS STEEL FOOD SERVICE EQUIPMENT - --------------------------------------------------------------- HEWLETT PACKARD - --------------------------------------------------------------- WAREHOUSE 36X18X85" OPEN ADVANCED WAREHOUSE - --------------------------------------------------------------- WAREHOUSE 36X18X85" OPEN ADVANCED WAREHOUSE - --------------------------------------------------------------- WAREHOUSE 36X18X85" OPEN ADVANCED WAREHOUSE - --------------------------------------------------------------- WAREHOUSE 36X18X85" OPEN ADVANCED WAREHOUSE - --------------------------------------------------------------- WAREHOUSE 36X18X85" OPEN ADVANCED WAREHOUSE - ---------------------------------------------------------------
LE: PHOENIX - SCHED 1 DATE: 10/28/93 Page 1 65 PHOENIX-SCHED 1
CHECK DATE CHECK # INVOICE # PO # DEPT. CAR # ACQ DATE ASSET # ITEM COST - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 76.91 - --------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 76.91 - --------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 117.29 - --------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 117.29 - --------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 117.29 - --------------------------------------------------------------------------------------------------------------------------------- 10/15/93 2913 MONITOR 210 AS-027 10/15/93 1174 MONITOR 948.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2658 844435 10648 300-610 8/31/93 1170 PELLICON HOLDER 4,979.00 - --------------------------------------------------------------------------------------------------------------------------------- 2406860 10730 300-610 R-040 9/30/93 1171 INCUBATOR 5,894.00 - --------------------------------------------------------------------------------------------------------------------------------- 2406860 10730 300-610 R-040 9/30/93 1173 INCUBATOR 5,894.00 - --------------------------------------------------------------------------------------------------------------------------------- 2406860 10730 300-610 R-040 9/30/93 1171 CHART RECORDER 695.00 - --------------------------------------------------------------------------------------------------------------------------------- 2406860 10730 300-610 R-040 9/30/93 1171 CHART RECORDER 695.00 - --------------------------------------------------------------------------------------------------------------------------------- 8/27/93 2604 33448750 10556 400 M-033a 8/19/93 CORROSIVE CABINET 395.70 - --------------------------------------------------------------------------------------------------------------------------------- 8/27/93 2604 33448750 10556 400 M-033a 8/19/93 CORROSIVE CABINET 395.70 - --------------------------------------------------------------------------------------------------------------------------------- 8/27/93 2604 33448750 10556 400 M-033a 8/19/93 FLAMMABLE CABINET 408.45 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2882 29408 10732 120 AS-026 9/21/93 1159 CONFERENCE TABLE 229.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2862 29408 10732 120 AS-026 9/21/93 1151 CHAIR - OAK BLUE 80.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2862 29408 10732 120 AS-026 9/21/93 1153 CHAIR - OAK BLUE 80.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2862 29408 10732 120 AS-026 9/21/93 1155 CHAIR - OAK BLUE 80.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2862 29408 10732 120 AS-026 9/21/93 1157 CHAIR - OAK BLUE 80.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2862 29408 10732 120 AS-026 9/21/93 1152 CHAIR - OAK STEEL GRAY 80.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2862 29408 10732 120 AS-026 9/21/93 1154 CHAIR - OAK STEEL GRAY 80.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2862 29408 10732 120 AS-026 9/21/93 1156 CHAIR - OAK STEEL GRAY 80.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2862 29408 10732 120 AS-026 9/21/93 1158 CHAIR - OAK STEEL GRAY 80.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2623 3051853 10611 400 8/20/93 1160 COAT RACK 295.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2623 3051853 10611 400 8/20/93 1172 COAT RACK 295.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2623 3051853 10611 400 8/20/93 1177 COAT RACK 295.00 - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- TOTAL FURNITURE & EQUIPMENT 65,816.26 - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 CLEANROOM 300 R-027 8/19/93 R-027 AIR DUCTS FOR CLEANROOM 2,544.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 TWO LABS 400 M-025 8/19/93 M-025 AIR DUCTS FOR LABS 11,400.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/29/93 2770 1089 400 M-025 9/16/93 M-025 ELECTRICAL IMPROVEMENTS 867.50 - --------------------------------------------------------------------------------------------------------------------------------- 9/29/93 2770 1087 400 M-025 9/1/93 M-025 ELECTRICAL IMPROVEMENTS 2,601.15 - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- TOTAL TENANT IMPROVEMENTS 17,412.65 - --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- GRAND TOTAL 83,228.91 - --------------------------------------------------------------------------------------------------------------------------------- DESCRIPTION VENDOR - --------------------------------------------------------------- - --------------------------------------------------------------- WAREHOUSE 36X18X85" OPEN ADVANCED WAREHOUSE - --------------------------------------------------------------- WAREHOUSE 36X18X85" OPEN ADVANCED WAREHOUSE - --------------------------------------------------------------- WAREHOUSE 36X18X85" CLOSED ADVANCED WAREHOUSE - --------------------------------------------------------------- WAREHOUSE 36X18X85" CLOSED ADVANCED WAREHOUSE - --------------------------------------------------------------- WAREHOUSE 36X18X85" CLOSED ADVANCED WAREHOUSE - --------------------------------------------------------------- 19" B&W COMPUTERWARE - --------------------------------------------------------------- SANITARY SS MILLIPORE - --------------------------------------------------------------- REFRIGERATOR FORMA - --------------------------------------------------------------- REFRIGERATOR FORMA - --------------------------------------------------------------- FACILITY INSTALLED FORMA - --------------------------------------------------------------- FACILITY INSTALLED FORMA - --------------------------------------------------------------- 30 GALLON 44X43X18" LAB SAFETY SUPPLY - --------------------------------------------------------------- 30 GALLON 44X43X18" LAB SAFETY SUPPLY - --------------------------------------------------------------- 30 GALLON 44X43X18" LAB SAFETY SUPPLY - --------------------------------------------------------------- MED OAK 36X42X96 KANTOR'S - --------------------------------------------------------------- SIDE CHAIR KANTOR'S - --------------------------------------------------------------- SIDE CHAIR KANTOR'S - --------------------------------------------------------------- SIDE CHAIR KANTOR'S - --------------------------------------------------------------- SIDE CHAIR KANTOR'S - --------------------------------------------------------------- SIDE CHAIR KANTOR'S - --------------------------------------------------------------- SIDE CHAIR KANTOR'S - --------------------------------------------------------------- SIDE CHAIR KANTOR'S - --------------------------------------------------------------- SIDE CHAIR KANTOR'S - --------------------------------------------------------------- STAINLESS STEEL W/ SHELVES BAXTER - --------------------------------------------------------------- STAINLESS STEEL W/ SHELVES BAXTER - --------------------------------------------------------------- STAINLESS STEEL W/ SHELVES BAXTER - --------------------------------------------------------------- - --------------------------------------------------------------- - --------------------------------------------------------------- - --------------------------------------------------------------- SAN BRUNO SHEET METAL - --------------------------------------------------------------- SAN BRUNO SHEET METAL - --------------------------------------------------------------- POWER CONSTRUCTION - --------------------------------------------------------------- POWER CONSTRUCTION - --------------------------------------------------------------- - --------------------------------------------------------------- - --------------------------------------------------------------- - --------------------------------------------------------------- - ---------------------------------------------------------------
Page 2 66 Attachment to Equipment Schedule No. 1 CASUALTY VALUES
Month of % of Original Equipment Month of % of Original Equipment Lease Term Purchase Price Lease Term Purchase Price - ---------- ----------------------- ---------- ----------------------- 0 125.0 36 71.0 1 123.5 37 69.5 2 122.0 38 68.0 3 120.5 39 66.5 4 119.0 40 65.0 5 117.5 41 63.5 6 116.0 42 62.0 7 114.5 43 60.5 8 113.0 44 59.0 9 111.5 45 57.5 10 110.0 46 56.0 11 108.5 47 54.5 12 107.0 48 53.0 13 105.5 49 51.5 14 104.0 50 50.0 15 102.5 51 48.5 16 101.0 52 47.0 17 99.5 53 45.5 18 98.0 54 44.0 19 96.5 55 42.5 20 95.0 56 41.0 21 93.5 57 39.5 22 92.0 58 38.0 23 90.5 59 36.5 24 89.0 60 35.0 25 87.5 61 33.5 26 86.0 62 32.0 27 84.5 63 30.5 28 83.0 64 29.0 29 81.5 65 27.5 30 80.0 66 26.0 31 78.5 67 24.5 32 77.0 68 23.0 33 75.5 69 21.5 34 74.0 70 20.0 35 72.5 Thereafter 20.0
Lessor's Lessee's Initials ______ Initials ______ 67 BILL OF SALE For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, CALYPTE BIOMEDICAL CORPORATION ("Seller") does hereby sell, grant, transfer and deliver to Phoenix Leasing Incorporated ("Buyer"), all of Seller's right, title and interest in and to the property listed on Schedule 1 attached hereto (the "Equipment"), together with all warranties, guarantees and indemnities owned by Seller with respect to the Equipment (the "Equipment Warranties"), to have and to hold the Equipment and the Equipment Warranties forever. Seller covenants and warrants that: (1) it is the owner of, and has absolute title to, the Equipment and the Equipment Warranties, which, as of the date hereof, are free and clear of all claims, liens and encumbrances; (2) it has not made any prior sale, assignment, or transfer of the Equipment or the Equipment Warranties; (3) it has the present right, power and authority to sell the Equipment and the Equipment Warranties to Buyer; and (4) all action has been taken which is required to make this Bill of Sale a legal, valid and binding obligation of Seller. Seller shall forever warrant and defend the sale of the Equipment and the Equipment Warranties to Buyer, its successors and assigns, against all claims, liens and encumbrances and against any and every person or persons claiming any interest in the Equipment or the Equipment Warranties, except with respect to any claims, liens or encumbrances caused by any action of Buyer not contemplated under that certain Master Equipment Lease Agreement dated as of August 20, 1993 by and between Buyer and Seller (together with all Schedules thereto, the "Lease") or under any agreement, instrument or other document delivered in connection with the Lease. This Bill of Sale shall be binding on the successors and assigns of the Seller and shall inure to the benefit of the successors and assigns of Buyer. Executed as of November 15, 1993, at Berkeley, CA. CALYPTE BIOMEDICAL CORPORATION By: PAUL SIEGEL ---------------------------------- Title: Chief Financial Officer ------------------------------- 4 68 PHOENIX-SCHED 1
- --------------------------------------------------------------------------------------------------------------------------------- CHECK - --------------------------------------------------------------------------------------------------------------------------------- DATE CHECK # INVOICE # PO # DEPT. CAR # ACQ DATE ASSET # ITEM COST - --------------------------------------------------------------------------------------------------------------------------------- 8/27/93 2569 1698 10537 300-610 R-027 8/11/93 1166 TABLE - LAB UTILITY 377.50 - --------------------------------------------------------------------------------------------------------------------------------- 8/27/93 2569 1698 10537 300-610 R-027 8/11/93 1169 TABLE - LAB UTILITY 377.50 - --------------------------------------------------------------------------------------------------------------------------------- 8/27/93 2569 1698 10537 300-610 R-027 8/11/93 1167 TABLE - LAB UTILITY 377.50 - --------------------------------------------------------------------------------------------------------------------------------- 8/27/93 2569 1698 10537 300-610 R-027 8/11/93 1168 TABLE - LAB UTILITY 377.50 - --------------------------------------------------------------------------------------------------------------------------------- 8/27/95 2543 1065 300-610 R-027 7/23/93 R-027 SOFTWALL CLEANROOMS 491.25 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2629 73222 10638 300 R-001a 8/18/93 1147 ELECTROPHORESIS 1,095.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2651 190666-01 10430 300 R-003 7/7/93 1131 FRACTION COLLECTOR 1,450.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2672 593376 10650 300 R-006b 8/23/93 1130 CONDUCTIVITY METER 2,093.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1137 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1138 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1139 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1140 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1141 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1142 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1143 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1144 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1145 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1146 SHELVING 120.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 15271 10552 400 M-028 8/24/93 1136 CAGE 1,056.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2816 351223 10734 300 R-042 9/21/93 1133 COLUMN 2,250.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/29/93 2742 2614402 10691 300 R-018 9/3/93 1132 SONIC DISMEMBRATOR 2,516.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/29/93 2742 2683631 10711 300-610 R-001B 9/14/93 1148 TRANSMISSION DENSITOMETER 1,825.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2900 54367570 10770 400 M-001 9/29/93 1162 BALANCE - TOP LOADING 1,652.40 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2900 54367570 10770 400 M-001 9/29/93 1163 BALANCE - ANALYTICAL 1,940.40 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2900 54367570 10770 400 M-001 9/29/93 1164 PRINTER 636.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2900 54367570 10770 400 M-001 9/29/93 1165 PRINTER 636.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2855 66136 10667 400 M-034 9/13/93 1135 FEEZER - CHEST -50C 3,082.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2855 66012 10667 400 M-034 9/10/93 1134 FEEZER - CHEST -90C 5,000.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2829 97186 10722 300 R-041 9/27/93 1151 POWER SUPPLY 715.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2811 118385 10747 320 AS-024 9/22/93 1129 FILE - 4 DR LATERAL 564.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/24/93 2705 MACIIVX,SEIKO 10829 210 AS-002c 9/24/93 1127 MAC II VX 999.00 - --------------------------------------------------------------------------------------------------------------------------------- 9/24/93 2705 MACIIVX,SEIKO 10829 210 AS-002c 9/24/93 1126 MONITOR - 14" COLOR 529.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2866 0-8762 10761 210 AS-001 9/28/93 1128 PRINTER - LASER 4,299.00 - --------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2900 54367560 10770 400 M-001 9/30/93 1161 BALANCE 2,876.40 - --------------------------------------------------------------------------------------------------------------------------------- 79296 10792 400 M-044 10/7/93 SCULLERY SINK 2,856.72 - --------------------------------------------------------------------------------------------------------------------------------- 8WF1801 10812 300 R-002 10/9/93 1149 INTEGRATOR 1,595.00 - --------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 76.91 - --------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 76.91 - --------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 76.91 - --------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 76.91 - --------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 76.91 - --------------------------------------------------------------------------------------------------------------------------------- DESCRIPTION VENDOR - --------------------------------------------------------------- BEIGE W/DRAWERS 48X30X31" NORLAB HANSON - --------------------------------------------------------------- BEIGE W/DRAWERS 48X30X31" NORLAB HANSON - --------------------------------------------------------------- BEIGE W/DRAWERS 60X30X37" NORLAB HANSON - --------------------------------------------------------------- BEIGE W/DRAWERS 72X30X37" NORLAB HANSON - --------------------------------------------------------------- SUPPORT BARS ENVIROFLEX - --------------------------------------------------------------- LARGE FORMAT GEL BIO-RAD - --------------------------------------------------------------- RETRIEVER II, 117 VOLTS, 60HZ ISCO - --------------------------------------------------------------- W/CDC 104 CELL RADIOMETER - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 72X36X8' SILICON VALLEY SHELVING - --------------------------------------------------------------- WAREHOUSE 22.5'X10' SILICON VALLEY SHELVING - --------------------------------------------------------------- P90X500 AMICON - --------------------------------------------------------------- W/EXTENDER & COOLING CELL FISHER - --------------------------------------------------------------- FISHER - --------------------------------------------------------------- DELTA RANGE VWR - --------------------------------------------------------------- VWR - --------------------------------------------------------------- METTLER TOLEDO VWR - --------------------------------------------------------------- METTLER TOLEDO VWR - --------------------------------------------------------------- HARRIS - --------------------------------------------------------------- HARRIS - --------------------------------------------------------------- 100/120V BIORAD - --------------------------------------------------------------- PUTTY, LEGAL AC PAPER - --------------------------------------------------------------- 4/80 COMPUTERWARE - --------------------------------------------------------------- TRINITRON COMPUTERWARE - --------------------------------------------------------------- POSTSCRIPT LEVEL II LASER-LIFE - --------------------------------------------------------------- HIGH CAPACITY VWR - --------------------------------------------------------------- STAINLESS STEEL FOOD SERVICE EQUIPMENT - --------------------------------------------------------------- HEWLETT PACKARD - --------------------------------------------------------------- WAREHOUSE 36X18X85" OPEN ADVANCED WAREHOUSE - --------------------------------------------------------------- WAREHOUSE 36X18X85" OPEN ADVANCED WAREHOUSE - --------------------------------------------------------------- WAREHOUSE 36X18X85" OPEN ADVANCED WAREHOUSE - --------------------------------------------------------------- WAREHOUSE 36X18X85" OPEN ADVANCED WAREHOUSE - --------------------------------------------------------------- WAREHOUSE 36X18X85" OPEN ADVANCED WAREHOUSE - ---------------------------------------------------------------
LE: PHOENIX - SCHED 1 DATE: 10/28/93 Page 1 69
PHOENIX-SCHED 1 - ----------------------------------------------------------------------------------------------------------------------------------- CHECK - ---------------------------------------------------------------------------------------------------------------------------------- DATE CHECK # INVOICE # PO # DEPT CAR # ACQ DATE ASSET # ITEM COST - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 76.91 - ---------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 76.91 - ---------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 117.29 - ---------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 117.29 - ---------------------------------------------------------------------------------------------------------------------------------- SHELVING 10874 400 M-047 10/22/93 SHELVING 117.29 - ---------------------------------------------------------------------------------------------------------------------------------- 10/15/93 2913 MONITOR 210 AS-027 10/15/93 1174 MONITOR 948.00 - ---------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2658 844435 10648 300-610 8/31/93 1170 PELLICON HOLDER 4,979.00 - ---------------------------------------------------------------------------------------------------------------------------------- 2406860 10730 399-610 R-040 9/30/93 1171 INCUBATOR 5,894.00 - ---------------------------------------------------------------------------------------------------------------------------------- 2406860 10730 399-610 R-040 9/30/93 1173 INCUBATOR 5,894.00 - ---------------------------------------------------------------------------------------------------------------------------------- 2406860 10730 399-610 R-040 9/30/93 1171 CHART RECORDER 695.00 - ---------------------------------------------------------------------------------------------------------------------------------- 2406860 10730 399-610 R-040 9/30/93 1173 CHART RECORDER 695.00 - ---------------------------------------------------------------------------------------------------------------------------------- 8/27/93 2604 33448750 10556 400 M-033A 8/19/93 CORROSIVE CABINET 395.70 - ---------------------------------------------------------------------------------------------------------------------------------- 8/27/93 2604 33448750 10556 400 M-033A 8/19/93 CORROSIVE CABINET 395.70 - ---------------------------------------------------------------------------------------------------------------------------------- 8/27/93 2604 33448750 10556 400 M-033A 8/19/93 FLAMMABLE CABINET 408.45 - ---------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2882 29408 10732 120 AS-028 9/21/93 1159 CONFERENCE TABLE 229.00 - ---------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2882 29408 10732 120 AS-028 9/21/93 1151 CHAIR - OAK BLUE 80.00 - ---------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2882 29408 10732 120 AS-028 9/21/93 1153 CHAIR - OAK BLUE 80.00 - ---------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2882 29408 10732 120 AS-028 9/21/93 1155 CHAIR - OAK BLUE 80.00 - ---------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2882 29408 10732 120 AS-028 9/21/93 1157 CHAIR - OAK BLUE 80.00 - ---------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2882 29408 10732 120 AS-028 9/21/93 1152 CHAIR - OAK STEEL GRAY 80.00 - ---------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2882 29408 10732 120 AS-028 9/21/93 1154 CHAIR - OAK STEEL GRAY 80.00 - ---------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2882 29408 10732 120 AS-028 9/21/93 1156 CHAIR - OAK STEEL GRAY 80.00 - ---------------------------------------------------------------------------------------------------------------------------------- 10/13/93 2882 29408 10732 120 AS-028 9/21/93 1158 CHAIR - OAK STEEL GRAY 80.00 - ---------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2623 3051853 10611 400 8/20/93 1160 COAT RACK 295.00 - ---------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2623 3051853 10611 400 8/20/93 1172 COAT RACK 295.00 - ---------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2623 3051853 10611 400 8/20/93 1177 COAT RACK 295.00 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL FURNITURE & EQUIPMENT 85,816.26 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 CLEANROOM 300 R-027 8/19/93 R-027 AIR DUCTS FOR CLEANROOM 2,544.00 - ---------------------------------------------------------------------------------------------------------------------------------- 9/10/93 2698 TWO LABS 400 M-025 8/19/93 M-025 AIR DUCTS FOR LABS 11,400.00 - ---------------------------------------------------------------------------------------------------------------------------------- 9/29/93 2770 1089 400 M-025 9/16/93 M-025 ELECTRICAL IMPROVEMENTS 867.50 - ---------------------------------------------------------------------------------------------------------------------------------- 9/29/93 2770 1087 400 M-025 9/1/93 M-025 ELECTRICAL IMPROVEMENTS 2,601.15 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL TENANT IMPROVEMENTS 17,512.65 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- GRAND TOTAL 83,228.91 - ----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------- - ------------------------------------------------------------------ DESCRIPTION VENDOR - ------------------------------------------------------------------ - ------------------------------------------------------------------ WAREHOUSE 36x18x85" OPEN ADVANCED WAREHOUSE - ------------------------------------------------------------------ WAREHOUSE 36x18x85" OPEN ADVANCED WAREHOUSE - ------------------------------------------------------------------ WAREHOUSE 36x18x85" CLOSED ADVANCED WAREHOUSE - ------------------------------------------------------------------ WAREHOUSE 36x18x85" CLOSED ADVANCED WAREHOUSE - ------------------------------------------------------------------ WAREHOUSE 36x18x85" CLOSED ADVANCED WAREHOUSE - ------------------------------------------------------------------ 19" B&W COMPUTER WARE - ------------------------------------------------------------------ SANITARY SS MILLIPORE - ------------------------------------------------------------------ REFIGERATOR FORMA - ------------------------------------------------------------------ REFRIGERATOR FORMA - ------------------------------------------------------------------ FACILITY INSTALLED FORMA - ------------------------------------------------------------------ FACILITY INSTALLED FORMA - ------------------------------------------------------------------ 30 GALLON 44X43X18" LAB SAFETY SUPPLY - ------------------------------------------------------------------ 30 GALLON 44X43X18" LAB SAFETY SUPPLY - ------------------------------------------------------------------ 30 GALLON 44X43X18" LAB SAFETY SUPPLY - ------------------------------------------------------------------ MED OAK 36X42X96 KANTOR'S - ------------------------------------------------------------------ SIDE CHAIR KANTOR'S - ------------------------------------------------------------------ SIDE CHAIR KANTOR'S - ------------------------------------------------------------------ SIDE CHAIR KANTOR'S - ------------------------------------------------------------------ SIDE CHAIR KANTOR'S - ------------------------------------------------------------------ SIDE CHAIR KANTOR'S - ------------------------------------------------------------------ SIDE CHAIR KANTOR'S - ------------------------------------------------------------------ SIDE CHAIR KANTOR'S - ------------------------------------------------------------------ SIDE CHAIR KANTOR'S - ------------------------------------------------------------------ STAINLESS STEEL W/SHELVES BAXTER - ------------------------------------------------------------------ STAINLESS STEEL W/SHELVES BAXTER - ------------------------------------------------------------------ STAINLESS STEEL W/SHELVES BAXTER - ------------------------------------------------------------------ - ------------------------------------------------------------------ - ------------------------------------------------------------------ - ------------------------------------------------------------------ SAN BRUNO SHEET METAL - ------------------------------------------------------------------ SAN BRUNO SHEET METAL - ------------------------------------------------------------------ POWER CONSTRUCTION - ------------------------------------------------------------------ POWER CONSTRUCTION - ------------------------------------------------------------------ - ------------------------------------------------------------------ - ------------------------------------------------------------------ - ------------------------------------------------------------------ - ------------------------------------------------------------------
Page 2 70 Wire Activity Date: NOVEMBER 19, 1993 Page No.: 1 WIRE SERVICES DEPARTMENT POST OFFICE BOX 60691 LOS ANGELES, CA 90060 Account Number 1480001571 For Inquiries Call: (415) 843-6353 148 CALYPTE BIOMEDICAL CORP 1440 FOURTH ST BERKELEY CA 94710 Wire Transfer Activity IF YOU HAVE A CHECKING OR SAVINGS ACCOUNT WITH UNION BANK, THE WIRE TRANSFER FEE(S) WILL BE CHARGED AGAINST YOUR ACCOUNT OR APPEAR ON YOUR ACCOUNT ANALYSIS STATEMENT.
INCOMING WIRE TRANSFER CREDITS TYPE AMOUNT OUR TRN RECEIVED FROM REFERENCE 00 $500,000.00 931119-006021 NORTHERN TRUST COMPANY, THE 9311190048362394 ORIGINATOR KIDDER PEABODY & COMPANY INCORPORAT INFORMATION ORIGINATOR TO BENEF: BNF-CALYPTE BIOMEDICAL CORP MONEY MARKET BANK TO BANK: SEQ-931119004836 ORIGINATOR: KIDDER PEABODY & COMPANY INCORPORATED 00 $78,235.18 931119-005617 FIRST INTERSTATE BANK 3648 ORIGINATOR BENHAM GOVERNMENT AGY FUND INFORMATION ORIGINATOR TO BENEF: 7158912 BY ORDER OF PHOENIX LEASING INC CONTACT SCHUYLER BAILEY ORIGINATOR: BENHAM GOVERNMENT AGY FUND - ----------------------------------------------------------------------------------------------------------------------- Upon receipt, please examine the confirmation and statement, and report Total Debits: $.00 any error irregularity in any transfer immediately. If you have any questions, please call your office of account. Total Credits: $578,235.18 Total Transactions: 2
71 SCHEDULE NO. 2 TRUE LEASE This Schedule No. 2 (this "Schedule"), dated as of June 30, 1995, (such date being the "Delivery Date" for this Schedule), is a part of the Master Equipment Lease Agreement, dated as of August 20, 1993 (the "Lease"), between PHOENIX LEASING INCORPORATED ("Lessor") and CALYPTE BIOMEDICAL CORPORATION ("Lessee") and is incorporated therein by this reference. The terms used in this Schedule shall have the meanings given to them in the Lease unless otherwise defined herein. 1. Description and Cost of Units The Units subject to this Schedule are described in Annex A hereto. The Lessor's Cost for this Schedule is: $177,217.40 2. Acceptance: Obligations Lessee confirms that on the Delivery Date hereof (i) all of the Units described in Annex A attached hereto were duly accepted by Lessee and became subject to the Lease; and (ii) Lessee became obligated to make Rental Payments to Lessor and perform certain other obligations with respect to such Units as provided in the Lease and this Schedule. 3. Rent (a) Commencing on July 14, 1995 (the "Rent Commencement Date") and on the first day of each month thereafter, the rent for each Unit shall be paid by Lessee in advance by check (or if requested by Lessor, by wire transfer), to the location prescribed by Lessor in writing, in thirty-six (36) consecutive installments, each of which shall be calculated based upon a Rent Factor of 3.2402% of the Lessor's Cost for this Schedule, which rentals are: $5,742.20 for each of the 36 installments. (b) The Lease Term for the Units subject to this Schedule is 36 months and commences on the Rent Commencement Date. The Lease Term for the Units subject to this Schedule shall expire on: July 31, 1995 (c) The Interim Rental Payment for the period from the Delivery Date of this Schedule through the Rent Commencement Date, which is due on the Delivery Date, is: $3,253.91 -1- 72 4. Conditions. Lessor's obligations under the Lease and this Schedule are subject to the prior satisfaction of the following conditions on or before the Delivery Date of this Schedule: (a) Lessor shall have received, in form and substance satisfactory to Lessor: (i) All applicable waivers of landlords and/or mortgagees, substantially in the form of Exhibit B to the Lease. (ii) To the extent Lessor deems it necessary, a release or other arrangement with any other lessor or lender to the Company to insure that there will be no impairment of Lessor's interest in the Units subject to this or other Schedules. (iii) A sales tax exemption or other similar certificate from Lessee with respect to any Units included in this Schedule, but not placed in service by Lessee before the Delivery Date of this Schedule. (iv) Copies of invoices, purchase orders and cancelled checks relating to all Units being placed under the Lease pursuant to a sale/leaseback on the Delivery Date of this Schedule and/or a Purchase Order and Invoice Assignment from Lessee to Lessor substantially in the form of Exhibit C to the Lease, instead of copies of cancelled checks, for all Units to be purchased by Lessor directly from the vendor. (v) For all sales of Units by Lessee to Lessor, a Bill of Sale, substantially in the form of Exhibit D to the Lease. (vi) An executed copy of each manufacturer's service contract entered into by Lessee pursuant to Section 9 of the Lease. (vii) A Certificate of Acceptance covering the Units subject to this Schedule. (b) Lessee shall have filed or recorded, to the satisfaction of Lessor, all instruments and documents, including, but not limited to, Financing Statements on Form UCC-1 and Releases and Termination Statements on Form UCC-2, then deemed necessary by Lessor to preserve and protect its rights hereunder, under the Uniform Commercial Code (including the termination of any after-acquired property clause of third parties with respect to any Unit) and, if applicable, not less than ten days before the Delivery Date, a notice of the proposed transfer to Lessor by Lessee of title to the Units to be placed under the Lease on such Delivery Date shall have been published as and to the extent required by Section 3440 of the Civil Code of the State of California. (c) Lessor shall have received all other documents and Lessee shall have performed all other acts as Lessor shall have reasonably requested to consummate the transaction contemplated by this Schedule. (d) Except with the prior consent of Lessor which shall not be unreasonably withheld, (i) Lessor's Cost for the Units subject to this Schedule shall be equal to or exceed the Minimum Funding Amount, (ii) Lessor's Cost for the Units subject to this Schedule when aggregated with Lessor's Cost for all -2- 73 Units under all previously funded Schedules shall not exceed the Lessor's Commitment set forth on the cover page of the Lease, and (iii) the funding contemplated by this Schedule when aggregated with all previous fundings under the Lease shall not exceed the Maximum Number of Fundings. (e) Except with the prior written consent of Lessor, the aggregate of Lessor's Cost of all Units subject to this Schedule and all Schedules previously made subject to the Lease which consist of tenant improvements, computer software, equipment manufactured specially for Lessee and/or delivery and installation costs shall not exceed 17.39% ($200,000 of Lessor's Cost if the entire Lessor's Commitment is funded) of the total Lessor's Cost of Equipment funded. (f) The Delivery Date of this Schedule shall not be later than the Commitment Termination Date. (g) On the Delivery Date of this Schedule no Event of Default or event, which with the passage of time or the giving of notice or both would constitute an Event of Default, shall exist. (h) Except with the prior written consent of Lessor which shall not be unreasonably withheld, all of the Units listed on Annex A shall consist of Eligible Equipment. 5. Representations and Warranties. Lessee hereby makes the representations and warranties set forth in Section 14 of the Lease. 6. Payments. Pursuant to Section 16(h) of the Lease, all payments shall be made to Lessor at 2401 Kerner Boulevard, San Rafael, California 94901 unless otherwise indicated in a writing signed by Lessor. This Schedule is hereby duly executed by the parties hereto as of the date first written above. PHOENIX LEASING INCORPORATED By: ---------------------------------- Title: Contract Administrator ------------------------------- LESSEE'S ADDRESS FOR NOTICES: CALYPTE BIOMEDICAL CORPORATION 1440 Fourth Street By: Berkeley, CA 94710 ---------------------------------- Attn: Paul Siegel Title: President Chief Financial Officer ------------------------------- Annex A - Description of Units Annex B - Stipulated Loss Values Annex C - Exceptions to Representations and Warranties -3- 74 ANNEX A Description of Units
Description Serial Number Invoice Number ----------- ------------- -------------- Ionics Ultrapure Water System 7102A, 7102B, 7102C w/valves Total: $177,217.40
75 ANNEX B STIPULATED LOSS VALUES
Month of % of original Equipment Month of % of Original Equipment Lease Term Purchase Price Lease Term Purchase Price - ---------- ----------------------- ---------- ----------------------- 0 125.0 36 71.0 1 123.5 37 69.5 2 122.0 38 68.0 3 120.5 39 66.5 4 119.0 40 65.0 5 117.5 41 63.5 6 116.0 42 62.0 7 114.5 43 60.5 8 113.0 44 59.0 9 111.5 45 57.5 10 110.0 46 56.0 11 108.5 47 54.5 12 107.0 48 53.0 13 105.5 49 51.5 14 104.0 50 50.0 15 102.5 51 48.5 16 101.0 52 47.0 17 99.5 53 45.5 18 98.0 54 44.0 19 96.5 55 42.5 20 95.0 56 41.0 21 93.5 57 39.5 22 92.0 58 38.0 23 90.5 59 36.5 24 89.0 60 35.0 25 87.5 61 33.5 26 86.0 62 32.0 27 84.5 63 30.5 28 83.0 64 29.0 29 81.5 65 27.5 30 80.0 66 26.0 31 78.5 67 24.5 32 77.0 68 23.0 33 75.5 69 21.5 34 74.0 70 20.0 35 72.5 Thereafter 20.0
Lessor's Lessee's Initials ______ Initials ______ 76 ANNEX C Exceptions to Representations and Warranties Lessor's Lessee's Initials ______ Initials ______ EX-10.36 11 EQUIPMENT LEASE W/ MEIR MITCHELL/GATX 1 EXHIBIT 10.36 HOSIE, WES, McLAUGHLIN & SACKS ATTORNEYS AT LAW FACSIMILE ONE SANSOME STREET ALASKA OFFICE 5) 781-2525 FOURTEENTH FLOOR 510 L STREET. SUITE 500 SAN FRANCISCO, CALIFORNIA 94104 ANCHORAGE, ALASKA 99501 (415) 781-3200 (907) 279-2114 September 24, 1993 VIA CALIFORNIA OVERNIGHT Mr. Paul Siegel Chief Financial Officer Calypte Biomedical Corporation 1440 Fourth Street Berkeley, California 94710 Re: MMC/GATX PARTNERSHIP NO. I - CALYPTE BIOMEDICAL CORPORATION Dear Paul: Enclosed for your review, signature and return to me are the following closing documents in connection with the upcoming Schedules Nos. 1, 2 and 3 under the Equipment Lease: 1. UCC-1 Sale-Leaseback Notice. 2. UCC-1 Precautionary Financing Statement. 3. UCC-1 Precautionary Fixture Filing. Please return the signed UCCs to me as soon as possible. Also enclosed for your records are fully-executed copies of the Master Equipment Lease Agreement and the Security Deposit Pledge Agreement. I will send you execution copies of Schedules Nos. 1, 2 and 3 and the related Bill of Sale in the next few days. Please call me if you have any questions or comments. Sincerely, /s/ ROBERT F. MCLAUGHLIN Robert F. McLaughlin RFM:ogw Enclosures. cc: Thomas Klein, Esq. - w/enc. -- UCCs only (via California Overnight) Annette Bishop - w/o enc. David G. Mayer, Esq. - w/o enc. 2 MASTER EQUIPMENT LEASE AGREEMENT Agreement No. ___________ Dated as of August 20, 1993 between MMC/GATX PARTNERSHIP NO. 1, Four Embarcadero Center, San Francisco, CA 94111 as Lessor and CALYPTE BIOMEDICAL CORPORATION, a California corporation 1440 Fourth Street Berkeley, CA. 94710 as Lessee LESSOR'S COMMITMENT: $1,150,000 Initial Rent Factor: 12 months at 1.5% Initial Lease Term: 42 months followed by 30 months at 3.5% Treasury Base Rate: 4.68% Treasury Constant, Maturity: 42 months Initial Implicit Rate: 10.91% Minimum Implicit Rate: 10.00% Minimum Funding Amount: $75,000 Maximum No. of Fundings: One per month Minimum Renewal Percentage: 1.3% Minimum Purchase Option Percentage: 10%
Commitment Termination Date: June 30, 1994 Eligible Equipment: Scientific laboratory and test equipment; manufacturing equipment; and up to $200,000 of tenant improvements. The terms and information set forth on this cover page are a part of the MASTER EQUIPMENT LEASE AGREEMENT, dated as of the date first written above (this "Lease"), entered into by and between MMC/GATX PARTNERSHIP NO. I ("Lessor") and the Lessee set forth above, the terms and conditions of which are as follows: 3 LESSOR'S OBLIGATIONS UNDER THIS LEASE AND EACH SCHEDULE ARE SUBJECT TO THE PRIOR SATISFACTION OF THE CONDITIONS SET FORTH ON RIDER I HERETO. 1. DEFINITIONS: Unless otherwise defined in this Lease (which term shall include the cover page, any Rider, any Exhibit or any Schedule hereto), capitalized terms shall have the following meanings: "Commitment Termination Date" means the date set forth opposite such term on the cover page of this Lease, or such earlier date on which Lessor terminates its commitment to fund pursuant to the terms of this Lease. "Delivery Date" means, with respect to any Schedule, the date first set forth on such Schedule. "Eligible Equipment" means Equipment of the types listed following such term on the cover page of this Lease to the extent acceptable to Lessor. "Environmental Law" means the Resource Conservation and Recovery Act of 1987, the Comprehensive Environmental Response, Compensation and Liability Act, and any other Federal, state or local statute, law, ordinance, code, rule, regulation, order or decree (in each case having the force of law) regulating or imposing liability or standards of conduct concerning, any Hazardous Materials or other hazardous, toxic or dangerous waste, constituent, or other substance, whether solid, liquid or gas, as now or at any time hereafter in effect. "Equipment" means all equipment, fixtures and personal property listed in any Schedule together with all replacement parts, additions, accessions and accessories to such equipment, fixtures and personal property. "Event of Default" shall have the meaning set forth in Section 12 hereof. "Hazardous Materials" means any hazardous substance, pollutant or contaminant defined as such in any Environmental Law. "Implicit Rate" means, with respect to a Schedule, an implicit interest rate used in calculating the Rent Factor applicable to such Schedule, calculated as set forth in Section 3(b) of this Lease. "Initial Implicit Rate" means the implicit interest rate specified on the cover page of this Lease. "Initial Lease Term" means the period of months set forth opposite such term on the cover page of this Lease. "Initial Rent Factor" means the Rent Factor set forth on the cover page of this Lease calculated using the Initial Implicit Rate. "Interim Rental Payment" shall have the meaning set forth Section 3(a) of this Lease. "Lessor's Commitment" means the maximum amount that Lessor may be obligated to fund under the Lease, which amount is set forth opposite such term on the cover page of this Lease. "Lessor's Cost" with respect to a Unit of Equipment means the total cost to Lessor of purchasing such Unit of Equipment, as indicated on the applicable Schedule. "Maximum Number of Fundings" means the number of fundings under this Lease specified opposite such term on the cover page hereof. "Minimum Funding Amount" means the amount set forth opposite such term on the cover page of this Lease. 1 4 "Minimum Implicit Rate" means the interest rate set forth opposite such term on the cover page to this Lease. "Minimum Purchase Option Percentage" means the percentage of Lessor's Cost set forth opposite such term on the cover page of this Lease. "Minimum Renewal Percentage" means the percentage set forth opposite such term on the cover page of this Lease. "Rent Commencement Date" means the date, with respect to any Schedule, set forth in Section 3(a) of such Schedule, which shall be the first day of the calendar quarter immediately following the Delivery Date for such Schedule. "Rent Factor" means, with respect to a Schedule, the rent factor calculated using the Implicit Rate applicable on the Delivery Date of such Schedule. "Rental Payment" means, for any Schedule, the monthly rent payment for the Units identified in such Schedule. "Schedule" or "Schedule No. " means a schedule in the form of Exhibit E to this Lease identifying this Lease and incorporating this Lease by reference, which is executed by both parties hereto. "Stipulated Loss Value" shall have the meaning set forth in Section 11(e). "Term" means the Initial Lease Term, together with any renewal or extension thereof. "Treasury Base Rate" means the interest rate set forth opposite such term on the cover page of this Lease. "Treasury Constant Maturity" means the period of months set forth opposite such term on the cover page of this Lease. "Unit" means an item of Equipment. 2. LEASE: Lessor agrees to lease to Lessee and Lessee agrees to lease from Lessor the Equipment described in each Schedule on the terms and subject to the conditions specified herein and therein. Lessor's obligation to fund Schedules under this Lease shall terminate on the Commitment Termination Date. Lessor may, in its sole discretion, terminate its commitment herein to fund the Lessor's Commitment or any unfunded portion thereof at any time if: (a) there is any material adverse change to the general affairs, management, results of operations, condition (financial or otherwise) or prospects of Lessee, whether or not arising from transactions in the ordinary course of business, (b) there is any material adverse deviation by Lessee from the business plan of Lessee presented to and not disapproved in writing by Lessor, since the date first written on the cover page of this Lease, (c) any Event of Default exists, or (d) if any term or condition in any Schedule is not satisfied by the Delivery Date of such Schedule. This Lease shall constitute a "Finance Lease" under Division 10 of the California Uniform Commercial Code ("UCC"); provided, however, that the characterization of this Lease as a "Finance Lease" is for purposes of Division 10 of the UCC only, and shall not affect the accounting treatment of this Lease. This Lease, and Lessee's obligation to pay all rent and other sums hereunder, shall be absolute and unconditional, and shall not be subject to, and Lessee hereby waives any right of or to, abatement, reduction, set-off, defense or counterclaim. Lessee waives any and all rights and remedies conferred upon Lessee by UCC Sections 10508 through 10522, including (without limitation) Lessee's rights to (i) cancel or repudiate this Lease, (ii) reject or revoke acceptance of the leased property, (iii) recover damages from Lessor for breach of warranty or for any other reason, (iv) claim a security interest in any rejected property in Lessee's possession or control, (v) deduct from Rental Payments all or any part of any claimed damages resulting from Lessor's default under this 2 5 Lease, (vi) accept partial delivery of the Equipment, (vii) "cover" by making any purchase or lease of other property in substitution for property due from Lessor, (viii) recover from the Lessor any general, special, incidental or consequential damages, for any reason whatsoever, and (ix) seek specific performance, replevin or the like for any of the Equipment. Lessee acknowledges that, at the time of each Schedule, it will have received and approved the terms of the agreements with the vendors under which Lessor will, subject to the terms and conditions of this Lease, purchase the Units covered by such Schedule. The Units shall be leased for commercial purposes only, and not for consumer, personal, home or family purposes. This Lease describes the terms of, and is intended by the parties hereto to be, a true lease; provided, however, that the parties acknowledge that the terms and conditions of the Lease may, alternatively, create a secured financing or lease for security. If this Lease as supplemented by any Schedule constitutes a security agreement or lease for security, the Lessee hereby grants a security interest to Lessor in all of Lessee's right, title and interest in the Units described in Annex A to such Schedule and the proceeds thereof, to secure all of Lessee's obligations under this Lease and such Schedule. 3. TERM AND RENTALS: THIS LEASE SHALL BE EFFECTIVE UPON EXECUTION AND DELIVERY HEREOF by Lessee and Lessor. (a) The Initial Lease Term for each Schedule shall commence upon the Rent Commencement Date set forth in such Schedule. For the Initial Lease Term of such Schedule, Lessee agrees to pay Lessor aggregate rentals equal to the number of months in the Initial Lease Term of such Schedule multiplied by the amount of the Rental Payment specified in such Schedule. In addition, for the period from the Delivery Date of each Schedule until such Schedule's Rent Commencement Date, Lessee shall pay an interim rental ("Interim Rental Payment") equal to the product of (i) the total rental for the Initial Lease Term of such Schedule divided by 1,260 [42 x 30] and (ii) the actual number of days between the Delivery Date and the Rent Commencement Date, including the Delivery Date but excluding the Rent Commencement Date. Lessor will make reasonable efforts to se nd Lessee invoices for Rental Payments, but the failure to do so or the incorrectness of any invoice will not relieve Lessee of its obligation to pay all amounts, including Rental Payments, due under this Lease. The Interim Rental Payment for each Schedule is due on the Delivery Date for such Schedule and the remaining Rental Payments are due commencing on the Rent Commencement Date and thereafter on the same date of each succeeding month of the Term, or as specified in the applicable Schedule. A late charge on any overdue payments shall accrue at the rate of 1.5% per month on the overdue amount, or the highest lawful rate, whichever is less. (b) The Rent Factor will be calculated for each Schedule based on a basis point for basis point adjustment (if any) to the Initial Implicit Rate equal to the change from the Treasury Base Rate in the U.S. Treasury note rate for notes of a term equal to the Treasury Constant Maturity as quoted three business days prior to the Delivery Date for such Schedule in The Wall Street Journal. The Implicit Rate used for calculating the Rent Factor for any Schedule shall not be less than the Minimum Implicit Rate. (c) It is not the intent of the parties to create rent or other payment obligations of Lessee which will be considered usurious under applicable law. However, if any such payment shall be found to be usurious by a court of competent jurisdiction, then Rental Payments or such other amounts shall automatically be reduced to the highest rate or amounts permitted by applicable law and the usurious portion of the Rental Payments or such other amounts shall be applied to the Lessee's remaining obligations under the Lease in a manner reasonably determined by Lessor. If Lessee retains possession of any Unit after the expiration or termination of this 3 6 Lease, Rental Payments shall continue to be paid with respect to such Unit at the rate set forth in Section 3(a) of the Schedule relating to such Unit until all obligations of Lessee under this Lease relating to such Unit, including, without limitation, Rental Payments and payments due under Section 4 of this Lease, have been satisfied. This Lease may be terminated only as expressly provided herein. 4. LESSEE'S PURCHASE OF TENANT IMPROVEMENTS; OPTIONS AT END OF INITIAL LEASE TERM FOR NON-TENANT IMPROVEMENTS: 4A. Tenant Improvements. At the expiration of the Initial Lease Term of each Schedule covering tenant improvements, Lessee shall purchase all of the Units that are tenant improvements under such Schedule for a purchase price equal to fifteen percent (15%) of Lessor's Cost of all such Units, plus any applicable sales or other transfer tax. 4B. Non-Tenant Improvements. (a) Provided that the Lease has not been terminated and that no Event of Default or event which, with notice or lapse of time or both, would become an Event of Default shall have occurred and be continuing, Lessee shall elect one of the following options in clauses (i) or (ii) below: (i) Lessee's Option to Renew: At the expiration of the Initial Lease Term of the first Schedule covering Units other than tenant improvements, Lessee may elect to renew the Lease with respect to all, but not less than all, of such Units under all Schedules to the Lease at their respective expiration dates for not less than twelve (12) months nor more than thirty-six (36) months for a rent equal to the "Fair Rental Value" (as defined in Section 4B(b) below) of such Units for such additional period, but in no event less than the Minimum Renewal Percentage of Lessor's Cost of such Units per month, which rent shall be paid monthly in advance. At the end of the renewal term, Lessee must purchase all of such Units for a purchase price equal to the Fair Market Value (as defined in Section 4B(b) below) plus any applicable sales or other transfer tax. (ii) Lessee's Option to Purchase: At the expiration of the Initial Lease Term of the first Schedule covering Units other than tenant improvements, Lessee may elect to purchase all, but not less than all, of such Units under all Schedules to the Lease at their respective expiration dates for a purchase price equal to the "Fair Market Value" (as defined in Section 4(b) below) thereof as of the end of the Initial Lease Term of the first Schedule covering Units other than tenant improvements, but in no event less than the Minimum Purchase Option Percentage of Lessor's Cost of all such Units nor greater than twenty-five percent (25%) of Lessor's Cost of all such Units, plus any applicable sales or other transfer tax. (iii) If neither of the foregoing options in clauses (i) or (ii) of this Section 4B(a) is duly exercised by Lessee, this Lease shall be renewed at the rental in effect immediately prior to the renewal with respect to all Units other than tenant improvements covered by the applicable Schedule from the expiration date of the Initial Lease Term of such Schedule on a month-to-month basis. Lessee may terminate any such extended term on 90 days' 4 7 notice to Lessor and shall along with such notice elect one of the options in clauses (i) or (ii) above. Either of the foregoing options in clauses (i) or (ii) shall be exercised by written notice delivered to Lessor not more than 180 days and not less than 120 days prior to the expiration of the Initial Lease Tenn of the Units which are subject to the first Schedule covering Units other than tenant improvements. (b) Fair Market Value or Fair Rental Value, as the case may be, shall be determined on the basis of and shall be equal in amount to the value which would obtain in an arm's-length transaction between an informed and willing buyer-user or lessee-user (other than a used equipment dealer) and an informed and willing seller or lessor under no compulsion to sell or lease, on the assumptions that: such Units (i) are being sold "in place and in use"; (ii) are free and clear of all liens and encumbrances; and (iii) are in the condition required upon the return of the Units under Section 9 of this Lease. In such determination, costs of removal from the location of current use shall not be a deduction from such value(s). (c) If the Lessor and Lessee have not agreed upon a determination of the Fair Market Value or Fair Rental Value of any Unit within 30 days after one of the parties has requested such determination, that determination shall be made by a certified independent appraiser approved by both Lessor and Lessee, such approvals not to be unreasonably withheld. The appraiser shall be furnished with a letter of instruction concerning the preparation of the appraisal, together with a copy of the Lease and Schedule and, to the extent available, related purchase orders and/or invoices. The appraiser shall be instructed to make such determination within 30 days following appointment. The determination made by the appraiser shall be final and binding on both Lessor and Lessee. The fees and expenses of any appraisal shall be paid by the Lessee, if such appraisal is needed for the Lessor's exercise of its remedies under Sections 12 and 13 hereof, and equally by the Lessor and Lessee otherwise. 4C. General. The purchase of the Units by Lessee pursuant to this Section 4 shall be "AS IS, WHERE IS", without recourse to or any warranty by Lessor, other than a warranty that the Units are free and clear of liens and encumbrances resulting from acts of Lessor. 5. WARRANTIES; INDEMNITY: (a) Lessee acknowledges that it has made the selection of each Unit based upon its own judgment. LESSOR MAKES NO EXPRESS OR IMPLIED WARRANTIES INCLUDING, WITHOUT LIMITATION, THOSE OF DESCRIPTION, INFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE WITH RESPECT TO THE EQUIPMENT AND HEREBY DISCLAIMS THE SAME. Lessor shall have no liability for any damages, whether direct or consequential, incurred by Lessee as a result of any defect or malfunction of a Unit. Lessee agrees to look solely to the manufacturer or vendor of any defective or malfunctioning Unit for the repair or replacement of such Unit and to continue to make all Rental Payments with respect to such Unit in spite of such defect or malfunction. Lessor hereby assigns to Lessee, for and during the Term, any warranty, guaranty or indemnity of the manufacturer or vendor issued to Lessor with respect to any Unit. 5 8 (b) Lessee shall indemnify, reimburse and hold Lessor (including, without limitation, each of its partners) and each of their respective successors, assigns, officers, directors, shareholders, servants, agents and employees harmless from and against all liabilities, losses, damages, actions, suits, demands, claims of any kind and nature (including, without limitation, claims relating to environmental discharge, cleanup or compliance), and all costs and expenses whatsoever to the extent they may be incurred or suffered by such indemnified party in connection therewith (including, without limitation reasonable attorneys' fees and expenses), fines, penalties (and other charges of applicable governmental authorities), licensing fees relating to any Unit, damage to or loss of use of property (including, without limitation, consequential or special damages to third parties or damages to Lessee's property), or bodily injury to or death of any person (including, without limitation, any agent or employee of Lessee) (each a "Claim"), directly or indirectly relating to or arising out of the acquisition, use, lease or sublease, ownership, operation, possession, control, storage or condition of any Unit (regardless of whether such Unit is at the time in the possession of Lessee), the falsity of any non-tax representation or warranty of Lessee or Lessee's failure to comply with the terms of the Lease during the Term. The foregoing indemnity shall cover, without limitation, (i) any Claim in connection with a design or other defect (latent or patent) in any Unit, (ii) any Claim for infringement of any patent, copyright, trademark or other intellectual property right, (iii) any Claim resulting from the presence on or under or the escape, seepage, leakage, spillage, discharge, emission or release from any Unit of any Hazardous Materials, including, without limitation, any Claims asserted or arising under any Environmental Law, or (iv) any Claim for negligence or strict or absolute liability in tort; provided, however, that Lessee shall not indemnify Lessor for any liability incurred by Lessor as a direct and sole result of Lessor's gross negligence or willful misconduct. Such indemnities shall continue in full force and effect, notwithstanding the expiration or termination of this Lease. Upon Lessor's written demand, Lessee shall assume and diligently conduct, at its sole cost and expense, the entire defense of Lessor and its agents, employees, successors and assigns against any indemnified Claim described in this Section 5. Lessee shall not settle or compromise any Claim against or involving Lessor without first obtaining Lessor's written consent thereto, which consent shall not be unreasonably withheld. 6. TITLE, LOCATION AND RETURN: Lessor and Lessee hereby confirm their intent that the Equipment remain and be deemed personal property and that title thereto shall remain in Lessor. If requested by Lessor, Lessee will affix plates or markings on the Equipment indicating the interests of Lessor. Lessee may not remove the Equipment from its place of installation without Lessor's prior written consent, which consent shall not be unreasonably withheld. Lessor shall have the right to inspect the Equipment during regular business hours, with reasonable notice, and in compliance with Lessee's reasonable security procedures. If for any reason the Equipment is to be returned to Lessor on Lessor's demand hereunder, Lessee at its own risk and expense, will cause the Equipment to be delivered promptly to Lessor free of all Hazardous Materials and in the same condition as when delivered hereunder, ordinary wear and tear excepted, to such point in the United States as Lessor may designate and in such a manner as is consistent with the manufacturer's recommendations, if any, for transportation and packaging of such Equipment. All charges to cover Equipment transportation, deinstallation, storage until returned, packing, and handling and all other costs associated with a return of the Equipment to the location designated by Lessor shall be paid by Lessee. 6 9 7. SUBLEASE, ASSIGNMENT: Lessee acknowledges and agrees that Lessor may, subject to the terms of this Lease, sell, assign, grant a security interest in, or otherwise transfer all or any part of its rights, title and interest in this Lease and the Equipment. Upon Lessor's written notice, Lessee shall, if requested, pay directly to such assignee without abatement, deduction or set-off all amounts which become due hereunder. Lessee waives and agrees it will not assert against such assignee any counterclaim or set-off in any action for rent under the Lease. Such assignee shall have and be entitled to exercise any and all rights and remedies of Lessor hereunder, and all references herein to Lessor shall include Lessor's assignee. Lessee acknowledges that such a sale, assignment, grant or transfer would neither materially change Lessee's duties nor materially increase the burdens or risks imposed on the Lessee under this Lease. LESSEE MAY NOT, WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, (i) SUBLEASE, TRANSFER, DISPOSE OF OR ASSIGN ITS RIGHTS IN RESPECT OF ANY UNIT OR ITS OBLIGATIONS UNDER THIS LEASE OR (ii) ASSIGN, GRANT A SECURITY INTEREST IN, OR OTHERWISE TRANSFER ALL OR ANY PART OF ITS RIGHTS, TITLE AND INTEREST IN AND TO THIS LEASE OR THE EQUIPMENT. 8. TAXES: Lessee agrees to pay if and when due, in addition to other amounts due hereunder and under each Schedule, all fees and assessments, and all sales, use, property, excise and other taxes and charges (including all interest and penalties) (collectively "Taxes"), now or hereafter imposed by any governmental body or agency upon any of the Equipment or upon the purchase, ownership, possession, leasing, operation, use, rentals or other payments, or disposition hereunder whether payable by Lessor or Lessee (exclusive of taxes on or measured by Lessor's net income). Lessee agrees to prepare and file promptly with the appropriate offices any and all tax and similar returns required to be filed with respect thereto, or, if requested by Lessor, to notify Lessor of such requirements and furnish Lessor with all information required by Lessor so that it may effect such filing, at Lessee's expense. Any Taxes paid by or imposed on, Lessor on behalf of Lessee shall become immediately due and payable on Lessor's demand. Lessor, as owner, shall be entitled to any and all depreciation and modified cost recovery deductions provided under the Internal Revenue Code of 1986, as amended from time to time and any other such tax benefits which may now or hereafter be available to an owner of such Equipment (collectively, "Tax Benefits"). If as a result of (i) the inaccuracy or breach of any of Lessee's representations,, warranties and covenants herein or in any Schedule, or (ii) the acts or failure to act of Lessee or any person claiming an interest in the Equipment through the Lessee (other than a casualty or other event described in Section 11 with respect to which Stipulated Loss Value shall have been paid by Lessee), Lessor or any of its assigns shall lose, or shall not, in its reasonable opinion, have the right to claim, or there shall be disallowed, deferred or recaptured, any portion of the Tax Benefits with respect to a Unit (a "Loss of Tax Benefits") or there shall be included in Lessor's gross income any amounts other than Rental Payments in respect of the purchase price of any Unit (an "Inclusion"), then, on and after the next succeeding Rent Payment date after written notice to Lessee by Lessor, Lessee agrees as follows: The rent for the Equipment shall, on the Rent Payment date next succeeding Lessor's written notice to Lessee of Lessor's payment of any tax payment attributable to such Inclusion or of a Loss of Tax Benefits, be increased to such amount or amounts as shall, by the end of the original term of the last Schedule to this Lease, in the reasonable opinion of Lessor, after deduction of all fees, taxes, or other charges required to be paid by Lessor in respect of the receipt of all amounts payable by Lessee to Lessor under 7 10 this Section 8 under the laws of any federal, state, or local government or taxing authority in the United States, cause Lessor's after-tax yield and cash flow in respect of the Equipment to equal those which would have been realized by Lessor if Lessor had not incurred such a Loss of Tax Benefits or had such an Inclusion. If any claim or contest regarding any tax indemnity covered by this Section 8 shall arise, such claim or contest shall be addressed or conducted, at Lessee's expense, in the manner reasonably specified by Lessor. 9. USE; MAINTENANCE: (a) Lessee, at its expense, shall make all necessary site preparations and cause the Equipment to be operated in accordance with any applicable manufacturer's manuals or instructions. So long as no Event of Default has occurred and is continuing, Lessee shall have the right to quietly possess and use the Equipment as provided herein without interference by Lessor. (b) Lessee, at its expense, shall maintain the Equipment in good condition, reasonable wear and tear excepted, and will comply with all laws, ordinances and regulations to which the use and operation of the Equipment may be or become subject. Such obligation shall extend to repair and replacement of any partial loss or damage to the Equipment, regardless of the cause. If maintenance is mandated by the manufacturer, Lessee shall obtain and keep in effect at all times during the Term maintenance service contracts with suppliers approved by Lessor, such approval not to be unreasonably withheld. All parts furnished in connection with such maintenance or repair shall immediately become part of the Equipment. All such maintenance, repair and replacement services shall be paid for and discharged by Lessee when due with the result that no lien will attach to the Equipment. Only qualified personnel of Lessee shall operate the Equipment. The Equipment shall be used only for the purposes for which it was designed. 10. INSURANCE: (a) Lessee shall obtain and maintain for the Term, at its own expense, (i) "all risk" insurance against loss or damage to the Equipment, (ii) commercial general liability insurance (including contractual liability, products liability and completed operations coverages) reasonably satisfactory to Lessor, and (iii) such other insurance against such other risks of loss and with such terms, as shall in each case be reasonably satisfactory to or reasonably required by Lessor (as to carriers, amounts and otherwise). (b) The amount of the "all risk" insurance shall be the greater of the replacement value of the Equipment (as new) or the "Stipulated Loss Value" specified in the applicable Schedules, which amount shall be determined to Lessor's reasonable satisfaction as of each anniversary date of this Lease with the amount so determined being put into effect on the next succeeding renewal or inception date of such insurance. (c) The deductible with respect to "all-risk" insurance required by clause (b) above and product liability insurance required by clause (a) above shall not exceed $25,000; otherwise there shall be no deductible with respect to any insurance required to be maintained hereunder. (d) The amount of commercial general liability insurance (other than products liability coverage and completed operations insurance) required by clause (a) above shall be at least $2,000,000 per occurrence. The amount of the products liability and completed operations insurance required by clause (a) above shall be at least $2,000,000 per occurrence. (e) Each "all risk" policy shall: (i) name Lessor as sole loss payee with respect to the Equipment, (ii) provide for each insurer's waiver of its right of subrogation against Lessor and Lessee, and (iii) provide that such insurance (A) shall not be invalidated by any action of Lessee, or any breach by Lessee of any provision of any of its insurance policies, and (B) shall waive set-off, counterclaim or offset against Lessor. Each liability policy shall 8 11 (w) name Lessor as an additional insured and (x) provide that such insurance shall have cross-liability and severability of interest endorsements (which shall not increase the aggregate' policy limits of Lessee's insurance). All insurance policies (y) shall provide that Lessee's insurance shall be primary without a right of contribution of Lessor's insurance, if any, or any obligation on the part of Lessor to pay premiums of Lessee, and (z) shall contain a clause requiring the insurer to give Lessor at least 30 days' prior written notice of its cancellation (other than cancellation for non-payment for which 10 days' notice shall be sufficient). Lessee shall on or prior to the Delivery Date of Schedule No. 1 and prior to each policy renewal, furnish to Lessor certificates of insurance or other evidence satisfactory to Lessor that such insurance coverage is in effect. Lessee further agrees to give Lessor prompt notice of any damage to, or loss of, the Equipment, or any part thereof. 11. LOSS; DAMAGE; DESTRUCTION AND SEIZURE: (a) Lessee shall bear the risk of the Units being lost, stolen, destroyed, damaged or seized by governmental authority for any reason whatsoever at any time until the latest to occur' of (i) the expiration or termination of the Term or (ii) any storage period thereafter or (iii) the return of the subject Unit to Lessor (if authorized hereunder), and shall proceed diligently and cooperate fully to recover any and all damages, insurance proceeds or condemnation awards. (b) Except as described in Section 11(c) hereof, if during the Term or the storage period thereafter, any Unit shall be lost, stolen, destroyed, irreparably damaged or seized by governmental authority for a period equal to at least the remainder of the Term, Lessor shall receive from the proceeds of insurance obtained pursuant to Section 10 hereof, from any award paid by the seizing governmental authority and, to the extent not received from the proceeds of such insurance or award or both, from Lessee, on or before the Rental Payment date next succeeding such loss, theft, destruction, damage or governmental seizure: (i) all accrued and unpaid rent in respect of such Unit including rent due on the rental payment date next succeeding the date of such loss or seizure if the rent is in arrears; (ii) the Stipulated Loss Value of such Unit, determined as of such Rental Payment date; (iii) all other sums, if any, that shall have become due and payable hereunder; and (iv) interest on the foregoing at the lower of the rate equal to 1.5% per month or the highest rate then permitted by applicable law from the due dates(s) of such payment(s) to the date of payment. On receipt by Lessor of the amount specified hereinabove with respect to each such Unit so lost, stolen, destroyed, damaged or seized, (i) this Lease shall be deemed terminated as to such Unit and rent in respect of such Unit shall be deemed abated, as of the Rental Payment date next succeeding such loss, theft, damage, destruction or seizure; and (ii) so long as no default or Event of Default has occurred and is continuing hereunder, Lessor shall on demand, transfer title to such Unit, "AS IS, WHERE IS, WITHOUT RECOURSE, REPRESENTATION OR WARRANTY," to Lessee, or, if appropriate in Lessor's sole judgment, which judgment shall be exercised in a reasonable manner, and on prior notice to Lessee, to Lessee's insurance carrier. Any proceeds of insurance payable to Lessor pursuant to this Section 11 and Section 10 hereof received by Lessee shall be paid to Lessor promptly upon their receipt by Lessee. If any proceeds of insurance or awards received from governmental authorities are in excess of the amount owed under this Section 11(b), Lessor shall promptly remit to Lessee the amount in excess of the amount owed to Lessor. (c) So long as no Event of Default shall have occurred and be continuing, any proceeds of insurance obtained pursuant to Section 10 hereof received with respect to any Unit the repair of which is practical shall, at the election of Lessee, be applied either to the repair of such Unit 9 12 or, upon Lessor's receipt of evidence of the repair of the Unit reasonably satisfactory to Lessor, to the reimbursement of Lessee for the cost of such repair. (d) Lessee shall promptly, but in any event within 30 days thereafter, notify Lessor in writing in reasonable detail of any loss, theft, destruction or seizure described in this Section 11. (e) The Stipulated Loss Value payable by Lessee under this Lease shall be that percentage of Lessor's Cost of the affected Unit(s) set forth in the table attached to the applicable Schedule as Annex B opposite the Rental Payment date next following the event giving rise to Lessee's obligation to pay Stipulated Loss Value. Stipulated Loss Values and Rental Payments shall not be prorated. 12. EVENTS OF DEFAULT: An "Event of Default" shall occur if Lessee: (a) fails to pay/make any Rental Payment or other payment required hereunder when due and such failure continues for a period of 10 days; or (b) fails to perform or observe any other material covenant, condition or agreement hereunder or breaches any provision contained herein or in any other document furnished Lessor in connection herewith, and such failure or breach continues for a period of 30 days after written notice by Lessor; or (c) makes any representation or warranty herein or in any document furnished in connection herewith, which shall have been materially false or inaccurate when made; or (d) fails to maintain insurance under this Lease or otherwise required by the Lessor hereunder; or (e) shall admit in writing that it is unable to pay its debts as they become due, become insolvent or bankrupt or make an assignment for the benefit of its creditors or consents to the appointment of a trustee or receiver or insolvency proceedings shall be instituted by or against Lessee. 13. REMEDIES: Upon the occurrence of any Event of Default and at any time thereafter, provided such Event of Default is then continuing (which occurrence, for purposes of clause (a)(ii)(B) below is the day Lessee shall be deemed to tender possession of the Equipment to Lessor), (a) Lessor may, in its discretion, do any one or more of the following, all of which Lessor and Lessee expressly agree are commercially reasonable under the UCC and any other applicable law: (i) terminate this Lease; (ii) declare to be immediately due and payable: (A) all unpaid rent and sums then due and payable under this Lease (other than amounts payable under clause (B) hereof, if any,) plus (B) an amount equal to the greater of the then applicable Stipulated Loss Value (which value Lessee acknowledges has a reasonable discount rate implicit therein) or the then applicable fair market value of the Equipment as determined by Lessor (but in no event less than an amount, equal to the Minimum Purchase Option Percentage of Lessor's Cost); (iii) require that Lessee return all Equipment to Lessor in accordance with Section 6 hereof, (iv) enter upon the premises where such Equipment is located and take immediate possession of and remove the same, all without liability to Lessor or its agents for such entry; (v) sell any or all of the Equipment at public or private sale, with or without notice to Lessee or advertisement, or otherwise dispose of, hold, use, operate, lease to others or keep idle such Equipment, all free and clear of any rights of Lessee and without any duty to account to Lessee for such action or inaction or for any proceeds with respect thereto subject to applicable law; (vi) exercise any other right or remedy which may be available under the UCC or other applicable law including the right to recover damages for the breach hereof. (b) In addition, Lessee shall be liable for, and reimburse Lessor for, all reasonable and necessary attorneys' fees and other expenses incurred by Lessor as a result of the foregoing defaults, or the exercise of Lessor's remedies, including without limitation placing any Equipment in the condition required by Section 9 hereof. No remedy referred to 10 13 in this Section 13 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to Lessor at law or in equity (c) There shall be no waiver by Lessor of any default unless in writing and such waiver shall not constitute a waiver of any other default by Lessee, or a waiver of any of Lessor's other rights. Lessee waives any rights now or hereafter conferred by statute or otherwise that may require Lessor to sell, re-lease or otherwise use or dispose any Unit in mitigation of the Lessor's damages or that might otherwise limit or modify any of Lessor's rights or remedies under this Lease. 14. LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS: (a) Lessee warrants and represents the following as of the date hereof. (i) Lessee is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and is duly qualified and authorized to do business in the state where the Equipment will be located; (ii) Lessee has the full corporate power, authority and legal right and has obtained all necessary approvals, consents and given all notices to execute and deliver this Lease and perform the terms hereof and of each Schedule; (iii) there is no action, proceeding or patent claim pending or, insofar as Lessee knows, threatened against Lessee or any of its subsidiaries before any court or administrative agency which might have a materially adverse effect on the business, condition or operations of Lessee or such subsidiary; and (iv) this Lease has been and each Schedule will be duly executed and delivered by Lessee and constitute or will constitute the valid, binding and enforceable obligations of Lessee. (b) Lessee agrees that by its signature on each Schedule it shall be deemed to have warranted and represented the following as of the Delivery Date of such Schedule: (i) all of the Units being delivered on the Delivery Date of such Schedule are accurately described in Annex A attached to such Schedule, have been fully assembled and conform to all applicable performance criteria; (ii) the requirements of this Lease and of Lessor with respect to the identification of the Units have been met; and (iii) except as set forth in Annex C to the applicable Schedule, each of the representations and warranties set forth in clause (a) of this Section 14 remains true and correct. (c) Lessee covenants and agrees that it shall not, without Lessor's prior written consent, attempt, cause or permit another to sell, transfer, encumber, part with possession, or sublet, voluntarily or involuntarily, any Unit. 11 14 15. NOTICES. All notices (and financial information required to be delivered to Lessor under Section 16(c) of this Lease) shall be addressed as follows: If to Lessor: MMC/GATX PARTNERSHIP NO. I c/o GATX CAPITAL CORPORATION, Agent Four Embarcadero Center, Suite 2200 San Francisco, CA 94111 Attn: Contract Administration With a copy of required financial information to: MEIER MITCHELL & COMPANY 4 Orinda Way, Suite 200-B Orinda, California 94563 Attn: Contract Administration If to Lessee, at the address set forth on the cover page of this Lease. 16. MISCELLANEOUS: (a) Any notices hereunder shall be in writing and shall be deemed given when delivered personally, by private courier, by facsimile transmission or sent by certified mail, postage prepaid, addressed to the other party at its address set forth herein or to such other address as either party may designate in writing. Such notices or demands shall be deemed given upon receipt in the case of personal delivery, mailing or facsimile transmission. (b) Lessee will promptly execute and deliver to Lessor such further reasonable documents (including, but not limited to, financing statements) and take such further reasonable action (such as obtaining landlord or mortgagee's waivers), as Lessor may request in order to more effectively carry out the intent and purpose of this Lease or an assignment of Lessor's interest herein. (c) Lessee shall furnish to Lessor monthly and audited annual financial statements and such other financial information as Lessor may reasonably request from time to time. (d) This Lease constitutes the entire agreement on the subject matter hereof between the parties hereto (other than any document executed in connection herewith) and shall be binding upon and inure to the benefit of the parties hereto, their permitted successors and assigns. (e) Any provision of the Lease which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof; and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. (f) Time is of the essence with respect to the Lease. (g) The captions set forth herein are for convenience only and shall not define or limit any of the terms hereof (h) The language in this Lease and the related documents is to be construed as to its fair meaning and not strictly for or against any party. (i) All payments shall be paid to the address designated by Lessor in the applicable Schedule or otherwise in a writing signed by Lessor. (j) Lessee's and Lessor's obligations hereunder shall survive the expiration and termination of the Term to the extent required for full performance and satisfaction thereof. (k) ALL MATTERS INVOLVING THE CONSTRUCTION, VALIDITY, PERFORMANCE AND ENFORCEMENT OF THIS LEASE WILL BE GOVERNED BY THE LAWS OF THE 12 15 STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW OR CHOICE OF LAW. This Lease is being executed in the State of California and is to be performed in such State. Lessee agrees and consents that the Superior Court of the State of California for the County of San Francisco or the Federal District Court for the jurisdiction in that County shall have jurisdiction and shall be the venue for determination of all controversies, disputes and actions arising under this Lease. Nothing contained herein is intended to preclude Lessor from commencing any action under this Lease in any court having jurisdiction thereof. (1) This Lease may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and same instrument; provided, however, that to the extent, if any, that this Lease constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction), no security interest in this Lease may be created through the transfer or possession of any counterpart of this Lease other than the original executed counterpart of this Lease, which shall be identified as such counterpart. 17. AMENDMENTS, MODIFICATIONS, WAIVERS: NONE OF THE PROVISIONS OF TIES LEASE MAY BE AMENDED, MODIFIED OR WAIVED EXCEPT IN A WRITING SIGNED BY LESSOR AND LESSEE. INITIALS /s/ KG (LESSOR) /s/ PS INITIALS (LESSEE) This Lease is hereby duly executed by the parties hereto as set forth below. LESSEE: LESSOR: CALYPTE BIOMEDICAL CORPORATION MMC/GATX PARTNERSHIP NO. I By GATX CAPITAL CORPORATION, as Agent BY: /s/ PAUL SIGEL BY: /s/ KEITH E. GUINN NAME (PRINT): Paul Sigel NAME (PRINT): Keith E. Guinn TITLE: CFO TITLE: VP DATE: [ILLEGIBLE] DATE: 9/24/93 This Lease incorporates the following Riders as if set forth herein: Rider I; ___________ ; ___________ ; ___________ INITIALS /s/ KG (LESSOR) INITIALS /s/ PS (LESSEE) 13 16 Exhibit A - Warrant Exhibit B - Landlord Waiver Exhibit C - Purchase Order and Invoice Assignment Exhibit D - Bill of Sale Exhibit E - Form of Schedule Exhibit F - Security Deposit Pledge Agreement 14 17 RIDER I TO MASTER EQUIPMENT LEASE AGREEMENT NO._____ DATED AUGUST 20, 1993 Conditions to Lessor's Obligations By their initials below and on the signature page of the Master Equipment Lease Agreement referenced in the upper right corner of this page, Lessor and Lessee agree that the Lease incorporates the following terms: 1. On or prior to the date of execution of the Lease by Lessor, Lessor shall have received in form and substance satisfactory to Lessor: (a) A Warrant substantially in the form of Exhibit A hereto. (b) A Security Deposit Pledge Agreement in the form of Exhibit F hereto. (c) A legal opinion of Lessee's legal counsel in form and substance reasonably satisfactory to Lessor. (d) Copies, certified by the Secretary or Assistant Secretary or Chief Financial Officer of Lessee, of: (A) the Articles of Incorporation and By-Laws of Lessee (as amended to the date of the Lease) and (B) the resolutions adopted by Lessee's board of directors authorizing the execution and delivery of this Lease, the Schedules, the Warrant and the other documents referred to herein and the performance by Lessee of its obligations hereunder and thereunder; (e) Unless the opinion of Lessor's legal counsel contains language to the same effect, a Good Standing Certificate (including franchise tax status) with respect to Lessee from Lessee's state of incorporation, dated a date reasonably close to the date of acceptance of the Lease by Lessor. (f) Evidence of the insurance coverage required by Section 10 of the Lease. (g) All necessary consents of shareholders and other third parties with respect to the subject matter of the Lease, the Schedules and the Warrant. (h) All other documents as Lessor shall have reasonably requested. 2. Prior to any funding on a Delivery Date, Lessee shall have satisfied all of the conditions set forth in the applicable Schedule. Initials /s/ KG (Lessor) Initials /s/ PS (Lessee) RIDER I 18 RIDER II TO MASTER EQUIPMENT LEASE AGREEMENT NO._____ DATED AUGUST 20,1993 LESSOR:MMC/GATX PARTNERSHIP NO. I LESSEE: CALYPTE BIOMEDICAL CORPORATION Lessor and Lessee hereby agree that the Master Equipment Lease Agreement referenced in the upper right corner of this page (the "Lease") incorporates the following amended terms: Notwithstanding the provisions of Section 10 of the Lease, the amount of products liability and completed operations insurance required by clause (a) of Section 10 of the Lease shall be at least (i) $1,000,000 per occurrence until the earlier of (A) the date Lessee commences commercial sales of its products, or (B) January 1, 1994, and (ii) thereafter, $5,000,000 per occurrence. This Rider II is hereby duly executed by the parties hereto as set forth below. LESSEE: LESSOR: CALYPTE BIOMEDICAL CORPORATION MMC/GATX PARTNERSHIP NO. I By GATX Capital Corporation, as Agent By /s/ PAUL SIEGEL By: /s/ KEITH E. GUINN Name: Paul Siegel Name: KEITH E. GUINN Title: CFO Title: VP Date: 8/20/93 Date: 9/24/93 19 EXHIBIT A WARRANT 20 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS WARRANT. CALYPTE BIOMEDICAL CORPORATION WARRANT TO PURCHASE 122,667 SHARES OF COMMON STOCK THIS CERTIFIES THAT, for value received, MMC/GATX Partnership No. I (the "Partnership") is entitled to subscribe for and purchase 122,667 shares of the fully paid and nonassessable Common Stock, $.001 par value (as adjusted pursuant to Section 4 hereof, the "Shares") of Calypte Biomedical Corporation, a California corporation (the "Company"), at the price of $.75 per share (such price and such other price as shall result, from time to time, from the adjustments specified in Section 4 hereof is herein referred to as the "Warrant Price"), subject to the provisions and upon the terms and conditions hereinafter set forth. As used herein, (a) the term "Common Stock" shall mean the Company's presently authorized Common Stock, and any stock into or for which such Common Stock may hereafter be converted or exchanged, (b) the term "Date of Grant" shall mean August 20, 1993, and (c) the term "Other Warrants" shall mean any other warrants issued by the Company in connection with the transaction with respect to which this Warrant was issued, and any warrant issued upon transfer or partial exercise of this Warrant. The term "Warrant" as used herein shall be deemed to include Other Warrants unless the context clearly requires otherwise. 1. Term. The purchase right represented by this Warrant is exercisable, in whole or in part, at any time and from time to time from the Date of Grant through the later of (i) ten (10) years after the Date of Grant or (ii) five (5) years after the closing of the Company's initial public offering of its Common Stock effected pursuant to a Registration Statement on Form S-1 (or its successor) filed under the Securities Act of 1933, as amended (the "Act"). 2. Method of Exercise, Payment, Issuance of New Warrant. Subject to Section 1 hereof, the purchase right represented by this Warrant may be exercised by the holder hereof, in whole or in part and from time to time, by either, at the election of the holder hereof, (a) the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A duly executed) at the principal office of the Company and by the payment to the Company, by 21 check, of an amount equal to the then applicable Warrant Price multiplied by the number of Shares then being purchased, or (b) if in connection with a registered public offering of the Company's securities, the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit A-1 duly executed) at the principal office of the Company together with notice of arrangements reasonably satisfactory to the Company for payment to the Company either by check or from the proceeds of the sale of shares to be sold by the holder in such public offering of an amount equal to the then applicable Warrant Price per share multiplied by the number of Shares then being purchased. The person or persons in whose name(s) any certificate(s) representing shares of Common Stock shall be issuable upon exercise of this Warrant shall be deemed to have become the holder(s) of record of, and shall be treated for all purposes as the record holder(s) of, the shares represented thereby (and such shares shall be deemed to have been issued) immediately prior to the close of business on the date or dates upon which this Warrant is exercised. In the event of any exercise of the rights represented by this Warrant, certificates for the shares of stock so purchased shall be delivered to the holder hereof as soon as possible and in any event within thirty days after such exercise and, unless this Warrant has been fully exercised or expired, a new Warrant representing the portion of the Shares, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the holder hereof as soon as possible and in any event within such thirty-day period. 3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance pursuant to the terms and conditions herein, be fully paid and nonassessable, and free from all taxes, liens and charges with respect to the issue thereof. During the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized, and reserved for the purpose of the issue upon exercise of the purchase rights evidenced by this Warrant, a sufficient number of shares of its Common Stock to provide for the exercise of the rights represented by this Warrant. 4. Adjustment of Warrant Price and Number of Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Warrant Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: (a) Reclassification or Merger. In case of any reclassification, change or conversion of securities of the class issuable upon exercise of this Warrant (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or in case of any merger of the Company with or into another corporation (other than a merger with another corporation in which the Company is the acquiring and the surviving corporation and which does not result in any reclassification or change of outstanding securities issuable upon exercise of this Warrant), or in case of any sale of all or substantially all of the assets of the Company, the Company, or such successor or purchasing corporation, as the case may be, shall duly execute and deliver to the holder of this Warrant a new Warrant (in form and substance satisfactory to the holder of this Warrant), so that the holder of this Warrant shall have the right to receive, at a total purchase price not 2 22 to exceed that payable upon the exercise of the unexercised portion of this Warrant, and in lieu of the shares of Common Stock theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money and property receivable upon such reclassification, change or merger by a holder of the number of shares of Common Stock then purchasable under this Warrant. Such new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 4. The provisions of this subparagraph (a) shall similarly apply to successive reclassifications, changes, mergers and transfers. (b) Subdivision or Combination of Shares. If the Company at any time while this Warrant remains outstanding and unexpired shall subdivide or combine its outstanding shares of Common Stock, the Warrant Price shall be proportionately decreased in the case of a subdivision or increased in the case of a combination, effective at the close of business on the date the subdivision or combination becomes effective. (c) Stock Dividends and Other Distributions. If the Company at any time while this Warrant is outstanding and unexpired shall (i) pay a dividend with respect to Common Stock payable in Common Stock, or (ii) make any other distribution with respect to Common Stock (except any distribution specifically provided for in the foregoing subparagraphs (a) and (b)) of Common Stock, then the Warrant Price shall be adjusted, from and after the date of determination of shareholders entitled to receive such dividend or distribution, to that price determined by multiplying the Warrant Price in effect immediately prior to such date of determination by a fraction (i) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and (ii) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution. (d) Adjustment of Number of Shares. Upon each adjustment in the Warrant Price, the number of Shares of Common Stock purchasable hereunder shall be adjusted, to the nearest whole share, to the product obtained by multiplying the number of Shares purchasable immediately prior to such adjustment in the Warrant Price by a fraction, the numerator of which shall be the Warrant Price immediately prior to such adjustment and the denominator of which shall be the Warrant Price immediately thereafter. (e) Antidilution Rights. In the event that the "Conversion Price" (as defined in the Company's Restated Articles of Incorporation, as amended through the Date of Grant, a true and complete copy of which is attached hereto as Exhibit B (the "Charter")), for the Company's Series D Preferred Stock is reduced from time to time prior to December 16, 1993 pursuant to the antidilution rights applicable to the Series D Preferred Stock set forth in Section 6.C.(a)(i)(I) of Article III of the Charter (other than reductions covered by Sections 4(b) or (c) of this Warrant), then the same reduction shall forthwith be made to the Warrant Price, subject to proportionate adjustment to reflect any stock split or combination, stock dividend or similar event occurring after the Date of Grant. The intent of this Section 4(e) is to provide the holder of this Warrant with the same antidilution protection as would have 3 23 prevailed prior to December 16, 1993 if this Warrant had entitled the holder hereof to purchase shares of the Company's Series D Preferred Stock (rather than Common Stock), as such antidilution protection is set forth in the Charter. Such antidilution rights shall not be amended, modified or waived in any manner that is materially adverse to the holder hereof without such holder's prior written consent. The Company shall promptly provide the holder hereof with any restatement, amendment, modification or waiver of the Charter promptly after the same has been made. 5. Notice of Adjustments. Whenever the Warrant Price or the number of Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the Company shall make a certificate signed by its chief financial officer setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Warrant Price and the number of Shares purchasable hereunder after giving effect to such adjustment, which shall be mailed (without regard to Section 13 hereof, by first class mail, postage prepaid) to the holder of this Warrant. 6. Fractional Shares. No fractional shares of Common Stock will be issued in connection with any exercise hereunder, but in lieu of such fractional shares the Company shall make a cash payment therefor based on the fair market value of the Common Stock on the date of exercise as reasonably determined in good faith by the Company's Board of Directors. 7. Compliance with Securities Act, Disposition of Warrant or Shares of Common Stock. (a) Compliance with Securities Act. The holder of this Warrant, by accept agrees that this Warrant, and the shares of Common Stock to be issued upon exercise hereof are being acquired for investment and that such holder will not offer, sell or otherwise dispose of this Warrant, or any shares of Common Stock to be issued upon exercise hereof except under circumstances which will not result in a violation of the Act. Upon exercise of this Warrant, unless the Shares being acquired are registered under the Act or an exemption from such registration is available, the holder hereof shall confirm in writing, by executing the form attached as Schedule 1 to Exhibit A hereto, that the shares of Common Stock so purchased are being acquired for investment and not with a view toward distribution or resale. This Warrant and all shares of Common Stock issued upon exercise of this Warrant (unless registered under the Act) shall be stamped or imprinted with a legend in substantially the following form: "THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH RE- 4 24 GISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY." In addition, in connection with the issuance of this Warrant, the holder specifically represents to the Company by acceptance of this Warrant as follows: (1) The holder is aware of the Company's business affairs and financial condition, and has acquired information about the Company sufficient to reach an informed and knowledgeable decision to acquire this Warrant. The holder is acquiring this Warrant for its own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Act. (2) The holder understands that this Warrant has not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the holder's investment intent as, expressed herein. In this connection, the holder understands that, in the view of the SEC, the statutory basis for such exemption may be unavailable if the holder's representation was predicated solely upon a present intention to hold the Warrant for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Warrant, or for a period of one year or any other fixed period in the future. (3) The holder further understands that this Warrant must be held indefinitely unless subsequently registered under the Act and any applicable state securities laws, or unless exemptions from registration are otherwise available. Moreover, the holder understands that, except as provided in Section 9 hereof, the Company is under no obligation to register this Warrant. (4) The holder is aware of the provisions of Rule 144 and 144A, promulgated under the Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly, from the issuer thereof (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions, if applicable, including, among other things: The availability of certain public information about the Company, the resale occurring not less than two years after the party has purchased and paid for the securities to be sold; the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934, as amended) and the amount of securities being sold during any three-month period not exceeding the specified limitations stated therein. (5) The holder further understands that at the time it wishes to sell this Warrant there may be no public market upon which to make such a sale, and that, even if such a public market then exists, the Company may not be satisfying the current public information re- 5 25 quirements of Rule 144 and 144A, and that, in such event, the holder may be precluded from selling this Warrant under Rule 144 and 144A even if the two-year minimum holding period had been satisfied. (6) The holder further understands that in the event all of the requirements of Rule 144 and 144A are not satisfied, registration under the Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 and 144A are not exclusive, the Staff of the SEC has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 and 144A will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. (b) Disposition of Warrant or Shares. With respect to any offer, sale or other disposition of this Warrant or any shares of Common Stock acquired pursuant to the exercise of this Warrant prior to registration of such Warrant or shares, the holder hereof and each subsequent holder of this Warrant agrees to give written notice to the Company prior thereto, describing briefly the manner thereof, together with a written opinion of such holder's counsel, if reasonably requested by the Company, to the effect that such offer, sale or other disposition may be effected without registration or qualification (under the Act as then in effect or any federal or state law then in effect) of this Warrant or such shares of Common Stock and indicating whether or not under the Act certificates for this Warrant or such shares of Common Stock to be sold or otherwise disposed of require any restrictive legend as to applicable restrictions on transferability in order to ensure compliance with such law. Promptly upon receiving such written notice and reasonably satisfactory opinion, if so requested, the Company, as promptly as practicable, shall notify such holder that such holder may sell or otherwise dispose of this Warrant or such shares of Common Stock, all in accordance with the terms of the notice delivered to the Company. If a determination has been made pursuant to this subsection (b) that the opinion of counsel for the holder is not reasonably satisfactory to the Company, the Company shall so notify the holder promptly after such determination has been made and shall specify in detail the legal analysis supporting any such conclusion. Notwithstanding the foregoing, this Warrant or such shares of Common Stock may, as to such federal laws, be offered, sold or otherwise disposed of in accordance with Rule 144 or 144A under the Act, provided that the Company shall have been furnished with such. information as the Company may reasonably request to provide a reasonable assurance that the provisions of Rule 144 or 144A have been satisfied. Each certificate representing this Warrant or the shares of Common Stock thus transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with such laws, unless in the aforesaid opinion of counsel for the holder, such legend is not required in order to ensure compliance with such laws. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions. 6 26 (c) Excepted Transfers. Neither any restrictions of any legend described in this Warrant nor the requirements of Section 7(b) above shall apply to any transfer without any additional consideration of, or grant of a security interest in, this Warrant or any part hereof (i) to a partner of the holder if the holder is a partnership, (ii) by the holder to a partnership of which the holder is a general partner, or (iii) to any affiliate of the holder if the holder is a corporation; provided, however, in any such transfer, the transferee shall on the Company's request agree in writing to be bound by the terms of this Warrant as if an original signatory hereto. 8. Rights as Shareholders, Information. No holder of this Warrant, as such, shall be entitled to vote or receive dividends or be deemed the holder of Common Stock or any other securities of the Company which may at any time be issuable on the exercise hereof for any purpose, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until this Warrant shall have been exercised and the Shares purchasable upon the exercise hereof shall have become deliverable, as provided herein. Notwithstanding the foregoing, the Company will transmit to the holder of this Warrant such information, documents and reports as are generally distributed to the holders of any class or series of the securities of the Company concurrently with the distribution thereof to the shareholders. 9. Registration Rights. The Company covenants and agrees as follows: 9.1 Definitions. For purposes of this Section 9: (a) The term "Registrable Shares" means (i) the Common Stock issuable or issued upon exercise or conversion of this Warrant or upon exercise or conversion of the Other Warrants, and (ii) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such Series Common Stock; (b) The term "Shareholder" means any person owning or having the right to acquire Registrable Shares or any assignee thereof in accordance with Paragraph 9.3 hereof; and (c) The term "Registration Rights" means Section 9 (other than Sections 9.1, 9.3 and 9.4) of the Agreement for the Purchase and Sale of Series D Preferred Stock dated as of December 16, 1992 by and among the Company and the investors who are signatories thereto (the "Purchase Agreement"). 9.2 Grant of Rights. The Company hereby grants to the Shareholders the rights set forth in the Registration Rights. A true and complete copy of the Registration 7 27 Rights is attached hereto as Exhibit C. The Company represents and warrants to the Shareholders that the Company has obtained all consents of parties to the Purchase Agreement and of any other persons that are required in order for the Registrable Shares to be included in the definition of "Registrable Securities" and for the Shareholders to be included in the definition of "Holders," as such terms are used in the Registration Rights. 9.3 Assignment of Registration Rights. Notwithstanding any provision of the Registration Rights, the rights to cause the Company to register Registrable Shares pursuant to the Registration Rights and this Section 9 may be assigned by a Shareholder to a transferee or assignee of such securities provided the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; and provided, further, that such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act. 9.4 No Conflicting Agreements. The Company represents and warrants to the Shareholders that the Company is not a party to any agreement that conflicts in any manner with the Shareholders' rights to cause the Company to register Registrable Shares pursuant to the Registration Rights and this Section 9. The Company covenants and agrees that it shall not, without the prior written consent of the Shareholders holding a majority of the outstanding Registrable Shares, amend, modify or restate the Registration Rights if the rights of the Shareholders would be subordinated, diminished or otherwise adversely affected in a different manner than other "Holders" of "Registrable Securities" (as defined in the Registration Rights). 9.5 Rights and Obligations Survive Exercise and Expiration of Warrant. The rights and obligations of the Company, of the holder of this Warrant and of the Registrable Shares contained in the Registration Rights and this Section 9 shall survive exercise, conversion and expiration of this Warrant. 10. Additional Rights. 10.1 Secondary Sales. The Company agrees that it will not interfere with the holder of this Warrant in obtaining liquidity if opportunities to make secondary sales of the Company's securities become available. To this end, the Company will promptly provide the holder of this Warrant with the same notice (if any) as it provides to other holders of the Company's securities of any offer to acquire from the Company's security holders more than five percent (5%) of the total voting power of the Company and will not interfere with the holder in arranging the sale of this Warrant to the person or persons making such offer. 10.2 Mergers. The Company will provide the holder of this Warrant with at least 30 days' notice of the terms and conditions of any proposed (i) sale, lease, exchange, conveyance or other disposition of all or substantially all of its property or business, or (ii) 8 28 merger into or consolidation with any other corporation (other than a wholly-owned subsidiary of the Company), or any other transaction (including a merger or other reorganization) or series of related transactions, in which more than 50% of the voting power of the Company is disposed of. 10.3 Right to Convert Warrant into Common Stock: Net Issuance. (a) Right to Convert. In addition to and without limiting the rights of the holder under the terms of this Warrant, the holder shall have the right to convert this Warrant or any portion thereof (the "Conversion Right") into shares of Common Stock as provided in this Section 10.3 at any time or from time to time during the term of this Warrant. Upon exercise of the Conversion Right with respect to a particular number of shares subject to this Warrant (the "Converted Warrant Shares"), the Company shall deliver to the holder (without payment by the holder of any exercise price or any cash or other consideration) (X) that number of shares of fully paid and nonassessable Common Stock equal to the quotient obtained by dividing the value of this Warrant (or the specified portion hereof) on the Conversion Date (as defined in subsection (b) hereof), which value shall be determined by subtracting (A) the aggregate Warrant Price of the Converted Warrant Shares immediately prior to the exercise of the Conversion Right from (B) the aggregate fair market value of the Converted Warrant Shares issuable upon exercise of this Warrant (or the specified portion hereof) on the Conversion Date (as herein defined) by (Y) the fair market value of one share of Common Stock on the Conversion Date (as herein defined). Expressed as a formula, such conversion shall be computed as follows: X = B - A ----- Y Where: X = the number of shares Common Stock that may be issued to holder Y = the fair market value (FMV) of one share of Common Stock A = the aggregate Warrant Price (i.e., Converted Warrant Shares x Warrant Price) B = the aggregate FMV (i.e., FMV x Converted Warrant Shares) No fractional shares shall be issuable upon exercise of the Conversion Right, and, if the number of shares to be issued determined in accordance with the foregoing formula is other than a whole number, the Company shall pay to the holder an amount in cash equal to the fair market value of the resulting fractional share on the Conversion Date (as hereinafter defined). 9 29 (b) Method of Exercise. The Conversion Right may be exercised by the holder by the surrender of this Warrant at the principal office of the Company together with a written statement specifying that the holder thereby intends to exercise the Conversion Right and indicating the number of shares subject to this Warrant which are being surrendered (referred to in subsection (a) hereof as the Converted Warrant Shares) in exercise of the Conversion Right. Such conversion shall be effective upon receipt by the Company of this Warrant together with the aforesaid written statement, or on such later date as is specified therein (the "Conversion Date"), and, at the election of the holder hereof, may be made contingent upon the closing of the sale of the Company's Common Stock to the public in a public offering pursuant to a Registration Statement under the Act (a "Public Offering"). Certificates for the shares issuable upon exercise of the Conversion Right and, if applicable, a new warrant evidencing the balance of the shares remaining subject to this Warrant, shall be issued as of the Conversion Date and shall be delivered to the holder within thirty (30) days following the Conversion Date. (c) Determination of Fair Market Value. For purposes of this Section 10.3, "fair market value" of a share of Common Stock as of a particular date (the "Determination Date") shall mean: (i) If the Conversion Right is exercised in connection with and contingent upon a Public Offering, and if the Company's Registration Statement relating to such Public Offering ("Registration Statement") has been declared effective by the SEC, then the initial "Price to Public" specified in the final prospectus with respect to such offering. (ii) If the Conversion Right is not exercised in connection with and contingent upon a Public Offering, then as follows: (A) If traded on a securities exchange, the fair market value of the Common Stock shall be deemed to be the average of the closing prices of the Common Stock on such exchange over the 30-day period ending five business days prior to the Determination Date; (B) If traded over-the-counter, the fair market value of the Common Stock shall be deemed to be the average of the closing bid prices of the Common Stock over the 30-day period ending five business days prior to the Determination Date; and (C) If there is no public market for the Common Stock, then fair market value shall be determined by mutual agreement of the holder of this Warrant and the Company, and if the holder and the Company are unable to so agree, by an investment banker of national reputation selected by the Company and reasonably acceptable to the holder of this Warrant. The fees and expenses of any such investment banker shall be borne equally by the Company and the holder of this Warrant. 10 30 11. Representations and Warranties. The Company represents and warrants to the holder of this Warrant as follows: (a) This Warrant has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and the rules of law or principles at equity governing specific performance, injunctive relief and other equitable remedies; (b) The Shares have been duly authorized and reserved for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and nonassessable; (c) The rights, preferences, privileges and restrictions granted to or imposed upon the Common Stock and the holders thereof are as set forth in the Charter, as amended to the Date of the Grant, a true and complete copy of which has been delivered to the original holder of this Warrant and is attached hereto as Exhibit B; (d) The execution and delivery of this Warrant are not, and the issuance of the Shares upon exercise of this Warrant in accordance with the terms hereof will not be, inconsistent with the Company's Charter or by-laws, do not and will not contravene any law, governmental rule or regulation, judgment or order applicable to the Company, and do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound or require the consent or approval of, the giving of notice to, the registration or filing with or the taking of any action in respect of or by, any Federal, state or local government authority or agency or other person, except for the filing of notices pursuant to federal and state securities laws, which filings will be effected by the time required thereby; and (e) There are no actions, suits, audits, investigations or proceedings pending or, to the knowledge of the Company, threatened against the Company in any court or before any governmental commission, board or authority which, if adversely determined, will have a material adverse effect on the ability of the Company to perform its obligations under this Warrant. 12. Modification and Waiver. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought. 13. Notices. Any notice, request, communication or other document required or permitted to be given or delivered to the holder hereof or the Company shall be delivered, or shall be sent by certified or registered mail, postage prepaid, to each such holder at its address 11 31 as shown on the books of the Company or to the Company at the address indicated therefor on the signature page of this Warrant. 14. Binding Effect on Successors. This Warrant shall be binding upon any corporation succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company's assets, and all of the obligations of the Company relating to the Common Stock issuable upon the exercise or conversion of this Warrant shall survive the exercise, conversion and termination of this Warrant and all of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the holder hereof. The Company will, at the time of the exercise or conversion of this Warrant, in whole or in part, upon request of the holder hereof but at the Company's expense, acknowledge in writing its continuing obligation to the holder hereof in respect of any rights (including, without limitation, any right to registration of the shares of Registrable Securities) to which the holder hereof shall continue to be entitled after such exercise or conversion in accordance with this Warrant; provided, that the failure of the holder hereof to make any such request shall not affect the continuing obligation of the Company to the holder hereof in respect of such rights. 15. Lost Warrants or Stock Certificates. The Company covenants to the holder hereof that, upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant or any stock certificate and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant or stock certificate, the Company will make and deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate. 16. Descriptive Headings. The descriptive headings of the several paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. 17. Governing Law. This Warrant shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of California. 18. Survival of Representations, Warranties and Agreements. All representations and warranties of the Company and the holder hereof contained herein shall survive the Date of Grant, the exercise or conversion of this Warrant (or any part hereof) or the termination or expiration of rights hereunder. All agreements of the Company and the holder hereof contained herein shall survive indefinitely until, by their respective terms, they are no longer operative. 19. Remedies. In case any one or more of the covenants and agreements contained in this Warrant shall have been breached, the holders hereof (in the case of a breach by the Company), or the Company (in the case of a breach by a holder), may proceed to protect and enforce their or its rights either by suit in equity and/or by action at law, including, but not limited to, an action for damages as a result of any such breach and/or an action for specific performance of any such covenant or agreement contained in this Warrant. 12 32 20. Value. The Company and the holder of this Warrant agree that the value of this Warrant and the Other Warrants on the Date of Grant is $100.00. 21. Acceptance. Receipt of this Warrant by the holder hereof shall constitute acceptance of and agreement to the foregoing terms and conditions. 22. No Impairment of Rights. The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the holder of this Warrant against impairment. CALYPTE BIOMEDICAL CORPORATION By ___________________________________ Title Address: 1440 Fourth Street Berkeley, CA 94701 Date: ________________________ 199_ 13 33 EXHIBIT A NOTICE OF EXERCISE To: Calypte Biomedical Corporation 1. The undersigned hereby elects to purchase _________________ shares of Common Stock of Calypte Biomedical Corporation pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full. 2. Please issue a certificate or certificates representing said shares in the name of the undersigned or in such other name or names as are specified below: (Name) (Address) 3. The undersigned represents that the aforesaid shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale in connection with, the distribution thereof and that the undersigned has no present intention of distributing or reselling such shares. In support thereof, the undersigned has executed an Investment Representation Statement attached hereto as Schedule 1. --------------------------------- (Signature) ---------------------------- (Date) 14 34 EXHIBIT A-1 NOTICE OF EXERCISE To: Calypte Biomedical Corporation (the "Company") 1. Contingent upon and effective immediately prior to the closing (the "Closing") of the Company's public offering contemplated by the Registration Statement on Form S-____________, filed __________ 199__, the undersigned hereby elects to purchase _____ shares of Common Stock of the Company (or such lesser number of shares as may be sold on behalf of the undersigned at the Closing) pursuant to the terms of the attached Warrant. 2. Please deliver to the custodian for the selling shareholders a stock certificate representing such ________ shares. 3. The undersigned has instructed the custodian for the selling shareholders to deliver to the Company $______________ or, if less, the net proceeds due the undersigned from the sale of shares in the aforesaid public offering. If such net proceeds are less than the purchase price for such shares, the undersigned agrees to deliver the difference to the Company prior to the Closing. ------------------------------------- (Signature) -------------------- (Date) 15 35 Schedule I INVESTMENT REPRESENTATION STATEMENT Purchaser: Company: Calypte Biomedical Corporation Security: Common Stock Amount: Date: In connection with the purchase of the above-listed securities (the "Securities"), the undersigned (the "Purchaser") represents to the Company as follows: (a) The Purchaser is aware of the Company's business affairs and financial condition, and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. The Purchaser is purchasing the Securities for its own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Securities Act of 1933, as amended (the "Act"). (b) The Purchaser understands that the Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Purchaser's investment intent as expressed herein. In this connection, the Purchaser understands that, in the view of the Securities and Exchange Commission ("SEC"), the statutory basis for such exemption may be unavailable if the Purchaser's representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. (c) The Purchaser further understands that the Securities must be held indefinitely unless subsequently registered under the Act or unless an exemption from registration is otherwise available. Moreover, the Purchaser understands that the Company is under no obligation to register the Securities except as set forth in the Warrant under which the Securities are being acquired. In addition, the Purchaser understands that the certificate evidencing the Securities will be imprinted with the legend referred to in the Warrant under which the Securities are being purchased. (d) The Purchaser is aware of the provisions of Rule 144 and 144A, promulgated under the Act, which, in substance, permit limited public resale of "restricted securities" 16 36 acquired, directly or indirectly, from the issuer thereof (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions, if applicable, including, among other things: The availability of certain public information about the Company, the resale occurring not less than two years after the party has purchased and paid for the securities to be sold; the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934, as amended) and the amount of securities being sold during any three-month period not exceeding the specified limitations stated therein. (e) The Purchaser further understands that at the time it wishes to sell the Securities there may be no public market upon which to make such a sale, and that, even if such a public market then exists, the Company may not be satisfying the current public information requirements of Rule 144 and 144A, and that, in such event, the Purchaser may be precluded from selling the Securities under Rule 144 and 144A even if the two-year minimum holding period had been satisfied. (f) The Purchaser further understands that in the event all of the requirements of Rule 144 and 144A are not satisfied, registration under the Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the SEC has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Purchaser: ------------------------------------ Date: 199 ---------------------- ---- 17 37 Exhibit B Restated Articles of Incorporation, as Amended 18 38 Exhibit C Section 9 of Series D Preferred Stock Agreement 19 39 EXHIBIT B LANDLORD WAIVER 40 RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: MMC/GATX PARTNERSHIP NO. I c/o GATX CAPITAL CORPORATION, Agent Four Embarcadero Center, Suite 2200 San Francisco, CA 94111 Attn: Contract Administration CONSENT TO REMOVAL OF PERSONAL PROPERTY KNOW ALL PERSONS BY THESE PRESENTS: (i) The undersigned has an interest as owner and landlord in the following described real property (the "Real Property"): That certain real property in the County of Alameda, State of California, with the street address of _________________ and more fully described as: SEE ATTACHMENT 1 ATTACHED HERETO FOR FULL LEGAL DESCRIPTION (ii) Calypte Biomedical Corporation, a California corporation ("Lessee"), has entered into or will enter into a Master Equipment Lease Agreement with MMC/GATX Partnership No. I ("Lessor") dated as of August 20, 1993 (the "Lease Agreement") and certain Schedules related thereto (collectively the "Lease"). (iii) Lessor, as a condition to entering into the Lease Agreement, requires that the undersigned consent to the removal by Lessor of the equipment and other assets covered by the Lease (hereinafter called "Equipment") from the Real Property, no matter how it is affixed thereto, and to the other matters set forth below. NOW, THEREFORE, for good and sufficient consideration, receipt of which is hereby acknowledged, the undersigned consents to the placing of the Equipment on the Real Property, and agrees with Lessor as follows: 41 1. Undersigned waives and releases each and every right which undersigned now has, under laws of California or by virtue of the lease for the Real Property now in effect, to levy or distrain upon for rent, in arrears, in advance or both, or to claim or assert title to the Equipment that is already on said Real Property, or may hereafter be delivered or installed thereon. 2. The Equipment shall be considered to be personal property and shall not be considered part of the Real Property regardless of whether or by what means it is or may become attached or affixed to the Real Property. 3. The undersigned will permit Lessor to enter upon the Real Property for the purpose of exercising any right it may have under the terms of the Lease or otherwise, including, without limitation, the right to remove the Equipment; provided, however, that if Lessor, in removing the Equipment damages any improvements of the undersigned on the Real Property, Lessor will, at its expense, cause same to be repaired. 4. This agreement shall be binding upon the heirs, successors and assigns of the undersigned and shall inure to the benefit of Lessor and its successors and assigns. Upon any sale, transfer or other assignment of the Real Property, the undersigned shall notify the transferee of the existence of this agreement and that it is binding on the transferee. IN WITNESS WHEREOF, the undersigned has executed this instrument at _________, this ___ day of _____, 19__. By: _______________________________ Title: _______________________________ Date: _______________________________ The foregoing Consent must be acknowledged before a Notary Public. [ATTACH NOTARY JURAT] 2 42 ATTACHMENT 1 LEGAL DESCRIPTION OF PREMISES [To Be Provided By Tenant] 43 State of_____________________) ) County of____________________) On ________________________, 19_____ before me, the undersigned, personally appeared _______________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature ____________________________________ (Seal) State of_____________________) ) County of____________________) On ________________________, 19_____ before me, the undersigned, personally appeared ______________, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature ____________________________________ (Seal) 44 EXHIBIT C PURCHASE ORDER AND INVOICE ASSIGNMENT 45 PURCHASE ORDER AND INVOICE ASSIGNMENT THIS PURCHASE ORDER ASSIGNMENT, dated as of _____________, 199_ (this "Assignment"), between Calypte Biomedical Corporation ("Assignor") and MMC/GATX Partnership No. I ("Assignee"); WITNESSETH: WHEREAS, Assignor has submitted its Purchase Orders and Invoices listed in Schedule 1 hereto (collectively, the "Purchase Orders"), to ____________ (the "Vendor") concerning certain Units of equipment (the "Units") listed in Schedule 1 hereto to be subject to a Master Equipment Lease Agreement, dated as of August 20, 1993 (the "Lease"), between Assignor and Assignee (all terms used but not otherwise defined herein shall have the meaning given to them in the Lease): NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: 1. Assignor does hereby sell, assign, transfer and set over unto Assignee, all of the Assignor's rights to and interests in the Purchase Orders as and to the extent that the same relates to the Units. The assignment herein shall include, without limitation, the right of Assignee to purchase the Units pursuant to the Purchase Orders and to take title to the Units, all claims for damages in respect of the Units arising as a result of any default by Vendor under the Purchase Orders, together with any and all rights of Assignor to compel performance of the terms of the Purchase Orders in respect of the Units. 2. The exercise by Assignee of any of the rights assigned hereunder shall not release Assignor from any of its duties or obligations to Vendor under the Purchase Orders except to the extent that such exercise by Assignee shall constitute performance of such duties and obligations. 3. Upon satisfaction of the conditions set forth in the applicable Schedule to the Lease with respect to the Units, Assignee shall purchase such Unit by paying or causing to be paid, by check mailed or delivered to Vendor, on such date or thereafter as permitted by Vendor, an amount equal to the purchase price of the Unit, as such amount may be adjusted in accordance with the terms of the Purchase Orders and reflected on invoices prepared by Vendor to Assignee on or before the date of delivery and acceptance of the Unit. 4. Assignor agrees that it will, at any time and from time to time, upon the written consent of Assignee, promptly and duly exercise and deliver any and all such further instruments and documents and take such further action as Assignee may reasonably request 46 in order that Assignee may obtain the full benefits of this Agreement and of the rights and powers herein granted. 5. Assignor does hereby represent and warrant that the Purchase Orders are in full force and effect and that Assignor is not in default under any of them. Assignor does hereby further represent and warrant that Assignor has not assigned or pledged, and so long as this Assignment shall remain in effect, will not assign or pledge, the whole or any part of the rights hereby assigned or any of its rights with respect to the Units under the Purchase Orders to anyone other than Assignee. IN WITNESS WHEREOF, the parties hereto have caused this Purchase Order Assignment to be duly executed as of the day and year first above written. CALYPTE BIOMEDICAL CORPORATION MMC/GATX PARTNERSHIP NO. I (Lessee) (Lessor) By GATX Capital Corporation, Agent By By __________________________ _________________________________ Title Title ______________________ ______________________________ Acknowledged and Consented to this ____________________ day of ____________________, 199______ __________________________________________________(Vendor) By: ___________________________________________________ Title: ___________________________________________________ 47 SCHEDULE I TO PURCHASE ORDER AND INVOICE ASSIGNMENT 48 EXHIBIT D BILL OF SALE 49 BILL OF SALE For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, CALYPTE BIOMEDICAL CORPORATION ("Seller") does hereby sell, grant, transfer and deliver to MMC/GATX Partnership No. I ("Buyer"), all of Seller's right, title and interest in and to the property listed on Schedule 1 attached hereto (the "Equipment"), together with all warranties, guarantees and indemnities owned by Seller with respect to the Equipment (the "Equipment Warranties"), to have and to hold the Equipment and the Equipment Warranties forever. Seller covenants and warrants that: (1) it is the owner of, and has absolute title to, the Equipment and the Equipment Warranties, which, as of the date hereof, are free and clear of all claims, liens and encumbrances; (2) it has not made any prior sale, assignment, or transfer of the Equipment or the Equipment Warranties; (3) it has the present right, power and authority to sell the Equipment and the Equipment Warranties to Buyer; and (4) all action has been taken which is required to make this Bill of Sale a legal, valid and binding obligation of Seller. Seller shall forever warrant and defend the sale of the Equipment and the Equipment Warranties to Buyer, its successors and assigns, against all claims, liens and encumbrances and against any and every person or persons claiming any interest in the Equipment or the Equipment Warranties, except with respect to any claims, liens or encumbrances caused by any action of Buyer not contemplated under that certain Master Equipment Lease Agreement dated as of August 20, 1993 by and between Buyer and Seller (together with all Schedules thereto, the "Lease") or under any agreement, instrument or other document delivered in connection with the Lease. This Bill of Sale shall be binding on the successors and assigns of the Seller and shall inure to the benefit of the successors and assigns of Buyer. Executed as of ______________________, 199__, at ___________________________. CALYPTE BIOMEDICAL CORPORATION By:_________________________________ Title:______________________________ 50 ANNEX A TO BILL OF SALE 51 EXHIBIT E SCHEDULE NO._______ TRUE LEASE This Schedule No.______________ (this "Schedule"), dated _____________, 199_ (such date being the "Delivery Date" for this Schedule), is a part of the Master Equipment Lease Agreement, dated as of August 20, 1993 (the "Lease"), between MMC/GATX PARTNERSHIP NO. I ("Lessor") and CALYPTE BIOMEDICAL CORPORATION ("Lessee") and is incorporated therein by this reference. The terms used in this Schedule shall have the meanings given to them in the Lease unless otherwise defined herein. 1. Description and Cost of Units The Units subject to this Schedule are described in Annex A hereto. The Lessor's Cost for this Schedule is: $________________________. 2. Acceptance; Obligations Lessee confirms that on the Delivery Date hereof (i) all of the Units described in Annex A attached hereto were duly accepted by Lessee and became subject to the Lease; and (ii) Lessee became obligated to make Rental Payments to Lessor and perform certain other obligations with respect to such Units as provided in the Lease and this Schedule. 3. Rent (a) Commencing on ________________________, 19___ (the "Rent Commencement Date") and on the first day of each month thereafter, the rent for each Unit shall be paid by Lessee in advance by check (or if requested by Lessor, by wire transfer), to the location prescribed by Lessor in writing, in forty-two (42) consecutive installments, each of the first twelve (12) of which shall be calculated based upon a Rent Factor of _____________________ % of the Lessor's Cost for this Schedule and each of the following thirty (30) of which shall be calculated based upon a Rent Factor of _______________ % of the Lessor's Cost for this Schedule, which rentals are: $ ___________________ for each of the first 12 such installments, and $ ___________________ for each of the following 30 such installments. (b) The Lease Term for the Units subject to this Schedule is 42 months and commences on the Rent Commencement Date. The Lease Term for the Units subject to this Schedule shall expire on: _____________________, 199___ 52 (c) The Interim Rental Payment for the period from the Delivery Date of this Schedule through the Rent Commencement Date, which is due on the Delivery date, is: $ ____________________________. 4. Conditions. Lessor's obligations under the Lease and this Schedule are subject to the prior satisfaction of the following conditions on or before the Delivery Date of this Schedule: (a) Lessor shall have received, in form and substance satisfactory to Lessor: (i) All acceptable waivers of landlords and/or mortgagees, substantially in the form of Exhibit B to the Lease. (ii) To the extent Lessor deems it necessary, a release or other arrangement with any other lessor or lender to the Company to insure that there will be no impairment of Lessor's interest in the Units subject to this or other Schedules. (iii) A sales tax exemption or other similar certificate from Lessee with respect to any Units included in this Schedule, but not placed in service by Lessee before the Delivery Date of this Schedule. (iv) Copies of invoices, purchase orders and cancelled checks relating to all Units being placed under the Lease pursuant to a sale/leaseback on the Delivery Date of this Schedule and/or a Purchase Order and Invoice Assignment from Lessee to Lessor substantially in the form of Exhibit C to the Lease, instead of copies of cancelled checks, for all Units to be purchased by Lessor directly from the vendor. (v) For all sales of Units by Lessee to Lessor, a Bill of Sale, substantially in the form of Exhibit D to the Lease. (vi) An executed copy of each manufacturer's service contract entered into by Lessee pursuant to Section 9 of the Lease. (b) Lessee shall have filed or recorded, to the satisfaction of Lessor, all instruments and documents, including, but not limited to, Financing Statements on Form UCC-1 and Releases and Termination Statements on Form UCC-2, then deemed necessary by Lessor to preserve and protect its rights hereunder, under the Uniform Commercial Code (including the termination of any after-acquired property clause of third parties with respect to any Unit) and, if applicable, not less than ten days before the Delivery Date, a notice of the proposed transfer to Lessor by Lessee of title to the Units to be placed under the Lease on such Delivery Date shall have been published as and to the extent required by Section 3440 of the Civil Code of the State of California. 2 53 (c) Lessor shall have received all other documents and Lessee shall have performed all other acts as Lessor shall have reasonably requested to consummate the transaction contemplated by this Schedule. (d) Except with the prior consent of Lessor which shall not be unreasonably withheld, (i) Lessor's Cost for the Units subject to this Schedule shall be equal to or exceed the Minimum Funding Amount, (ii) Lessor's Cost for the Units subject to this Schedule when aggregated with Lessor's Cost for all Units under all previously funded Schedules shall not exceed the Lessor's Commitment set forth on the cover page of the Lease, and (iii) the funding contemplated by this Schedule when aggregated with all previous fundings under the Lease shall not exceed the Maximum Number of Fundings. (e) Except with the prior written consent of Lessor which shall not be unreasonably withheld, the aggregate of Lessor's Cost of all Units subject to this Schedule and all Schedules previously made subject to the Lease which consist of tenant improvements, computer software, equipment manufactured specially for Lessee and/or delivery and installation costs shall not exceed 17.39% ($200,000 of Lessor's Cost if the entire Lessor's Commitment is funded) of the total Lessor's Cost of Equipment funded. (f) The Delivery Date of this Schedule shall not be later than the Commitment Termination Date. (g) On the Delivery Date of this Schedule no Event of Default or event, which with the passage of time or the giving of notice or both would constitute an Event of Default, shall exist. (h) Except with the prior written consent of Lessor which shall not be unreasonable withheld, all of the Units listed on Annex A shall consist of Eligible Equipment. 5. Representations and Warranties. Lessee hereby makes the representations and warranties set forth in Section 14 of the Lease. 6. Payments. Pursuant to Section 16(h) of the Lease, all payments shall be made to Lessor c/o GATX Capital Corporation, as Agent, Box 71316, Chicago, Illinois 60694 unless otherwise indicated in a writing signed by Lessor. 3 54 This Schedule is hereby duly executed by the parties hereto as of the date first written above. MMC/GATX PARTNERSHIP NO. I By GATX Capital Corporation, as Agent By _____________________________________ Title ___________________________________ CALYPTE BIOMEDICAL CORPORATION By _____________________________________ Title ___________________________________ LESSEE'S ADDRESS FOR NOTICES: 1440 Fourth Street Berkeley, CA 94710 ATTN: Paul Siegel Chief Financial Officer Annex A - Description of Units Annex B - Stipulated Loss Values Annex C - Exceptions to Representations and Warranties 4 55 ANNEX A DESCRIPTION OF UNITS Units are Located at Lessee's Offices at ______________________________________, CA ________________.
Major Equipment Description Manufacturer Identification Lessor's Category of Unit or Vendor or Serial No. Cost -------- ------- --------- ------------ ----
Subtotal By Equipment Category $_______________ 5 56 ANNEX B STIPULATED LOSS VALUES
Rental Stipulated Loss Value Payment Date Percentage of Lessor's Cost - ------------ ---------------------------
Thereafter _________________________________ * * If Lessee renews the Lease, the Stipulated Loss Value during any extended Term shall be an amount equal to the fair market value of the Units as at the end of the applicable initial lease term, as reasonably determined by Lessor, or in the event of disagreement between Lessor and Lessee, as determined by the independent appraiser selected under the provisions of Section 4(b) of the Lease; provided, however, that such Stipulated Loss Value shall not be less than 25% of Lessor's Cost of the Units. 6 57 ANNEX C EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES 7 58 EXHIBIT F SECURITY DEPOSIT PLEDGE AGREEMENT 59 SECURITY DEPOSIT PLEDGE AGREEMENT AGREEMENT made and entered into as of August 20, 1993, by and between Calypte Biomedical Corporation, a California corporation, with a principal place of business at 1440 Fourth Street, Berkeley, CA 94710 ("Pledgor") and MMC/GATX Partnership No. I, a California general partnership, with its place of business at c/o GATX Capital Corporation, Four Embarcadero Center, San Francisco, CA 94111, as Agent (the "Agent" or "Pledgee"). WITNESSETH In consideration of, and as an inducement for Pledgee (i) to enter into and advance funds under the Equipment Lease Agreement, dated as of August. 20, 1993 (as amended from time to time, the "Lease"), with Pledgor and one or more Schedules in connection with the Lease (the "Schedules"), and (ii) to secure the payment of rentals and performance of all Pledgor's other obligations under this Agreement, the Lease and all exhibits and Schedules thereto (collectively, the "Obligations"), Pledgor shall deposit and pledge with Pledgee, on the Delivery Date of each Schedule, a cash collateral security deposit (the "Security Deposit") in the amount of six percent (6%) of Lessor's Cost under such Schedule (such terms and other terms not otherwise defined herein having the meaning therefor as set forth in the Lease or the Schedules). NOW THEREFORE, it is agreed: 1. Delivery of Deposit; Earnings. Pledgor shall, on or before the Delivery Date of each Schedule, deliver the Security Deposit for such Schedule to Pledgee to secure the due and punctual payment and performance of the Obligations. Pledgor will receive simple interest on the Security Deposit at a rate equal to four and one-half percent (4.5%) per annum (the "Earnings"), such Earnings to be paid to Pledgor when and if the Security Deposit is returned to Pledgor in accordance with the terms hereof. The Agent may commingle the Security Deposit and Earnings with its own funds or funds of the Pledgee or otherwise deposit such Security Deposit in any bank selected by Pledgee. 2. Grant of Security. All funds held by the Pledgee, representing the Security Deposit and any Earnings, shall constitute collateral security for the performance by Pledgor of all its Obligations. Accordingly, Pledgor assigns, delivers, pledges and conveys to Pledgee, and grants to Pledgee a first priority, perfected security interest in and to the Security Deposit and all Earnings for the prompt and unconditional fulfillment of the Obligations. 1 60 3. Deposit Defaults. If any default or Event of Default under the Lease (each being a "Deposit Default") by Pledgor shall occur and be continuing, earnings accrued on the Security Deposit for Pledgor's benefit shall cease on notice of such Deposit Default to Pledgor. Pledgee may thereupon apply the Security Deposit and any Earnings (accrued to the date of such default notice), in such manner as Pledgee reasonably determines, towards the satisfaction of the Obligations, including the payment of all costs and expenses incurred by Pledgee as a result of any Deposit Default. 4. Enforcement. Pledgee shall have no duty to commence an action against or seek recourse from Pledgor in the event of a Deposit Default first before enforcing the provisions of this Agreement. The Obligations of Pledgor shall be absolute and unconditional, and shall remain in force and effect without regard to, and shall not be released or discharged or in any way affected by: (a) any amendment or modification of or supplement to the Lease or any exhibit or Schedule thereto, or to this Agreement; (b) any exercise or non-exercise of any right, remedy or privilege under or in respect to this Agreement, the Lease or any exhibit or Schedule thereto, or any other instrument provided for in any thereof, or any waiver, consent, indulgence or actions or inaction with respect to any such instrument; (c) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or similar proceeding of or against Pledgor; or (d) any payment received by Pledgee and subsequently refunded or returned to Pledgor or anyone on behalf of Pledgor. 5. Return of Security Deposit. So long as no Event of Default shall have occurred and be continuing under the Lease, at the end of the Term of each Schedule, the Security Deposit with respect to such Schedule shall be applied first to Pledgor's end-of-Term obligations to Pledgee with respect to such Schedule, and the balance (if any) of such Security Deposit with respect to such Schedule and Earnings attributable thereto (less any portion thereof applied or otherwise utilized pursuant to this Agreement) shall be delivered to Pledgor. 6. Further Assurances. Pledgor will promptly execute and deliver to Pledgee such further reasonable documents and take such further reasonable action as Pledgee may request in order to more effectively carry out the intent and purpose of this Agreement or an assignment of Pledgee's interest herein. 7. Notices. Notices required or permitted hereunder shall be given in accordance with the Lease. 2 61 8. Amendments and Supplements. No agreement shall be effective to amend, supplement or discharge this Agreement in whole or in part unless such agreement is in writing, signed by the parties hereto. 9. Assignability. This Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties hereto. Pledgor hereby acknowledges that Lessor's rights under this Agreement may be assigned at any time to any person having an interest in the Lease. 10. Governing Law. This Agreement shall be governed by and construed under the laws of the State of California. 11. Assignment. Pledgor shall not transfer or assign, in whole or in part, any of its rights under this Agreement. Pledgee shall have the absolute right to transfer or assign to any person, firm, partnership, corporation or other entity, for security or otherwise, any or all of Pledgee's obligations, benefits and interests under this Agreement without the consent of or notice to Pledgor. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. MMC/GATX PARTNERSHIP NO. I By GATX CAPITAL CORPORATION as Agent for Pledgee By: ----------------------------- Its: ---------------------------- CALYPTE BIOMEDICAL CORPORATION, Pledgor By: ----------------------------- Its: ---------------------------- 3 62 SECURITY DEPOSIT PLEDGE AGREEMENT AGREEMENT made and entered into as of August 20, 1993, by and between Calypte Biomedical Corporation, a California corporation, with a principal place of business at 1440 Fourth Street, Berkeley, CA 94710 ("Pledgor") and MMC/GATX Partnership No. I, a California general partnership, with its place of business at c/o GATX Capital Corporation, Four Embarcadero Center, San Francisco, CA 94111, as Agent (the "Agent" or "Pledgee"). WITNESSETH In consideration of, and as an inducement for Pledgee (i) to enter into and advance funds under the Equipment Lease Agreement, dated as of August 20, 1993 (as amended from time to time, the "Lease"), with Pledgor and one or more Schedules in connection with the Lease (the "Schedules"), and (ii) to secure the payment of rentals and performance of all Pledgor's other obligations under this Agreement, the Lease and all exhibits and Schedules thereto (collectively, the "Obligations"), Pledgor shall deposit and pledge with Pledgee, on the Delivery Date of each Schedule, a cash collateral security deposit (the "Security Deposit") in the amount of six percent (6%) of Lessor's Cost under such Schedule (such terms and other terms not otherwise defined herein having the meaning therefor as set forth in the Lease or the Schedules). NOW THEREFORE, it is agreed: 1. Delivery of Deposit; Earnings. Pledgor shall, on or before the Delivery Date of each Schedule, deliver the Security Deposit for such Schedule to Pledgee to secure the due and punctual payment and performance of the Obligations. Pledgor will receive simple interest on the Security Deposit at a rate equal to four and one-half percent (4.5%) per annum (the "Earnings"), such Earnings to be paid to Pledgor when and if the Security Deposit is returned to Pledgor in accordance with the terms hereof. The Agent may commingle the Security Deposit and Earnings with its own funds or funds of the Pledgee or otherwise deposit such Security Deposit in any bank selected by Pledgee. 2. Grant of Security. All funds held by the Pledgee, representing the Security Deposit and any Earnings, shall constitute collateral security for the performance by Pledgor of all its Obligations. Accordingly, Pledgor assigns, delivers, pledges and conveys to Pledgee, and grants to Pledgee a first priority, perfected security interest in and to the Security Deposit and all Earnings for the prompt and unconditional fulfillment of the Obligations. 1 63 3. Deposit Defaults. If any default or Event of Default under the Lease (each being a "Deposit Default") by Pledgor shall occur and be continuing, earnings accrued on the Security Deposit for Pledgor's benefit shall cease on notice of such Deposit Default to Pledgor. Pledgee may thereupon apply the Security Deposit and any Earnings (accrued to the date of such default notice), in such manner as Pledgee reasonably determines, towards the satisfaction of the Obligations, including the payment of all costs and expenses incurred by Pledgee as a result of any Deposit Default. 4. Enforcement. Pledgee shall have no duty to commence an action against or seek recourse from Pledgor in the event of a Deposit Default first before enforcing the provisions of this Agreement. The Obligations of Pledgor shall be absolute and unconditional, and shall remain in force and effect without regard to, and shall not be released or discharged or in any way affected by: (a) any amendment or modification of or supplement to the Lease or any exhibit or Schedule thereto, or to this Agreement; (b) any exercise or non-exercise of any right, remedy or privilege under or in respect to this Agreement, the Lease or any exhibit or Schedule thereto, or any other instrument provided for in any thereof, or any waiver, consent, indulgence or actions or inaction with respect to any such instrument; (c) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or similar proceeding of or against Pledgor; or (d) any payment received by Pledgee and subsequently refunded or returned to Pledgor or anyone on behalf of Pledgor. 5. Return of Security Deposit. So long as no Event of Default shall have occurred and be continuing under the Lease, at the end of the Term of each Schedule, the Security Deposit with respect to such Schedule shall be applied first to Pledgor's end-of-Term obligations to Pledgee with respect to such Schedule, and the balance (if any) of such Security Deposit with respect to such Schedule and Earnings attributable thereto (less any portion thereof applied or otherwise utilized pursuant to this Agreement) shall be delivered to Pledgor. 6. Further Assurances. Pledgor will promptly execute and deliver to Pledgee such further reasonable documents and take such further reasonable action as Pledgee may request in order to more effectively carry out the intent and purpose of this Agreement or an assignment of Pledgee's interest herein. 7. Notices. Notices required or permitted hereunder shall be given in accordance with the Lease. 2 64 8. Amendments and Supplements. No agreement shall be effective to amend, supplement or discharge this Agreement in whole or in part unless such agreement is in writing, signed by the parties hereto. 9. Assignability. This Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties hereto. Pledgor hereby acknowledges that Lessor's rights under this Agreement may be assigned at any time to any person having an interest in the Lease. 10. Governing Law. This Agreement shall be governed by and construed under the laws of the State of California. 11. Assignment. Pledgor shall not transfer or assign, in whole or in part, any of its rights under this Agreement. Pledgee shall have the absolute right to transfer or assign to any person, firm, partnership, corporation or other entity, for security or otherwise, any or all of Pledgee's obligations, benefits and interests under this Agreement without the consent of or notice to Pledgor. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. MMC/GATX PARTNERSHIP NO. I By GATX CAPITAL CORPORATION as Agent for Pledgee By: [SIG] ----------------------------- Its: VP ---------------------------- CALYPTE BIOMEDICAL CORPORATION, Pledgor By: [SIG] ----------------------------- ITS: CFO ---------------------------- 3 65 [LETTERHEAD] VIA CALIFORNIA OVERNIGHT Mr. Paul Siegel Chief Financial Officer Calypte Biomedical Corporation 1440 Fourth Street Berkeley, California 94710 RE: MMC/GATX PARTNERSHIP NO. I - CALYPTE BIOMEDICAL CORPORATION Dear Paul: Enclosed are the following documents: 1. Original lessee's copy of Schedule No. 1 dated October 4, 1993. 2. Original lessee's copy of Schedule No. 2 dated October 4, 1993. 3. Original lessee's copy of Schedule No. 3 dated October 4, 1993. 4. Copy of Proof of Publication of the sale-leaseback notice. 5. Copy of the three financing statements filed in connection with the above transaction. Please call me or Tom Klein if you have questions. Very truly yours, [SIG] William S. Veatch WSV:ogw Enclosures. cc: Thomas Klein, Esq. - w/enc. James V. Mitchell - w/o enc. 66 SCHEDULE NO. 1 TRUE LEASE This Schedule No. 1 (this "Schedule"), dated October 4, 1993 (such date being the "Delivery Date" for this Schedule), is a part of the Master Equipment Lease Agreement, dated as of August 20, 1993 (the "Lease"), between MMC/GATX PARTNERSHIP NO. I ("Lessor") and CALYPTE BIOMEDICAL CORPORATION ("Lessee") and is incorporated therein by this reference. The terms used in this Schedule shall have the meanings given to them in the Lease unless otherwise defined herein. 1. Description and Cost of Units The Units subject to this Schedule are described in Annex A hereto. The Lessor's Cost for this Schedule is: $ 38,012.90 2. Acceptance; Obligations Lessee confirms that on the Delivery Date hereof (i) all of the Units described in Annex A attached hereto were duly accepted by Lessee and became subject to the Lease; and (ii) Lessee became obligated to make Rental Payments to Lessor and perform certain other obligations with respect to such Units as provided in the Lease and this Schedule. 3. Rent (a) Commencing on October 4, 1993 (the "Rent Commencement Date") and on the fourth day of each month thereafter, the rent for each Unit shall be paid by Lessee in advance by check (or if requested by Lessor, by wire transfer), to the location prescribed by Lessor in writing, in forty-two (42) consecutive installments, each of the first twelve (12) of which shall be calculated based upon a Rent Factor of 1.4946% of the Lessor's Cost for this Schedule and each of the following thirty (30) of which shall be calculated based upon a Rent Factor of 3.4825% of the Lessor's Cost for this Schedule, which rentals are: $ 568.14 for each of the first 12 such installments, and $1,323.80 for each of the following 30 such installments. (b) The Lease Term for the Units subject to this Schedule is 42 months and commences on the Rent Commencement Date. The Lease Term for the Units subject to this Schedule shall expire on: April 3, 1997 67 (c) The Interim Rental Payment for the period from the Delivery Date of this Schedule through the Rent Commencement Date, which is due on the Delivery date, is: $0. 4. Conditions. Lessor's obligations under the Lease and this Schedule are subject to the prior satisfaction of the following conditions on or before the Delivery Date of this Schedule: (a) Lessor shall have received, in form and substance satisfactory to Lessor: (i) All acceptable waivers of landlords and/or mortgagees, substantially in the form of Exhibit B to the Lease. (ii) To the extent Lessor deems it necessary, a release or other arrangement with any other lessor or lender to the Company to insure that there will be no impairment of Lessor's interest in the Units subject to this or other Schedules. (iii) A sales tax exemption or other similar certificate from Lessee with respect to any Units included in this Schedule, but not placed in service by Lessee before the Delivery Date of this Schedule. (iv) Copies of invoices, purchase orders and cancelled checks relating to all Units being placed under the Lease pursuant to a sale/leaseback on the Delivery Date of this Schedule and/or a Purchase Order and Invoice Assignment from Lessee to Lessor substantially in the form of Exhibit C to the Lease, instead of copies of cancelled checks, for all Units to be purchased by Lessor directly from the vendor. (v) For all sales of Units by Lessee to Lessor, a Bill of Sale, substantially in the form of Exhibit D to the Lease. (vi) An executed copy of each manufacturer's service contract entered into by Lessee pursuant to Section 9 of the Lease. (b) Lessee shall have filed or recorded, to the satisfaction of Lessor, all instruments and documents, including, but not limited to, Financing Statements on Form UCC-1 and Releases and Termination Statements on Form UCC-2, then deemed necessary by Lessor to preserve and protect its rights hereunder, under the Uniform Commercial Code (including the termination of any after-acquired property clause of third parties with respect to any Unit) and, if applicable, not less than ten days before the Delivery Date, a notice of the proposed transfer to Lessor by Lessee of title to the Units to be placed under the Lease on such Delivery Date shall have been published as and to the extent required by Section 3440 of the Civil Code of the State of California. 2 68 (c) Lessor shall have received all other documents and Lessee shall have performed all other acts as Lessor shall have reasonably requested to consummate the transaction contemplated by this Schedule. (d) Except with the prior consent of Lessor which shall not be unreasonably withheld, (i) Lessor's Cost for the Units subject to this Schedule shall be equal to or exceed the Minimum Funding Amount, (ii) Lessor's Cost for the Units subject to this Schedule when aggregated with Lessor's Cost for all Units under all previously funded Schedules shall not exceed the Lessor's Commitment set forth on the cover page of the Lease, and (iii) the funding contemplated by this Schedule when aggregated with all previous fundings under the Lease shall not exceed the Maximum Number of Fundings. (e) Except with the prior written consent of Lessor which shall not be unreasonably withheld, the aggregate of Lessor's Cost of all Units subject to this Schedule and all Schedules previously made subject to the Lease which consist of tenant improvements, computer software, equipment manufactured specially for Lessee and/or delivery and installation costs shall not exceed 17.39% ($200,000 of Lessor's Cost if the entire Lessor's Commitment is funded) of the total Lessor's Cost of Equipment funded. (f) The Delivery Date of this Schedule shall not be later than the Commitment Termination Date. (g) On the Delivery Date of this Schedule no Event of Default or event, which with the passage of time or the giving of notice or both would constitute an Event of Default, shall exist. (h) Except with the prior written consent of Lessor which shall not be unreasonable withheld, all of the Units listed on Annex A shall consist of Eligible Equipment. 5. Representations and Warranties. Lessee hereby makes the representations and warranties set forth in Section 14 of the Lease. 6. Payments. Pursuant to Section 16(h) of the Lease, all payments shall be made to Lessor c/o GATX Capital Corporation, as Agent, Box 71316, Chicago, Illinois 60694 unless otherwise indicated in a writing signed by Lessor. 3 69 This Schedule is hereby duly executed by the parties hereto as of the date first written above. MMC/GATX PARTNERSHIP NO. I By GATX Capital Corporation, as Agent By [SIG] --------------------------------------- Title Vice President ------------------------------------ LESSEE'S ADDRESS FOR NOTICES: CALYPTE BIOMEDICAL CORPORATION 1440 Fourth Street Berkeley, CA 94710 By: [SIG] ATTN: Paul Siegel -------------------------------------- Chief Financial Officer Title: Chief Financial Officer ----------------------------------- Annex A - Description of Units Annex B - Stipulated Loss Values Annex C - Exceptions to Representations and Warranties 4 70 ANNEX A DESCRIPTION OF UNITS Units are Located at Lessee's Offices at , CA . ------------------------------------------------------ -----
Major Equipment Description Manufacturer Identification Lessor's Category of Unit or Vendor or Serial No. Cost
Subtotal By Equipment Category $ -------------------- 5 71 22-Sep-93 CALYPTE BIOMEDICAL/SCHEDULE NO. 1 PAGE 1 ANNEX A ALL UNITS LOCATED AT: 1440 FOURTH STREET BERKELEY, CA 94710
ASSET COST OF # VENDOR QTY ITEM DESCRIPTION INVOICE # UNIT - ----- ----------------------- ----- ------------------------ --------- --------- TENANT IMPROVEMENTS ------------------- R-027 4 PHASE ELECTRIC GENERATOR HOOKUP & 1963 3,515.90 CLEANROOM POWER & LIGHTING - -------------------------------------------------------------------------------------------------------------- R-027 DELUCCHI SHEET METAL STAINLESS STEEL FABRICATION 42937 162.00 FOR CLEANROOMS - -------------------------------------------------------------------------------------------------------------- R-027 DELUCCHI SHEET METAL STAINLESS STEEL FABRICATION 42936 147.50 FOR CLEANROOMS - -------------------------------------------------------------------------------------------------------------- R-027 DELUCCHI SHEET METAL STAINLESS STEEL FABRICATION 42950 92.00 FOR CLEANROOMS - -------------------------------------------------------------------------------------------------------------- R-027 LO HEATH LABOR AND MATERIALS FOR 1445 281.00 PLUMBING SERVICES AS FOLLOWS: RELOCATE 2 FIRE SPRINKLER HEADS CAP 2 PVC PIPES - -------------------------------------------------------------------------------------------------------------- R-027 LO HEATH LABOR AND MATERIALS FOR 1446 118.50 PLUMBING SERVICES AS FOLLOWS: REBUILD 1 CHICAGO LAB FAUCET REPAIR LEAK UNDER LAB SINK - -------------------------------------------------------------------------------------------------------------- R-027 MICROCANTAMINATION INSTALLATION OF 1 TRAX IND. 549 100.00 CONTROL SERVICES PRODUCTS VINYL CURTAIN WALL PANEL; MOVE 1 FRAME SUPPORT 6" - -------------------------------------------------------------------------------------------------------------- R-027 PETER S. BERRY MATERIALS AND LABOR TO 15064 180.00 RELOCATE CENTRIFUGE OUTLET TO CLEANROOM - -------------------------------------------------------------------------------------------------------------- R-027 SAN BRUNO SHEET METAL INSTALLATION OF: 4/21/93 12,870.00 1 7 1/2 TON HEAT PUMP 1 5 TON HEAT PUMP ON ROOF AREA W/SPRING ICELATORS ALL DUCT WORK W/RETURN & SUPPLY DAMPERS FARR GLIDE FILTER BOXES SUPPLY OUTSIDE AIR W/SEPARATE FILTERS REMOVE OLD SKYLIGHT & INSTALL 2 X 4 & PLYWOOD W/METAL COVER - -------------------------------------------------------------------------------------------------------------- R-027 SAN BRUNO SHEET METAL INSTALLED ALL DUCT WORK IN 4/30/93 8,865.00 CEILING AREA - -------------------------------------------------------------------------------------------------------------- R-027 TRAX INDUSTRIAL 1 CUSTOM ANTI-STATIC SOFTWALL 4536 1,046.00 PRODUCTS PANEL FOR CLEANROOM - -------------------------------------------------------------------------------------------------------------- M-027 4 PHASE ELECTRIC EMERGENCY POWER SET-UP 4/21/93 5,250.00 - -------------------------------------------------------------------------------------------------------------- M-026 J & M ENTERPRISES PHASE III - WAREHOUSE 1440.1 5,385.00 - -------------------------------------------------------------------------------------------------------------- GRAND TOTAL $38,012.90 ==========
72 ANNEX B STIPULATED LOSS VALUES
Rental Stipulated Loss Value Payment Date Percentage of Lessor's Cost - ------------ ---------------------------
Thereafter___________________ * * If Lessee renews the Lease, the Stipulated Loss Value during any extended Term shall be an amount equal to the fair market value of the Units as at the end of the applicable initial lease term, as reasonably determined by Lessor, or in the event of disagreement between Lessor and Lessee, as determined by the independent appraiser selected under the provisions of Section 4(b) of the Lease; provided, however, that such Stipulated Loss Value shall not be less than 25% of Lessor's Cost of the Units. 6 73 ANNEX B CALYPTE BIOMEDICAL Stipulated Loss Values
Stipulated Loss Value Rental as a Percentage of Payment Date Lessor's Cost ----------------- -------------------- (on or before) 1 Oct-93 100.00 2 Nov-93 99.89 3 Dec-93 99.77 4 Jan-94 99.66 5 Feb-94 99.54 6 Mar-94 99.43 7 Apr-94 99.31 8 May-94 99.20 9 Jun-94 99.08 10 Jul-94 98.97 11 Aug-94 98.85 12 Sep-94 98.74 13 Oct-94 98.62 14 Nov-94 98.51 15 Dec-94 98.39 16 Jan-95 98.28 17 Feb-95 98.16 18 Mar-95 98.05 19 Apr-95 95.45 20 May-95 92.84 21 Jun-95 90.19 22 Jul-95 87.53 23 Aug-95 84.84 24 Sep-95 82.11 25 Oct-95 79.37 26 Nov-95 76.59 27 Dec-95 73.78 28 Jan-96 70.95 29 Feb-96 68.08 30 Mar-96 65.18 31 Apr-96 62.24 32 May-96 59.30 33 Jun-96 56.31 34 Jul-96 53.32 35 Aug-96 50.29 36 Sep-96 47.23 37 Oct-96 44.15 38 Nov-96 41.04 39 Dec-96 37.88 40 Jan-97 34.72 41 Feb-97 31.52 42 Mar-97 28.28 43 Apr-97 and Thereafter 25.00
* If Lessee renews the Lease, the Stipulated Loss Value during any extended Term shall be an amount equal to the fair market value of the Units as at the end of the applicable initial lease term, as reasonably determined by Lessor, or in the event of disagreement between Lessor and Lessee, as determined by the independent appraiser selected under the provisions of Section 4(b) of the Lease; provided, however, that such Stipulated Loss Value shall not be less than 25% of Lessor's Cost of the Units. 74 ANNEX C EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES NONE 7 75 SCHEDULE NO. 2 TRUE LEASE This Schedule No. 2 (this "Schedule"), dated October 4, 1993 (such date being the "Delivery Date" for this Schedule), is a part of the Master Equipment Lease Agreement, dated as of August 20, 1993 (the "Lease"), between MMC/GATX PARTNERSHIP NO. I ("Lessor") and CALYPTE BIOMEDICAL CORPORATION ("Lessee") and is incorporated therein by this reference. The terms used in this Schedule shall have the meanings given to them in the Lease unless otherwise defined herein. 1. Description and Cost of Units The Units subject to this Schedule are described in Annex A hereto. The Lessor's Cost for this Schedule is: $148,871.25 2. Acceptance; Obligations Lessee confirms that on the Delivery Date hereof (i) all of the Units described in Annex A attached hereto were duly accepted by Lessee and became subject to the Lease; and (ii) Lessee became obligated to make Rental Payments to Lessor and perform certain other obligations with respect to such Units as provided in the Lease and this Schedule. 3. Rent (a) Commencing on October 4, 1993 (the "Rent Commencement Date") and on the fourth day of each month thereafter, the rent for each Unit shall be paid by Lessee in advance by check (or if requested by Lessor, by wire transfer), to the location prescribed by Lessor in writing, in forty-two (42) consecutive installments, each of the first twelve (12) of which shall be calculated based upon a Rent Factor of 1.4946% of the Lessor's Cost for this Schedule and each of the following thirty (30) of which shall be calculated based upon a Rent Factor of 3.4825% of the Lessor's Cost for this Schedule, which rentals are: $2,225.03 for each of the first 12 such installments, and $5,184.44 for each of the following 30 such installments. (b) The Lease Term for the Units subject to this Schedule is 42 months and commences on the Rent Commencement Date. The Lease Term for the Units subject to this Schedule shall expire on: April 3, 1997 76 (c) The Interim Rental Payment for the period from the Delivery Date of this Schedule through the Rent Commencement Date, which is due on the Delivery date, is: $0. 4. Conditions. Lessor's obligations under the Lease and this Schedule are subject to the prior satisfaction of the following conditions on or before the Delivery Date of this Schedule: (a) Lessor shall have received, in form and substance satisfactory to Lessor: (i) All acceptable waivers of landlords and/or mortgagees, substantially in the form of Exhibit B to the Lease. (ii) To the extent Lessor deems it necessary, a release or other arrangement with any other lessor or lender to the Company to insure that there will be no impairment of Lessor's interest in the Units subject to this or other Schedules. (iii) A sales tax exemption or other similar certificate from Lessee with respect to any Units included in this Schedule, but not placed in service by Lessee before the Delivery Date of this Schedule. (iv) Copies of invoices, purchase orders and cancelled checks relating to all Units being placed under the Lease pursuant to a sale/leaseback on the Delivery Date of this Schedule and/or a Purchase Order and Invoice Assignment from Lessee to Lessor substantially in the form of Exhibit C to the Lease, instead of copies of cancelled checks, for all Units to be purchased by Lessor directly from the vendor. (v) For all sales of Units by Lessee to Lessor, a Bill of Sale, substantially in the form of Exhibit D to the Lease. (vi) An executed copy of each manufacturer's service contract entered into by Lessee pursuant to Section 9 of the Lease. (b) Lessee shall have filed or recorded, to the satisfaction of Lessor, all instruments and documents, including, but not limited to, Financing Statements on Form UCC-1 and Releases and Termination Statements on Form UCC-2, then deemed necessary by Lessor to preserve and protect its rights hereunder, under the Uniform Commercial Code (including the termination of any after-acquired property clause of third parties with respect to any Unit) and, if applicable, not less than ten days before the Delivery Date, a notice of the proposed transfer to Lessor by Lessee of title to the Units to be placed under the Lease on such Delivery Date shall have been published as and to the extent required by Section 3440 of the Civil Code of the State of California. 2 77 (c) Lessor shall have received all other documents and Lessee shall have performed all other acts as Lessor shall have reasonably requested to consummate the transaction contemplated by this Schedule. (d) Except with the prior consent of Lessor which shall not be unreasonably withheld, (i) Lessor's Cost for the Units subject to this Schedule shall be equal to or exceed the Minimum Funding Amount, (ii) Lessor's Cost for the Units subject to this Schedule when aggregated with Lessor's Cost for all Units under all previously funded Schedules shall not exceed the Lessor's Commitment set forth on the cover page of the Lease, and (iii) the funding contemplated by this Schedule when aggregated with all previous fundings under the Lease shall not exceed the Maximum Number of Fundings. (e) Except with the prior written consent of Lessor which shall not be unreasonably withheld, the aggregate of Lessor's Cost of all Units subject to this Schedule and all Schedules previously made subject to the Lease which consist of tenant improvements, computer software, equipment manufactured specially for Lessee and/or delivery and installation costs shall not exceed 17.39% ($200,000 of Lessor's Cost if the entire Lessor's Commitment is funded) of the total Lessor's Cost of Equipment funded. (f) The Delivery Date of this Schedule shall not be later than the Commitment Termination Date. (g) On the Delivery Date of this Schedule no Event of Default or event, which with the passage of time or the giving of notice or both would constitute an Event of Default, shall exist. (h) Except with the prior written consent of Lessor which shall not be unreasonably withheld, all of the Units listed on Annex A shall consist of Eligible Equipment. 5. Representations and Warranties. Lessee hereby makes the representations and warranties set forth in Section 14 of the Lease. 6. Payments. Pursuant to Section 16(h) of the Lease, all payments shall be made to Lessor c/o GATX Capital Corporation, as Agent, Box 71316, Chicago, Illinois 60694 unless otherwise indicated in a writing signed by Lessor. 3 78 This Schedule is hereby duly executed by the parties hereto as of the date first written above. MMC/GATX PARTNERSHIP NO. I By GATX Capital Corporation, as Agent By /SIG/ ---------------------------------- Title Vice President ---------------------------------- LESSEE'S ADDRESS FOR NOTICES: CALYPTE BIOMEDICAL CORPORATION 1440 Fourth Street Berkeley, CA 94710 By: /SIG/ ATTN: Paul Siegel -------------------------------- Chief Financial Officer Title: Chief Financial Officer -------------------------------- Annex A - Description of Units Annex B - Stipulated Loss Values Annex C - Exceptions to Representations and Warranties 4 79 ANNEX A DESCRIPTION OF UNITS Units are Located at Lessee's Offices at ___________________________, CA ______________.
Major Equipment Description Manufacturer Identification Lessor's Category of Unit or Vendor or Serial No. Cost - -------- ------- --------- -------------- ----
Subtotal By Equipment Category $_________________ 5 80 22-Sep-93 CALYPTE BIOMEDICAL/SCHEDULE NO. 2 PAGE 1 ANNEX A ALL UNITS LOCATED AT: 1440 FOURTH STREET BERKELEY, CA 94710
ASSET COST OF # VENDOR QTY ITEM DESCRIPTION MODEL # PO # INVOICE # SERIAL # UNIT - ----- ------ --- ---------------- ------- ---- --------- -------- ------- LAB EQUIPMENT - ------------- 1065 AIR TECHNIQUES 1 PARTICULATE DET. UNIT - TDA-2E 10181 5276 10065 5,690.00 PORTABLE AEROSOL PHOTOMETER WITH PARTS 1 PORTABLE AEROSOL GENERATO FTDA-4A 9912 1,250.00 - ------------------------------------------------------------------------------------------------------------------------------- 1112 BAXTER 1 BIOFUGE 15 MICROCENTRIFUGE 10288 9014760 1,552.50 1 ANGLE ROTOR 240.00 - ------------------------------------------------------------------------------------------------------------------------------- 1051 BIO-TEK 1 MICROPLATE READER EL312 10189 118914 85259 5,800.00 - ------------------------------------------------------------------------------------------------------------------------------- R-027 ENVIROFLEX 1 PORTABLE SOFTWALL CLEAN 10024 DEPOSIT 7,430.00 ROOM 16' X 10'; 4 HEPA; 3 LIGHTS 1025 1 PORTABLE SOFTWALL CLEAN 1031 7,019.00 ROOM 14' X 12'; 3 HEPA; 3 LIGHTS 1 PORTABLE SOFTWALL CLEAN 6,732.00 ROOM 12' X 11'; 3 HEPA; 3 LIGHTS - ------------------------------------------------------------------------------------------------------------------------------- 1123 ISCO 1 UA-6 DETECTOR WITH TYPE 11 10430 190666-00 3,500.00 OPTICAL UNIT 1 DIVERTER VALVE 275.00 - ------------------------------------------------------------------------------------------------------------------------------- KAYE INSTRUMENTS 1 PORTABLE VALIDATOR ASSY. 10294 53652 8,000.00 1 D4 PLUS ANALOG PANEL ASSY 820.00 1 PROBE ASSY 1,950.00 - ------------------------------------------------------------------------------------------------------------------------------- KAYE INSTRUMENTS 1 CALIBRATOR - 115V LTR-50 10294 53829 5,500.00 - ------------------------------------------------------------------------------------------------------------------------------- MED-EQUIP 1 STEAM GENERATOR 9291 5648 N3-13378 13,000.00 STAINLESS STEEL - ------------------------------------------------------------------------------------------------------------------------------- 1054 MILLIPORE 1 HPLC INERT PROTEIN 625 LC 10115 719923 24,109.00 PURIFICATION SYSTEM 1 WATERS FRACTION COLLECTOR 486 3,314.60 1 DUAL PEN RECORDER SE-120 2,009.70 - ------------------------------------------------------------------------------------------------------------------------------- 1054 MILLIPORE 1 AP MINICOLUM 5MM X 100MM 10115 719237 215.30 1 DIVERTER VALVE 301.40 - ------------------------------------------------------------------------------------------------------------------------------- 1114 PETERSON POWER SYSTEM 1 OLYMPIAN GENERATOR-DIESEL CD076 10087 E099301 2007042 15,276.18 ENGINE LIQUID COOLED 1115 1 OLYMPIAN DOUBLE WALL TANK CTS020Y 93A01704W 2,486.82 - ------------------------------------------------------------------------------------------------------------------------------- 1052 SHANDON UPSHAW 1 CYTOSPIN 3 (SLIDE MAKING 10196 3575830 4,995.00 APPARATUS) - ------------------------------------------------------------------------------------------------------------------------------- 1113 SIERRA INSTRUMENTS 1 HOT WIRE ANEMOMETER 634 10519 41849 18593 1,675.00 - ------------------------------------------------------------------------------------------------------------------------------- 1088 TERRA UNIVERSAL 1 DESICCATOR CHAMBER 10247 19065 2,088.00 PLEXIGLASS 45" X 24" X 60", 10 DOORS - HERMETICALLY SEALED 56 PLEXIGLASS SHELF W/ BOW GUARD 840.00 1 STAND: 3" H, STEEL 198.00 4 CASTER WITH BRAKE 128.00 - ------------------------------------------------------------------------------------------------------------------------------- 1039 VWR 2 ROTARY CULTURE APPARATUS DECK 10117 5E-07 910.80 - ------------------------------------------------------------------------------------------------------------------------------- 1111 VWR 1 WHEATON ROTARY CULTURE BASE 10249 5E-07 1,311.00 4 ROTARY CULTURE DECK 1,548.00 - -------------------------------------------------------------------------------------------------------------------------------
81 22-Sep-93 CALYPTE BIOMEDICAL/SCHEDULE NO. 2 PAGE 2 ANNEX A ALL UNITS LOCATED AT: 1440 FOURTH STREET BERKELEY, CA 94710
ASSET COST OF # VENDOR QTY ITEM DESCRIPTION MODEL # PO # INVOICE # SERIAL # UNIT - ----- ------ --- ---------------- ------- ---- --------- -------- ------- 1109 VWR 1 AQUASTAR TITRATOR C2000 10363 SE-07 5,328.00 1 AQUASTAR SOLID EVAPORATOR EV-6T 4,496.00 - ------------------------------------------------------------------------------------------------------------------------------- SUBTOTAL LAB EQUIPMENT $139,989.30 ----------- - ------------------------------------------------------------------------------------------------------------------------------- FURNTURE - -------- 1074 AC PAPER 1 FILE-4 OR LATERAL; HON; LEGAL; 10238 110120 629.00 PUTTY - ------------------------------------------------------------------------------------------------------------------------------- 1086 NORLAB HANSON 2 LAB BENCHES; PROTABLE; TABLES 10411 1621 2,979.00 1087 AND SHELVES; BEIGE - ------------------------------------------------------------------------------------------------------------------------------- SUBTOTAL FURNITURE $3,608.00 --------- - ------------------------------------------------------------------------------------------------------------------------------- COMPUTER EQUIPMENT - ------------------ 1120 COMPUTERWARE 1 CENTRIS 610 CPU W/80 MB 10542 500492 F2319LHBCN2 1,597.00 HARDDRIVE WITH 4MB MEMORY & APPLE KEYBOARD II - ------------------------------------------------------------------------------------------------------------------------------- 1117 COMPUTERWARE 1 CENTRIS 610 CPU W/80 MB 10549 500589 F2314LAXCN2 1,398.00 HARDDRIVE AND APPLE KEYBOARD - ------------------------------------------------------------------------------------------------------------------------------- 1081 FUTURE NOW 1 SEIKO MONITOR-14" COLOR CM1445 10381 368215 27MS273B 480.00 - ------------------------------------------------------------------------------------------------------------------------------- 1121 FUTURE NOW 1 SEIKO MONITOR-14" COLOR CM1445 10548 S0400477 26M5093B 480.00 1118 1 SEIKO MONITOR-14" COLOR CM1445 27M5693B 480.00 - ------------------------------------------------------------------------------------------------------------------------------- 1082 MAC PRO SYSTEMS 1 MAC IISI 40/3 10380 JW0279 FC2252XTC56 838.95 - ------------------------------------------------------------------------------------------------------------------------------- SUBTOTAL COMPUTERS $5,273.95 --------- GRAND TOTAL $148,871.25 ===========
82 ANNEX B STIPULATED LOSS VALUES Rental Stipulated Loss Value Payment Date Percentage of Lessor's Cost - ------------ --------------------------- Thereafter ________________________________ * * If Lessee renews the Lease, the Stipulated Loss Value during any extended Term shall be an amount equal to the fair market value of the Units as at the end of the applicable initial lease term, as reasonably determined by Lessor, or in the event of disagreement between Lessor and Lessee, as determined by the independent appraiser selected under the provisions of Section 4(b) of the Lease; provided, however, that such Stipulated Loss Value shall not be less than 25% of Lessor's Cost of the Units. 6 83 ANNEX B CALYPTE BIOMEDICAL Stipulated Loss Values
Stipulated Loss Value Rental as a Percentage of Payment Date Lessor's Cost ----------------- ------------------ (on or before) 1 Oct-93 100.00 2 Nov-93 99.89 3 Dec-93 99.77 4 Jan-94 99.66 5 Feb-94 99.54 6 Mar-94 99.43 7 Apr-94 99.31 8 May-94 99.20 9 Jun-94 99.08 10 Jul-94 98.97 11 Aug-94 98.85 12 Sep-94 98.74 13 Oct-94 98.62 14 Nov-94 98.51 15 Dec-94 98.39 16 Jan-95 98.28 17 Feb-95 98.16 18 Mar-95 98.05 19 Apr-95 95.45 20 May-95 92.84 21 Jun-95 90.19 22 Jul-95 87.53 23 Aug-95 84.84 24 Sep-95 82.11 25 Oct-95 79.37 26 Nov-95 76.59 27 Oct-95 73.78 28 Jan-96 70.95 29 Feb-96 68.08 30 Mar-96 65.18 31 Apr-96 62.24 32 May-96 59.30 33 Jun-96 56.31 34 Jul-96 53.32 35 Aug-96 50.29 36 Sep-96 47.23 37 Oct-96 44.15 38 Nov-96 41.04 39 Dec-96 37.88 40 Jan-97 34.72 41 Feb-97 31.52 42 Mar-97 28.28 43 Apr-97 and Thereafter 25.00
* If Lessee renews the Lease, the Stipulated Loss Value during any extended Term shall be an amount equal to the fair market value of the Units as at the end of the applicable initial lease term, as reasonably determined by Lessor, or in the event of disagreement between Lessor and Lessee, as determined by the independent appraiser selected under the provisions of Section 4(b) of the Lease; provided, however, that such Stipulated Loss Value shall not be less than 25% of Lessor's Cost of the Units. 84 ANNEX C EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES NONE 7 85 SCHEDULE NO. 3 TRUE LEASE This Schedule No. 3 (this "Schedule"), dated October 4, 1993 (such date being the "Delivery Date" for this Schedule), is a part of the Master Equipment Lease Agreement, dated as of August 20, 1993 (the "Lease"), between MMC/GATX PARTNERSHIP NO. I ("Lessor") and CALYPTE BIOMEDICAL CORPORATION ("Lessee") and is incorporated therein by this reference. The terms used in this Schedule shall have the meanings given to them in the Lease unless otherwise defined herein. 1. Description and Cost of Units The Units subject to this Schedule are described in Annex A hereto. The Lessor's Cost for this Schedule is: $38,297.00 2. Acceptance; Obligations Lessee confirms that on the Delivery Date hereof (i) all of the Units described in Annex A attached hereto were duly accepted by Lessee and became subject to the Lease; and (ii) Lessee became obligated to make Rental Payments to Lessor and perform certain other obligations with respect to such Units as provided in the Lease and this Schedule. 3. Rent (a) Commencing on October 4, 1993 (the "Rent Commencement Date") and on the fourth day of each month thereafter, the rent for each Unit shall be paid by Lessee in advance by check (or if requested by Lessor, by wire transfer), to the location prescribed by Lessor in writing, in forty-two (42) consecutive installments, each of the first twelve (12) of which shall be calculated based upon a Rent Factor of 1.4946% of the Lessor's Cost for this Schedule and each of the following thirty (30) of which shall be calculated based upon a Rent Factor of 3.4825% of the Lessor's Cost for this Schedule, which rentals are: $ 572.39 for each of the first 12 such installments, and $1,333.69 for each of the following 30 such installments. (b) The Lease Term for the Units subject to this Schedule is 42 months and commences on the Rent Commencement Date. The Lease Term for the Units subject to this Schedule shall expire on: April 3, 1997 86 (c) The Interim Rental Payment for the period from the Delivery Date of this Schedule through the Rent Commencement Date, which is due on the Delivery date, is: $0. 4. Conditions. Lessor's obligations under the Lease and this Schedule are subject to the prior satisfaction of the following conditions on or before the Delivery Date of this Schedule: (a) Lessor shall have received, in form and substance satisfactory to Lessor: (i) All acceptable waivers of landlords and/or mortgagees, substantially in the form of Exhibit B to the Lease. (ii) To the extent Lessor deems it necessary, a release or other arrangement with any other lessor or lender to the Company to insure that there will be no impairment of Lessor's interest in the Units subject to this or other Schedules. (iii) A sales tax exemption or other similar certificate from Lessee with respect to any Units included in this Schedule, but not placed in service by Lessee before the Delivery Date of this Schedule. (iv) Copies of invoices, purchase orders and cancelled checks relating to all Units being placed under the Lease pursuant to a sale/leaseback on the Delivery Date of this Schedule and/or a Purchase Order and Invoice Assignment from Lessee to Lessor substantially in the form of Exhibit C to the Lease, instead of copies of cancelled checks, for all Units to be purchased by Lessor directly from the vendor. (v) For all sales of Units by Lessee to Lessor, a Bill of Sale, substantially in the form of Exhibit D to the Lease. (vi) An executed copy of each manufacturer's service contract entered into by Lessee pursuant to Section 9 of the Lease. (b) Lessee shall have filed or recorded, to the satisfaction of Lessor, all instruments and documents, including, but not limited to, Financing Statements on Form UCC-1 and Releases and Termination Statements on Form UCC-2, then deemed necessary by Lessor to preserve and protect its rights hereunder, under the Uniform Commercial Code (including the termination of any after-acquired property clause of third parties with respect to any Unit) and, if applicable, not less than ten days before the Delivery Date, a notice of the proposed transfer to Lessor by Lessee of title to the Units to be placed under the Lease on such Delivery Date shall have been published as and to the extent required by Section 3440 of the Civil Code of the State of California. 2 87 (c) Lessor shall have received all other documents and Lessee shall have performed all other acts as Lessor shall have reasonably requested to consummate the transaction contemplated by this Schedule. (d) Except with the prior consent of Lessor which shall not be unreasonably withheld, (i) Lessor's Cost for the Units subject to this Schedule shall be equal to or exceed the Minimum Funding Amount, (ii) Lessor's Cost for the Units subject to this Schedule when aggregated with Lessor's Cost for all Units under all previously funded Schedules shall not exceed the Lessor's Commitment set forth on the cover page of the Lease, and (iii) the funding contemplated by this Schedule when aggregated with all previous fundings under the Lease shall not exceed the Maximum Number of Fundings. (e) Except with the prior written consent of Lessor which shall not be unreasonably withheld, the aggregate of Lessor's Cost of all Units subject to this Schedule and all Schedules previously made subject to the Lease which consist of tenant improvements, computer software, equipment manufactured specially for Lessee and/or delivery and installation costs shall not exceed 17.39% ($200,000 of Lessor's Cost if the entire Lessor's Commitment is funded) of the total Lessor's Cost of Equipment funded. (f) The Delivery Date of this Schedule shall not be later than the Commitment Termination Date. (g) On the Delivery Date of this Schedule no Event of Default or event, which with the passage of time or the giving of notice or both would constitute an Event of Default, shall exist. (h) Except with the prior written consent of Lessor which shall not be unreasonably withheld, all of the Units listed on Annex A shall consist of Eligible Equipment. 5. Representations and Warranties. Lessee hereby makes the representations and warranties set forth in Section 14 of the Lease. 6. Payments. Pursuant to Section 16(h) of the Lease, all payments shall be made to Lessor c/o GATX Capital Corporation, as Agent, Box 71316, Chicago, Illinois 60694 unless otherwise indicated in a writing signed by Lessor. 3 88 This Schedule is hereby duly executed by the parties hereto as of the date first written above. MMC/GATX PARTNERSHIP NO. I By GATX Capital Corporation, as Agent By [SIG] --------------------------------------- Title VP ------------------------------------ CALYPTE BIOMEDICAL CORPORATION By: [SIG] --------------------------------------- Title: Chief Financial Officer ------------------------------------ LESSEE'S ADDRESS FOR NOTICES: 1440 Fourth Street Berkeley, CA 94710 ATTN: Paul Siegel Chief Financial Officer Annex A - Description of Units Annex B - Stipulated Loss Values Annex C - Exceptions to Representations and Warranties 4 89 ANNEX A DESCRIPTION OF UNITS Units are Located at Lessee's Offices at ____________________, CA _______.
Major Equipment Description Manufacturer Identification Lessor's Category of Unit or Vendor or Serial No. Cost - -------- ------- --------- ------------- ----
Subtotal By Equipment Category $ ______________________ 5 90 22-Sep-93 CALYPTE BIOMEDICAL/SCHEDULE NO. 3 PAGE 1 ANNEX A ALL UNITS LOCATED AT: 1440 FOURTH STREET BERKELEY, CA 94710
ASSET # VENDOR QTY ITEM DESCRIPTION MODEL # PO # INVOICE # SERIAL # - ----- ------ --- ---------------- ------- ---- --------- -------- LAB EQUIPMENT - ------------- 1034 COLE-PARMER 1 SCALE MIXER, STIR PAK 115 W/ 10012 1500795 M92002749 CONTROLLER, MOTOR, SUPPORT PLATFORM, PIVOT MOUNT & CLAMP - ---------------------------------------------------------------------------------------------------------------------------------- 1067 FISHER 1 CORROSIVE SAFETY CABINET 9768 982505 - ---------------------------------------------------------------------------------------------------------------------------------- 1016 FISHER 1 PH METER 340 10001 1426579 - ---------------------------------------------------------------------------------------------------------------------------------- 1038 FORMA 1 INCUBATOR--REACH IN LARGE 9906 2375900 36069 CAPACITY 32 C.F. 1 RECORDER - ---------------------------------------------------------------------------------------------------------------------------------- 1036 HARRIS MANUFACTURING 1 FREEZER CHEST--50C 9978 49995 P23C-138269-Pt - ---------------------------------------------------------------------------------------------------------------------------------- 1040 SCIENTIFIC INSTRUMENTS 1 OLYMPUS MICROSCOPE-- 10025 78497 FLUORESCENT WITH ACCESSORIES - ---------------------------------------------------------------------------------------------------------------------------------- 1039 VWR 1 WHEATON ROTARY CULTURE BASE 9996 45976860 1 ROTARY CULTURE DECK - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- FURNITURE - --------- 1024 AC PAPER & SUPPLY 1 SCHWAB INSULATE LEGAL FILE 4CFC-5000 9940 106317 CABINET 4 DRAWER PUTTY - ---------------------------------------------------------------------------------------------------------------------------------- 1022 AC PAPER 1 FILE CABINET--INSULATED 4DR. 9940 107401 LATERAL; PUTTY LEGAL - ---------------------------------------------------------------------------------------------------------------------------------- AS-008 CV INSTALLATIONS 2 HERMAN MILLER WORKSTATIONS 10133 4/6/93 8' x 10' FOR FAX & PRINTER; GRAY - ---------------------------------------------------------------------------------------------------------------------------------- 1013 SAM CLAR OFFICE FURNITURE 1 DESK--WOOD 36X72 USED 9926 41118 1014 1 CREDENZA--WOOD USED 1042 1 FILE--2 DR LATERAL WOOD - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- OFFICE EQUIPMENT - ---------------- 1041 TAYLOR MADE 1 CANNON PLAIN PAPER FAX L775 10010 PUR. SPEC. - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- COMPUTER EQUIPMENT - ------------------ 1044 COMPUTERWARE 1 TRINITRON MONITOR--14" COLOR 9931 679050 S1237RK04 1008 1 APPLE MONITOR--12" MONOCHROME SG2341VVC97 - ---------------------------------------------------------------------------------------------------------------------------------- 1010 COMPUTERWARE (UNION BANK) 1 MAC IIsi CPU W/40MB HARD DRIVE II SI 9859 678183 FC2234C1C56 1084 1 MAC IIsi CPU W/40MB HARD DRIVE II SI FC22347FC56 1011 1 MAC IIsi CPU W/40MB HARD DRIVE II SI FC22335YC56 1007 1 MAC IIsi CPU W/40MB HARD DRIVE II SI FC22347BC56 - ---------------------------------------------------------------------------------------------------------------------------------- 1009 PERIPHERAL LAND INCORPORATED 1 INFINITY EXTERNAL DRIVE 88-R/44 9896 94549 16055 - ----------------------------------------------------------------------------------------------------------------------------------
ASSET COST OF NBV # VENDOR QTY ITEM DESCRIPTION UNIT COST - ----- ------ --- ---------------- ------- ---- LAB EQUIPMENT - ------------- 1034 COLE-PARMER 1 SCALE MIXER, STIR PAK 115 W/ $ 721.00 $ 692.00 CONTROLLER, MOTOR, SUPPORT PLATFORM, PIVOT MOUNT & CLAMP - ------------------------------------------------------------------------------------------------------------ 1067 FISHER 1 CORROSIVE SAFETY CABINET 405.00 384.00 - ------------------------------------------------------------------------------------------------------------ 1016 FISHER 1 PH METER 495.30 454.00 - ------------------------------------------------------------------------------------------------------------ 1038 FORMA 1 INCUBATOR--REACH IN LARGE 6,028.00 5,777.00 CAPACITY 32 C.F. 1 RECORDER 719.00 659.00 - ------------------------------------------------------------------------------------------------------------ 1036 HARRIS MANUFACTURING 1 FREEZER CHEST--50C 3,194.00 3,088.00 - ------------------------------------------------------------------------------------------------------------ 1040 SCIENTIFIC INSTRUMENTS 1 OLYMPUS MICROSCOPE-- 13,829.00 13,253.00 FLUORESCENT WITH ACCESSORIES - ------------------------------------------------------------------------------------------------------------ 1039 VWR 1 WHEATON ROTARY CULTURE BASE 1,249.00 1,186.00 1 ROTARY CULTURE DECK 379.00 354.00 - ------------------------------------------------------------------------------------------------------------ SUBTOTAL LAB EQUIPMENT $27,019.30 $25,827.00 ---------- ---------- - ------------------------------------------------------------------------------------------------------------ FURNITURE - --------- 1024 AC PAPER & SUPPLY 1 SCHWAB INSULATE LEGAL FILE 929.25 852.00 CABINET 4 DRAWER PUTTY - ------------------------------------------------------------------------------------------------------------ 1022 AC PAPER 1 FILE CABINET--INSULATED 4DR. 445.00 408.00 LATERAL; PUTTY LEGAL - ------------------------------------------------------------------------------------------------------------ AS-008 CV INSTALLATIONS 2 HERMAN MILLER WORKSTATIONS 2,500.00 2,292.00 8' x 10' FOR FAX & PRINTER; GRAY - ------------------------------------------------------------------------------------------------------------ 1013 SAM CLAR OFFICE FURNITURE 1 DESK--WOOD 36X72 USED 299.95 270.00 1014 1 CREDENZA--WOOD USED 299.95 270.00 1042 1 FILE--2 DR LATERAL WOOD 174.95 157.00 - ------------------------------------------------------------------------------------------------------------ SUBTOTAL FURNITURE $4,649.10 $4,249.00 --------- --------- - ------------------------------------------------------------------------------------------------------------ OFFICE EQUIPMENT - ---------------- 1041 TAYLOR MADE 1 CANNON PLAIN PAPER FAX 4,068.00 3,729.00 - ------------------------------------------------------------------------------------------------------------ SUBTOTAL OFFICE EQUIPMENT $4,068.00 $3,729.00 --------- --------- - ------------------------------------------------------------------------------------------------------------ COMPUTER EQUIPMENT - ------------------ 1044 COMPUTERWARE 1 TRINITRON MONITOR--14" COLOR 529.00 476.00 1008 1 APPLE MONITOR--12" MONOCHROME 199.00 179.00 - ------------------------------------------------------------------------------------------------------------ 1010 COMPUTERWARE (UNION BANK) 1 MAC IIsi CPU W/40MB HARD DRIVE II SI 899.00 824.00 1084 1 MAC IIsi CPU W/40MB HARD DRIVE II SI 899.00 824.00 1011 1 MAC IIsi CPU W/40MB HARD DRIVE II SI 899.00 824.00 1007 1 MAC IIsi CPU W/40MB HARD DRIVE II SI 899.00 824.00 - ------------------------------------------------------------------------------------------------------------ 1009 PERIPHERAL LAND INCORPORATED 1 INFINITY EXTERNAL DRIVE 590.00 541.00 - ------------------------------------------------------------------------------------------------------------ SUBTOTAL COMPUTER EQUIPMENT $4,914.00 $4,492.00 --------- --------- GRAND TOTAL $40,650.40 $38,297.00 ---------- ----------
91 ANNEX B STIPULATED LOSS VALUES Rental Stipulated Loss Value Payment Date Percentage of Lessor's Cost - ------------ --------------------------- Thereafter ___________________________ * *If Lessee renews the Lease, the Stipulated Loss Value during any extended Term shall be an amount equal to the fair market value of the Units as at the end of the applicable initial lease term, as reasonably determined by Lessor, or in the event of disagreement between Lessor and Lessee, as determined by the independent appraiser selected under the provisions of Section 4(b) of the Lease; provided, however, that such Stipulated Loss Value shall not be less than 25% of Lessor's Cost of the Units. 6 92 ANNEX B CALYPTE BIOMEDICAL Stipulated Loss Values
Stipulated Loss Value Rental as a Percentage of Payment Date Lessor's Cost ----------------- ------------------ (on or before) 1 Oct-93 100.00 2 Nov-93 99.89 3 Dec-93 99.77 4 Jan-94 99.66 5 Feb-94 99.54 6 Mar-94 99.43 7 Apr-94 99.31 8 May-94 99.20 9 Jun-94 99.08 10 Jul-94 98.97 11 Aug-94 98.85 12 Sep-94 98.74 13 Oct-94 98.62 14 Nov-94 98.51 15 Dec-94 98.39 16 Jan-95 98.28 17 Feb-95 98.16 18 Mar-95 98.05 19 Apr-95 95.45 20 May-95 92.84 21 Jun-95 90.19 22 Jul-95 87.53 23 Aug-95 84.84 24 Sep-95 82.11 25 Oct-95 79.37 26 Nov-95 76.59 27 Oct-95 73.78 28 Jan-96 70.95 29 Feb-96 68.08 30 Mar-96 65.18 31 Apr-96 62.24 32 May-96 59.30 33 Jun-96 56.31 34 Jul-96 53.32 35 Aug-96 50.29 36 Sep-96 47.23 37 Oct-96 44.15 38 Nov-96 41.04 39 Dec-96 37.88 40 Jan-97 34.72 41 Feb-97 31.52 42 Mar-97 28.28 43 Apr-97 and Thereafter 25.00
* If Lessee renews the Lease, the Stipulated Loss Value during any extended Term shall be an amount equal to the fair market value of the Units as at the end of the applicable initial lease term, as reasonably determined by Lessor, or in the event of disagreement between Lessor and Lessee, as determined by the independent appraiser selected under the provisions of Section 4(b) of the Lease; provided, however, that such Stipulated Loss Value shall not be less than 25% of Lessor's Cost of the Units. 93 ANNEX C EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES NONE 7 94 NOTICE OF INTENDED TRANSFER AND LEASE BACK RE: 1440 4TH ST. BERKELEY, CA 94710 SALE DATE: OCTOBER 2, 1993 CNS118716 PROOF OF PUBLICATION STATE OF CALIFORNIA Alameda County, ss RONALD J. LEWIS of said County, does hereby certify That he is and was during all times herein mentioned a citizen of the United States over the age of 21 years and neither a party to nor in anyway interested in the matter or action herein set forth and is and was competent to be a witness in said matter or action. That he is now and at all times herein mentioned was the principal clerk of The Independent Berkeley Student Publishing Co., Inc., publishers of The Daily Californian which is and was at all times herein mentioned a newspaper of general circulation printed and published daily in the City of Berkeley, County of Alameda, State of California, and as such principal clerk, has now and at all times had charge of all legal notices and advertisements in said newspaper, that said The Daily Californian is now and was at all times herein mentioned a newspaper of general circulation as that term is defined by Section 6000 of the Government Code and as provided by said Section, is and at all of said times was published for the dissemination of local and telegraphic news and intelligence of a general character, having a bona fide subscription list of paying subscribers, and is not and at none of said times was devoted to the interests or published for the entertainment or instruction of a particular class, profession, trade, calling, race, or denomination, or for any number of such classes, professions, trades, callings, race, or denominations, that at all times said newspaper has been established, printed and published at regular intervals in said County and State, for more than one year preceding the date of the first publication of the notice herein mentioned, that said notice was set in type no smaller than nonpareil, and was preceded with words printed in black face type no smaller than nonpareil describing and expressing in general terms and purpose and character of the notice intended to be given. THAT THE NOTICE OF INTENDED TRANSFER AND LEASEBACK RE; 1440 4TH ST. BERKELEY, CA 94710 SALE DATE: OCTOBER 2, 1993 of which the annexed is a printed copy, was published in said newspaper and not in any supplement thereof on the following dates to wit: 9/22/93 I certify (or declare) under penalty of perjury that the foregoing is true and correct. Dated at Berkeley, California this 22ND day of SEPTEMBER 1993. Signed [SIG] ------------------------------------------------------------ NOTICE OF INTENDED TRANSFER AND LEASEBACK Notice is hereby given that Calypte Biomedical Corporation, a California corporation, (the "Transferer"), whose address is 1440 Fourth Street, Berkeley, CA 94710, intends to transfer certain personal property to MMC/GATX Partnership No. 1, a California partnership (the "Intended Transferee") whose address is c/o GATX Capital Corporation, Four Embarcadero Center, Suite 2200, San Francisco, California 94111; and that said intended Transferee (Leasor) intends to leaseback to said Transferor (Leasee), the said personal property, a general description of which is as follows, to wit: certain scientific laboratory and test equipment, manufacturing equipment, tenant improvements, fixtures, furniture and personal property, including, without limitation, a portable aerosol photometer and generator, a biofuge 15 microcentrifuge, angle rotor, a microplate reader, portable softwall clean rooms, UA-6 detector, portable validator assy., probe assy., a calibrator, a steam generator, an HPLC inert protein purification system, Olympian generator-diesel engine liquid cooled, Aquastar titrator, Aquastar solid evaporator, stainless steel fabrication for cleanrooms, rubber base to cleanroom, pipes and sprinkler heads, faucet, and vinyl curtain wall panel. The personal property to be transferred shall be located at the premises of the Transferor at the following two locations: 1625 Harbor Bay Parkway, Technology Center at Harbor Bay, Alameda, CA 94501; and 1440 4th Street, Berkeley, CA 94710. Such sale and leaseback transaction is to be consummated on or after October 2, 1993. Dated: September 16, 1993. MMC/GATX PARTNERSHIP NO. 1, By GATX Capital Corporation, as Agent By: David G. Mayer Name: David G. Mayer Title: Assistant Secretary CNS 1118716 95 This FINANCING STATEMENT is presented for filing and will remain effective with certain exceptions for a period of five years from the date of filing pursuant to Section 9403 of the California Uniform Commercial Code. - ---------------------------------------------------------------------------------------------------------------------------------- 1. DEBTOR (LAST NAME FIRST--IF AN INDIVIDUAL) (LESSEE) 1A. SOCIAL SECURITY OR FEDERAL TAX NO. CALYPTE BIOMEDICAL CORPORATION - ---------------------------------------------------------------------------------------------------------------------------------- 1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE 1440 FOURTH STREET BERKELEY, CALIFORNIA 94710 - ---------------------------------------------------------------------------------------------------------------------------------- 2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST--IF AN INDIVIDUAL) 2A. SOCIAL SECURITY OR FEDERAL TAX NO. - ---------------------------------------------------------------------------------------------------------------------------------- 2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE - ---------------------------------------------------------------------------------------------------------------------------------- 3. DEBTOR'S TRADE NAMES OR STYLES (IF ANY) 3A. FEDERAL TAX NUMBER - ---------------------------------------------------------------------------------------------------------------------------------- 4. (LESSOR) MMC/GATX PARTNERSHIP NO. I 4A. SOCIAL SECURITY NO., FEDERAL TAX NO. NAME c/o GATX CAPITAL CORPORATION, AS AGENT OR BANK TRANSIT AND A.B.A. NO. MAILING ADDRESS FOUR EMBARCADERO CENTER, SUITE 2200 CITY SAN FRANCISCO STATE CALIFORNIA ZIP CODE 94111 - ---------------------------------------------------------------------------------------------------------------------------------- 5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL TAX NO. NAME OR BANK TRANSIT AND A.B.A. NO. MAILING ADDRESS CITY STATE ZIP CODE - ---------------------------------------------------------------------------------------------------------------------------------- 6. This FINANCING STATEMENT covers the following types or items of property (include description of real property on which located and owner of record when required by Instruction 4). This filing is made for notice purposes only. The parties acknowledge and agree that the Master Equipment Lease Agreement is a true lease and that, in accordance with Section 9-408 of the Uniform Commercial Code, the execution and filing of this Financing Statement shall not of itself be a factor or evidence to the contrary. The parties acknowledge that the equipment and other property covered by this Financing Statement shall be personal property and shall not constitute fixtures for any purposes and that the execution of this Financing Statement shall not be used as evidence to the contrary. See also "Schedule 1 to the Financing Statement" attached hereto and incorporated herein by this reference. - ---------------------------------------------------------------------------------------------------------------------------------- 7. CHECK [X] 7A. [X] PRODUCTS OF COLLATERAL 7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH IF APPLICABLE ARE ALSO COVERED INSTRUCTION 5(a) ITEM: [ ] (1) [ ] (2) [ ] (3) [ ] (4) - ---------------------------------------------------------------------------------------------------------------------------------- 8. CHECK [X] IF APPLICABLE [ ] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC SECTION 9105 (1) (n) - ---------------------------------------------------------------------------------------------------------------------------------- 9. CALYPTE BIOMEDICAL CORPORATION DATE: 9/27/93 C 10. THIS SPACE FOR USE OF FILING OFFICER O (DATE, TIME, FILE NUMBER By: [SIG] D AND FILING OFFICER) SIGNATURE(S) OF DEBTOR(S) Title: CFO E - --------------------------------------------------------------------- CALYPTE BIOMEDICAL CORPORATION 1 TYPE OR PRINT NAME(S) OF DEBTOR(S) - ------------------------------------------------------------- 2 3 SIGNATURE(S) OF SECURED PARTY(IES) 4 - ------------------------------------------------------------- MMC/GATX PARTNERSHIP NO. I 5 By: GATX Capital Corporation, as Agent TYPE OR PRINT NAME(S) OF SECURED PARTY(IES) 6 ============================================================= 11. Return copy to: 7 NAME / / ADDRESS Robert F. McLaughlin 8 CITY Hosie, Wes, McLaughlin & Sacks STATE One Sansome Street, 14th Floor 9 ZIP CODE San Francisco, CA 94104 / / 0 ============================================================= FORM UCC-1-- Approved by the Secretary of State ================================================================================================================================== (1) FILING OFFICER COPY
[RECEIVED STAMP] 96 This FINANCING STATEMENT is presented for filing and will remain effective with certain exceptions for a period of five years from the date of filing pursuant to Section 9403 of the California Uniform Commercial Code. - ---------------------------------------------------------------------------------------------------------------------------------- 1. DEBTOR (LAST NAME FIRST--IF AN INDIVIDUAL) (LESSEE) 1A. SOCIAL SECURITY OR FEDERAL TAX NO. CALYPTE BIOMEDICAL CORPORATION - ---------------------------------------------------------------------------------------------------------------------------------- 1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE 1440 FOURTH STREET BERKELEY, CALIFORNIA 94710 - ---------------------------------------------------------------------------------------------------------------------------------- 2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST--IF AN INDIVIDUAL) 2A. SOCIAL SECURITY OR FEDERAL TAX NO. - ---------------------------------------------------------------------------------------------------------------------------------- 2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE - ---------------------------------------------------------------------------------------------------------------------------------- 3. DEBTOR'S TRADE NAMES OR STYLES (IF ANY) 3A. FEDERAL TAX NUMBER - ---------------------------------------------------------------------------------------------------------------------------------- 4. (LESSOR) MMC/GATX PARTNERSHIP NO. I 4A. SOCIAL SECURITY NO., FEDERAL TAX NO. NAME c/o GATX CAPITAL CORPORATION, AS AGENT OR BANK TRANSIT AND A.B.A. NO. MAILING ADDRESS FOUR EMBARCADERO CENTER, SUITE 2200 CITY SAN FRANCISCO STATE CALIFORNIA ZIP CODE 94111 - ---------------------------------------------------------------------------------------------------------------------------------- 5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL TAX NO. NAME OR BANK TRANSIT AND A.B.A. NO. MAILING ADDRESS CITY STATE ZIP CODE - ---------------------------------------------------------------------------------------------------------------------------------- 6. This FINANCING STATEMENT covers the following types or items of property (include description of real property on which located and owner of record when required by Instruction 4). This filing is made for notice purposes only. The parties acknowledge and agree that the Master Equipment Lease Agreement is a true lease and that, in accordance with Section 9-408 of the Uniform Commercial Code, the execution and filing of this Financing Statement shall not of itself be a factor or evidence to the contrary. The parties acknowledge that the equipment and other property covered by this Financing Statement shall be personal property and shall not constitute fixtures for any purposes and that the execution of this Financing Statement shall not be used as evidence to the contrary. See also "Schedule 1 to the Financing Statement" attached hereto and incorporated herein by this reference. - ---------------------------------------------------------------------------------------------------------------------------------- 7. CHECK [X] 7A. [X] PRODUCTS OF COLLATERAL 7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH IF APPLICABLE ARE ALSO COVERED INSTRUCTION 5(a) ITEM: [ ] (1) [ ] (2) [ ] (3) [ ] (4) - ---------------------------------------------------------------------------------------------------------------------------------- 8. CHECK [X] IF APPLICABLE [ ] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC SECTION 9105 (1) (n) - ---------------------------------------------------------------------------------------------------------------------------------- 9. CALYPTE BIOMEDICAL CORPORATION DATE: 9/27/93 C 10. THIS SPACE FOR USE OF FILING OFFICER O (DATE, TIME, FILE NUMBER By: [SIG] D AND FILING OFFICER) SIGNATURE(S) OF DEBTOR(S) Title: CFO E - --------------------------------------------------------------------- CALYPTE BIOMEDICAL CORPORATION 1 TYPE OR PRINT NAME(S) OF DEBTOR(S) - ------------------------------------------------------------- 2 3 SIGNATURE(S) OF SECURED PARTY(IES) 4 - ------------------------------------------------------------- MMC/GATX PARTNERSHIP NO. I 5 [STAMP] By: GATX Capital Corporation, as Agent TYPE OR PRINT NAME(S) OF SECURED PARTY(IES) 6 ============================================================= 11. Return copy to: 7 NAME / / ADDRESS Robert F. McLaughlin 8 CITY Hosie, Wes, McLaughlin & Sacks STATE One Sansome Street, 14th Floor 9 ZIP CODE San Francisco, CA 94104 / / 0 ============================================================= FORM UCC-1-- Approved by the Secretary of State ================================================================================================================================== (4) FILE COPY--DEBTOR
97 SCHEDULE 1 TO FINANCING STATEMENT DEBTOR (Lessee): CALYPTE BIOMEDICAL CORPORATION SECURED PARTY (Lessor): MMC/GATX Partnership No. I ITEM 6: The items which shall constitute Lessor's equipment and other personal property under the Master Equipment Lease Agreement, dated as of August 20, 1993, as amended or supplemented from time to time (the "Lease"), between MMC/GATX Partnership No. I ("MMC/GATX"), and Calypte Biomedical Corporation ("Lessee," such term and other terms not defined herein having the meaning referred to in the Lease) and the Schedules to the Lease, are as follows: All right, title and interest of the Lessee in and to each and every Unit of equipment, tenant improvements, fixtures, software, parts, components or personal property covered by the Lease (including all Schedules executed in connection therewith) and as further described below (which such equipment, tenant improvements, fixtures, software, parts, components and personal property shall remain subject to the lien of the Lease until specifically released in writing) whether or not any such equipment, tenant improvements, fixtures, software, parts, components and personal property is thereafter purported to be sold, destroyed, released, subleased, assigned, conveyed, transferred or otherwise disposed of; together with all accessories, equipment, parts and appurtenances appertaining or attached to any of such equipment, tenant improvements, fixtures, software, parts, components or personal property, whether now owned or hereafter acquired, and all substitutions, renewals or replacements of and additions, improvements, accessions and accumulations to any and all of such equipment, tenant improvements, fixtures, software, parts, components or personal property, together with all the income, profits and avails therefrom and the proceeds thereof, including, without limitation, insurance payments and all proceeds from sales or other dispositions thereof. The Lease (including all schedules executed in connection therewith) is intended by the parties thereto to be a true lease. However, if notwithstanding the intent of the parties, the Lease is held to create a secured financing or lease for security, the Lessee shall be deemed to have granted to MMC/GATX a security interest in the above-described equipment and other property. The specific Units constituting equipment and personal property under Schedules 1, 2 and 3 to the Lease include, without limitation, the equipment and property set forth on the attached Annex A which is made a part hereof. The equipment and personal property set forth on the attached Annex A was sold by Lessee to Lessor prior to being leased by Lessor to Lessee. Other Security: That certain Security Deposit and proceeds thereof under the Security Deposit Pledge Agreement, dated as of August 20, 1993, between MMC/GATX and Lessee. 1 98 22-Sep-93 CALYPTE BIOMEDICAL/SCHEDULE NO. 1 PAGE 1 ANNEX A ALL UNITS LOCATED AT: 1440 FOURTH STREET BERKELEY, CA 94710
ASSET COST OF # VENDOR QTY ITEM DESCRIPTION INVOICE # UNIT - ----- ------ --- ---------------- --------- --------- TENANT IMPROVEMENTS - ------------------- R-027 4 PHASE ELECTRIC GENERATOR HOOKUP & 1963 3,515.90 CLEANROOM POWER & LIGHTING - -------------------------------------------------------------------------------------------------------------------------------- R-027 DELUCCHI SHEET METAL STAINLESS STEEL FABRICATION 42937 162.00 FOR CLEANROOMS - -------------------------------------------------------------------------------------------------------------------------------- R-027 DELUCCHI SHEET METAL STAINLESS STEEL FABRICATION 42936 147.50 FOR CLEANRROMS - -------------------------------------------------------------------------------------------------------------------------------- R-027 DELUCCHI SHEET METAL STAINLESS STEEL FABRICATION 42950 92.00 FOR CLEANROOMS - -------------------------------------------------------------------------------------------------------------------------------- R-027 LO HEATH LABOR AND MATERIALS FOR 1445 281.00 PLUMBING SERVICES AS FOLLOWS: RELOCATE 2 FIRE SPRINKLER HEADS CAP 2 PVC PIPES - -------------------------------------------------------------------------------------------------------------------------------- R-027 LO HEALTH LABOR AND MATERIALS FOR 1446 118.50 PLUMBING SERVICES AS FOLLOWS: REBUILD 1 CHICAGO LAB FAUCET REPAIR LEAK UNDER LAB SINK - -------------------------------------------------------------------------------------------------------------------------------- R-027 MICROCANTAMINATION INSTALLATION OF 1 TRAX IND. 549 100.00 CONTROL SERVICES PRODUCTS VINYL CURTAIN WALL PANEL; MOVE 1 FRAME SUPPORT 6" - -------------------------------------------------------------------------------------------------------------------------------- R-027 PETER S. BERRY MATERIALS AND LABOR TO 15064 180.00 RELOCATE CENTRIFUGE OUTLET TO CLEANROOM - -------------------------------------------------------------------------------------------------------------------------------- R-027 SAN BRUNO SHEET METAL INSTALLATION OF: 4/21/93 12,870.00 1 7 1/2 TON HEAT PUMP 1 5 TON HEAT PUMP ON ROOF AREA W/SPRING ICELATORS ALL DUCT WORK W/RETURN & SUPPLY DAMPERS FARR GLIDE FILTER BOXES SUPPLY OUTSIDE AIR W/SEPARATE FILTERS REMOVE OLD SKYLIGHT & INSTALL 2 X 4 & PLYWOOD W/METAL COVER - -------------------------------------------------------------------------------------------------------------------------------- R-027 SAN BRUNO SHEET METAL INSTALLED ALL DUCT WORK IN 4/30/93 8,865.00 CEILING AREA - -------------------------------------------------------------------------------------------------------------------------------- R-027 TRAX INDUSTRIAL 1 CUSTOM ANTI-STATIC SOFTWALL 4536 1,046.00 PRODUCTS PANEL FOR CLEANROOM - -------------------------------------------------------------------------------------------------------------------------------- M-027 4 PHASE ELECTRIC EMERGENCY POWER SET-UP 4/21/93 5,250.00 - -------------------------------------------------------------------------------------------------------------------------------- M-026 J&M ENTERPRISES PHASE III-WAREHOUSE 1440.1 5,385.00 - -------------------------------------------------------------------------------------------------------------------------------- GRAND TOTAL $38,012.90 ==========
99 22-Sep-93 CALYPTE BIOMEDICAL/SCHEDULE NO. 2 PAGE 1 ANNEX A ALL UNITS LOCATED AT: 1440 FOURTH STREET BERKELEY, CA 94710
ASSET COST OF # VENDOR QTY ITEM DESCRIPTION MODEL # PO # INVOICE # SERIAL # UNIT - ----- --------------------- ----- ------------------------ --------- ------ --------- -------- --------- LAB EQUIPMENT - ------------- 1065 AIR TECHNIQUES 1 PARTICULATE DET. UNIT - TDA-2E 10181 6276 10065 5,690.00 PORTABLE AEROSOL PHOTOMETER WITH PARTS 1 PORTABLE AEROSOL GENERATOR TDA-4A 9912 1,250.00 - --------------------------------------------------------------------------------------------------------------------------------- 1112 BAXTER 1 BIOFUGE 15 MICROCENTRIFUGE 10288 9014760 1,552.50 1 ANGLE ROTOR 240.00 - --------------------------------------------------------------------------------------------------------------------------------- 1051 BIO-TEK 1 MICROPLATE READER EL312 10189 118914 85259 5,800.00 - --------------------------------------------------------------------------------------------------------------------------------- R-027 ENVIROFLEX 1 PORTABLE SOFTWALL CLEAN 10024 DEPOSIT 7,430.00 ROOM 16' X 10'; 4 HEPA; 3 LIGHTS 1025 1 PORTABLE SOFTWALL CLEAN 1031 7,019.00 ROOM 14' X 12'; 3 HEPA; 3 LIGHTS 1 PORTABLE SOFTWALL CLEAN 6,732.00 ROOM 12' X 11'; 3 HEPA; 3 LIGHTS - --------------------------------------------------------------------------------------------------------------------------------- 1123 ISCO 1 UA-6 DETECTOR WITH TYPE 11 10430 190666-00 3,500.00 OPTICAL UNIT 1 DIVERTER VALVE 275.00 - --------------------------------------------------------------------------------------------------------------------------------- KAYE INSTRUMENTS 1 PORTABLE VALIDATOR ASSY. 10294 53652 8,000.00 1 D4 PLUS ANALOG PANEL ASSY. 820.00 1 PROBE ASSY. 1,950.00 - --------------------------------------------------------------------------------------------------------------------------------- KAYE INSTRUMENTS 1 CALIBRATOR - 115V LTR-50 10294 53829 5,500.00 - --------------------------------------------------------------------------------------------------------------------------------- MED-EQUIP 1 STEAM GENERATOR 9291 5648 N3-13378 13,000.00 STAINLESS STEEL - --------------------------------------------------------------------------------------------------------------------------------- 1054 MILLIPORE 1 HPLC INERT PROTEIN 625 LC 10115 719923 24,109.00 PURIFICATION SYSTEM 1 WATERS FRACTION COLLECTOR 486 3,314.60 1 DUAL PEN RECORDER SE-120 2,009.70 - --------------------------------------------------------------------------------------------------------------------------------- 1054 MILLIPORE 1 AP MINICOLUM 5MM X 100MM 10115 719237 215.30 1 DIVERTER VALVE 301.40 - --------------------------------------------------------------------------------------------------------------------------------- 1114 PETERSON POWER SYSTEM 1 OLYMPIAN GENERATOR - DIESEL CD075 10087 E099301 2007042 15,276.18 ENGINE LIQUID COOLED 1115 1 OLYMPIAN DOUBLE WALL TANK CTS020Y 93A01704W 2,486.82 - --------------------------------------------------------------------------------------------------------------------------------- 1052 SHANDON UPSHAW 1 CYTOSPIN 3 (SLIDE MAKING 10196 3575830 4,995.00 APPARATUS) - --------------------------------------------------------------------------------------------------------------------------------- 1113 SIERRA INSTRUMENTS 1 HOT WIRE ANEMOMETER 634 10519 41849 18593 1,675.00 - --------------------------------------------------------------------------------------------------------------------------------- 1088 TERRA UNIVERSAL 1 DESICCATOR CHAMBER 10247 19065 2,088.00 PLEXIGLASS 45" X 24" X 60", 10 DOORS - HERMETICALLY SEALED 56 PLEXIGLASS SHELF W/80W GUARD 840.00 1 STAND; 3" H, STEEL 198.00 4 CASTER WITH BRAKE 128.00 - --------------------------------------------------------------------------------------------------------------------------------- 1039 VWR 2 ROTARY CULTURE APPARATUS DECK 10117 5E-07 910.80 - --------------------------------------------------------------------------------------------------------------------------------- 1111 VWR 1 WHEATON ROTARY CULTURE BASE 10249 5E-07 1,311.00 4 ROTARY CULTURE DECK 1,548.00 - ---------------------------------------------------------------------------------------------------------------------------------
100 22-Sep-93 CALYPTE BIOMEDICAL/SCHEDULE NO. 2 PAGE 2 ANNEX A ALL UNITS LOCATED AT: 1440 FOURTH STREET BERKELEY, CA 94710
ASSET COST OF # VENDOR QTY ITEM DESCRIPTION MODEL # PO # INVOICE # SERIAL # UNIT - ----- --------------------- ----- ------------------------ --------- ------ --------- -------- --------- 1109 VWR 1 AQUASTAR TITRATOR C2000 10363 5E-07 5,328.00 1 AQUASTAR SOLID EVAPORATOR EV-ST 4,496.00 - --------------------------------------------------------------------------------------------------------------------------------- SUBTOTAL LAB EQUIPMENT $139,989.30 ----------- - --------------------------------------------------------------------------------------------------------------------------------- FURNITURE - --------- 1074 AC PAPER 1 FILE - 4 DR LATERAL; HON; LEGAL; 10238 110120 629.00 PUTTY - --------------------------------------------------------------------------------------------------------------------------------- 1086 NORLAB HANSON 2 LAB BENCHES; PROTABLE; TABLES 10411 1621 2,979.00 1087 AND SHELVES, BEIGE - --------------------------------------------------------------------------------------------------------------------------------- SUBTOTAL FURNITURE $3,608.00 --------- - --------------------------------------------------------------------------------------------------------------------------------- COMPUTER EQUIPMENT - ------------------ 1120 COMPUTERWARE 1 CENTRIS 610 CPU W/80 MB 10542 500492 F2319LHBCN2 1,597.00 HARDDRIVE WITH 4MB MEMORY & APPLE KEYBOARD II - --------------------------------------------------------------------------------------------------------------------------------- 1117 COMPUTERWARE 1 CENTRIS 610 CPU W/80 MB 10549 500589 F2314LAXCN2 1,398.00 HARDDRIVE AND APPLE KEYBOARD - --------------------------------------------------------------------------------------------------------------------------------- 1081 FUTURE NOW 1 SEIKO MONITOR - 14" COLOR CM1445 10381 368215 27M52738 480.00 - --------------------------------------------------------------------------------------------------------------------------------- 1121 FUTURE NOW 1 SEIKO MONITOR - 14" COLOR CM1445 10548 S0400477 26M50938 480.00 1118 1 SEIKO MONITOR - 14" COLOR CM1445 27M56938 480.00 - --------------------------------------------------------------------------------------------------------------------------------- 1082 MAC PRO SYSTEMS 1 MAC IISI 40/3 10380 JW0279 FC2252XTC56 838.95 - --------------------------------------------------------------------------------------------------------------------------------- SUBTOTAL COMPUTERS $5,273.95 --------- GRAND TOTAL $148,871.25 ===========
101 22-Sep-93 CALYPTE BIOMEDICAL/SCHEDULE NO. 3 PAGE 1 ANNEX A ALL UNITS LOCATED AT: 1440 FOURTH STREET BERKELEY, CA 94710
ASSET COST OF NBV # VENDOR QTY ITEM DESCRIPTION MODEL # PO # INVOICE # SERIAL # UNIT COST - ----- ------ --- ---------------- ------- ---- --------- -------- -------- ----- LAB EQUIPMENT - ------------- 1034 COLE-PARMER 1 SCALE MIXER, STIR PAK 115 W/ 10012 1500795 M92002749 721.00 692.00 CONTROLLER, MOTOR, SUPPORT PLATFORM, PIVOT MOUNT & CLAMP - ------------------------------------------------------------------------------------------------------------------------------------ 1067 FISHER 1 CORROSIVE SAFETY CABINET 9768 982505 405.00 384.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1016 FISHER 1 PH METER 340 10001 1428579 495.30 464.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1038 FORMA 1 INCUBATOR-REACH IN LARGE 9906 2375900 36069 6,028.00 5,777.00 CAPACITY 32 C.F. 1 RECORDER 719.00 659.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1036 HARRIS MANUFACTURING 1 FREEZER CHEST -50C 9976 49995 P23C-136269-P1 3,194.00 3,088.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1040 SCIENTIFIC INSTRUMENTS 1 OLYMPUS MICROSCOPE- 10025 78497 13,829.00 13,253.00 FLUORESCENT WITH ACCESSORIES - ------------------------------------------------------------------------------------------------------------------------------------ 1039 VWR 1 WHEATON ROTARY CULTURE BASE 9996 45976860 1,249.00 1,186.00 1 ROTARY CULTURE DECK 379.00 354.00 - ------------------------------------------------------------------------------------------------------------------------------------ SUBTOTAL LAB EQUIPMENT $27,019.30 $25,827.00 --------------------- - ------------------------------------------------------------------------------------------------------------------------------------ FURNITURE - --------- 1024 AC PAPER & SUPPLY 1 SCHWAB INSULATE LEGAL FILE 4CFC-5000 9940 106317 929.25 852.00 CABINET 4 DRAWER PUTTY - ------------------------------------------------------------------------------------------------------------------------------------ 1022 AC PAPER 1 FILE CABINET-INSULATED 4DR 9940 107401 445.00 408.00 LATERAL; PUTTY LEGAL - ------------------------------------------------------------------------------------------------------------------------------------ AS-008 CVL INSTALLATIONS 2 HERMAN MILLER WORKSTATIONS 10133 4/6/93 2,500.00 2,292.00 8' X 10' FOR FAX & PRINTER; GRAY - ------------------------------------------------------------------------------------------------------------------------------------ 1013 SAM CLAR OFFICE FURNITURE 1 DESK-WOOD 38X72 USED 9926 41118 299.95 270.00 1014 1 CREDENZA-WOOD USED 299.95 270.00 1042 1 FILE-2 DR LATERAL WOOD 174.95 157.00 - ------------------------------------------------------------------------------------------------------------------------------------ SUBTOTAL FURNITURE $4,649.10 $4,249.00 -------------------- - ------------------------------------------------------------------------------------------------------------------------------------ OFFICE EQUIPMENT - ---------------- 1041 TAYLOR MADE 1 CANNON PLAIN PAPER FAX L775 10010 PUR. SPEC. 4,068.00 3,729.00 - ------------------------------------------------------------------------------------------------------------------------------------ SUBTOTAL OFFICE EQUIPMENT $4,068.00 $3,729.00 - ------------------------------------------------------------------------------------------------------------------------------------ COMPUTER EQUIPMENT - ------------------ 1044 COMPUTERWARE 1 TRINITRON MONITOR-14" COLOR 9931 679050 S1237RK04 529.00 476.00 1008 1 APPLE MONITOR-12" MONOCHROME SG2341VVC97 199.00 179.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1010 COMPUTERWARE (UNION BANK) 1 MAC IIsi CPU W/40MB HARD DRIVE II SI 9859 878183 FC2234C1C56 899.00 824.00 1084 1 MAC IIsi CPU W/40MB HARD DRIVE II SI FC22347FC56 899.00 824.00 1011 1 MAC IIsi CPU W/40MB HARD DRIVE II SI FC22335YC56 899.00 824.00 1007 1 MAC IIsi CPU W/40MB HARD DRIVE II SI FC22347BC56 899.00 824.00 - ------------------------------------------------------------------------------------------------------------------------------------ 1009 PERIPHERAL LAND INCORPORATED 1 INFINITY EXTERNAL DRIVE 88-R/W44 9898 94549 16055 590.00 541.00 - ------------------------------------------------------------------------------------------------------------------------------------ SUBTOTAL COMPUTER EQUIPMENT $4,914.00 $4,492.00 -------------------- GRAND TOTAL $40,650.40 $38.297.00 =====================
102 This FINANCING STATEMENT is presented for filing and will remain effective with certain exceptions for a period of five years from the date of filing pursuant to Section 9403 of the California Uniform Commercial Code. - ---------------------------------------------------------------------------------------------------------------------------------- 1. DEBTOR (LAST NAME FIRST--IF AN INDIVIDUAL) (TRANSFEROR) 1A. SOCIAL SECURITY OR FEDERAL TAX NO. CALYPTE BIOMEDICAL CORPORATION - ---------------------------------------------------------------------------------------------------------------------------------- 1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE 1440 FOURTH STREET BERKELEY, CALIFORNIA 94710 - ---------------------------------------------------------------------------------------------------------------------------------- 2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST--IF AN INDIVIDUAL) 2A. SOCIAL SECURITY OR FEDERAL TAX NO. - ---------------------------------------------------------------------------------------------------------------------------------- 2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE - ---------------------------------------------------------------------------------------------------------------------------------- 3. DEBTOR'S TRADE NAMES OR STYLES (IF ANY) 3A. FEDERAL TAX NUMBER - ---------------------------------------------------------------------------------------------------------------------------------- 4. (TRANSFEREE) MMC/GATX PARTNERSHIP NO. I 4A. SOCIAL SECURITY NO., FEDERAL TAX NO. NAME c/o GATX CAPITAL CORPORATION, AS AGENT OR BANK TRANSIT AND A.B.A. NO. MAILING ADDRESS FOUR EMBARCADERO CENTER, SUITE 2200 CITY SAN FRANCISCO STATE CALIFORNIA ZIP CODE 94111 - ---------------------------------------------------------------------------------------------------------------------------------- 5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL TAX NO. NAME OR BANK TRANSIT AND A.B.A. NO. MAILING ADDRESS CITY STATE ZIP CODE - ---------------------------------------------------------------------------------------------------------------------------------- 6. This FINANCING STATEMENT covers the following types or items of property (include description of real property on which located and owner of record when required by Instruction 4). See Exhibit A attached hereto and incorporated herein by this reference. - ---------------------------------------------------------------------------------------------------------------------------------- 7. CHECK [X] 7A. [X] PRODUCTS OF COLLATERAL 7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH IF APPLICABLE ARE ALSO COVERED INSTRUCTION 5(a) ITEM: [ ] (1) [ ] (2) [ ] (3) [ ] (4) - ---------------------------------------------------------------------------------------------------------------------------------- 8. CHECK [X] IF APPLICABLE [ ] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC SECTION 9105 (1) (n) - ---------------------------------------------------------------------------------------------------------------------------------- 9. CALYPTE BIOMEDICAL CORPORATION DATE: 9/27/93 C 10. THIS SPACE FOR USE OF FILING OFFICER O (DATE, TIME, FILE NUMBER By: [SIG] D AND FILING OFFICER) SIGNATURE(S) OF DEBTOR(S) Title: CFO E - --------------------------------------------------------------------- CALYPTE BIOMEDICAL CORPORATION 1 TYPE OR PRINT NAME(S) OF DEBTOR(S) - ------------------------------------------------------------- 2 3 SIGNATURE(S) OF SECURED PARTY(IES) 4 - ------------------------------------------------------------- MMC/GATX PARTNERSHIP NO. I 5 By: GATX Capital Corporation, as Agent TYPE OR PRINT NAME(S) OF SECURED PARTY(IES) 6 ============================================================= 11. Return copy to: 7 NAME / / ADDRESS Robert F. McLaughlin 8 CITY Hosie, Wes, McLaughlin & Sacks STATE One Sansome Street, 14th Floor 9 ZIP CODE San Francisco, CA 94104 / / 0 ============================================================= FORM UCC-1-- Approved by the Secretary of State ================================================================================================================================== (1) FILING OFFICER COPY
[RECEIVED STAMP] 103 This FINANCING STATEMENT is presented for filing and will remain effective with certain exceptions for a period of five years from the date of filing pursuant to Section 9403 of the California Uniform Commercial Code. - ---------------------------------------------------------------------------------------------------------------------------------- 1. DEBTOR (LAST NAME FIRST--IF AN INDIVIDUAL) (TRANSFEROR) 1A. SOCIAL SECURITY OR FEDERAL TAX NO. CALYPTE BIOMEDICAL CORPORATION - ---------------------------------------------------------------------------------------------------------------------------------- 1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE 1440 FOURTH STREET BERKELEY, CALIFORNIA 94710 - ---------------------------------------------------------------------------------------------------------------------------------- 2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST--IF AN INDIVIDUAL) 2A. SOCIAL SECURITY OR FEDERAL TAX NO. - ---------------------------------------------------------------------------------------------------------------------------------- 2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE - ---------------------------------------------------------------------------------------------------------------------------------- 3. DEBTOR'S TRADE NAMES OR STYLES (IF ANY) 3A. FEDERAL TAX NUMBER - ---------------------------------------------------------------------------------------------------------------------------------- 4. (TRANSFEREE) MMC/GATX PARTNERSHIP NO. I 4A. SOCIAL SECURITY NO., FEDERAL TAX NO. NAME c/o GATX CAPITAL CORPORATION, AS AGENT OR BANK TRANSIT AND A.B.A. NO. MAILING ADDRESS FOUR EMBARCADERO CENTER, SUITE 2200 CITY SAN FRANCISCO STATE CALIFORNIA ZIP CODE 94111 - ---------------------------------------------------------------------------------------------------------------------------------- 5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL TAX NO. NAME OR BANK TRANSIT AND A.B.A. NO. MAILING ADDRESS CITY STATE ZIP CODE - ---------------------------------------------------------------------------------------------------------------------------------- 6. This FINANCING STATEMENT covers the following types or items of property (include description of real property on which located and owner of record when required by Instruction 4). See Exhibit A attached hereto and incorporated herein by this reference. - ---------------------------------------------------------------------------------------------------------------------------------- 7. CHECK [X] 7A. [X] PRODUCTS OF COLLATERAL 7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH IF APPLICABLE ARE ALSO COVERED INSTRUCTION 5(a) ITEM: [ ] (1) [ ] (2) [ ] (3) [ ] (4) - ---------------------------------------------------------------------------------------------------------------------------------- 8. CHECK [X] IF APPLICABLE [ ] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC SECTION 9105 (1) (n) - ---------------------------------------------------------------------------------------------------------------------------------- 9. CALYPTE BIOMEDICAL CORPORATION DATE: 9/27/93 C 10. THIS SPACE FOR USE OF FILING OFFICER O (DATE, TIME, FILE NUMBER By: [SIG] D AND FILING OFFICER) SIGNATURE(S) OF DEBTOR(S) Title: CFO E - --------------------------------------------------------------------- CALYPTE BIOMEDICAL CORPORATION 1 TYPE OR PRINT NAME(S) OF DEBTOR(S) - ------------------------------------------------------------- 2 3 SIGNATURE(S) OF SECURED PARTY(IES) 4 - ------------------------------------------------------------- MMC/GATX PARTNERSHIP NO. I 5 [STAMP] By: GATX Capital Corporation, as Agent TYPE OR PRINT NAME(S) OF SECURED PARTY(IES) 6 ============================================================= 11. Return copy to: 7 NAME / / ADDRESS Robert F. McLaughlin 8 CITY Hosie, Wes, McLaughlin & Sacks STATE One Sansome Street, 14th Floor 9 ZIP CODE San Francisco, CA 94104 / / 0 ============================================================= FORM UCC-1-- Approved by the Secretary of State ================================================================================================================================== (4 FILE COPY--DEBTOR
104 EXHIBIT A TO FINANCING STATEMENT DEBTOR (Transferor): Calypte Biomedical Corporation SECURED PARTY (Transferee): MMC/GATX Partnership No. I ITEM 6 NOTICE OF INTENDED TRANSFER AND LEASEBACK Notice is hereby given that Calypte Biomedical Corporation, a California corporation, (the "Transferor"), whose address is 1440 Fourth Street, Berkeley, CA 94710, intends to transfer certain personal property to MMC/GATX Partnership No. I, a California partnership (the "Intended Transferee") whose address is c/o GATX Capital Corporation, Four Embarcadero Center, Suite 2200, San Francisco, California 94111; and that said intended Transferee (Lessor) intends to leaseback to said Transferor (Lessee), the said personal property, a general description of which is as follows, to wit: certain scientific laboratory and test equipment, manufacturing equipment, tenant improvements, fixtures, furniture and personal property, including, without limitation, a portable aerosol photometer and generator, a biofuge 15 microcentrifuge, angle rotor, a microplate reader, portable softwall clean rooms, UA-6 detector, portable validator assy., probe assy., a calibrator, a steam generator, an HPLC inert protein purification system, Olympian generator-diesel engine liquid cooled, Aquastar titrator, Aquastar solid evaporator, stainless steel fabrication for cleanrooms, rubber base to cleanroom, pipes and sprinkler heads, faucet, and vinyl curtain wall panel. The personal property to be transferred shall be located at the premises of the Transferor at the following two locations: 1625 Harbor Bay Parkway, Technology Center at Harbor Bay, Alameda, CA 94501; and 1440 4th Street, Berkeley, CA 94710. Such sale and leaseback transaction is to be consummated on or after October 2, 1993. 105 FIXTURE FILING This FINANCING STATEMENT is presented for filing and will remain effective with certain exceptions for a period of five years from the date of filing pursuant to Section 9403 of the California Uniform Commercial Code. - ---------------------------------------------------------------------------------------------------------------------------------- 1. DEBTOR (LAST NAME FIRST--IF AN INDIVIDUAL) (LESSEE) 1A. SOCIAL SECURITY OR FEDERAL TAX NO. CALYPTE BIOMEDICAL CORPORATION - ---------------------------------------------------------------------------------------------------------------------------------- 1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE 1440 FOURTH STREET BERKELEY, CALIFORNIA 94710 - ---------------------------------------------------------------------------------------------------------------------------------- 2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST--IF AN INDIVIDUAL) 2A. SOCIAL SECURITY OR FEDERAL TAX NO. - ---------------------------------------------------------------------------------------------------------------------------------- 2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE - ---------------------------------------------------------------------------------------------------------------------------------- 3. DEBTOR'S TRADE NAMES OR STYLES (IF ANY) 3A. FEDERAL TAX NUMBER - ---------------------------------------------------------------------------------------------------------------------------------- 4. (LESSOR) MMC/GATX PARTNERSHIP NO. I 4A. SOCIAL SECURITY NO., FEDERAL TAX NO. NAME c/o GATX CAPITAL CORPORATION, AS AGENT OR BANK TRANSIT AND A.B.A. NO. MAILING ADDRESS FOUR EMBARCADERO CENTER, SUITE 2200 CITY SAN FRANCISCO STATE CALIFORNIA ZIP CODE 94111 - ---------------------------------------------------------------------------------------------------------------------------------- 5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL TAX NO. NAME OR BANK TRANSIT AND A.B.A. NO. MAILING ADDRESS CITY STATE ZIP CODE - ---------------------------------------------------------------------------------------------------------------------------------- 6. This FINANCING STATEMENT covers the following types or items of property (include description of real property on which located and owner of record when required by Instruction 4). This filing is made for notice purposes only. The parties acknowledge and agree that the Master Equipment Lease Agreement is a true lease and that, in accordance with Section 9-408 of the Uniform Commercial Code, the execution and filing of this Financing Statement shall not of itself be a factor or evidence to the contrary. See also "Schedule 1 to the Financing Statement" attached hereto and incorporated herein by this reference. This is a fixture filing. - ---------------------------------------------------------------------------------------------------------------------------------- 7. CHECK [X] 7A. [X] PRODUCTS OF COLLATERAL 7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH IF APPLICABLE ARE ALSO COVERED INSTRUCTION 5(a) ITEM: [ ] (1) [ ] (2) [ ] (3) [ ] (4) - ---------------------------------------------------------------------------------------------------------------------------------- 8. CHECK [X] IF APPLICABLE [ ] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC SECTION 9105 (1) (n) - ---------------------------------------------------------------------------------------------------------------------------------- 9. CALYPTE BIOMEDICAL CORPORATION DATE: 9/27/93 C 10. THIS SPACE FOR USE OF FILING OFFICER O (DATE, TIME, FILE NUMBER By: [SIG] D AND FILING OFFICER) SIGNATURE(S) OF DEBTOR(S) Title: CFO E - --------------------------------------------------------------------- CALYPTE BIOMEDICAL CORPORATION 1 TYPE OR PRINT NAME(S) OF DEBTOR(S) - ------------------------------------------------------------- 2 3 SIGNATURE(S) OF SECURED PARTY(IES) 4 - ------------------------------------------------------------- MMC/GATX PARTNERSHIP NO. I 5 [STAMP] By: GATX Capital Corporation, as Agent TYPE OR PRINT NAME(S) OF SECURED PARTY(IES) 6 ============================================================= 11. Return copy to: 7 NAME / RETURN TO: / ADDRESS CALIFORNIA LENDERS' & ATTORNEYS' SERVICES 8 CITY 1000 G Street, Suite 225 STATE Sacramento, CA 95814 (916) 447-6237 9 ZIP CODE Toll Free in California Only: (800) 952-5696 / Account Number 2860 06W / 0 ============================================================= Filing Officer is requested to note file number, date and hour of filing on this copy and return to the above party. FORM UCC-1-- Approved by the Secretary of State ================================================================================================================================== (1) FILING OFFICER COPY--ACKNOWLEDGEMENT
106 FIXTURE FILING This FINANCING STATEMENT is presented for filing and will remain effective with certain exceptions for a period of five years from the date of filing pursuant to Section 9403 of the California Uniform Commercial Code. - ---------------------------------------------------------------------------------------------------------------------------------- 1. DEBTOR (LAST NAME FIRST--IF AN INDIVIDUAL) (LESSEE) 1A. SOCIAL SECURITY OR FEDERAL TAX NO. CALYPTE BIOMEDICAL CORPORATION - ---------------------------------------------------------------------------------------------------------------------------------- 1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE 1440 FOURTH STREET BERKELEY, CALIFORNIA 94710 - ---------------------------------------------------------------------------------------------------------------------------------- 2. ADDITIONAL DEBTOR (IF ANY) (LAST NAME FIRST--IF AN INDIVIDUAL) 2A. SOCIAL SECURITY OR FEDERAL TAX NO. - ---------------------------------------------------------------------------------------------------------------------------------- 2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE - ---------------------------------------------------------------------------------------------------------------------------------- 3. DEBTOR'S TRADE NAMES OR STYLES (IF ANY) 3A. FEDERAL TAX NUMBER - ---------------------------------------------------------------------------------------------------------------------------------- 4. (LESSOR) MMC/GATX PARTNERSHIP NO. I 4A. SOCIAL SECURITY NO., FEDERAL TAX NO. NAME c/o GATX CAPITAL CORPORATION, AS AGENT OR BANK TRANSIT AND A.B.A. NO. MAILING ADDRESS FOUR EMBARCADERO CENTER, SUITE 2200 CITY SAN FRANCISCO STATE CALIFORNIA ZIP CODE 94111 - ---------------------------------------------------------------------------------------------------------------------------------- 5. ASSIGNEE OF SECURED PARTY (IF ANY) 5A. SOCIAL SECURITY NO., FEDERAL TAX NO. NAME OR BANK TRANSIT AND A.B.A. NO. MAILING ADDRESS CITY STATE ZIP CODE - ---------------------------------------------------------------------------------------------------------------------------------- 6. This FINANCING STATEMENT covers the following types or items of property (include description of real property on which located and owner of record when required by Instruction 4). This filing is made for notice purposes only. The parties acknowledge and agree that the Master Equipment Lease Agreement is a true lease and that, in accordance with Section 9-408 of the Uniform Commercial Code, the execution and filing of this Financing Statement shall not of itself be a factor or evidence to the contrary. See also "Schedule 1 to the Financing Statement" attached hereto and incorporated herein by this reference. This is a fixture filing. - ---------------------------------------------------------------------------------------------------------------------------------- 7. CHECK [X] 7A. [X] PRODUCTS OF COLLATERAL 7B. DEBTOR(S) SIGNATURE NOT REQUIRED IN ACCORDANCE WITH IF APPLICABLE ARE ALSO COVERED INSTRUCTION 5(a) ITEM: [ ] (1) [ ] (2) [ ] (3) [ ] (4) - ---------------------------------------------------------------------------------------------------------------------------------- 8. CHECK [X] IF APPLICABLE [ ] DEBTOR IS A "TRANSMITTING UTILITY" IN ACCORDANCE WITH UCC SECTION 9105 (1) (n) - ---------------------------------------------------------------------------------------------------------------------------------- 9. CALYPTE BIOMEDICAL CORPORATION DATE: 9/27/93 C 10. THIS SPACE FOR USE OF FILING OFFICER O (DATE, TIME, FILE NUMBER By: [SIG] D AND FILING OFFICER) SIGNATURE(S) OF DEBTOR(S) Title: CFO E - --------------------------------------------------------------------- CALYPTE BIOMEDICAL CORPORATION 1 TYPE OR PRINT NAME(S) OF DEBTOR(S) - ------------------------------------------------------------- 2 3 SIGNATURE(S) OF SECURED PARTY(IES) 4 - ------------------------------------------------------------- MMC/GATX PARTNERSHIP NO. I 5 [STAMP] By: GATX Capital Corporation, as Agent TYPE OR PRINT NAME(S) OF SECURED PARTY(IES) 6 ============================================================= 11. Return copy to: 7 NAME / RETURN TO: / ADDRESS CALIFORNIA LENDERS' & ATTORNEYS' SERVICES 8 CITY 1000 G Street, Suite 225 STATE Sacramento, CA 95814 (916) 447-6237 9 ZIP CODE Toll Free in California Only: (800) 952-5696 / Account Number 2860 06W / 0 ============================================================= FORM UCC-1-- Approved by the Secretary of State ================================================================================================================================== (4) FILE COPY--DEBTOR
107 SCHEDULE 1 TO FINANCING STATEMENT (FIXTURE FILING) DEBTOR (Lessee): CALYPTE BIOMEDICAL CORPORATION SECURED PARTY (Lessor): MMC/GATX Partnership No. I Item 6: The items which shall constitute Lessor's equipment and other personal property under the Master Equipment Lease Agreement, dated as of August 20, 1993, as amended or supplemented from time to time (the "Lease"), between MMC/GATX Partnership No. I ("MMC/GATX"), and Calypte Biomedical Corporation ("Lessee," such term and other terms not defined herein having the meaning referred to in the Lease) and the Schedules to the Lease, are as follows: All right, title and interest of the Lessee in and to each and every Unit of equipment, tenant improvements, fixtures, software, parts, components or personal property covered by the Lease (including all Schedules executed in connection therewith) and as further described below (which such equipment, tenant improvements, fixtures, software, parts, components and personal property shall remain subject to the lien of the Lease until specifically released in writing) whether or not any such equipment, tenant improvements, fixtures, software, parts, components and personal property is thereafter purported to be sold, destroyed, released, subleased, assigned, conveyed, transferred or otherwise disposed of; together with all accessories, equipment, parts and appurtenances appertaining or attached to any of such equipment, tenant improvements, fixtures, software, parts, components or personal property, whether now owned or hereafter acquired, and all substitutions, renewals or replacements of and additions, improvements, accessions and accumulations to any and all of such equipment, tenant improvements, fixtures, software, parts, components or personal property; together with all the income, profits and avails therefrom and the proceeds thereof, including, without limitation, insurance payments and all proceeds from sales or other dispositions thereof. The Lease (including all schedules executed in connection therewith) is intended by the parties thereto to be a true lease. However, if notwithstanding the intent of the parties, the Lease is held to create a secured financing or lease for security, the Lessee shall be deemed to have granted to MMC/GATX a security interest in the above-described equipment and other property. The specific Units constituting equipment and personal property under Schedule 1 include, without limitation, the equipment and property set forth on the attached Annex A which is made a part hereof. The above goods are, or may become, fixtures on the real property described in Schedule 2 to this financing statement, commonly known as 1440 Fourth Street, Berkeley, California 94710. 1 108 This financing statement is to be recorded in the real estate records of the County of Alameda. The name of the record owner of the real property is G&G Properties. The equipment and personal property set forth on the attached Annex A was sold by Lessee to Lessor prior to being leased by Lessor to Lessee. Other Security: That certain Security Deposit and proceeds thereof under the Security Deposit Pledge Agreement, dated as of August 20, 1993, between MMC/GATX and Lessee. 2 109 22-Sep-93 CALYPTE BIOMEDICAL/SCHEDULE NO. 1 PAGE 1 ANNEX A ALL UNITS LOCATED AT: 1440 FOURTH STREET BERKELEY, CA 94710
ASSET COST OF # VENDOR QTY ITEM DESCRIPTION INVOICE # UNIT - ----- ------ --- ---------------- --------- ------- TENANT IMPROVEMENTS - ------------------- R-027 4 PHASE ELECTRIC GENERATOR HOOKUP & 1963 3,515.90 CLEANROOM POWER & LIGHTING - ---------------------------------------------------------------------------------------------------------------- R-027 DELUCCHI SHEET METAL STAINLESS STEEL FABRICATION 42937 162.00 FOR CLEANROOMS - ---------------------------------------------------------------------------------------------------------------- R-027 DELUCCHI SHEET METAL STAINLESS STEEL FABRICATION 42936 147.50 FOR CLEANROOMS - ---------------------------------------------------------------------------------------------------------------- R-027 DELUCCHI SHEET METAL STAINLESS STEEL FABRICATION 42950 92.00 FOR CLEANROOMS - ---------------------------------------------------------------------------------------------------------------- R-027 LO HEATH LABOR AND MATERIALS FOR 1445 281.00 PLUMBING SERVICES AS FOLLOWS: RELOCATE 2 FIRE SPRINKLER HEADS CAP 2 PVC PIPES - ---------------------------------------------------------------------------------------------------------------- R-027 LO HEATH LABOR AND MATERIALS FOR 1446 118.50 PLUMBING SERVICES AS FOLLOWS: REBUILD 1 CHICAGO LAB FAUCET REPAIR LEAK UNDER LAB SINK - ---------------------------------------------------------------------------------------------------------------- R-027 MICROCANTAMINATION INSTALLATION OF 1 TRAX IND. 549 100.00 CONTROL SERVICES PRODUCTS VINYL CURTAIN WALL PANEL; MOVE 1 FRAME SUPPORT 6" - ---------------------------------------------------------------------------------------------------------------- R-027 PETER S. BERRY MATERIALS AND LABOR TO 15064 180.00 RELOCATE CENTRIFUGE OUTLET TO CLEANROOM - ---------------------------------------------------------------------------------------------------------------- R-027 SAN BRUNO SHEET METAL INSTALLATION OF: 4/21/93 12,870.00 1 7-1/2 TON HEAT PUMP 1 5 TON HEAT PUMP ON ROOF AREA W/SPRING ICELATORS ALL DUCT WORK W/RETURN & SUPPLY DAMPERS FARR GLIDE FILTER BOXES SUPPLY OUTSIDE AIR W/SEPARATE FILTERS REMOVE OLD SKYLIGHT & INSTALL 2 X 4 & PLYWOOD W/METAL COVER - ---------------------------------------------------------------------------------------------------------------- R-027 SAN BRUNO SHEET METAL INSTALLED ALL DUCT WORK IN 4/30/93 8,865.00 CEILING AREA - ---------------------------------------------------------------------------------------------------------------- R-027 TRAX INDUSTIAL 1 CUSTOM ANTI-STATIC SOFTWALL 4536 1,046.00 PRODUCTS PANEL FOR CLEANROOM - ---------------------------------------------------------------------------------------------------------------- M-027 4 PHASE ELECTRIC EMERGENCY POWER SET-UP 4/21/93 5,250.00 - ---------------------------------------------------------------------------------------------------------------- M-026 J&M ENTERPRISES PHASE III--WAREHOUSE 1440.1 5,385.00 - ---------------------------------------------------------------------------------------------------------------- GRAND TOTAL $38,012.90 ==========
CALIFORNIA LENDERS' AND ATTORNEYS' SERVICES 1000 G STREET, SUITE 225 SACRAMENTO, CA 95814 110 AMENDMENT NO. 1 TO LEASE & SCHEDULE SCHEDULE NO. 4 This Schedule No. 4 (this Schedule), dated June 30, 1995 (such date being the "Delivery Date") for this Schedule), is a part of the Master Equipment Lease Agreement, dated as of August 20, 1993 (the "Lease"), between MMC/GATX PARTNERSHIP NO. I ("Lessor") and CALYPTE BIOMEDICAL CORPORATION ("Lessee") and is incorporated therein by this reference. The terms used in this Schedule shall have the meanings given to them in the Lease unless otherwise defined herein. The Commitment Termination Date is hereby amended to December 31, 1995. The Initial Lease Term applicable to this Schedule and all subsequent schedules is hereby amended to 36 months. The Initial Rent Factor applicable to this Schedule and all subsequent schedules is hereby amended to 3.2402%. 1. Description and Cost of Units The units subject to this Schedule are described in Annex A hereto. The Lessor's Cost for this Schedule is: $168,923.19 2. Acceptance; Obligations Lessee confirms that on the Delivery Date hereof (i) all of the Units described in Annex A attached hereto were duly accepted by Lessee and became subject to the Lease; and (ii) Lessee became obligated to make Rental Payments to Lessor and perform certain other obligations with respect to such Units as provided in the Lease and Schedule. 3. Rent (a) Commencing on July 1, 1995 (the "Rent Commencement Date") and on the first day of each month thereafter, the rent for each Unit shall be paid by Lessee in advance by check (or if requested by Lessor, by wire transfer), to the location prescribed by Lessor in writing, in thirty-six (36) consecutive installments, each of which shall be calculated based upon a Rent Factor of 3.2935% of the Lessor's cost for this Schedule which rental is: $5,563.49 for each such installment. (b) The Lease Term for the Units subject to this Schedule is 36 months and commences on the Rent Commencement Date. The Lease Term for the Units subject to this Schedule shall expire on: July 1, 1998 111 (c) The Interim Rental Payment for the period from the Delivery Date of this Schedule through the Rent Commencement Date, which is due on the Delivery Date is: $185.45 4. Conditions. Lessor's obligations under the Lease and this Schedule are subject to the prior satisfaction of the following conditions on or before the Delivery Date of this Schedule: (a) Lessor shall have received, in form and substance satisfactory to Lessor: (i) All acceptable waivers of landlords and/or mortgagees, substantially in the form of Exhibit B to the Lease. (ii) To the extent Lessor deems it necessary, a release or other arrangement with any other lessor or lender to the Company to insure that there will be no impairment of Lessor's interest in the Units subject to this or other Schedules. (iii) A sales tax exemption or other similar certificate from Lessee with respect to any Units included in this Schedule, but not placed in service by Lessee before the Delivery Date of this Schedule. (iv) Copies of invoices, purchase orders and cancelled checks relating to all Units being placed under the Lease pursuant to a sale/leaseback on the Delivery Date of this Schedule and/or a Purchase Order and Invoice Assignment form Lessee to Lessor substantially in the form of Exhibit C to the Lease, instead of copies of cancelled checks, for all Units purchased by Lessor directly from the vendor. (v) For all sales of Units by Lessee to Lessor, a Bill of Sale substantially in the form of Exhibit D to the Lease. (vi) An executed copy of each manufacturer's service contract entered into by Lessee pursuant to Section 9 of the Lease. (vi) Two new Warrants acceptable to Lessor replacing the Warrant granted August 20, 1993. (b) Lessee shall have filed or recorded, to the satisfaction of Lessor, all instruments and documents, including, but not limited to, Financing Statements on Form UCC-1 and Releases and Termination Statements on Form UCC-2, then deemed necessary by Lessor to preserve and protect its rights hereunder, under the Uniform Commercial Code (including the termination of any after-acquired property clause of third parties with respect to any Unit) and, 112 if applicable, not less than ten days before the Delivery Date, a notice of the proposed transfer to Lessor by Lessee of title to the Units to be placed under the Lease on such Delivery Date shall have been published as and to the extent required by Section 3440 of the Civil Code of the State of California. (c) Lessor shall have received all other documents and Lessee shall have performed all other acts as Lessor shall have reasonably requested to consummate the transaction contemplated by this Schedule. (d) Except with the prior consent of Lessor which shall not be unreasonably withheld, (i) Lessor's Cost for the Units subject to this Schedule shall be equal to or exceed the Minimum Funding Amount, (ii) Lessor's cost for the Units subject to this Schedule when aggregated with Lessor Cost for all Units under all previously funded Schedules shall not exceed the Lessor's Commitment set forth on the cover page of the Lease, and (iii) the funding contemplated by this Schedule when aggregated with all previous fundings under the Lease shall not exceed the Maximum Number of Fundings. (e) Except with the prior written consent of Lessor which shall not be unreasonably withheld, the aggregate of Lessor's Cost for all Units subject to this Schedule and all Schedules previously made subject to the Lease which consist of tenant improvements, computer software, equipment manufactured specially for Lessee and/or delivery and installation costs shall not exceed 17.39% ($200,000 of Lessor's Costs if the entire Lessor's Commitment is funded) of the total Lessor's Cost of Equipment funded, provided however, that tenant improvements will not be eligible Equipment until Lessee receives FDA approval of its lead product. (f) The Delivery Date of this Schedule shall not be later than the Commitment Termination Date. (g) On the Delivery Date of this Schedule no Event of Default or event, which with the passage of time or the giving of notice or both would constitute an Event of Default, shall exist. (h) Except with the prior written consent of Lessor which shall not be unreasonably withheld, all of the Units listed on Annex A shall consist of Eligible Equipment. 5. Representation and Warranties. Lessee hereby makes the representations and warranties set forth in Section 14 of the Lease. 6. Payments. Pursuant to Section 16(h) of the Lease all payments shall be made to Lessor c/o GATX Capital Corporation, as Agent, Box 71316, Chicago, Illinois 60694 unless otherwise indicated in a writing signed by Lessor. 113 This Schedule is hereby duly executed by the parties hereto as of the date first written above. MMC/GATX PARTNERSHIP NO. I By: GATX Capital Corporation, as Agent By: [SIG] ----------------------------------- Title: VP -------------------------------- CALYPTE BIOMEDICAL CORPORATION By: [SIG] ----------------------------------- Title: President -------------------------------- LESSEE'S ADDRESS FOR NOTICES: 1440 Fourth Street Berkeley, CA 94710 ATTN: Bill Boeger Chairman & C.E.O. Annex A - Description of Units Annex B - Stipulated Loss Values Annex C - Exceptions to Representations and Warranties 114 06/30/95 CALYPTE BIOMEDICAL SCHEDULE NO. 4 - ANNEX A PAGE 1
REF.# VENDOR QTY. DESCRIPTION P.O. # INVOICE # SERIAL # UNIT COST NBV TOTAL - ------------------------------------------------------------------------------------------------------------------------------------ COMPUTER EQUIPMENT ================== 1 Miracle Computers, Inc. 1 Everex Stepnote 4DX4/100 4M/524 12741 122445 4031917A 3,481.00 w/ethernet and memory upgrade $3,481.00 - ------------------------------------------------------------------------------------------------------------------------------------ 2 Miracle Computers, Inc. 1 PowerMac 6100/66 w/ add'l memory 12764 122508 XB5150P4TE 2,908.00 $2,908.00 - ------------------------------------------------------------------------------------------------------------------------------------ 3 Miracle Computers, Inc. 1 PowerMac 6100/66 w/ add'l memory 121964 XB5124FE47Z 2,877.00 1 Sony CPD-15SF1 15" Monitor S01-7124395-H 449.00 $3,326.00 - ------------------------------------------------------------------------------------------------------------------------------------ 4 Gateway 2000 1 Gateway 2000 PC 486x66 12460 509154 3208724 1,459.00 1 Sony 15" Vivitron Monitor 5209235 340.00 $1,799.00 - ------------------------------------------------------------------------------------------------------------------------------------ 5 Hard Drive Super Source 1 DAT External Backup Unit 12440 TM10726 50125549/ 929.00 (Located in Ref. #10, line #1) TEC5B7 $929.00 - ------------------------------------------------------------------------------------------------------------------------------------ 6 Computerware 1 Duo Dock for Mac Powerbook 12208 1079365 TF3391SJIAI 495.00 (Located in Ref. #11) $495.00 - ------------------------------------------------------------------------------------------------------------------------------------ 7 The Mac Zone 2 Sony Multiscan 15" Monitors 547307500017 20005858 905.96 @ $452.98/ea 20005860 2 Sony Universal Mac to VGA Cable 30.00 @ $15./ea $935.96 - ------------------------------------------------------------------------------------------------------------------------------------ 8 HIQ Computer Systems 1 HIQMARS 486DX66 mhz w/monitor 12258 27147 BVL449B0063035 1,254.00 (Manufacturer is HIQ) $1,254.00 - ------------------------------------------------------------------------------------------------------------------------------------ 9 HIQ Computer Systems 1 8mb of ram 70 ns for 486PCI 27099 310.00 1 PCI SVGA Card 1mb 27101 100.00 1 VLB SVGA Card 1mb (returned) (68.00) 1 VLB SCSI Card 106.00 (Located in Ref. #10--Item #1) $448.00 - ------------------------------------------------------------------------------------------------------------------------------------ 10 HIQ Computer Systems 1 Green PC-486DX66 mhz w/256k PCI 12155 26722 BRL424B0011266 1,728.00 & Monitor 1 Green PC-486DX66 mhz w/256k PCI BRL424B0023134 1,728.00 & Monitor 1 Green PC-486DX66 mhz w/256k PCI BRL424B0023148 1,728.00 & Monitor 1 Green PC-486DX66 mhz w/256k PCI BRL424B0023738 1,728.00 & Monitor (Manufacturer is HIQ) $6,912.00 - ------------------------------------------------------------------------------------------------------------------------------------ 11 Macattack Computers 1 Powerbook Duo 280c 12/320 w/modem 12083 44073 FC445HCN230 3,708.00 3,411.36 $3,411.36 - ------------------------------------------------------------------------------------------------------------------------------------
115 06/30/95 CALYPTE BIOMEDICAL SCHEDULE NO. 4 - ANNEX A PAGE 2
REF.# VENDOR QTY. DESCRIPTION P.O. # INVOICE # SERIAL # UNIT COST NBV TOTAL - ------------------------------------------------------------------------------------------------------------------------------------ 12 Proctor-Willenbacher 1 Micropolic 4110 int. Hard Disk 11829 PW-10018-84 A237227 803.85 (Located in system funded by MMC/GATX on 10/4/93-s/n#F2314LAXCN2) 667.20 $667.20 - ------------------------------------------------------------------------------------------------------------------------------------ 13 Compaq Computer Corp. 1 Compaq Prolinea & Densitometer PC 11426 53905 A416HHC70850 3,139.00 4/66 with monitor & add'l memory 141685-001 2,354.25 $2,354.25 - ------------------------------------------------------------------------------------------------------------------------------------ 14 Compaq Computer Corp. 1 Compaq Contura Laptop model 120 11229 49101 7410HDJ33500 2,135.00 1,601.25 $1,601.25 - ------------------------------------------------------------------------------------------------------------------------------------ 15 Gateway 2000 1 Gateway 2000 PC 486x66 w/monitor 11090 3481382 1827692 2,065.00 1,383.55 $1,383.55 ==================================================================================================================================== SUBTOTAL COMPUTER EQUPMENT $31,905.57 ==================================================================================================================================== OFFICE FURNITURE & EQUIPMENT ---------------------------- 16 Kantors 1 Adjustable leg Table 12506 6430 164.83 1 Computer Stand 169.84 $334.67 - ------------------------------------------------------------------------------------------------------------------------------------ 17 Kantors 5 Oak 84" Bookshelves @ $269.99/ea 12327A 83033 1,349.95 $1,349.95 - ------------------------------------------------------------------------------------------------------------------------------------ 18 Kantors 2 Oak Bookcases @ $154.99/ea 12276 82725 309.98 $309.98 - ------------------------------------------------------------------------------------------------------------------------------------ 19 Kantors 5 Admiral Steno Chairs @ $238./ea 11537 36296 1,190.00 5 Admiral Task Chairs @ $338./ea 1,690.00 2,160.00 $2,160.00 - ------------------------------------------------------------------------------------------------------------------------------------ 20 Corporate Raider 1 Okidata Printer 12106 8533 312A0020796 820.00 754.40 $754.40 - ------------------------------------------------------------------------------------------------------------------------------------ 21 Kantors 1 5 Drawer Lateral File 12288 6126 678.65 $678.65 - ------------------------------------------------------------------------------------------------------------------------------------ 22 MAC 1 Deskwriter 560C Printer 301997 SG4C817142 529.00 $529.00 ==================================================================================================================================== SUBTOTAL OFFICE FURNITURE & EQUIPMENT $6,116.65 ====================================================================================================================================
116 06/30/95 CALYPTE BIOMEDICAL SCHEDULE NO. 4 - ANNEX A PAGE 3
REF.# VENDOR QTY. DESCRIPTION P.O. # INVOICE # SERIAL # UNIT COST NBV TOTAL - ------------------------------------------------------------------------------------------------------------------------------------ LAB EQUIPMENT ------------- 23 Circuit City 1 Refrigerator 24001435599 940905682 459.97 $459.97 - ------------------------------------------------------------------------------------------------------------------------------------ 24 Acme Scale 1 Floor Scale 12426 953829 1048460.1RW 8,008.32 $8,008.32 - ------------------------------------------------------------------------------------------------------------------------------------ 25 American Vacuum Tedhnology 2 Stands for Portable Mixers 12522 10602 950.00 @ $475./ea $950.00 - ------------------------------------------------------------------------------------------------------------------------------------ 26 Millipore 1 Milliflex Single Pump 12525 1260087 F4MM98269 1,301.00 $1,301.00 - ------------------------------------------------------------------------------------------------------------------------------------ 27 Sartorius Corporation 1 Sartocheck III Filter Integrity 12486 111319-01 4502019 14,025.00 Tester $14,025.00 - ------------------------------------------------------------------------------------------------------------------------------------ 29 Advanced Handling Systems 1 Cage for -80c Freezer 12269 3836 964.00 $964.00 - ------------------------------------------------------------------------------------------------------------------------------------ 30 Sullair Pacific 1 Air Compressor 12304 908736 E03-C00595 10,751.00 $10,751.00 - ------------------------------------------------------------------------------------------------------------------------------------ 31 VWR Scientific 2 PH meters w/electrodes 12469 27158330 123124 3,389.64 @ $1694.82/ea 167879 $3,389.64 - ------------------------------------------------------------------------------------------------------------------------------------ 32 Pelco Sales 1 Double Refrigerator 12495 3-021 1323231 1,970.00 $1,970.00 - ------------------------------------------------------------------------------------------------------------------------------------
117 06/30/95 CALYPTE BIOMEDICAL SCHEDULE NO. 4 - ANNEX A PAGE 4
REF.# VENDOR QTY. DESCRIPTION P.O. # INVOICE # SERIAL # UNIT COST NBV TOTAL - ------------------------------------------------------------------------------------------------------------------------------------ 33 Scientific Equipment Exchange 1 Beckman Centrifuge 12485 2619 3657 9,995.00 $9,995.00 - ------------------------------------------------------------------------------------------------------------------------------------ 34 Baxter Scientific 3 Free Standing Gowning Benches 11965 4627443 1,335.00 @ $445./ea $1,335.00 - ------------------------------------------------------------------------------------------------------------------------------------ 35 Advanced Handling Systems 6 Transport Cars w/ casters 12104 3576 4,490.00 @ $748.33/ea $4,490.00 - ------------------------------------------------------------------------------------------------------------------------------------ 36 Baxter Scientific 1 Urine Chem-Analyzer 12138 3582283 2,115.00 $2,115.00 - ------------------------------------------------------------------------------------------------------------------------------------ 37 Biotest Diagnostics 1 Centrifugal Air Sampler 12069 106168 11648 1,775.00 1,663.00 $1,663.00 - ------------------------------------------------------------------------------------------------------------------------------------ 38 Harris Manufacturing 1 Chart Recorder for -20C Freezer 12073 118232 659.00 606.28 $606.28 - ------------------------------------------------------------------------------------------------------------------------------------ 39 Silicon Valley Shelving 1 Locker for Change Room 11980 50598 1,397.00 1,285.24 $1,285.24 - ------------------------------------------------------------------------------------------------------------------------------------ 40 VWR Scientific 1 Small Incubator 12113 22881680 35823-204 1,360.00 1,251.20 $1,251.20 - ------------------------------------------------------------------------------------------------------------------------------------ 41 VWR Scientific 4 Temp/Humidity Chart Recorder 12035 21870800 4322445-449 1,962.00 @ $490.50/ea 1,805.04 $1,805.04 - ------------------------------------------------------------------------------------------------------------------------------------ 42 VWR Scientific 1 Bioprocess Kettles 12053 22634040 2674 5,882.00 0150 5,426.59 $5,426.59 - ------------------------------------------------------------------------------------------------------------------------------------ 43 Altair/Linde Gases 2 Nitrogen Regulators @ $473.25/ea 11982 768356 946.50 870.78 $870.78 - ------------------------------------------------------------------------------------------------------------------------------------ 44 Baxter Scientific 5 Two Shelf Plastic Carts 11965 1393722 700.00 @ $140./ea 1 Stem Caster Cart 249.75 873.77 $873.77 - ------------------------------------------------------------------------------------------------------------------------------------ 45 Baxter Scientific 1 Biocentrifuge Rotor 12030 1439695 243.75 224.25 $224.25 - ------------------------------------------------------------------------------------------------------------------------------------ 46 Baxter Scientific 1 Biocentrifuge 12030 1524548 75003637 1,175.00 1,081.00 $1,081.00 - ------------------------------------------------------------------------------------------------------------------------------------ 47 Baxter Scientific 5 Two Shelf Plastic Carts 11965 2288046 700.00 @ $140./ea 2 Stem Caster Cart @ $330./ea 660.00 1,251.20 $1,251.20 - ------------------------------------------------------------------------------------------------------------------------------------ 48 Baxter Scientific 10 Cleanroom Chairs @ $310./ea 11993 2288045 3,100.00 2,852.00 $2,852.00 - ------------------------------------------------------------------------------------------------------------------------------------
118 06/30/95 CALYPTE BIOMEDICAL - SCHEDULE NO. 4 - ANNEX A PAGE 5
REF.# VENDOR QTY. DESCRIPTION P.O.# INVOICE# SERIAL # UNIT COST NBV TOTAL - ----------------------------------------------------------------------------------------------------------------------------------- 49 Harris Manufacturing 1 -20C Freezer 11959 113556 Y03D-188874-YD 3,365.40 3,096.17 $3,096.17 - ----------------------------------------------------------------------------------------------------------------------------------- 51 The Baker Company 1 Baker 4' Chemgard Fume Hood 11958 72871 57075 5,618.00 1 4' Base Cabinet 51928 1,130.00 6,208.16 $6,208.16 - ----------------------------------------------------------------------------------------------------------------------------------- 52 Amicon, Inc. 1 Stirred Cell 11574 386703 785.00 772.20 $772.20 - ----------------------------------------------------------------------------------------------------------------------------------- 53 Bio-Tek Instruments 1 Combo Pressure/Vacuum 11613 135103 97846 1,445.00 System 1,329.40 $1,329.40 - ----------------------------------------------------------------------------------------------------------------------------------- 54 Nuaire, Inc. 1 Horizontal Flow Clean Cabinet 11820 52407 60215ABV 3,512.83 3,231.80 $3,231.80 - ----------------------------------------------------------------------------------------------------------------------------------- 55 Bio-Rad Laboratories 1 Econo System Chromatography 11612 272714 Mon=700BR05945 7,240.00 **SEE COPY OF QUOTE #94-1990 701BR04787 6,009.20 $6,009.20 - ----------------------------------------------------------------------------------------------------------------------------------- 56 Bio-Rad Laboratories 1 Demsitometer 11580 572510 T41405H 12,500.00 **SEE COPY OF QUOTE #94-0964 10,375.00 $10,375.00 - ----------------------------------------------------------------------------------------------------------------------------------- 57 Met One, Inc. 1 Particle Counter 11647 27965 95188012 4,600.00 95188012A 3,818.00 $3,818.00 - ----------------------------------------------------------------------------------------------------------------------------------- 58 Norlab Manufacturing 1 Controlair 4' Fume Hood & 11592 2127 3S147A 2,562.00 Accessories 2,126.46 $2,126.46 - ----------------------------------------------------------------------------------------------------------------------------------- 59 Dynatech Laboratories 1 Pump 11161 47877 2,400.00 1,608.00 $1,608.00 - ----------------------------------------------------------------------------------------------------------------------------------- 61 National Instrument 1 Fil-A-Matic Filling Machine 10717 153510 19854 14,579.00 Co. 59523-2 9,767.93 $9,767.93 - ----------------------------------------------------------------------------------------------------------------------------------- 62 Advanced Handling 1 Black Plastic Pallet 12220 3644 175.00 Systems 1 3 Shelf Metro Cart 275.00 1 2 Shelf Metro Cart 145.00 $595.00 - ----------------------------------------------------------------------------------------------------------------------------------- 63 Advanced Handling 1 18x36x69"h Metro Max Cart 12341 3831 250.00 Systems 3 18x36x69" Metro Max Carts @$325./ea. 975.00 $1,225.00 - ----------------------------------------------------------------------------------------------------------------------------------- 64 Advanced Handling 1 Lot Price for 25 Metro Systems Shelves & 20 Posts 12104 3592 2,004.75 1,844.37 $1,844.37 =================================================================================================================================== SUB TOTAL LAB EQUIPMENT $130,900.97 ===================================================================================================================================
119 06/30/95 CALYPTE BIOMEDICAL - SCHEDULE NO. 4 - ANNEX A PAGE 6
REF.# VENDOR QTY. DESCRIPTION P.O.# INVOICE# SERIAL # UNIT COST NBV TOTAL - ----------------------------------------------------------------------------------------------------------------------------------- TOTAL - SCHEDULE NO. 4 $168,923.19 ====================== ===========
120 ANNEX B CALYPTE BIOMEDICAL Schedule No. 4 Stipulated Loss Values (SLV) as a Percentage of Lessor's Cost
Rental Rental Payment Date *SLV Payment Date *SLV -------------------- -------------------- on or 1 01-Jul-95 100.00% 23 01-May-97 61.59% before 2 01-Aug-95 99.59% 24 01-Jun-97 59.24% 3 01-Sep-95 98.37% 25 01-Jul-97 56.86% 4 01-Oct-95 97.00% 26 01-Aug-97 54.44% 5 01-Nov-95 96.57% 27 01-Sep-97 51.97% 6 01-Dec-95 95.28% 28 01-Oct-97 49.47% 7 01-Jan-96 93.63% 29 01-Nov-97 46.94% 8 01-Feb-96 91.93% 30 01-Dec-97 44.34% 9 01-Mar-96 90.19% 31 01-Jan-98 41.72% 10 01-Apr-90 88.41% 32 01-Feb-98 39.06% 11 01-May-96 86.59% 33 01-Mar-98 36.34% 12 01-Jun-96 84.74% 34 01-Apr-98 33.57% 13 01-Jul-96 82.84% 35 01-May-98 30.75% 14 01-Aug-96 80.91% 36 01-Jun-98 27.90% 15 01-Sep-96 78.93% 37 01-Jul-98 25.00% 16 01-Oct-96 76.92% Thereafter 25.00% 17 01-Nov-96 74.86% 18 01-Dec-96 72.75% 19 01-Jan-97 70.61% 20 01-Feb-97 68.42% 21 01-Mar-97 66.19% 22 01-Apr-97 63.90%
* Each Stipulated Loan Value percentage assumes payment of all Scheduled Payments due on or before the indicated Payment Date. 121 Calypte Biomedical, Inc. Commitment Deposit/Expenses - ------------------------ --------------------------- Instructions: This is a sample taken from the Neocrin transaction. Just fill in the blanks as you see fit. This is also a good worksheet to send to the customer when they ask how their Deposit was used. CALYPTE BIOMEDICAL INC. ----------------------- Section E of the Proposal Letter: "A Commitment Fee of $15,000 is required by - ------------------------------------------------------------------------------- the Lessor to initiate its due diligence review process. This deposit is - ------------------------------------------------------------------------------- refundable if the transaction is not approved by the Lessor, which approval is - ------------------------------------------------------------------------------- in the sole discretion of the Lessor. Should the transaction be approved, any - ------------------------------------------------------------------------------- portion of the fee not utilized to pay expenses, will be applied on a pro rata - ------------------------------------------------------------------------------- basis to the first rental payable on each Schedule. If, subsequent to the - ------------------------------------------------------------------------------- Lessor's approval and mutually acceptable lease documents, the Lessee does not - ------------------------------------------------------------------------------- proceed with this transaction, fails to execute final documents with Lessor or - ------------------------------------------------------------------------------- does not utilize the lease line, the fee shall be retained by the Lessor." - ------------------------------------------------------------------------------- COMMITMENT DEPOSIT 25,000.00 Phoenix Leasing Commitment Deposit Portion: (7,500.00) MMC/GATX Partnership No. 1 Commitment Deposit Retained: 17,500.00
EXPENSES Legal Attorney Fees 9,467.50 ----- Clerical overtime 0.00 Telephone 4.05 UCC Work 213.00 Copying Expense 380.70 Postage 0.00 Express Delivery 418.11 Outside Services 91.15 Facsimile 144.00 --------- 10,718.51 Travel 0.00 ------ ---- Total Expenses 10,718.51 (10,718.51) -------------- ---------- Legal Expense Cap: (10,000.00) REMAINING DEPOSIT $7,500.00 ---------
--------------------------------------------------------------- As a % of $7,500.00 Lessor's Apply Against 1,150,000.00 Commitment Commitment Remtal ------------------------------- ---------- ------------- First Draw $38,012.90 3.31% (248.25) Second Draw $148,871.25 12.95% (971.25) Third Draw $38,297.00 3.33% (249.75) Fourth Draw $168,923.19 14.69% (1,101.75) Fifth Draw $0.00 0.00% 0.00 ----- ----- ---- $394,104.34 34.28% (2,571.00) Remaining Deposit 4,929.00 ======== --------------------------------------------------------------- CREDITS TAKEN 1 258.18 All 3 credits were credited Please Note: When the credits shown here were taken 2 1,010.10 to Invoice #17961. all legal expenses were not allocated. Therefore the 3 259.74 overpaid amounts totalling $58.77 will be subtracted 4 1,042.98 Invoice #1168M from the pro-rata credit from the commitment deposit -------- on Schedule 4. (i.e. $1,101.75 - $58.77 = $1,042.98) 2,571.00 The box above reflects the revised allocation of the commitment deposit.
EX-11.1 12 STATEMENT OF COMPUTATION OF NET INCOME PER SHARE 1 EXHIBIT 11.1 CALYPTE BIOMEDICAL CORPORATION COMPUTATION OF LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ---------------------------------------- ------------------------- 1993 1994 1995 1995 1996 ----------- ----------- ------------ ----------- ----------- Net loss attributable to common stockholders................. $(6,301,272) $(5,586,982) $(10,411,385) $(1,428,260) $(2,846,433) =========== =========== ============ =========== =========== Weighted average shares used to compute net loss per share attributable to common stockholders:................ Convertible preferred stock................... 3,492,026 4,460,402 5,705,714 5,705,234 5,705,234 Common stock.............. 514,939 551,365 569,349 569,349 569,378 Number of common shares issued, warrants granted, warrants exercised and stock options granted in accordance with Staff Accounting Bulletin No. 83........................... 1,175,629 1,175,629 1,175,629 1,175,629 1,175,629 ----------- ----------- ------------ ----------- ----------- Total................ 5,182,594 6,187,396 7,450,692 7,450,212 7,450,241 =========== =========== ============ =========== =========== Net loss per share attributable to common stockholders....... $ (1.22) $ (0.90) $ (1.40) $ (0.19) $ (0.38) =========== =========== ============ =========== ===========
The calculation includes the shares of convertible preferred stock (Series B, Series C, Series D and Series E) as if they had converted to common stock on their respective original dates of issuance, because such shares automatically convert to common stock upon the closing of the public offering of the Company's common stock. EX-21.1 13 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21.1 LIST OF SUBSIDIARIES Calypte, Inc., a Delaware corporation Calypte Biomedical Corporation, a Delaware corporation Pepgen Corporation, a California corporation (49% owned) EX-23.1 14 CONSENT OF KPMG PEAT MARWICK, INDEPENDENT AUDITORS 1 EXHIBIT 23.1 We consent to the use of our reports included herein and to the reference to our firm under the headings "Selected Consolidated Financial Data" and "Experts" in the Prospectus. San Francisco, California /s/ KPMG Peat Marwick LLP June 24, 1996 -----END PRIVACY-ENHANCED MESSAGE-----