Exhibit 10.123
 
Dated: January 14, 2003
 
EXHIBIT A
 
NEITHER THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS
CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS, AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY.
 
No. 1
  
$1,000,000

 
CALYPTE BIOMEDICAL CORPORATION
10% UNSECURED CONVERTIBLE DEBENTURE
DUE JANUARY 14, 2004
 
THIS DEBENTURE is issued by Calypte Biomedical Corporation., a Delaware
Corporation, with its principal place of business at 1265 Harbor Bay Parkway,
Alameda, CA 94502 (the “Company”), designated as its 10% Unsecured Convertible
Debenture, due January 14, 2004, in the aggregate principal amount of One
Million Dollars ($1,000,000) (the “Debenture”).
 
FOR VALUE RECEIVED, the Company promises to pay to MERCATOR FOCUS FUND, L.P. or
its registered assigns (the “Holder”), the principal sum of $1,000,000, on
January 14, 2004 or such earlier date as the Debenture is required or permitted
to be repaid as provided hereunder (the “Maturity Date”) and to pay interest to
the Holder on the aggregate unconverted and then outstanding principal amount of
this Debenture at the rate of 10% per annum, with interest accruing commencing
on January 14, 2003 and payable on the first business day of each month while
the Debenture remains outstanding (each an “Interest Payment Date’”). Subject to
the terms and conditions herein, the Holder may elect to receive interest
hereunder in shares of Common Stock or cash. If interest is paid by the Company
in shares of its Common Stock, then the number of shares of Common Stock
issuable on account of such interest shall equal the cash amount of such
interest on such Interest Payment Date divided by the Conversion Price (as
defined below) on such date. Interest shall be calculated on the basis on a
360-day year and shall accrue daily commencing on the Original Issue Date (as
defined in Section 5) until payment in full of the principal sum, together with
all accrued and unpaid interest and other amounts, which may become due
hereunder, has been made. Interest hereunder will be paid to the Person (as
defined in Section 5) in whose name this Debenture is registered on the records
of the Company regarding registration and transfers of Debentures (the
“Debenture Register”). All overdue

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accrued and unpaid interest to be paid in cash hereunder shall entail a late fee
at the rate of 18% per annum (“Late Fee”) (or such lower maximum amount of
interest permitted to be charged under applicable law) which will accrue daily,
from the date such interest is due hereunder through and including the date of
payment, payable in cash or, at the option of the Holder, in shares of Common
Stock. If such Late Fee is paid by the Company in shares of its Common Stock,
then the number of shares of Common Stock issuable on account of such Late Fee
shall equal the cash amount of such Late Fee on such Late Fee payment date
divided by the Conversion Price on such date.
 
This Debenture is subject to the following additional provisions:
 
Section 1. This Debenture is exchangeable for an equal aggregate principal
amount of Debentures of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such
registration of transfer or exchange.
 
Section 2. This Debenture has been issued subject to certain investment
representations of the original Holder set forth in the Purchase Agreement (as
defined in Section 5) and may be transferred or exchanged only in compliance
with the Purchase Agreement. Prior to due presentment to the Company for
transfer of this Debenture, the Company and any agent of the Company may treat
the Person (as defined in Section 5) in whose name this Debenture is duly
registered on the Debenture Register as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes, whether or not
this Debenture is overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
 
Section 3. Events of Default.
 
(a) An “Event of Default”, wherever used herein, means any one of the following
events (whatever the reason and whether it shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental
body):
 
(i) any default in the payment of the principal of, interest (including any Late
Fees) on or liquidated damages in respect of the Debenture, free of any claim of
subordination, as and when the same shall become due and payable (whether on a
Conversion Date or the Maturity Date or by acceleration or otherwise);
 
(ii) failure to file the Underlying Shares Registration Statement within 60 Days
with the Commission;
 
(iii) the Company shall fail to observe or perform any other covenant, agreement
or warranty contained in, or otherwise commit any breach of any of the
Transaction Documents (as defined in Section 5), and such failure or breach
shall not have been remedied within five days after the date on which notice of
such failure or breach shall have been given;
 
(iv) the Company or any of its subsidiaries shall commence, or there shall be
commenced against the Company or any such subsidiary a case under any applicable
bankruptcy or insolvency laws as now or hereafter in effect or any successor
thereto, or the Company commences any other proceeding under any reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or
liquidation or similar law of any jurisdiction whether

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now or hereafter in effect relating to the Company or any subsidiary thereof or
there is commenced against the Company or any subsidiary thereof any such
bankruptcy, insolvency or other proceeding which remains undismissed for a
period of 61 days; or the Company or any subsidiary thereof is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or the Company or any subsidiary thereof suffers
any appointment of any custodian or the like for it or any substantial part of
its property which continues undischarged or unstayed for a period of 61 days;
or the Company or any subsidiary thereof makes a general assignment for the
benefit of creditors; or the Company shall fail to pay, or shall state that it
is unable to pay, or shall be unable to pay, its debts generally as they become
due; or the Company or any subsidiary thereof shall call a meeting of its
creditors with a view to arranging a composition, adjustment or restructuring of
its debts; or the Company or any subsidiary thereof shall by any act or failure
to act expressly indicate its consent to, approval of or acquiescence in any of
the foregoing; or any corporate or other action is taken by the Company or any
subsidiary thereof for the purpose of effecting any of the foregoing;
 
(v) the Company shall default in any of its obligations under any other
debenture or any mortgage, credit agreement or other facility, (which default is
not waived or otherwise acquiesced to in writing within 30 of written notice of
such default), indenture agreement, factoring agreement or other instrument
under which there may be issued, or by which there may be secured or evidenced
any indebtedness for borrowed money or money due under any long term leasing or
factoring arrangement of the Company in an amount exceeding $100,000, whether
such indebtedness now exists or shall hereafter be created and such default
shall result in such indebtedness becoming or being declared due and payable
prior to the date on which it would otherwise become due and payable;
 
(vi) the Common Stock shall not be quoted for trading or listed for trading on
the OTC Bulletin Board (“OTC’), Nasdaq SmallCap Market, New York Stock Exchange,
American Stock Exchange or the Nasdaq National Market (each, a “Subsequent
Market”) and shall not again be quoted or listed for trading thereon within five
Trading Days;
 
(vii) the Company shall be a party to any Change of Control Transaction (as
defined in Section 5), shall agree to sell or dispose all or in excess of 33% of
its assets in one or more transactions (whether or not such sale would
constitute a Change of Control Transaction), or shall redeem or repurchase more
than a de minimis number of shares of Common Stock or other equity securities of
the Company (other than redemptions of Underlying Shares (as defined in Section
5));
 
(viii) an Underlying Shares Registration Statement (as defined in Section 5)
shall not have been declared effective by the Commission (as defined in Section
5) on or prior to the 120th day after the Original Issue Date. The Company shall
use all available resources to have the Registration Statement declared
effective by the SEC on or prior to the 120th day after the Original Issue Date;
 
(ix) if, during the Effectiveness Period (as defined in the Registration Rights
Agreement (as defined in Section 5)), the effectiveness of the Underlying Shares
Registration Statement lapses for any reason or the Holder shall not be
permitted to resell Registrable Securities (as defined in the Registration
Rights Agreement) under the Underlying Shares Registration Statement, in either
case, for more than five consecutive Trading Days or an aggregate of eight
Trading Days (which need not be consecutive Trading Days);
 
(x) an Event (as defined in the Registration Rights Agreement) shall not have
been cured to the satisfaction of the Holder prior to the expiration of thirty
days from the Event Date (as

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defined in the Registration Rights Agreement) relating thereto (other than an
Event resulting from a failure of an Underlying Shares Registration Statement to
be declared effective by the Commission on or, prior to the 120th day after the
Original Issue Date, which shall be covered by Section 3(a)(vii));
 
(xi) the Company shall fail for any reason to deliver common stock certificates
to a Holder prior to the third Trading Day after a Conversion Date pursuant to
and in accordance with Section 4(b) or the Company shall provide notice to the
Holder, including by way of public announcement, at any time, of its intention
not to comply with requests for conversions of any Debentures in accordance with
the terms hereof; or
 
(xii) the Company shall fail for any reason to deliver the payment in cash
pursuant to a Buy-In (as defined herein) within three days after notice is
claimed delivered hereunder.
 
(b) During the time that any portion of this Debenture is outstanding, if any
Event of Default occurs and is continuing, the full principal amount of this
Debenture, together with interest and other amounts owing in respect thereof, to
the date of acceleration shall become at the Holder’s election, immediately due
and payable in cash, provided however, that if the Company informs the Holder
that it will be unable to pay the amounts due in cash, the Holder may request
payment of such amounts in stock. If an Event of Default occurs and remains
uncured, the Company shall issue to Holder the higher of (i) 5,000 shares of
Company’s common stock per day or (ii) $300.00 a day, from the time of Default
until Default is corrected and the lower of 18% per annum or the highest rate
permitted by law. The corresponding Registration Statement shall be amended
immediately by Company to include the Default shares. The Holder need not
provide and the Company hereby waives any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and without expiration of any
grace period enforce any and all of its rights and remedies hereunder and all
other remedies available to it under applicable law. Such declaration may be
rescinded and annulled by Holder at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.
 
Section 4. Conversion.
 
(a) (i) Conversion at Option of Holder.
 
(A) This Debenture shall be convertible into shares of Common Stock at the
option of the Holder, in whole or in part at any time and from time to time,
after the Original Issue Date (subject to the limitations on conversion set
forth in Section 4(a)(ii) hereof). The number of shares of Common Stock issuable
upon a conversion hereunder equals the sum of (i) the quotient obtained by
dividing (x) the outstanding principal amount of this Debenture to be converted
by (y) the Conversion Price (see (c)(i) of this Section 4), and (ii) the amount
equal to (1) the product of (x) the outstanding principal amount of this
Debenture to be converted and (y) the product of (1) the quotient obtained by
dividing .10 by 360 and (2) the number of days for which such principal amount
was outstanding, divided by (II) the Conversion Price on the Conversion Date,
provided, that if the Holder shall have elected to receive the interest due on a
Conversion Date in cash, subsection (ii) shall not be used in the calculation of
the number of shares of Common Stock issuable upon a conversion hereunder.
 
(B) Notwithstanding anything to the contrary contained herein, if on any
Conversion Date: (1) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes, or held as treasury stock,
is insufficient to pay principal and interest hereunder in

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shares of Common Stock; (2) the Common Stock is not listed or quoted for trading
on the OTC or on a Subsequent Market; (3) the Company has failed to timely
satisfy its conversion; or (4) the issuance of such shares of Common Stock would
result in a violation of Section 4(a)(ii), then, at the option of the Holder,
the Company, in lieu of delivering shares of Common Stock pursuant to Section
4(a)(i), shall deliver, within three Trading Days of each applicable Conversion
Date, an amount in cash equal to the product of the outstanding principal amount
of the Debentures to be converted plus any interest due therein divided by the
Conversion Price and multiplied by the highest closing price of the stock from
date of the conversion notice till the date that such cash payment is made.
 
(C) The Holder shall effect conversions by simultaneously delivering to the
Company a completed notice in the form attached hereto as Exhibit A (a
“Conversion Notice”), including a completed Conversion Schedule in the form of
Schedule I to the Conversion Notice (on each Conversion Date, the “Conversion
Schedule”). The Conversion Schedule shall set forth the remaining principal
amount of this Debenture and all accrued and unpaid interest thereon subsequent
to the conversion at issue. The date on which a Conversion Notice is delivered
is the “Conversion Date.” Unless the Holder is converting the entire principal
amount outstanding under this Debenture, the Holder is not be required to
physically surrender this Debenture to the Company in order to effect
conversions. Subject to Section 4(b), each Conversion Notice, once given, shall
be irrevocable. Conversions hereunder shall have the effect of lowering the
outstanding principal amount of this Debenture plus all accrued and unpaid
interest thereon in an amount equal to the applicable conversion, which shall be
evidenced by entries set forth in the Conversion Schedule. The Holder and the
Company shall maintain records showing the principal amount converted and the
date of such conversions. In the event of any dispute or discrepancy, the
records of the Holder shall be controlling and determinative in the absence of
manifest error.
 
(ii) Certain Conversion Restrictions.
 
(A) A Holder may not convert the Debenture or receive shares of Common Stock as
payment of interest hereunder to the extent such conversion or receipt of such
interest payment would result in the Holder, together with any affiliate
thereof, beneficially owning (as determined in accordance with Section 13(d) of
the Exchange Act and the rules promulgated thereunder) in excess of 9.999% of
the then issued and outstanding shares of Common Stock, including shares
issuable upon conversion of, and payment of interest on, the Debenture held by
such Holder after application of this Section. Since the Holder will not be
obligated to report to the Company the number of shares of Common Stock it may
hold at the time of a conversion hereunder, unless the conversion at issue would
result in the issuance of shares of Common Stock in excess of 9.999% of the then
outstanding shares of Common Stock without regard to any other shares which may
be beneficially owned by the Holder or an affiliate thereof, the Holder shall
have the authority and obligation to determine whether the restriction contained
in this Section will limit any particular conversion hereunder and to the extent
that the Holder determines that the limitation contained in this Section
applies, the determination of which portion of the principal amount of the
Debenture is convertible shall be the responsibility and obligation of the
Holder. If the Holder has delivered a Conversion Notice for a principal amount
of the Debenture that, without regard to any other shares that the Holder or its
affiliates may beneficially own, would result in the issuance in excess of the
permitted amount hereunder, the Company shall notify the Holder of this fact and
shall honor the conversion for the maximum principal amount permitted to be
converted on such Conversion Date in accordance with the periods described in
Section 4(b) and, at the option of the Holder, either retain any principal

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amount tendered for conversion in excess of the permitted amount hereunder for
future conversions or return such excess principal amount to the Holder. The
provisions of this Section which limit issuance of Common Stock to Holder not
exceeding 9.999% may only be waived by the mutual written consent of Company and
Holder (but only as to Holder itself and not to any other Holder.)
 
(b) (i) Nothing herein shall limit a Holder’s right to pursue actual damages or
declare an Event of Default pursuant to Section 3 herein for the Company’s
failure to deliver certificates representing shares of Common Stock upon
conversion within the period specified herein and such Holder shall have the
right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief.
The exercise of any such rights shall not prohibit the Holder from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.
Further, if the Company shall not have delivered any cash due in respect of
conversion of the Debenture or as payment of interest thereon by the third
Trading Day after the Conversion Date, the Holder may, by notice to the Company,
require the Company to issue shares of Common Stock pursuant to Section 4(c),
except that for such purpose the Conversion Price applicable thereto shall be
the lesser of the Conversion Price on the Conversion Date and the Conversion
Price on the date of such Holder demand. Any such shares will be subject to the
provisions of this Section.
 
(ii) In addition to any other rights available to the Holder, if the Company
fails to deliver to the Holder such certificate or certificates pursuant to
Section 4(b)(i) by the third Trading Day after the Conversion Date, and if after
such third Trading Day the Holder purchases (in an open market transaction or
otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of
the Underlying Shares which the Holder anticipated receiving upon such
conversion (a “Buy-In”), then the Company shall (A) pay in cash to the Holder
(in addition to any remedies available to or elected by the Holder) the amount
by which (x) the Holder’s total purchase price (including brokerage commissions,
if any) for the Common Stock so purchased exceeds (y) the product of (1) the
aggregate number of shares of Common Stock that such Holder anticipated
receiving from the conversion at issue multiplied by (2) the market price of the
Common Stock at the time of the sale giving rise to such purchase obligation and
(B) at the option of the Holder, either reissue a Debenture in the principal
amount equal to the principal amount of the attempted conversion or deliver to
the Holder the number of shares of Common Stock that would have been issued had
the Company timely complied with its delivery requirements under Section
4(b)(i). For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of Debentures with respect to which the market price of the
Underlying Shares on the date of conversion was a total of $10,000 under clause
(A) of the immediately preceding sentence, the Company shall be required to pay
the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In.
Notwithstanding anything contained herein to the contrary, if a Holder requires
the Company to make payment in respect of a Buy-In for the failure to timely
deliver certificates hereunder and the Company timely pays in full such payment,
the Company shall not be required to pay such Holder liquidated damages under
Section 4(b)(ii) in respect of the certificates resulting in such Buy-In.
 
(c) (i) The conversion price (the “Conversion Price”) in effect on any
Conversion Date shall be 80% of the average of the lowest three inter-day
trading prices (which need not occur on consecutive Trading Days) during the 20
Trading Days immediately preceding the

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applicable Conversion Date (which may include Trading Days prior to the Original
Issue Date), provided, that such 20 Trading Day period shall be extended for the
number of Trading Days during such period in which (A) trading in the Common
Stock is suspended by, or not traded on, the OTC or a Subsequent Market on which
the Common Stock is then listed, or (B) after the date, the Underlying Shares
Registration Statement is declared effective by the Commission, the Prospectus
included in the Underlying Shares Registration Statement may not be used by the
Holder for the resale of Underlying Shares. Furthermore, the Conversion Price in
no event shall be higher than $.10 (“the Ceiling).
 
(ii) If the Company, at any time while the Debenture is outstanding shall (a)
pay a stock dividend or otherwise make a distribution or distributions on shares
of its Common Stock or any other equity or equity equivalent securities payable
in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into
a larger number of shares, (c) combine (including by way of reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (d) issue
by reclassification of shares of the Common Stock any shares of capital stock of
the Company, then the Initial Conversion Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock outstanding after such
event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
 
(iii) If the Company, at any time while the Debenture is outstanding, shall
issue rights, options or warrants to all holders of Common Stock (and not to the
Holder) entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the Per Share Market Value at the record date
mentioned below, then the Conversion Price shall be multiplied by a fraction, of
which the denominator shall be the number of shares of the Common Stock
(excluding treasury shares, if any) outstanding on the date of issuance of such
rights or warrants (plus the number of additional shares of Common Stock offered
for subscription or purchase), and of which the numerator shall be the number of
shares of the Common Stock (excluding treasury shares, if any) outstanding on
the date of issuance of such rights or warrants, plus the number of shares which
the aggregate offering price of the total number of shares so offered would
purchase at such Per Share Market Value. Such adjustment shall be made whenever
such rights or warrants are issued, and shall become effective immediately after
the record date for the determination of stockholders entitled to receive such
rights, options or warrants. However, upon the expiration of any such night,
option or warrant to purchase shares of the Common Stock the issuance of which
resulted in an adjustment in the Conversion Price pursuant to this Section, if
any such right, option or warrant shall expire and shall not have been
exercised, the Conversion Price shall immediately upon such expiration be
recomputed and effective immediately upon such expiration be increased to the
price which it would have been (but reflecting any other adjustments in the
Conversion Price made pursuant to the provisions of this Section after the
issuance of such rights or warrants) had the adjustment of the Conversion Price
made upon the issuance of such rights, options or warrants been made on the
basis of offering for subscription or purchase only that number of shares of the
Common Stock actually purchased upon the exercise of such rights, options or
warrants actually exercised.
 
(iv) If the Company or any subsidiary thereof, as applicable with respect to
Common Stock Equivalents (as defined below), at any time while the Debenture is
outstanding, shall issue shares

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of Common Stock or rights, warrants, options or other securities or debt that
are convertible into or exchangeable for shares of Common Stock (“Common Stock
Equivalents”) entitling any Person to acquire shares of Common Stock, at a price
per share less than the Conversion Price (if the holder of the Common Stock or
Common Stock Equivalent so issued shall at any time, whether by operation of
purchase price adjustments, reset provisions, floating conversion, exercise or
exchange prices or otherwise, or due to warrants, options or rights per share
which is issued in connection with such issuance, be entitled to receive shares
of Common Stock at a price per share which is less than the Conversion Price,
such issuance shall be deemed to have occurred for less than the Conversion
Price), then, at the sole option of the Holder, the Conversion Price shall be
adjusted to mirror the conversion, exchange or purchase price for such Common
Stock or Common Stock Equivalents (including any reset provisions thereof) at
issue. Such adjustment shall be made whenever such Common Stock or Common Stock
Equivalents are issued. The Company shall notify the Holder and the Escrow Agent
in writing, no later than the business day following the issuance of any Common
Stock or Common Stock Equivalent subject to this section, indicating therein the
applicable issuance price, or of applicable reset price, exchange price,
conversion price and other pricing terms. No adjustment under this Section shall
be made as a result of issuances and exercises of options to purchase shares of
Common Stock issued for compensatory purposes pursuant to any of the Company’s
stock option or stock purchase plans.
 
(v) If the Company, at any time while the Debenture is outstanding, shall
distribute to all holders of Common Stock (and not to the Holder) evidences of
its indebtedness or assets or rights or warrants to subscribe for or purchase
any security, then in each such case the Conversion Price at which the Debenture
shall thereafter be convertible shall be determined by multiplying the
Conversion Price in effect immediately prior to the record date fixed for
determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Per Share Market Value determined
as of the record date mentioned above, and of which the numerator shall be such
Per Share Market Value on such record date less the then fair market value at
such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors in good faith. In either case the
adjustments shall be described in a statement provided to the Holder of the
portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment
shall be made whenever any such distribution is made and shall become effective
immediately after the record date mentioned above.
 
(vi) In case of any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is converted into other securities,
cash or property, the Holder shall have the right thereafter to, at its option,
(A) convert the then outstanding principal amount, together with all accrued but
unpaid interest and any other amounts then owing hereunder in respect of this
Debenture only into the shares of stock and other securities, cash and property
receivable upon or deemed to be held by holders of the Common Stock following
such reclassification or share exchange, and the Holder of the Debenture shall
be entitled upon such event to receive such amount of securities, cash or
property as the shares of the Common Stock of the Company into which the then
outstanding principal amount, together with all accrued but unpaid interest and
any other amounts then owing hereunder in respect of this Debenture could have
been converted immediately prior to such reclassification or share exchange
would have been entitled, or (B) require the Company to prepay the outstanding
principal amount of the

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Debenture, plus all interest and other amounts due and payable thereon, at a
price determined in accordance with Section 3(b). The entire prepayment price
shall be paid in cash. This provision shall similarly apply to successive
reclassifications or share exchanges.
 
(vii) The Company shall maintain a share reserve of not less than 200% of the
shares of Common Stock issuable upon conversion of the Debenture; and within
three Business Days following the receipt by the Company of a Holder’s notice
that such minimum number of Underlying Shares is not so reserved, the Company
shall promptly reserve a sufficient number of shares of Common Stock to comply
with such requirement.
 
(viii) All calculations under this Section 4 shall be made to the nearest cent
or the nearest 1/100th of a share, as the case may be. No adjustments in either
the Conversion Price or the Initial Conversion Price shall be required if such
adjustment is less than $0.01, provided, however, that any adjustments which by
reason of this Section are not required to be made shall be carried forward and
taken into account in any subsequent adjustment.
 
(ix) Whenever either the Initial Conversion Price or the Conversion Price is
adjusted pursuant to any of Section 4(c)(ii) - (v), the Company shall promptly
mail to the Holder a notice setting forth the Initial Conversion Price or
Conversion Price (as applicable) after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.
 
(x) If (A) the Company shall declare a dividend (or any other distribution) on
the Common Stock; (B) the Company shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock; (C) the Company shall authorize
the granting to all holders of the Common Stock rights or warrants to subscribe
for or purchase any shares of capital stock of any class or of any rights; (D)
the approval of any stockholders of the Company shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger to
which the Company is a party, any sale or transfer of all or substantially all
of the assets of the Company, of any compulsory share exchange whereby the
Common Stock is converted into other securities, cash or property; (E) the
Company shall authorize the voluntary or involuntary dissolution, liquidation or
winding up of the affairs of the Company; then, in each case, the Company shall
cause to be filed at each office or agency maintained for the purpose of
conversion of the Debenture, and shall cause to be mailed to the Holder at its
last address as it shall appear upon the stock books of the Company, at least 20
calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants, or
if a record is not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled to exchange their
shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share
exchange, provided, that the failure to mail such notice or any defect therein
or in the mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice. The Holder is entitled to convert the
Debenture during the 20-day calendar period commencing the date of such notice
to the effective date of the event triggering such notice.
 
(xi) In case of any (1) merger or consolidation of the Company with or into
another Person, or (2) sale by the Company of more than one-half of the assets
of the Company in one or a series of related transactions, a Holder shall have
the right to (A) exercise any rights under Section 3(b),

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(B) convert the aggregate principal amount of the Debenture then outstanding
into the shares of stock and other securities, cash and property receivable upon
or deemed to be held by holders of Common Stock following such merger,
consolidation or sale, and such Holder shall be entitled upon such event or
series of related events to receive such amount of securities, cash and property
as the shares of Common Stock into which such aggregate principal amount of the
Debenture could have been converted immediately prior to such merger,
consolidation or sales would have been entitled, or (C) in the case of a merger
or consolidation, require the surviving entity to issue to the Holder a
convertible debenture with a principal amount equal to the aggregate principal
amount of the Debenture then held by such Holder, plus all accrued and unpaid
interest and other amounts owing thereon, which such newly issued convertible
debenture shall have terms identical (including with respect to conversion) to
the terms of this Debenture, and shall be entitled to all of the rights and
privileges of the Holder of the Debenture set forth herein and the agreements
pursuant to which the Debentures were issued. In the case of clause (C), the
conversion price applicable for the newly issued shares of convertible preferred
stock or convertible debentures shall be based upon the amount of securities,
cash and property that each share of Common Stock would receive in such
transaction and the Conversion Price in effect immediately prior to the
effectiveness or closing date for such transaction. The terms of any such
merger, sale or consolidation shall include such terms so as to continue to give
the Holder the right to receive the securities, cash and property set forth in
this Section upon any conversion or redemption following such event. This
provision shall similarly apply to successive such events.
 
(d) The Company covenants that it will at all times reserve and keep available
out of its authorized and unissued shares of Common Stock solely for the purpose
of issuance upon conversion of the Debenture and payment of interest on the
Debenture, each as herein provided, free from preemptive rights or any other
actual contingent purchase rights of persons other than the Holder, not less
than such number of shares of the Common Stock as shall (subject to any
additional requirements of the Company as to reservation of such shares set
forth in the Debenture) be issuable (taking into account the adjustments and
restrictions of Section 4(b)) upon the conversion of the outstanding principal
amount of the Debenture and payment of interest hereunder. The Company covenants
that all shares of Common Stock that shall be so issuable shall, upon issue, be
duly and validly authorized, issued and fully paid, nonassessable and, if the
Underlying Shares Registration Statement has been declared effective under the
Securities Act, registered for public sale in accordance with such Underlying
Shares Registration Statement.
 
(e) Upon a conversion hereunder the Company shall not be required to issue stock
certificates representing fractions of shares of the Common Stock, but may if
otherwise permitted, make a cash payment in respect of any final fraction of a
share based on the Per Share Market Value at such time. If the Company elects
not, or is unable, to make such a cash payment, the Holder shall be entitled to
receive, in lieu of the final fraction of a share, one whole share of Common
Stock.
 
(f) The issuance of certificates for shares of the Common Stock on conversion of
the Debenture shall be made without charge to the Holder thereof for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer involved in the
issuance and delivery of any such certificate upon conversion in a name other
than that of the Holder of such Debenture so converted and the Company shall not
be required to issue or deliver such certificates unless or until the person or
persons requesting the

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issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
 
(g) Any and all notices or other communications or deliveries to be provided by
the Holder hereunder, including, without limitation, any Conversion Notice,
shall be in writing and delivered personally, by facsimile, sent by a nationally
recognized overnight courier service or sent by certified or registered mail,
postage prepaid, addressed to the Company, 1265 Harbor Bay Parkway, Alameda, CA
94502, or such other address or facsimile number as the Company may specify for
such purposes by notice to the Holders delivered in accordance with this
Section, with a copy to (other than for Conversion Notices)                    
                    , Att:                                      . Any and all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, sent by a
nationally recognized overnight courier service or sent by certified or
registered mail, postage prepaid, addressed to each Holder at the facsimile
telephone number or address of such Holder appearing on the books of the
Company, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
5:00 p.m. (New York City time), (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:00 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) four days after deposit in the United States mail, (iv) the Business Day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (v) upon actual receipt by the party to whom such notice is
required to be given.
 
Section 5. Definitions. For the purposes hereof, the following terms shall have
the following meanings:
 
“Business Day” means any day except Saturday, Sunday and any day which shall be
a federal legal holiday in the United States or a day on which banking
institutions are authorized or required by law or other government action to
close.
 
“Change of Control Transaction” means the occurrence of (a) an acquisition after
the date hereof by an individual or legal entity or “group” (as described in
Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control
(whether through legal or beneficial ownership of capital stock of the Company,
by contract or otherwise) of in excess of 33% of the voting securities of the
Company, (b) a replacement at one time or over time of more than one-half of the
members of the Company’s board of directors which is not approved by a majority
of those individuals who are members of the board of directors on the date
hereof (or by those individuals who are serving as members of the board of
directors on any date whose nomination to the board of directors was approved by
a majority of the members of the board of directors who are members on the date
hereof), (c) the merger, consolidation or sale of 50% or more of the assets of
the Company in one or a series of related transactions with or into another
entity that is not wholly-owned by the Company, or (d) the execution by the
Company of an agreement to which

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the Company is a party or by which it is bound, providing for any of the events
set forth above in (a), (b) or (c).
 
“Commission” means the Securities and Exchange Commission.
 
“Common Stock” means the common stock, $0.001 par value per share, of the
Company and stock of any other class into which such shares may hereafter be
changed or reclassified.
 
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
 
“Original Issue Date” shall mean the date of the first issuance of the Debenture
regardless of the number of transfers and regardless of the number of
instruments, which may be issued to evidence such Debenture.
 
“Person” means a corporation, an association, a partnership, organization, a
business, an individual, a government or political subdivision thereof or a
governmental agency.
 
“Purchase Agreement” means this Secured Convertible Debenture in combination
with the Term Sheet, dated November 14, 2002 to which the Company and the
original Holder are parties, as amended, modified or supplemented from time to
time in accordance with its terms.
 
“Registration Rights Agreement” means the Registration Rights Agreement, dated
as of the Original Issue Date, to which the Company and the original Holder are
parties, as amended, modified or supplemented from time to time in accordance
with its terms.
 
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
 
“Trading Day” means (a) a day on which the shares of Common Stock are traded on
the OTC or on such Subsequent Market on which the shares of Common Stock are
then listed or quoted, or (b) if the shares of Common Stock are not listed on a
Subsequent Market, a day on which the shares of Common Stock are traded in the
over-the-counter market, as reported by the OTC, or (c) if the shares of Common
Stock are not quoted on the OTC, a day on which the shares of Common Stock are
quoted in the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding its
functions of reporting prices); provided, that in the event that the shares of
Common Stock are not listed or quoted as set forth in (a), (b) and (c) hereof,
then Trading Day shall mean any day except a Business Day.
 
“Transaction Documents” shall have the meaning set forth in the Purchase
Agreement.
 
“Underlying Shares” means the shares of Common Stock issuable upon conversion of
the Debenture or as payment of interest in accordance with the terms hereof.
 
“Underlying Shares Registration Statement” means a registration statement
meeting the requirements set forth in the Registration Rights Agreement,
covering among other things the resale of the Underlying Shares and naming the
Holder as a “selling stockholder” thereunder.
 

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Section 6. Except as expressly provided herein, no provision of this Debenture
shall alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of, interest and liquidated damages (if any)
on, this Debenture at the time, place, and rate, and in the coin or currency,
herein prescribed. This Debenture is a direct obligation of the Company. This
Debenture ranks pari passu with all other Debentures now or hereafter issued
under the terms set forth herein. As long as the Debenture is outstanding, the
Company shall not and shall cause it subsidiaries not to, without the consent of
the Holder, (i) amend its certificate of incorporation, bylaws or other charter
documents so as to adversely affect any rights of the Holder; (ii) repay,
repurchase or offer to repay, repurchase or otherwise acquire shares of its
Common Stock or other equity securities other than as to the Underlying Shares
to the extent permitted or required under the Transaction Documents; or (iii)
enter into any agreement with respect to any of the foregoing. The Company may
only voluntarily prepay the outstanding principal amount on the Debentures.
 
Section 7. This Debenture shall not entitle the Holder to any of the rights of a
stockholder of the Company, including without limitation, the right to vote, to
receive dividends and other distributions, or to receive any notice of, or to
attend, meetings of stockholders or any other proceedings of the Company, unless
and to the extent converted into shares of Common Stock in accordance with the
terms hereof.
 
Section 8. If this Debenture is mutilated, lost, stolen or destroyed, the
Company shall execute and deliver, in exchange and substitution for and upon
cancellation of the mutilated Debenture, or in lieu of or in substitution for a
lost, stolen or destroyed debenture, a new Debenture for the principal amount of
this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of
evidence of such loss, theft or destruction of such Debenture, and of the
ownership hereof, and indemnity, if requested, all reasonably satisfactory to
the Company.
 
Section 9. No indebtedness of the Company is senior to this Debenture in right
of payment, whether with respect to interest, damages or upon liquidation or
dissolution or otherwise. The Company will not and will not permit any of its
subsidiaries to, directly or indirectly, enter into, create, incur, assume or
suffer to exist any indebtedness of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest therein or
any income or profits there from that is senior in any respect to the Company’s
obligations under the Debenture.
 
Section 10. This Debenture shall be governed by and construed in accordance with
the laws of the State of California, without giving effect to conflicts of laws
thereof. The Company and the Holder hereby irrevocably submit to the exclusive
jurisdiction of the state and federal courts sitting in the City of Los Angeles,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waive, and agree not to assert in any suit, action or proceeding, any claim that
it is not personally subject to the jurisdiction of any such court, or that such
suit, action or proceeding is improper. Each of the Company and the Holder
hereby irrevocably waive personal service of process and consents to process
being served in any such suit, action or proceeding by receiving a copy thereof
sent to the Company at the address in effect for notices to it under this
instrument and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
Nothing contained herein shall be deemed to limit in any way any right to

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serve process in any manner permitted by law. Each party irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of a Transaction Document, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its’ attorneys fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
 
Section 11. Any waiver by the Company or the Holder of a breach of any provision
of this Debenture shall not operate as or be construed to be a waiver of any
other breach of such provision or of any breach of any other provision of this
Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.
 
Section 12. If any provision of this Debenture is invalid, illegal or
unenforceable, the balance of this Debenture shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances. If it shall be found
that any interest or other amount deemed interest due hereunder shall violate
applicable laws governing usury, the applicable rate of interest due hereunder
shall automatically be lowered to equal the maximum permitted rate of interest.
The Company covenants (to the extent that it may lawfully do so) that it shall
not at any time insist upon, plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the
principal of or interest on the Debenture as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this indenture, and the Company (to the extent
it may lawfully do so) hereby expressly waives all benefits or advantage of any
such law, and covenants that it will not, by resort to any such law, hinder,
delay or impeded the execution of any power herein granted to the Holder, but
will suffer and permit the execution of every such as though no such law has
been enacted.
 
Section 13. Whenever any payment or other obligation hereunder shall be due on a
day other than a Business Day, such payment shall be made on the next succeeding
Business Day.
 
Section 14. The payment obligations under this Debenture and the obligations of
the Company to the Holder arising upon the conversion of all or any of the
Debenture in accordance with the provisions hereof are secured pursuant to the
Security Agreement (as defined in the Purchase Agreement).
 
Section 15. The contents of this DEBENTURE shall be kept in complete confidence
by the Holder, the Company, and each of the affiliates, directors, officers,
employees and agents of the Company, and dissemination of the contents of this
DEBENTURE or knowledge of its existence and related information shall only be to
those persons as absolutely necessary, or as

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required by any governmental agencies, including the Commission, pursuant to the
Registration of the Debenture.
 
IN WITNESS WHEREOF, the Company has caused this 10% Unsecured Convertible
Debenture to be duly executed by a duly authorized officer as of the date first
above indicated.
 
By: The Company
 
Calypte Biomedical Corporation.
By:
 

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Name:
 

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Title:
 

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EXHIBIT A
 
NOTICE OF CONVERSION
 
(To be Executed by the Registered Holder
in order to Convert the Debenture)
 
The undersigned hereby elects to convert the attached Debenture into shares of
common stock, $0.001 par value per share (the “Common Stock”), of Calypte
Biomedical Corporation (the “Company”) according to the conditions hereof, as of
the date written below. If shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. No fee will be
charged to the holder for any conversion, except for such transfer taxes, if
any.
 
Conversion calculations:
    
 

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Date to Effect Conversion
          
 

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Principal Amount of Debentures to be Converted
          
 
Payment of Interest in Kind
 
¨    Yes
                        
¨    No
          
        If Yes, $                  
  
of Interest Accrued on Account of Conversion at Issue
          
 

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Number of shares of Common Stock to be Issued
          
 

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Applicable Conversion Price
          
 

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Signature
          
 

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Name
          
 

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Address
   

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Schedule 1
 
CONVERSION SCHEDULE
 
CALYPTE BIOMEDICAL CORPORATION.
 
10% Unsecured Convertible Debenture due January 13, 2004, in the aggregate
principal amount of $1,000,000 issued by CALPYTE BIOMEDICAL CORPORATION. This
Conversion Schedule reflects conversions made under Section 4(a)(i) of the above
referenced Debenture.
 
Dated:
 

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Date of
Conversion
(or for first
entry, Original
Issue Date)
  
Amount of
Conversion
  
Aggregate
Principal Amount
Remaining
Subsequent to
Conversion
(or original
Principal
Amount)
  
Company Attest
    

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REGISTRATION RIGHTS AGREEMENT
 
AGREEMENT dated as of the 14th day of January, 2003, between MERCATOR FOCUS FUND
LP, a California limited partnership (the “Holder”), and CALYPTE BIOMEDICAL
CORPORATION, a Delaware corporation (the “Company”).
 
WHEREAS, the Holder has the right to cause the 10% Unsecured Convertible
Debenture (the “Debenture”) purchased by the Holder from the Company to be
converted into shares of Common Stock, $.001 par value (the “Common Stock”) of
the Company, pursuant to the conversion formula set forth in the Debenture; and
 
WHEREAS, the Company desires to grant to the Holder the registration rights set
forth herein with respect to the shares of Common Stock issuable upon the
conversion of the Debenture;
 
NOW, THEREFORE, the parties hereto mutually agree as follows:
 
1. Registrable Securities. As used herein the term “Registrable Security” means
each of the shares of Common Stock issued upon the conversion of the Debenture;
provided, however, that with respect to any particular Registrable Security,
such security shall cease to be a Registrable Security when, as of the date of
determination, (a) it has been effectively registered under the Securities Act
of 1933, as amended (the “Securities Act”) and disposed of pursuant thereto, or
(b) registration under the Securities Act is no longer required for the
immediate public distribution of such security. The term “Registrable
Securities” means any and/or all of the securities falling within the foregoing
definition of a “Registrable Security.” In the event of any merger,
reorganization, consolidation, recapitalization or other change in corporate
structure affecting the Common Stock, such adjustment shall be made in the
definition of “Registrable Security” as is appropriate in order to prevent any
dilution or enlargement of the rights granted pursuant to this Section 1.
 
2. Registration. The Company agrees to file a registration statement (the
“Registration Statement”) with the Securities and Exchange Commission (the
“Commission”) within 60 days of the Holder’s purchase of the Debenture in order
to register the resale of the Registrable Securities under the Securities Act.
Once effective, the Company will be required to maintain the effectiveness of
the Registration Statement until the earlier of (a) the date that all of the
Registrable Securities have been sold, or (b) the date that the Company receives
an opinion of counsel to the Company that all of the Registrable Securities may
be freely traded without registration under the Securities Act, under Rule 144
promulgated under the Securities Act or otherwise.
 
3. Covenants of the Company With Respect to Registration.
 
The Company covenants and agrees as follows:

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(a) The Company shall use its best efforts to cause the Registration Statement
to become effective as promptly as possible and, if any stop order shall be
issued by the Commission in connection therewith, to use its best reasonable
efforts to obtain the removal of such order. Following the effective date of the
Registration Statement, the Company shall, upon the request of the Holder,
forthwith supply such reasonable number of copies of the Registration Statement,
preliminary prospectus and prospectus meeting the requirements of the Securities
Act, and other documents necessary or incidental to the public offering of the
Registrable Securities, as shall be reasonably requested by the Holder to permit
the Holder to make a public distribution of the Holder’s Registrable Securities.
The obligations of the Company hereunder with respect to the Holder’s
Registrable Securities are subject to the Holder’s furnishing to the Company
such appropriate information concerning the Holder, the Holder’s Registrable
Securities and the terms of the Holder’s offering of such Registrable Securities
as the Company may reasonably request in writing.
 
(b) The Company shall pay all costs, fees and expenses in connection with the
Registration Statement filed pursuant to Section 2 hereof including, without
limitation, the Company’s legal and accounting fees, printing expenses, and blue
sky fees and expenses; provided, however, that the Holder shall be solely
responsible for the fees of any counsel retained by the Holder in connection
with such registration and any transfer taxes or underwriting discounts,
commissions or fees applicable to the Registrable Securities sold by the Holder
pursuant thereto.
 
(c) The Company will take all necessary action which may be required to qualify
or register the Registrable Securities included in the Registration Statement
for the offer and sale under the securities or blue sky laws of such states as
are reasonably requested by the Holder of such securities, provided that the
Company shall not be obligated to execute or file any general consent to service
of process or to qualify as a foreign corporation to do business under the laws
of any such jurisdiction.
 
4. Additional Terms.
 
(a) The Company shall indemnify and hold harmless the Holder and each
underwriter, within the meaning of the Securities Act, who may purchase from or
sell for the Holder, any Registrable Securities, from and against any and all
losses, claims, damages and liabilities caused by any untrue statement of a
material fact contained in the Registration Statement, any other registration
statement filed by the Company under the Securities Act with respect to the
registration of the Registrable Securities, any post-effective amendment to such
registration statements, or any prospectus included therein or caused by any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission based upon information furnished or required to be furnished in
writing to the Company by the Holder or underwriter expressly for use therein,
which indemnification shall include each person, if any, who controls either the
Holder or underwriter within the meaning of the Securities Act and each officer,
director, employee and agent of the Holder and underwriter; provided, however,
that the indemnification in

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this Section 4(a) with respect to any prospectus shall not inure to the benefit
of the Holder or underwriter (or to the benefit of any person controlling the
Holder or underwriter) on account of any such loss, claim, damage or liability
arising from the sale of Registrable Securities by the Holder or underwriter, if
a copy of a subsequent prospectus correcting the untrue statement or omission in
such earlier prospectus was provided to the Holder or underwriter by the Company
prior to the subject sale and the subsequent prospectus was not delivered or
sent by the Holder or underwriter to the purchaser prior to such sale and
provided further, that the Company shall not be obligated to so indemnify the
Holder or any such underwriter or other person referred to above unless the
Holder or underwriter or other person, as the case may be, shall at the same
time indemnify the Company, its directors, each officer signing the Registration
Statement and each person, if any, who controls the Company within the meaning
of the Securities Act, from and against any and all losses, claims, damages and
liabilities caused by any untrue statement of a material fact contained in the
Registration Statement, any registration statement or any prospectus required to
be filed or furnished by reason of this Agreement or caused by any omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, insofar as such losses, claims, damages
or liabilities are caused by any untrue statement or omission based upon
information furnished in writing to the Company by the Holder or underwriter
expressly for use therein.
 
(b) If for any reason the indemnification provided for in the preceding section
is held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, claim, damage, liability or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party thereunder, shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by the indemnified party and the indemnifying party, but also the relative fault
of the indemnified party and the indemnifying party, as well as any other
relevant equitable considerations.
 
(c) Neither the filing of a Registration Statement by the Company pursuant to
this Agreement nor the making of any request for prospectuses by the Holder
shall impose upon the Holder any obligation to sell the Holder’s Registrable
Securities.
 
(d) The Holder, upon receipt of notice from the Company that an event has
occurred which requires a Post-Effective Amendment to the Registration Statement
or a supplement to the prospectus included therein, shall promptly discontinue
the sale of Registrable Securities until the Holder receives a copy of a
supplemented or amended prospectus from the Company, which the Company shall
provide as soon as practicable after such notice.
 
(e) If the Company fails to keep the Registration Statement referred to above
continuously effective during the requisite period, then the Company shall,
promptly upon the request of the Holder, use its best efforts to update the
Registration Statement or file a new registration statement covering the
Registrable Securities remaining unsold, subject to the terms and provisions
hereof.

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(f) The Holder agrees to provide the Company with any information or
undertakings reasonably requested by the Company in order for the Company to
include any appropriate information concerning the Holder in the Registration
Statement or in order to promote compliance by the Company or the Holder with
the Securities Act.
 
5. Governing Law. The Registrable Securities will be, if and when issued,
delivered in California. This Agreement shall be deemed to have been made and
delivered in the State of California and shall be governed as to validity,
interpretation, construction, effect and in all other respects by the internal
substantive laws of the State of California, without giving effect to the choice
of law rules thereof.
 
6. Amendment. This Agreement may only be amended by a written instrument
executed by the Company and the Holder.
 
7. Entire Agreement. This Agreement constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof, and supersedes all
prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
 
8. Execution in Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
 
9. Notices. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed duly given when delivered by hand or
mailed by registered or certified mail, postage prepaid, return receipt
requested, as follows:
 
If to the Holder,
 
Mercator Focus Fund LP
555 South Flower Street,
Suite 4500 Los Angeles, CA 90071
Attention: David Firestone
   
If to the Company,
 
Calypte Biomedical Corporation
1265 Harbor Bay Parkway
Alameda, CA 94502
Attention: Anthony Cateldo
   

 
10. Binding Effect; Benefits. The Holder may assign its rights hereunder. This
Agreement shall inure to the benefit of, and be binding upon, the parties hereto
and their respective heirs, legal representatives, successors and assigns.
Nothing herein contained, express or implied, is intended to confer upon any
person other than the parties hereto and their respective heirs, legal
representatives and successors, any rights or remedies under or by reason of
this Agreement.
 
11. Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.

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12. Severability. Any provision of this Agreement which is held by a court of
competent jurisdiction to be prohibited or unenforceable in any jurisdiction(s)
shall be, as to such jurisdiction(s), ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or affecting the validity or enforceability of such provision in
any other jurisdiction.
 
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto as of the date first above written.
 
CALYPTE BIOMEDICAL CORPORATION.
 
 
 
By:
 

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Name:
 

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Its:
 

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HOLDER:
 
MERCATOR FOCUS FUND, LP.
 
 
     
By:
 

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Name:
 

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Its:
 

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