<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
_______________________
For the Quarterly Period Ended March 31, 2000
Commission File Number 000-21930
BIOSOURCE INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
Delaware 77-0340829
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
820 Flynn Road, Camarillo, California 93012
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (805) 987-0086
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter periods that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [_]
The number of shares of the Registrant's common stock, $.001 par value,
outstanding as of May 9, was 7,923,953.
================================================================================
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
FORM 10-Q
March 31, 2000
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2000
(unaudited) and December 31, 1999 3
Condensed Consolidated Statements of Operations for the three months ended
March 31, 2000 and 1999 (unaudited) 4
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 2000 and 1999 (unaudited) 5
Notes to Condensed Consolidated Unaudited Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures of Market Risk 13
Item 4. Submission of matters to a vote of security holders 13
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
2
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except for share and per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------- -------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,626.2 4,644.5
Accounts receivable, less allowance for doubtful
accounts of $292.5 at March 31, 2000 and $328.1
at December 31, 1999 5,928.5 5,088.9
Inventories, net (note 4) 6,232.6 6,015.3
Prepaid expenses and other current assets 746.9 578.7
Deferred income taxes 1,994.8 1,997.8
------------- -------------
Total current assets 16,529.0 18,325.2
Property and equipment, net (note 5) 5,292.4 5,392.6
Intangible assets net of accumulated amortization of $1,455.7 13,546.9 13,816.3
at March 31, 2000 and $1,186.4 at December 31, 1999
Other assets 833.0 819.3
Deferred tax assets 1,868.4 1,868.4
------------- -------------
$ 38,069.7 40,221.8
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to banks, current portion (note 6) $ 236.6 2,754.4
Accounts payable 1,642.7 2,067.6
Accrued expenses 1,652.3 1,923.8
Deferred income 332.9 369.0
Income tax payable 477.9 225.5
------------- -------------
Total current liabilities 4,342.4 7,340.3
Notes payable to banks, less current portion (note 6) 1,204.0 11,459.3
------------- -------------
Total liabilities 5,546.4 18,799.6
Stockholders' equity: (note 8)
Preferred stock, $.001 par value. Authorized 1,000,000 shares;
371,300 shares issued and outstanding as of March 31, 2000 and
no shares issued or outstanding at December 31, 1999 6,018.6 -
Common stock, $.001 par value. Authorized 20,000,000 shares:
issued 8,180,852 shares and outstanding 7,894,852
shares at March 31, 2000; issued 7,711,716 shares and
outstanding 7,425,716 shares at December 31, 1999 7.9 7.4
Additional paid-in capital 27,645.7 22,025.9
Retained earnings 669.0 948.1
Accumulated other comprehensive loss (1,817.9) (1,559.2)
------------- -------------
Net stockholders' equity 32,523.3 21,422.2
------------- -------------
$ 38,069.7 40,221.8
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2000 and 1999
(Amounts in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
2000 1999
--------------- --------------
<S> <C> <C>
Net sales $ 7,891.4 7,318.5
Cost of sales 3,058.3 2,849.1
--------------- --------------
Gross profit 4,833.1 4,469.4
--------------- --------------
Operating expenses:
Research and development 822.4 794.4
Sales and marketing 1,346.4 1,071.3
General and administrative 1,092.2 1,035.6
Amortization of intangibles 269.4 248.9
--------------- --------------
Total operating expenses 3,530.4 3,150.2
--------------- --------------
Operating income 1,302.7 1,319.2
Interest expense, net (182.4) (239.2)
Other income (expense), net 15.9 (14.2)
--------------- --------------
Income before income taxes 1,136.2 1,065.8
Provision for income taxes 352.2 246.0
--------------- --------------
Net income 784.0 819.8
Non-cash preferred stock dividend
and effect of beneficial conversion (1,146.8) -
--------------- --------------
Net income (loss) available to common
stockholders $ (362.8) 819.8
=============== ==============
Net income (loss) per share:
Basic $ (0.05) 0.11
=============== ==============
Diluted $ (0.05) 0.11
=============== ==============
Shares used to compute net income (loss) per share:
Basic 7,717.3 7,179.1
=============== ==============
Diluted 7,717.3 7,551.3
=============== ==============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2000 and 1999
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
--------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 784.0 819.8
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 510.4 489.1
Changes in assets and liabilities:
Accounts receivable (839.6) (1,161.3)
Inventories (319.3) (66.8)
Prepaid expenses and other current assets (168.2) (266.1)
Other assets (10.8) (36.5)
Accounts payable (420.9) 348.0
Accrued expenses (262.3) (1,692.5)
Deferred income (61.4) (112.8)
Income tax payable 277.7 244.6
--------------------------------
Net cash used in operating activities (510.4) (1,434.5)
--------------------------------
Cash flows from investing activities
Purchase of property and equipment (202.4) (129.5)
--------------------------------
Cash flows from financing activities:
Proceeds from the exercise of options 1,362.1 -
Proceeds from the exercise of warrants 750.0 -
Proceeds from the issuance of preferred stock 8,461.5 -
Repayments of notes payable to bank (12,773.1) (587.8)
Payments on capital lease obligations (13.3) 13.5
--------------------------------
Net cash used in financing activities (2,212.8) (574.3)
--------------------------------
Effect of exchange rates on cash and cash equivalents (92.7) (61.5)
--------------------------------
Net decrease in cash and cash equivalents (3,018.3) (2,199.8)
Cash and cash equivalents at beginning of period 4,644.5 7,076.9
--------------------------------
Cash and cash equivalents at end of period $ 1,626.2 4,877.1
================================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 264.0 289.8
================================
Income taxes $ 22.0 -
================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Unaudited Financial Statements
1. Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited
and have been prepared by our company pursuant to the rules and regulations of
the Securities and Exchange Commission regarding interim financial reporting.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements
and should be read in conjunction with the consolidated financial statements and
notes thereto included in our Annual Report on Form 10-K, for the fiscal year
ended December 31, 1999. In the opinion of management, the accompanying
condensed consolidated unaudited financial statements include all adjustments,
consisting only of normal accruals, which are necessary for a fair presentation.
The results of operations for the three month period ended March 31, 2000 are
not necessarily indicative of results to be expected for the full fiscal year.
2. General
Our company develops, manufactures, markets and distributes products and
services that are widely used in biomedical research. Our products and services
enable scientists to better understand the biochemistry, immunology and cell
biology of the human body, aging and certain diseases such as cancer, arthritis
and other inflammatory diseases, AIDS and certain other infectious diseases. We
have a wide variety of products, including immunoassay and ELISA test kits;
immunological reagents, including bioactive proteins (cytokines, growth factors
and adhesion molecules), oligonucleotides, and monoclonal and polyclonal
antibodies. We also manufacture and market custom oligonucleotides to the
specifications of our customers. We use recombinant DNA technology to produce
cytokines and other proteins.
Our principal offices are located at 820 Flynn Road, Camarillo, California,
93012, and our telephone number is (805) 987-0086.
3. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of BioSource
International, Inc. and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents include all cash balances and highly liquid
investments with an original maturity of three months or less.
Financial Instruments
The carrying value of financial instruments such as cash and cash
equivalents, accounts receivable, payables and short-term debt approximates
their fair value at March 31, 2000 and December 31, 1999 due to the short-term
nature of these instruments.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
(net realizable value) for raw materials and work in process and the average-
cost method for finished goods.
Depreciation and amortization
Property and equipment are stated at cost. Depreciation and amortization of
property and equipment and goodwill is provided using the straight-line method
over the estimated useful lives of the related assets which generally range from
three to fifteen years. Real property is depreciated over thirty nine years.
Leasehold improvements are amortized using the straight-line method over their
estimated useful lives or the lease term, whichever is shorter.
6
<PAGE>
License Agreements
License agreements are recorded at cost and are amortized using the
straight-line method over the shorter of the estimated useful lives of the
license or the license term which is generally between five and ten years. These
costs are included in other assets in the accompanying condensed consolidated
balance sheet.
Sale Recognition
Sales and related cost of goods sold are recognized upon the shipment of
product. Customer prepayments for sera, media and buffer, custom antibody or
custom peptide products are recorded as deferred revenue until the product is
shipped. Upon shipment, the sale and related cost of goods sold is recognized.
In 1999 we earned royalties on certain products licensed to others and classify
those royalties in net sales.
Research and Development Costs
Research and development costs are expensed as incurred.
Income Taxes
Income taxes are accounted for under the asset and liability method.
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. 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.
Long-lived Assets
It is our policy to account for long-lived assets, including intangibles,
at amortized cost. As part of an ongoing review of the valuation and
amortization of long-lived assets, management assesses the carrying value of
such assets if facts and circumstances suggest that it may be impaired. If this
review indicates that the long-lived assets will not be recoverable, as
determined by a non-discounted cash flow analysis over the remaining
amortization period, the carrying value of our long-lived assets would be
reduced to the estimated fair market value based on discounted cash flows.
Comprehensive income
We adopted SFAS No. 130, "Reporting Comprehensive Income" in 1998. SFAS No.
130 establishes standards to measure all changes in equity that result from
transactions and other economic events other than transactions with owners.
Comprehensive income is the total of net earnings and all other non-owner
changes in equity. Except for net earnings and foreign currency translation
adjustments, we do not have any transactions and other economic events that
qualify as comprehensive income as defined under SFAS No. 130.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. This affects the reported amounts of assets and liabilities and
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.
Foreign Currency Translation
The assets and liabilities of our foreign subsidiary, whose functional
currency is Belgian francs, are translated at the rate of exchange at the
balance sheet date, and related revenues and expenses are translated at the
average exchange rate in effect during the period. Resulting translation
adjustments are recorded as a component of accumulated other comprehensive loss.
Gains and losses from foreign currency transactions are included in net income.
7
<PAGE>
4. Inventories (amounts in thousands)
<TABLE>
<CAPTION>
Mar. 31, 2000 Dec. 31, 1999
------------- -------------
<S> <C> <C>
Raw materials.................................. $3,161.4 $4,060.0
Work in process................................ 752.4 598.6
Finished goods................................. 5,861.7 5,040.7
-------- --------
9,775.5 9,699.3
Less inventory reserve......................... 3,542.9 3,684.0
-------- --------
$6,232.6 $6,015.3
======== ========
</TABLE>
5. Property and Equipment (amounts in thousands)
<TABLE>
<CAPTION>
Mar. 31, 2000 Dec. 31, 1999
------------- -------------
<S> <C> <C>
Land............................................. $ 360.0 $ 360.0
Building and improvements........................ 2,246.5 2,255.0
Machinery and equipment.......................... 4,214.6 4,157.4
Office furniture and equipment................... 1,902.4 1,883.1
Leasehold improvements........................... 107.9 107.9
-------- --------
8,831.4 8,763.4
Less accumulated depreciation and amortization... 3,539.0 3,370.8
-------- --------
$5,292.4 $5,392.6
======== ========
</TABLE>
6. Notes Payable to Banks
During the first quarter of 2000, the company repaid substantially all of
its remaining notes payable borrowed in December 1998 to finance the
acquisitions of Quality Controlled Biochemicals and Biofluids and converted its
remaining borrowings into a line of credit with the bank. We established a
revolving line of credit that provides for borrowings up to $3,400,000 and bears
interest at a rate of 2% per annum in excess of either the bank's adjusted
treasury rate, for a term that we may select, or the bank's LIBOR rate, also for
a term we may select. The line of credit expires on February 26, 2001. The
actual interest rate at March 31, 2000 was 9.0%. Additionally, we must maintain
specified ratios of annualized earnings before interest, taxes, depreciation and
amortization (EBITDA) to debt service, term debt to EBITDA, and maintain capital
expenditures within specified levels. We are also required to comply with
certain non-financial covenants. At March 31, 2000 we were in compliance with
regard to these covenants. At March 31, 2000, the balance on the revolving line
of credit was $200,000.
In June, 1996, we secured financing from Heller Financial Corp. in order to
partially finance the purchase of our corporate headquarters. The original loan
principal was $745,000 and is secured by a first trust deed on the property. The
loan bears interest at a rate of 9.4% and has a 20 year term. The principal
balance outstanding at March 31, 2000 was $683,524. In addition, in June, 1996,
we obtained a loan from the Small Business Administration in order to partially
finance the purchase of the corporate headquarters building. The original loan
principal was $616,000 and is secured by a second trust deed on the property.
The loan bears interest at a rate of 7.6% and has a 20 year term. The
outstanding principal balance at March 31, 2000 was $557,126.
Payments to both Heller Financial Corp. and the Small Business
Administration are guaranteed by the chairman of the board of our company.
8
<PAGE>
7. Earnings (loss) per Share
The Company accounts for earnings (loss) per share under the provisions of
SFAS No. 128, "Earnings per Share". SFAS No. 128 specifies the computation,
presentation and disclosure requirements for earnings (loss) per share (EPS).
The reconciliation of basic to diluted weighted average shares is as
follows:
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------
2000 1999
-------- --------
<S> <C> <C>
Net income (loss) available to
common stockholders $ (362.8) $ 819.8
======== ========
Weighted average shares used in basic
computation 7,717.3 7,179.1
Dilutive stock options and warrants - 372.2
-------- --------
Weighted average shares used for
diluted computation 7,717.3 7,551.3
======== ========
</TABLE>
Options to purchase 1,656,039 shares at a weighted average exercise price
of $3.29 per share and 580,690 shares at a weighted average exercise price of
$5.08 per share were outstanding as of March 31, 2000 and 1999, respectively,
but were not included in the computation of diluted net income per share for
either period because the effect would be anti-dilutive.
Preferred Stock convertible to 1,485,200 shares of common stock at a
weighted average exercise price of $6.06 per share were outstanding as of March
31, 2000 but were not included in the computation of diluted net income per
share because the effect would be anti-dilutive.
Warrants to purchase 59,050 shares at a weighted average exercise price of
$11.10 per share were outstanding as of March 31, 2000, and 118,800 shares at a
weighted average exercise price of $11.10 per share were outstanding as of March
31, 1999, but were not included in the computation of diluted net income per
share because the effect would be anti-dilutive.
Warrants to purchase 1,287,700 shares at a weighted average exercise price
of $7.77 per share were outstanding as of March 31, 2000 but were not included
in the computation of diluted net income per share because the effect would be
anti-dilutive.
Warrants to purchase 100,000 shares at a weighted average exercise price of
$7.50 per share were outstanding as of March 31, 1999 but were not included in
the computation of diluted net income per share because the effect would be
anti-dilutive.
8. Stockholders Equity
Comprehensive Income is determined as follows:
9
<PAGE>
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------
2000 1999
------- -------
<S> <C> <C>
Net income $ 784.0 $ 819.8
Foreign currency translation
adjustments (258.7) (397.6)
------- -------
Total comprehensive income $ 525.3 $ 422.2
======= =======
</TABLE>
b) On February 15, 2000, the Company issued 371,300 shares of $0.001 par
value Series B Preferred Stock with an initial aggregate liquidation value of
$9,000,300. The Series B Preferred Stock is initially convertible into 1,485,200
shares of the Company's Common Stock at an effective price of $6.06 per share
of Common Stock. The Series B Preferred Stock shares will be entitled to receive
dividends at a rate of 8% of the original issue price. Unless all dividends on
the outstanding Series B Preferred Stock shares have been paid, no dividends or
other distributions shall be paid to Common Stock shareholders. The Series B
Preferred Stock shareholders have liquidation preference to the Common Stock
shareholders. This preferred stock also is automatically convertible upon any of
the following events: (1) a public offering of common stock of not less than $15
per share, which results in proceeds to us of at least $40,000,000 before
commissions or discounts (2) the date we specify to the holders, if the last
reported sales price of our stock is above $20 per share for 20 consecutive
trading days on the Nasdaq National Market, or (3) the holders of greater than
50% of the shares of the Series B inform us in writing of their desire to
convert the shares. Holders of Series B Preferred Stock have the right to
require the Company to redeem the Series B Preferred Stock at the original
liquidation value plus accrued dividends after February 15, 2004, or as early as
February 15, 2001, if various stock price thresholds, as defined, are not met.
In connection with the issuance of Series B Preferred Stock the holders
received detachable stock purchase warrants. The warrants are exchangeable for
1,287,000 shares of Common Stock at an exercise price of $7.77 per share. The
Company allocated the net proceeds of $8,385,000 based on the relative fair
value of the warrants and the Series B Preferred Stock. The initial book value
of the Series B Preferred Stock of $5,581,600 accreted immediately by $995,100
related to the beneficial conversion feature and will continue to accrete to its
liquidation value through February 2004 or earlier upon accelerated conversion,
under the interest method. Such accretion does not have an effect on net income,
but reduces the income available to common shareholders used to calculate basic
and diluted earnings per share.
9. Legal Proceedings
We are not a party to, nor is any of our property subject to, any material
pending legal proceedings.
10. Business Segments
We are engaged in a single industry, the licensing, development,
manufacture, marketing and distribution of immunological reagents, test kits and
oligonucleotides used in biomedical research and human diagnostics. Our
customers are not concentrated in any specific geographic region and no single
customer accounts for a significant amount of our sales.
10
<PAGE>
Our accounting policies of the segments below are the same as those described
in the summary of significant accounting policies, except that we are only able
to track net sales for the geographic "Sales-to" segments. We evaluate
performance for the "Sales-from" segments on net revenues and profit or loss
from operations. Our reportable segments are strategic business units that offer
geographic product availability. They are managed separately because each
business requires different marketing and distribution strategies. Business
information is summarized as follows:
<TABLE>
<CAPTION>
Sales-from Segments:
Three months ended
March 31,
2000 1999
-------- --------
<S> <C> <C>
Net sales to external customers from:
United States:
Domestic $4,441.6 $3,842.6
Export 1,188.2 1,028.2
-------- --------
Total United States 5,629.8 4,870.8
Europe 2,261.6 2,447.7
-------- --------
Consolidated $7,891.4 $7,318.5
======== ========
Operating income:
United States $1,116.8 $ 840.7
Europe 118.9 478.5
-------- --------
Consolidated $1,302.7 $1,319.2
======== ========
Sales-to Segments:
Net sales to external customers:
United States $4,441.6 $3,843.5
Europe 2,189.6 2,456.8
Japan 864.5 731.7
Other 395.7 286.5
-------- --------
Consolidated $7,891.4 $7,318.5
======== ========
</TABLE>
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This discussion and analysis of financial condition and results of operations
should be read in conjunction with the consolidated financial statements, the
notes thereto and other information, including information set forth in our
10-K for the fiscal year ended December 31, 1999, and all other recent filings
we have made with the Securities and Exchange Commission.
This Form 10-Q contains forward-looking statements, which are made pursuant to
the safe-harbor provisions of the Private Securities Litigation Reform Act of
1995. Within this Form 10-Q, words such as "believes", "designed",
"anticipates", and similar expressions are intended to identify forward-looking
statements, but are not the exclusive means of identifying such statements.
These forward-looking statements involve a number of risks and uncertainties,
including the timely development and market acceptance of our products and
technologies and other factors described throughout this Form 10-Q and in our
other filings with the Securities and Exchange Commission. The actual results
that we achieve may differ from any forward-looking statements due to such risks
and uncertainties. We do not undertake any obligation to revise or update any
forward-looking statements in order to reflect events or circumstances that may
arise after the date of this report.
Overview
Our company develops, manufactures, markets and distributes products and
services that are widely used in biomedical research. Our products and services
enable scientists to better understand the biochemistry, immunology and cell
biology of the human body, aging and certain diseases such as cancer, arthritis
and other inflammatory diseases, AIDS and certain other infectious diseases. We
have a wide variety of products, including immunoassay and ELISA test kits;
immunological reagents, including bioactive proteins (cytokines, growth factors
and adhesion molecules), oligonucleotides, and monoclonal and polyclonal
antibodies. We also manufacture and market custom oligonucleotides, peptides
and antibodies to the specifications of our customers. We use recombinant DNA
technology to produce cytokines and other proteins. We have registered our
analyte specific reagents with the FDA and have received a license to sell these
products as Class I Medical Devices. We market these products to in vitro
diagnostic manufacturers and clinical reference laboratories as "active
ingredients" in the tests they produce to identify various specific diseases or
conditions. In order to market these products as medical devices, we are
required to be in compliance with the FDA's Current Good Manufacturing Practices
and Regulations.
Results of Operations
Revenues: Our sales for the three months ended March 31, 2000 and 1999 were
$7,891,400 and $7,318,500, respectively, representing an increase of $572,900 or
7.8% in 2000 as compared to 1999. The increase for three month periods is due
to increased sales of existing products such as ELISA assay test kits,
Antibodies, and Proteins. Geographically, our sales for the three months ended
March 31, 2000 to customers in the United States and Japan increased by 16%, and
sales to customers in Europe decreased by 11% as compared to the three month
period ended March 31, 1999.
Gross profit: Gross profit for the three months ended March 31, 2000 and 1999
was $4,833,100 and $4,469,400 representing a gross margin of 61.2% and 61.1%,
respectively. Gross profit for the quarter ended March 31, 2000 increased 8.1%
over the comparable prior year period due to increased sales volume.
Research and development: Research and development expense for the three months
ended March 31, 2000 and 1999 amounted to $822,400 and $794,400, respectively.
As a percentage of sales research and development expenditures were 10.4% of
sales for the quarter ended March 31, 2000 and 10.9% of sales for the quarter
ended March 31, 1999.
Sales and marketing: Sales and marketing expense for the three months ended
March 31, 2000 and 1999 amounted to $1,346,400 and $ 1,071,300, respectively.
The increased sales and marketing expense of $275,100 or 25.7% is attributable
to increased advertising and promotional, new catalog and other brochure
expenditures, increased trade show participation, and to the creation of a
direct sales force in the United Kingdom.
General and administrative: General and administrative expense for the three
months ended March 31, 2000 and 1999 amounted to $1,092,200 and $1,035,400,
respectively. The increase of $56,800 or 5.5% is primarily due to an increase
in
12
<PAGE>
general office and facilities expenses. As a percentage of sales, general and
administrative expenses were 13.8% for the quarter ended March 31, 2000 compared
to 14.1% for the three months ended March 31, 1999.
Amortization of intangible assets: Amortization of intangible assets for the
three months ended March 31, 2000 and 1999 amounted to $269,400 and $249,100,
respectively. The amortization of intangible assets relates to the amortization
of the intangible assets from the QCB and Biofluids acquisitions.
Interest income (expense), net: Net interest expense for the three months ended
March 31, 2000 of $182,400 decreased by $56,800 from net interest expense of
$239,200 for the three months ended March 31, 1999. The decrease resulted from
the decrease in the notes payable related to the debt acquired in December 1998
to fund the acquisitions of QCB and Biofluids.
Provision for income taxes: The provision for income taxes for the three months
ended March 31, 2000 and 1999 was $352,200 and $246,000, respectively. The 1999
effective income tax rate reflects a benefit that was obtained from the
recognition of a portion of the prior years net operating losses generated by
our European operations. All of the European net operating losses were
recognized in 1999 and accordingly, the income tax rate for 2000 does not
reflect the recognition of any net operating losses.
Recently Issued Accounting Standards:
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities"
is effective for fiscal years beginning after June 15, 2000. SFAS No. 133
addresses the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and hedging activities. The
Statement standardizes the accounting for derivative instruments by requiring
that an entity recognize those items as assets or liabilities in the statement
of financial position and measure them at fair value. We are evaluating the
Statement's provisions to determine the effect on our financial statements. In
addition, the impact of SFAS No. 133 will depend on the terms of future
transactions.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." The objective of this SAB is to provide further guidance on revenue
recognition issues in the absence of authoritative literature addressing a
specific arrangement or a specific industry. The Company is required to follow
the guidance in the SAB no later than the first quarter of its year 2000. The
SEC has recently indicated it intends to issue further guidance with respect to
adoption of specific issues addressed by SAB No. 101. Until such time as this
additional guidance is issued, the Company is unable to assess the impact, if
any, it may have, however based on current guidance the Company believes
adoption of the SAB will not have a material impact on the Company's financial
position or results of operations.
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions involving Stock
Compensation" (FIN 44). FIN 44 provides guidance for issues arising in applying
APB Opinion No. 25, "Accounting for Stock Issued to Employees". FIN 44 applies
specifically to new awards, exchanges of awards in a business combination,
modification to outstanding awards, and changes in grantee status that occur on
or after July 1, 2000, except for the provisions related to repricings and the
definition of an employee which apply to awards issued after December 15, 1998.
Application of FIN 44 did not have an affect on the Company's financial
reporting.
Liquidity and Capital Resources:
Cash and cash equivalents as of March 31, 2000 of $1,626,200 decreased by
$3,018,300 or 65.0% from $4,644,500 at December 31, 1999. The reduction in cash
was primarily due to interest and principal payments relating to the debt
incurred to acquire QCB and Biofluids in December 1998, and the timing of
collections of accounts receivable and payment of accounts payable. Working
capital, which is the excess of current assets over current liabilities was
$12,186,600 at March 31, 2000 as compared to $10,984,900 at December 31, 1999
representing an increase of $1,201,700 or 10.9%. Capital expenditures of
$202,400 were primarily for the purchases of laboratory, manufacturing and
computer equipment.
We have never paid dividends to our common stock shareholders and have no
plans to do so in fiscal 2000. Our earnings will be retained for reinvestment in
the business.
We expect to be able to meet our future cash and working capital requirements
for operations and capital additions through currently available funds and cash
generated from operations, if any. However, we may raise additional capital or
secure debt financing from time to time to take advantage of favorable
conditions in the market or in connection with our corporate development
activities.
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this report before purchasing shares of our common
stock. Investing in our common stock involves a high degree of risk. If any of
the following events or outcomes actually occur, our business, operating
results and financial condition would likely suffer. As a result, the trading
price of our common stock could decline, and you may lose all or part of the
money you paid to purchase our common stock.
Risks Related to Our Business
Failure to manage our growth and expansion could impair our business.
We historically have sought, and will continue to seek, to increase our
sales and profitability primarily through the acquisition or internal
development of new product lines, additional customers and new businesses. Our
historical revenue growth is primarily attributable to our acquisitions and
new product development and, to a lesser extent, to increased revenues from
our existing products. We expect that future acquisitions, if successfully
consummated, will create increased working capital requirements, which will
likely precede by several months any material contribution of an acquisition
to our net income. Our ability to achieve our expansion objectives and to
manage our growth effectively and profitably depends upon a variety of
factors, including:
. our ability to internally develop new products;
. our ability to make profitable acquisitions;
. integration of new facilities into existing operations;
. hiring, training and retention of qualified personnel;
. establishment of new relationships or expansion of existing relationships
with customers and suppliers; and
. availability of capital.
In addition, the implementation of our growth strategy will place
significant strain on our administrative, operational and financial resources
and increased demands on our financial systems and controls. Our ability to
manage our growth successfully will require us to continue to improve and
expand these resources, systems and controls. If our management is unable to
manage growth effectively, our operating results could be adversely affected.
Moreover, there can be no assurance that our historic rate of growth will
continue, that we will continue to successfully expand or that growth or
expansion will result in profitability.
We cannot guarantee that our future acquisitions will be successful.
We compete for acquisition and expansion opportunities with companies which
have significantly greater financial and management resources than us. There
can be no assurance that suitable acquisition or investment opportunities will
be identified, that any of these transactions can be consummated, or that, if
acquired, these new businesses can be integrated successfully and profitably
into our operations. These acquisitions and investments may also require a
significant allocation of resources, which will reduce our ability to focus on
the other portions of our business, including many of the factors listed in
the prior risk factor.
Reduction or delays in research and development budgets and in government
funding may negatively impact our sales.
Our customers include researchers at pharmaceutical and biotechnology
companies, academic institutions and government and private laboratories.
Fluctuations in the research and development budgets of these researchers and
their organizations could have a significant effect on the demand for our
products. Research and development budgets fluctuate due to numerous factors
that are outside our control and are difficult to predict, including changes
in available resources, spending priorities and institutional budgetary
policies. Our business could be seriously damaged by any significant decrease
in life sciences research and development expenditures by pharmaceutical and
biotechnology companies, academic institutions or government and private
laboratories.
A significant portion of our sales has been to researchers, universities,
government laboratories and private foundations whose funding is dependent
upon grants from government agencies such as the U.S. National Institutes of
Health and similar domestic and international agencies. Although the level of
research funding has increased during the past several years, we cannot assure
you that this trend will continue. Government funding of research and
development is subject to the political process, which is inherently fluid and
unpredictable. Our revenues may be adversely affected if our customers delay
purchases as a result of uncertainties surrounding the approval of government
budget proposals. Also, government proposals to reduce or eliminate budgetary
deficits have sometimes included reduced allocations to the NIH and other
government agencies that fund research and development activities. A reduction
in government funding for the NIH or other government research agencies could
seriously damage our business.
Many of our customers receive funds from approved grants at particular
times of the year, as determined by the federal government. Grants have, in
the past, been frozen for extended periods or have otherwise become
unavailable to various institutions without advance notice. The timing of the
receipt of grant funds affects the timing of purchase decisions by our
customers and, as a result, can cause fluctuations in our sales and operating
results.
We rely on raw materials for our manufacturing, which we may not always be
able to obtain on favorable terms.
Our manufacturing process relies on the continued availability of high-
quality raw materials. It is possible that a change in vendors, or in the
quality of the raw materials supplied to us, could have an adverse impact on
our manufacturing process and, ultimately, on the sale of our finished
products. We have from time to time experienced a disruption in the quality or
availability of key raw materials, which has created minor delays in our
ability to fill orders for specific test kits. This could occur again in the
future, resulting in significant delays, and could have a detrimental impact
on the sale of our products and our results of operations.
Our ability to raise the capital necessary to expand our business is
uncertain.
In the future, in order to expand our business through internal development
or acquisitions, we may need to raise substantial additional funds through
equity or debt financings, research and development financings or
collaborative relationships. However, this additional funding may not be
available or, if available, it may not be available on economically reasonable
terms. In addition, any additional funding may result in significant dilution
to existing stockholders. If adequate funds are not available, we may be
required to curtail our operations or obtain funds through collaborative
partners that may require us to release material rights to our products.
Our research and development efforts for new products may be unsuccessful.
We incur significant research and development expenses to develop new
products and technologies. There can be no assurance that any of these
products or technologies will be successfully developed or that if developed,
will be commercially successful. In the event that we are unable to develop
commercialized products from our research and development efforts or we are
unable or unwilling to allocate amounts beyond our currently anticipated
research and development investment, we could lose our entire investment in
these new products and technologies.
Failure to license new technologies could impair our new product development.
Our business model of providing products to researchers working on a
variety of genetic projects requires us to develop a wide spectrum of
products. To generate broad product lines it is advantageous to sometimes
license technologies from others rather than depending exclusively on our own
employees. As a result, we believe our ability to license new technologies
from third parties is and will continue to be important to our ability to
offer new products.
In addition, from time to time we are notified or become aware of patents
held by third parties that are related to technologies we are selling or may
sell in the future. After a review of these patents, we may decide to obtain a
license for these technologies from these third parties. We are currently in
the process of negotiating several of these licenses and expect that we will
also negotiate these types of licenses in the future. There can be no
assurances that we will be able to negotiate these licenses on favorable
terms, or at all.
Our ability to gain access to technologies needed for new products and
services also depends in part on our ability to convince licensors that we can
successfully commercialize their inventions. We cannot assure you that we will
be able to continue to identify new technologies developed by others. Even if
we are able to identify new technologies of interest, we may not be able to
negotiate a license on favorable terms, or at all.
If we fail to introduce new products, or our new products are not accepted by
potential customers, we may lose market share.
Rapid technological change and frequent new product introductions are
typical for our market. Our future success will depend in part on continuous,
timely development and introduction of new products that address evolving
market requirements. We believe successful new product introductions provide a
significant competitive advantage because customers make an investment of time
in selecting and learning to use a new product, and then are reluctant to
switch. To the extent we fail to introduce new and innovative products, we may
lose market share to our competitors, which will be difficult or impossible to
regain. An inability, for technological or other reasons, to successfully
develop and introduce new products could reduce our growth rate or damage our
business.
In the past we have experienced, and are likely to experience in the
future, delays in the development and introduction of products. We cannot
assure you that we will keep pace with the rapid rate of change in life
sciences research, or that our new products will adequately meet the
requirements of the marketplace or achieve market acceptance. Some of the
factors affecting market acceptance of new products include:
. availability, quality and price relative to competitive products;
. the timing of introduction of the product relative to competitive
products;
. scientists' opinion of the product's usefulness;
. citation of the product in published research; and
. general trends in life sciences research.
The expenses or losses associated with unsuccessful product development
activities or lack of market acceptance of our new products could materially
adversely affect our business, operating results and financial condition.
Failure to attract and retain qualified scientific or production personnel or
loss of key management or key personnel could hurt our business.
Recruiting and retaining qualified scientific and production personnel to
perform research and development work and product manufacturing is critical to
our success. Because the industry in which we compete is very competitive, we
face significant challenges attracting and retaining this qualified personnel
base. Although we believe we have been and will be able to attract and retain
these personnel, there can be no assurance that we will be able to continue to
successfully attract qualified personnel. In addition, our anticipated growth
and expansion into areas and activities requiring additional expertise, such
as clinical testing, government approvals, production and marketing, will
require the addition of new management personnel and the development of
additional expertise by existing management personnel. The failure to attract
and retain these personnel or, alternatively, to develop this expertise
internally would adversely affect our business.
Our success also will continue to depend to a significant extent on the
members of our management team and, in particular, on our Chief Executive
Officer and President, James H. Chamberlain. Except for an employment
agreement with Mr. Chamberlain, which has a term expiring on December 31,
2000, and an employment agreement with Jordan Fishman, Ph.D., our Vice
President, Cellular Biology, which has a term expiring on November 30, 2001,
we do not have employment agreements with any of our executive officers or key
employees or maintain any "key man" insurance policies regarding any of these
individuals. We may not be able to retain the services of our executive
officers and key personnel or attract additional qualified members to
management in the future. The loss of services of Mr. Chamberlain, Dr. Fishman
or of any of our other key management or employees, could have a material
adverse effect upon our business.
Many of our customers are obtaining our products through new distribution
channels and methods that may adversely impact our results of operations and
financial condition.
Many of our customers have developed purchasing initiatives to reduce the
number of vendors they purchase from in order to lower their supply costs.
These activities force us to supply the large distributors with our products
at a discount to reach those customers. For similar reasons, many larger
customers, including the federal government, have special pricing
arrangements, including blanket purchase agreements. These agreements may
limit our pricing flexibility with respect to our products, which could
adversely impact our business, financial condition and results of operations.
In addition, although we accept and process some orders through our Internet
website, we also implement sales through third-party Internet vendors.
Internet sales through third parties will negatively impact our gross margins
because we pay commission on these Internet sales.
We rely on international sales, which are subject to additional risks.
International sales accounted for approximately 47.0% of our revenues in
1999 and 59.5% of our revenues in 1998. International sales can be subject to
many inherent risks that are difficult or impossible for us to predict or
control, including:
. unexpected changes in regulatory requirements and tariffs;
. difficulties in staffing and managing foreign operations, including
foreign distributor relationships;
. longer payment cycles;
. adverse economic or political changes;
. potential trade restrictions, exchange controls and import and export
licensing requirements;
. problems in collecting accounts receivable; and
. potentially adverse tax consequences.
We intend to continue to generate revenues from sales outside the United
States in the future. Future distribution of our products outside the United
States also may be subject to greater governmental regulation. These
regulations, which include requirements for approvals or clearance to market,
additional time required for regulatory review and sanctions imposed for
violations, as well as the other risks indicated in the bullets listed above,
vary by country. We may not be able to obtain regulatory approvals in the
countries in which we currently sell our products or in countries where we may
sell our products in the future. In addition, we may be required to incur
significant costs in obtaining necessary regulatory approvals. Failure to
obtain necessary regulatory approvals or any other failure to comply with
regulatory requirements could result in a material reduction in our revenues
and earnings.
We also depend on third-party distributors for a material portion of our
international sales. If we lose or suffer any significant reduction in sales
to any material distributor, our business could be materially adversely
affected.
In addition, approximately 22% of our sales are made in foreign currencies,
primarily Belgian francs, British pounds, and German marks. Although a
significant portion of the foreign currencies in which we conduct our business
is currently, or is anticipated in the future to be, denominated in Euros as a
result of the European Monetary Union, we are not certain about the effect of
the Euro on our business, financial condition or results of operations. In the
past, gains and losses on the conversion of our accounts receivable arising
from international operations have contributed to negative fluctuations in our
results of operations. In general, increases in the exchange rate of the
United States dollar to foreign currencies cause our products to become
relatively more expensive to customers in those countries, leading to a
reduction in sales or profitability in some cases. We historically have not,
and currently are not, using hedging transactions or other means to reduce our
exposure to fluctuations in the value of the United States dollar as compared
to the foreign currencies in which many of our sales are made.
We may be unable to protect our trademarks, trade secrets and other
intellectual property rights that are important to our business.
We regard our trademarks, trade secrets and other intellectual property as
a component of our success. We rely on trademark law and trade secret
protection and confidentiality and/or license agreements with employees,
customers, partners and others to protect our intellectual property. Effective
trademark and trade secret protection may not be available in every country in
which our products are available. We cannot be certain that we have taken
adequate steps to protect our intellectual property, especially in countries
where the laws may not protect our rights as fully as in the United States. In
addition, our third-party confidentiality agreements can be breached and, if
they are, there may not be an adequate remedy available to us. If our trade
secrets become known, we may lose our competitive position.
Intellectual property or other litigation could harm our business.
Litigation regarding patents and other intellectual property rights is
extensive in the biotechnology industry. We are aware that patents have been
applied for, and in some cases issued to others, claiming technologies that
are closely related to ours. As a result, and in part due to the ambiguities
and evolving nature of intellectual property law, we periodically receive
notices of potential infringement of patents held by others. Although to date
we have successfully resolved these types of claims, we may not be able to do
so in the future.
In the event of an intellectual property dispute, we may be forced to
litigate. This litigation could involve proceedings declared by the U.S.
Patent and Trademark Office or the International Trade Commission, as well as
proceedings brought directly by affected third parties. Intellectual property
litigation can be extremely expensive, and these expenses, as well as the
consequences should we not prevail, could seriously harm our business.
If a third party claimed an intellectual property right to technology we
use, we might need to discontinue an important product or product line, alter
our products and processes, pay license fees or cease our affected business
activities. Although we might under these circumstances attempt to obtain a
license to this intellectual property, we may not be able to do so on
favorable terms, or at all.
In addition to intellectual property litigation, other substantial, complex
or extended litigation could result in large expenditures by us and
distraction of our management. For example, lawsuits by employees,
stockholders, collaborators or distributors could be very costly and
substantially disrupt our business. Disputes from time to time with companies
or individuals are not uncommon in our industry, and we cannot assure you that
we will always be able to resolve them out of court.
Accidents related to hazardous materials could adversely affect our business.
Portions of our operations require the controlled use of hazardous and
radioactive materials. Although we believe our safety procedures comply with
the standards prescribed by federal, state, local and foreign regulations, the
risk of accidental contamination of property or injury to individuals from
these materials cannot be completely eliminated. In the event of an accident,
we could be liable for any damages that result, which could seriously damage
our business and results of operations.
Our sales are subject to seasonality, which means that we have less revenue in
some months.
We experience a slowing of sales in Europe during the summer months and
worldwide during the Christmas holidays. Generally, our fourth quarter
revenues are significantly lower than our revenues in each of the first three
quarters of the year. We believe that period to period comparisons of our
operating results may not necessarily be reliable indicators of our future
performance. It is likely that in some future period our operating results
will not meet your expectations or those of public market analysts, which
could result in reductions in the market price of our common stock.
Potential product liability claims could affect our earnings and financial
condition.
We face a potential risk of liability claims based on our products and
services, and we have faced such claims in the past. We carry product
liability insurance coverage which is limited in scope and amount but which we
believe to be adequate. We cannot assure you, however, that we will be able to
maintain this insurance at reasonable cost and on reasonable terms. We also
cannot assure you that this insurance will be adequate to protect us against a
product liability claim, should one arise.
The labor laws applicable to our employees in Europe may restrict the
flexibility of our management.
As of February 29, 2000, 48 of our 207 employees worked for our BioSource
Europe subsidiary, which is located in Nivelles, Belgium. As a result of
Belgian labor laws, we are required to make specified severance payments in
the event we reduce the number of our employees working at this facility.
Accordingly, our management may be limited by the application of the Belgian
labor laws in the determination of staffing levels, and may have less
flexibility in making such determinations than our competitors whose employees
are not subject to similar labor laws.
Risks Associated With Our Industry
The biomedical research products industry is very competitive, and we may be
unable to continue to compete effectively in this industry in the future.
We are engaged in a segment of the biomedical research products industry
that is highly competitive. Many of our competitors, both in the United States
and elsewhere, are major pharmaceutical, chemical and biotechnology companies,
and many of them have substantially greater capital resources, marketing
experience, research and development staffs, and facilities than we do. Any of
these companies could succeed in developing products that are more effective
than the products that we have or may develop and may also be more successful
than us in producing and marketing their products. We expect this competition
to continue and intensify in the future.
Our industry has also seen substantial consolidation in recent years, which
has led to the creation of competitors with greater financial and intellectual
property resources than us. In addition, we believe that the success that
others have had in our industry will attract new competitors. Some of our
current and future competitors also may cooperate to better compete against
us. We may not be able to compete effectively against these current or future
competitors. Increased competition could result in price reductions for our
products, reduced margins and loss of market share, any of which could
adversely impact our business, financial condition and results of operations.
As a result of consolidation in the pharmaceutical industry, we may lose
existing customers or have greater difficulty obtaining new customers.
In recent years, the United States pharmaceutical industry has undergone
substantial consolidation. As part of many business combinations, companies
frequently reduce the number of suppliers used and we may not be selected as a
supplier after any business combination. Further, mergers or corporate
consolidations in the pharmaceutical industry could cause us to lose existing
customers and potential future customers, which could have a material adverse
effect on our business, financial condition and results of operations.
We are currently subject to government regulation.
Our business is currently subject to regulation, supervision and licensing
by federal, state and local governmental authorities. Also, from time to time
we must expend resources to comply with newly adopted regulations, as well as
changes in existing regulations. If we fail to comply with these regulations,
we could be subject to disciplinary actions or administrative enforcement
actions. These actions could result in penalties, including fines.
Risks Associated With Our Common Stock
Our stock price has been volatile.
Our common stock is quoted on the Nasdaq National Market, and there has
been substantial volatility in the market price of our common stock. The
trading price of our common stock has been, and is likely to continue to be,
subject to significant fluctuations due to a variety of factors, including:
. variations in our quarterly operating results;
. the gain or loss of significant contracts;
. changes in management;
. announcements of technological innovations or new products by us or our
competitors;
. legislative or regulatory changes;
. general trends in the industry;
. recommendations by securities industry analysts;
. biological or medical discoveries;
. developments concerning intellectual property, including patents and
litigation matters;
. public concern as to the safety of new technologies;
. developments in our relationships with current or future customers and
suppliers; and
. general economic conditions, both in the United States and abroad.
As a result of these factors, and potentially others, the sales price of
our common stock has ranged from $2.41 to $32.00 per share from January 1,
1998 through March 15, 2000 and from $6.06 to $32.00 per share from January 1,
2000 through March 15, 2000. For additional information regarding the price
range of our common stock, see "Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters."
In addition, the stock market in general has experienced extreme price and
volume fluctuations that have affected the market price of our common stock,
as well as the stock of many biotechnology companies. Often, price
fluctuations are unrelated to operating performance of the specific companies
whose stock is affected.
In the past, following periods of volatility in the market price of a
company's stock, securities class action litigation has occurred against the
issuing company. If we were subject to this type of litigation in the future,
we could incur substantial costs and a diversion of our management's attention
and resources, each of which could have a material adverse effect on our
revenue and earnings. Any adverse determination in this type of litigation
could also subject us to significant liabilities.
Anti-takeover provisions in our governing documents and under applicable law
could impair the ability of a third party to take over our company.
We are subject to various legal and contractual provisions that may impede
a change in our control, including the following:
. our adoption of a stockholders' rights plan, which could result in the
significant dilution of the proportionate ownership of any person that
engages in an unsolicited attempt to take over our company; and
. the ability of our board of directors to issue additional shares of our
preferred stock, which shares may be given superior voting, liquidation,
distribution and other rights as compared to our common stock.
These provisions, as well as other provisions in our certificate of
incorporation and bylaws and under the Delaware General Corporations Law, may
make it more difficult for a third party to acquire our company, even if the
acquisition attempt was at a premium over the market value of our common stock
at that time.
Item 3. Quantitative and Qualitative Disclosures of Market Risk:
We conduct business in various foreign currencies and are therefore subject
to the transaction exposures that arise from foreign exchange rate movements
between the dates that foreign currency transactions are initiated and the date
that they are converted. We are also subject to certain exposures arising from
the translation and consolidation of the financial results of our foreign
subsidiaries. There can be no assurance that actions taken to manage such
exposures will continue to be successful or that future changes in currency
exchange rates will not have a material impact on our future cash collections
and operating results. We do not currently hedge either our translation risk or
our economic risk. See Risk Factors - Risk related to our business - We rely on
international sales, which are subject to additional risks.
Item 4. Submission of matters to a vote of security holders.
None.
13
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.1 Investor Rights Agreement dated February 15, 2000 by and
among BioSource International, Inc., Genstar Capital
Partners II, L.P. and Stargen II LLC
4.2 Warrant to Purchase Common Stock of the Company issued to
Genstar Capital Partners II, L.P. on February 15, 2000
4.3 Warrant to Purchase Common Stock of the Company issued to
Stargen II LLC on February 15, 2000
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
BIOSOURCE INTERNATIONAL, INC.
(Registrant)
Date: May 15, 2000 /s/ JAMES H. CHAMBERLAIN
--------------------
James H. Chamberlain
President and Chief Executive Officer
Date: May 15, 2000 /s/ CHARLES C. BEST
---------------
Charles C. Best
Executive Vice President and
Chief Financial Officer
15
<PAGE>
EXHIBIT 4.1
INVESTOR RIGHTS AGREEMENT
INVESTOR RIGHTS AGREEMENT (this "Agreement"), dated as of February 15,
2000, by and among BIOSOURCE INTERNATIONAL, INC., a corporation organized under
the laws of the State of Delaware (the "Company"), and GENSTAR CAPITAL PARTNERS
II, L.P., Delaware limited partnership, and STARGEN II LLC, a Delaware limited
liability company (each, an "Investor" and collectively, the "Investors").
R E C I T A L S
- - - - - - - -
A. The Company and the Investors have entered into a Securities Purchase
Agreement dated as of January 10, 2000 (the "Purchase Agreement;" capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Purchase Agreement). In connection with the Purchase
Agreement, the Company has agreed, upon the terms and subject to the conditions
contained therein, to issue and sell to the Investors an aggregate of 371,300
shares of the Company's Series B Convertible Preferred Stock, par value $0.001
per share (the "Series B Shares") and warrants to purchase an aggregate of
1,287,000 shares of the Company's Common Stock, par value $.001 per share (the
"Warrants").
B. In connection with the transactions contemplated by the Purchase
Agreement, the Company has agreed to provide to the Investors certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws.
A G R E E M E N T
- - - - - - - - -
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investors,
intending to be legally bound, hereby agree as follows:
1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the
following meanings:
(a) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(b) "Registrable Securities" means the shares of Common Stock of the
Company issued or issuable to the Investors upon conversion of the Series B
Shares or upon exercise of the Warrants and any shares of capital stock issued
or issuable, from time to time (with any adjustments), as a distribution on or
in exchange for or otherwise with respect to the foregoing.
<PAGE>
(c) "Registration Statement" means one or more registration
statements of the Company under the Securities Act registering all or a portion
of the Registrable Securities.
2. REGISTRATION.
------------
(a) Requested Registration.
----------------------
(i) Request for Registration. If the Company shall receive from
------------------------
any Investor or Investors holding not less than 50% of the Registrable
Securities then outstanding, at any time, a written request that the Company
effect any registration with respect to all or a part of the Registrable
Securities, the Company will, as soon as reasonably practicable, use its
reasonable best efforts to effect such registration (including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act) as may be so requested and as would permit or facilitate the
sale and distribution of all or such portion of such Registrable Securities as
are specified in such request; provided that the Company shall not be obligated
--------
to effect, or take any action to effect, any such registration pursuant to this
Section 2(a):
A. after the Company has effected three (3) such
registrations pursuant to this Section 2(a) requested by the Investors, and, in
each case, such registrations have been declared or ordered effective and have
remained effective for ninety (90) days; provided, however, that the limitation
set forth in this Section 2(a)(i)A is not applicable if, at the time of the
request for registration, the Company qualifies to register the resale of the
Registrable Securities in accordance with the request on a Form S-3;
B. if at the time of any request to register Registrable
Securities, the Company is engaged or intends to engage in an acquisition,
financing or other material transaction which, in the good faith determination
of the Board of Directors of the Company, would be adversely affected by the
requested registration to the material detriment of the Company, or the Board of
Directors of the Company determines in good faith that the registration would
require the disclosure of material information that the Company has a bona fide
business purpose for preserving as confidential, and that the Company is not
otherwise required by applicable securities laws or regulations to disclose, in
which event, the Company may, at its option, direct that such request be delayed
for a period not in excess of 120 days from the date of the determination by the
Board of Directors, as the case may be; provided, however, that the Company may
not exercise this deferral right more than once in any 12-month period.
Subject to Section 2(a)(ii), a Registration Statement filed pursuant
to this Section 2(a)(i) may include other securities, other than Registrable
Securities, of the Company which are held by the other stockholders ("Other
Stockholders") of the Company. The Company shall prepare and file with the SEC,
as soon as practicable, the applicable Registration Statement
-2-
<PAGE>
required by Section 2(a) and shall use reasonable best efforts to cause such
Registration Statement to become effective as soon as practicable after such
filing. The Company shall keep such Registration Statement effective pursuant to
Rule 415 until the earliest of (i) one hundred and eighty (180) days from the
date the applicable Registration Statement is declared effective by the SEC,
(ii) the date at which all Registrable Securities included in such Registration
Statement have been sold by the Investors or (iii) the date on which all of the
Registrable Securities may (in the reasonable opinion of counsel to the Company)
be immediately sold to the public without registration or restriction pursuant
to Rule 144(k) under the Securities Act (the "Registration Period").
(ii) Underwriting. If the Investors intend to distribute the
------------
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 2(i)(a). If securities held by Other Stockholders are requested by such
Other Stockholders to be included in any registration pursuant to this Section
2, the Company shall condition such inclusion on their acceptance of the further
applicable provisions of this Section 2. The Investors and the Company shall
(together with all Other Stockholders proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected for
such underwriting by the Company and reasonably acceptable to such Investor;
provided, however, that an Investor shall not be required to make any
representations, warranties or indemnities except as they relate to such
Investor's ownership of securities and authority to enter into the underwriting
agreement and to such Investor's intended method of distribution, and the
liability of such Investor shall be limited to an amount equal to the net
proceeds from the offering received by such Investor. Notwithstanding any other
provision of this Section 2(a), if the representative advises the Investors in
writing that marketing factors (including, without limitation, pricing
considerations) require a limitation on the number of shares to be underwritten,
the securities of the Company held by Other Stockholders shall be excluded from
such registration to the extent so required by such limitation. If, after the
exclusion of such shares, further reductions are still required, the securities
proposed to be sold by the Company shall be excluded from such registration to
the extent so required by such limitation. If, after the exclusion of such
shares, further reductions are still required, the Registrable Securities
proposed to be sold by the Investors shall be excluded from such registration to
the extent so required by such limitation, provided, however, that the number of
Registrable Securities to be included in the offering by the Investors shall not
be reduced unless all other securities are excluded entirely from the offering.
No Registrable Securities or any other securities excluded from the underwriting
by reason of the underwriter's marketing limitation shall be included in such
registration. If any Other Stockholder who has requested inclusion in such
registration as provided above disapproves of the terms of the underwriting,
such person may elect to withdraw therefrom by written notice to the Company,
the underwriter and the Investors. The securities so withdrawn shall also be
withdrawn from registration.
(iii) Shares; Warrants. The Investors may elect to sell the Series B
----------------
Shares or Warrants to the underwriters and have the underwriters convert the
Series B Shares into
-3-
<PAGE>
the Conversion Shares and sell such Conversion Shares or exercise the Warrants
for the Warrant Shares and sell such Warrant Shares.
(b) Company Registration.
--------------------
(i) If the Company shall determine to register any of its equity
securities either for its own account or any Other Stockholders (a "Company
Registration"), other than a registration relating solely to employee benefit
plans, or a registration relating solely to a SEC Rule 145 transaction, or a
registration on any registration form which does not permit secondary sales or
does not include substantially the same information as would be required to be
included in a registration statement covering the sale of Registrable
Securities, the Company will:
(A) deliver to the Investors written notice thereof at least
thirty (30) days prior to the filing of the registration statement relating to
such Company Registration; and
(B) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by Investor within ten (10) days after receipt of the written
notice from the Company described in clause (A) above, except as set forth in
Section 2(b)(ii) below. The Company may terminate, in its sole and absolute
discretion, any registration described in this Section 2(b) at any time prior to
the effectiveness of the applicable registration statement. Upon such
termination, the Company's obligations under this Section 2(b) with respect to
such terminated registration shall terminate.
(ii) Underwriting. If the Company Registration of which the Company
------------
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Investors as a part of the written notice given
pursuant to Section 2(b)(i)(A). In such event, the right of the Investors to
registration pursuant to this Section 2(b) shall be conditioned upon the
Investors' participation in such underwriting and the inclusion of the
Investors' Registrable Securities in the underwriting to the extent provided
herein. The Investors shall (together with the Company and the Other
Stockholders distributing their securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for underwriting by the Company; provided,
however, that an Investor shall not be required to make any representations,
warranties or indemnities except as they relate to such Investor's ownership of
securities and authority to enter into the underwriting agreement and to such
Investor's intended method of distribution, and the liability of such Investor
shall be limited to an amount equal to the net proceeds from the offering
received by such Investor. Notwithstanding any other provision of this Section
2(b), if the representative determines that marketing factors require a
limitation on the number of shares to be underwritten, the representative may
limit or eliminate the number of Registrable Securities to be included in the
registration and underwriting to the extent so required by such limitation;
provided, however, that the number of Registrable Securities to be included in
the offering by the Investors shall not
-4-
<PAGE>
be reduced unless all securities to be included in the offering by Other
Stockholders are also reduced, in which instance the number of Registrable
Securities to be included in the offering by the Investors and the number of
securities to be included in the offering by Other Stockholders shall be
allocated among the Investors and the Other Stockholders in proportion (or as
nearly as practicable) to the amount of securities sought to be included in the
offering by each Investor and each Other Stockholder, as the case may be.
(iii) Number and Transferability. Each Investor shall be entitled to
--------------------------
have its Registrable Securities included in an unlimited number of registrations
pursuant to this Section 2(b).
(iv) Shares; Warrants. The Investors may elect to sell the Series B
----------------
Shares or Warrants to the underwriters and have the underwriters convert the
Series B Shares into the Conversion Shares and sell such Conversion Shares or
exercise the Warrants for the Warrant Shares and sell such Warrant Shares.
(c) Form S-3 Registration. In case the Company shall receive from any
---------------------
Investor or Investors holding not less than fifty percent (50%) of the
Registrable Securities then outstanding a written request or requests that the
Company effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Investor or Investors, the Company will:
(i) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Investors; and
(ii) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Investor's
or Investors' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Investor or
Investors joining in such request as are specified in a written request given
within 15 days after receipt of such written notice from the Company; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 2(c): (i) if
Form S-3 is not available for such offering by the Investors; (ii) if the
Company shall furnish to the Investors a certificate signed by the President of
Company stating that in the good faith judgment of the Board of Directors of the
Company that the registration would require the disclosure of material
information that the Company has a bona fide business purpose for preserving as
confidential, and that the Company is not otherwise required by applicable
securities laws or regulations to disclose, in which event the Company shall
have the right to defer the filing of the Form S-3 registration statement for a
period of not more than 120 days after receipt of the request of the Investor or
Investors under this Section 2(c); provided, however, that the Company shall not
utilize this right more than once in any twelve month period; (iii) if the
Company has, within the twelve (12) month period preceding the date of such
request,
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<PAGE>
already effected two registrations on Form S-3 for the Investors pursuant to
this Section 2(c); (iv) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance;
or (v) during the period ending one hundred eighty (180) days after the
effective date of a registration statement subject to Section 2(b).
(iii) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Investors. Registrations effected pursuant to this Section 2(c) shall not be
counted as demands for registration or registrations effected pursuant to
Sections 2(a).
3. OBLIGATIONS OF THE COMPANY.
--------------------------
In connection with each registration of the Registrable Securities, the
Company shall have the following obligations:
(a) Each Registration Statement (including any amendments or
supplements thereto and prospectuses contained therein and all documents
incorporated by reference therein) filed pursuant to this Agreement (i) shall
comply in all material respects with the requirements of the Securities Act and
the rules and regulations of the SEC promulgated thereunder and (ii) shall not
contain 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. The financial statements of the Company included in the Registration
Statement or incorporated by reference therein shall comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC applicable with respect thereto. Such financial
statements shall be prepared in accordance with U.S. generally accepted
accounting principles, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they
may not include footnotes or may be condensed or summary statements) and shall
fairly present in all material respects the consolidated financial position of
the Company and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to immaterial year-end
adjustments).
(b) The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the Investor as set forth
in the Registration Statement. Notwithstanding the foregoing, the
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<PAGE>
Company's obligations hereunder to file a Registration Statement and to keep a
Registration Statement in effect under the Securities Act shall be suspended if
the Company is engaged or intends to engage in an acquisition, financing or
other material transaction which, in the good faith determination of the Board
of Directors of the Company, would be adversely affected by the requested
registration to the material detriment of the Company, or the Board of Directors
of the Company determines in good faith that the registration would require the
disclosure of material information that the Company has a bona fide business
purpose for preserving as confidential, and that the Company is not otherwise
required by applicable securities laws or regulations to disclose, in which
event, the Company may, at its option, direct that such request be delayed for a
period not in excess of 120 days from the date of the determination by the Board
of Directors, as the case may be; provided, however, that the Company may not
exercise this deferral right more than once in any 12-month period.
(c) The Company shall furnish to the Investor (i) promptly after the
same is prepared and publicly distributed, filed with the SEC, or received by
the Company, such reasonable number of copies of the Registration Statement and
any amendment thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto as the Investors may reasonably request. In the
case of the Registration Statement referred to in Section 2(a), the Company
shall furnish to the Investors a copy of each letter written by or on behalf of
the Company to the SEC or the staff of the SEC (including, without limitation,
any request to accelerate the effectiveness of any Registration Statement or
amendment thereto), and each item of correspondence from the SEC or the staff of
the SEC, in each case relating to such Registration Statement (other than any
portion, if any, thereof which contains information for which the Company has
sought confidential treatment), (ii) on the date of effectiveness of the
Registration Statement or any amendment thereto, a notice stating that the
Registration Statement or amendment has been declared effective, and (iii) such
number of copies of a prospectus, including a preliminary prospectus, and all
amendments and supplements thereto and such other documents as such Investor may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Investor.
(d) The Company shall use all commercially reasonable efforts to (i)
register and qualify the Registrable Securities covered by the Registration
Statement under such other securities or "blue sky" laws of such jurisdictions
in the United States as such Investor reasonably requests (ii) prepare and file
in those jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject itself
to general taxation in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any undertakings that
cause the Company undue expense or burden, or (e) make any change in its
certificate of incorporation or bylaws, which in each case the Board of
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<PAGE>
Directors of the Company determines in good faith to be contrary to the best
interests of the Company and its stockholders.
(e) As promptly as practicable after becoming aware of such event,
the Company shall notify the Investors by telephone or facsimile of the
happening of any event, of which the Company has knowledge, as a result of which
the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and use reasonable best efforts promptly to prepare a supplement
or amendment to the Registration Statement to correct such untrue statement or
omission and deliver such number of copies of such supplement or amendment to
the Investors as the Investors may reasonably request.
(f) The Company shall use reasonable best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest practicable date (including in each
case by amending or supplementing such Registration Statement) and to notify
each Investor who holds Registrable Securities being sold (or, in the event of
an underwritten offering, the managing underwriters) of the issuance of such
order and the resolution thereof (and if such Registration Statement is
supplemented or amended, deliver such number of copies of such supplement or
amendment to such Investor as the Investor may reasonably request).
(g) The Company shall permit a single firm of counsel designated by
the Investors to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time prior to their filing with the
SEC.
(h) The Company shall make available for inspection by (i) any
underwriter participating in any disposition pursuant to a Registration
Statement and (ii) one firm of attorneys retained by all such underwriters
(collectively, the "Inspectors") all pertinent financial and other records, and
pertinent corporate documents and properties of the Company (collectively, the
"Records"), as shall be reasonably deemed necessary by each Inspector to enable
each Inspector to exercise its due diligence responsibility, and cause the
Company's officers, directors and employees to supply all information which any
Inspector may reasonably request for purposes of such due diligence.
(i) The Company shall use reasonable best efforts to promptly either
(i) secure the designation and quotation, of all the Registrable Securities
covered by a Registration Statement on the Nasdaq National Market or the Nasdaq
Small Cap Market, or (ii) cause all the Registrable Securities covered by the
Registration Statement to be listed on the NYSE or the AMEX or another national
securities exchange and on each additional national securities exchange on which
securities of the same class or series issued by the Company are then listed, if
any, if the listing of such Registrable Securities is then permitted under the
rules of such exchange.
(j) The Company shall provide a transfer agent and registrar, which
may be a
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<PAGE>
single entity, for the Registrable Securities not later than the effective date
of the Registration Statement.
(k) The Company shall hold in confidence and not make any disclosure
of information provided to the Company concerning the Investors unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement, or (v) the Investors
consent to the form and content of any such disclosure. The Company agrees that
it shall, upon learning that disclosure of such information concerning the
Investors is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Investors prior
to making such disclosure, and allow the Investors, at their expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, such information.
(l) The Company shall cooperate with the Investors and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends) representing
Registrable Securities to be offered pursuant to the Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or the Investors may
reasonably request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) (1) an opinion of
counsel for the Company, dated the effective date of the Registration Statement,
and (2) "comfort" letters signed by the Company's independent public accountants
who have examined and reported on the Company's financial statements included in
the Registration Statement, to the extent permitted by the standards of the
AICPA or other relevant authorities, covering substantially the same matters
with respect to the registration statement (and the prospectus included therein)
and (in the case of the accountants' "comfort" letters, with respect to events
subsequent to the date of the financial statements), in each case as are
customarily covered in opinions of issuers' counsel and in accountants'
"comfort" letters delivered to the underwriters in underwritten public offerings
of securities.
(m) The Company shall comply with applicable federal securities laws
and regulations related to a Registration Statement and offering and sale of
securities.
(n) The Company shall use its commercially reasonable efforts to
qualify for registration on Form S-3 or any comparable or successor form or
forms and remain so qualified following the Closing Date.
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<PAGE>
(o) The Company shall take all such other actions as any Investor or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities.
4. OBLIGATIONS OF THE INVESTOR.
---------------------------
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
(a) It shall be a condition precedent to the obligations of the
Company to complete any registration pursuant to this Agreement with respect to
the Registrable Securities that each Investor shall furnish to the Company such
information regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by it as shall
be reasonably required to effect the registration of such Registrable Securities
and shall execute such documents in connection with such registration as the
Company may reasonably request. At least five (5) business days prior to the
first anticipated filing date of the Registration Statement, the Company shall
notify the Investors of any information the Company requires from them.
(b) Each Investor agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder.
(c) If the Investors determine to engage the services of an
underwriter, the Investors agree to enter into and perform its obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriter(s) of such offering and the Company and take such other actions as
are reasonably required in order to expedite or facilitate the disposition of
the Registrable Securities, provided, however, that an Investor shall not be
required to make any representations, warranties or indemnities except as they
relate to such Investor's ownership of securities and authority to enter into
the underwriting agreement and to such Investor's intended method of
distribution, and the liability of such Investor shall be limited to an amount
equal to the net proceeds from the offering received by such Investor.
(d) The Investors will not participate in any underwritten
distribution hereunder unless they (i) agree to sell such the Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, provided, however, that an Investor
shall not be required to make any representations, warranties or indemnities
except as they relate to such Investor's ownership of securities and authority
to enter into the underwriting agreement and to such Investor's intended method
of distribution, and the liability of such Investor shall be limited to an
amount equal to the net proceeds from the offering received by such Investor,
(ii) complete and execute all questionnaires, powers of attorney, indemnities,
underwriting
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<PAGE>
agreements and other documents reasonably required under the terms of such
underwriting arrangements, provided, however, that an Investor shall not be
required to make any representations, warranties or indemnities except as they
relate to the Investor's ownership of securities and authority to enter into the
underwriting agreement and to such Investor's intended method of distribution,
and the liability of such Investor shall be limited to an amount equal to the
net proceeds from the offering received by such Investor, and (iii) agree to pay
all brokers fees, underwriting discounts and commissions and other selling
expenses applicable to the Registrable Securities.
5. EXPENSES OF REGISTRATION.
------------------------
All expenses incurred by the Company in connection with registrations,
filings or qualifications pursuant to Sections 2 and 3 above, including, without
limitation, all registration, listing and qualifications fees, printers and
accounting fees and the fees and disbursements of counsel for the Company, and
the reasonable fees and disbursements of one counsel for the selling Investors
selected by them, shall be borne by the Company. All brokers' fees, underwriting
discounts and commissions and similar selling expenses applicable to the
Registrable Securities shall be borne by the Investors.
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
(a) To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor, and (ii) the directors, officers,
partners, members, employees and agents of each Investor and each person who
controls such Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), if any (each, an "Indemnified Person"), against any joint or several
losses, claims, damages, liabilities or expenses (collectively, together with
actions, proceedings or inquiries by any regulatory or self-regulatory
organization, whether commenced or threatened, in respect thereof, "Claims") to
which any of them may become subject insofar as such Claims arise out of or are
based upon: (i) any untrue statement or alleged untrue statement of a material
fact in a Registration Statement, including any preliminary prospectus or final
prospectus contained therein and any amendments or supplements thereto or the
omission or alleged omission to state therein a material fact required to be
stated or necessary to make the statements therein not misleading, (ii) any
untrue statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law, or any rule or regulation thereunder relating to the offer or
sale of the Registrable Securities (the matters in the foregoing clauses (i)
through (iii) being,
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<PAGE>
collectively, "Violations"). Subject to the restrictions set forth in Section
6(c) with respect to the number of legal counsel, the Company shall reimburse
each Investor and each other Indemnified Person, promptly as such expenses are
incurred and are due and payable, for any reasonable legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person expressly for use in the Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld; and (iii) with respect to any preliminary prospectus,
shall not inure to the benefit of any Indemnified Person if the untrue statement
or omission of material fact contained in such preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or supplemented,
if such corrected prospectus was timely made available by the Company pursuant
to Section 3(c) hereof, and the Indemnified Person was promptly advised in
writing not to use the incorrect prospectus prior to the use giving rise to a
Violation and such Indemnified Person, notwithstanding such advice, used it.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
(b) In connection with any Registration Statement in which an
Investor is participating, to the extent permitted by law, each selling Investor
agrees to indemnify, hold harmless and defend, to the same extent and in the
same manner set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement, its employees, agents and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act (each,
an "Indemnified Party"), against any Claim to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim arises out of or is based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by the Investor
expressly for use in connection with such Registration Statement; and subject to
Section 6(c) the Investor will reimburse any legal or other expenses (promptly
as such expenses are incurred and are due and payable) reasonably incurred by
them in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Investor, and provided further, that
the obligations of an Investor hereunder shall be limited to an amount equal to
the net proceeds to such Investor from the Registrable Securities sold under
such Registration Statement, prospectus, offering circular or other document
contemplated herein. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive any transfer of the Registrable Securities by the Investor
pursuant to Section 9. Notwithstanding anything to the
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<PAGE>
contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact by the Investor contained in the preliminary prospectus was corrected on a
timely basis in the prospectus, as then amended or supplemented, and the
Indemnified Party failed to utilize such corrected prospectus.
(c) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
assume control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that such indemnifying party shall not be
entitled to assume such defense and an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the reasonable fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate due to actual or potential conflicts of interest between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding or the actual or potential defendants in, or targets
of, any such action include both the Indemnified Person or the Indemnified Party
and the indemnifying party and any such Indemnified Person or Indemnified Party
reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are in conflict with those
available to such indemnifying party. The indemnifying party shall pay for only
one separate legal counsel for the Indemnified Persons or the Indemnified
Parties, as applicable, and such legal counsel shall be selected by the
Investor, if the Investor is entitled to indemnification hereunder, or by the
Company, if the Company is entitled to indemnification hereunder, as applicable.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
actually prejudiced in its ability to defend such action. The indemnification
required by this Section 6 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as such expense,
loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6, (ii) no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
seller of Registrable Securities who was not guilty of such
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<PAGE>
fraudulent misrepresentation, and (iii) contribution (together with any
indemnification or other obligations under this Agreement) by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE EXCHANGE ACT.
------------------------------
With a view to making available to the Investor the benefits of Rule 144
promulgated under the Securities Act or any other similar rule or regulation of
the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
(a) file with the SEC in a timely manner and make and keep available
all reports and other documents required of the Company under the Securities Act
and the Exchange Act so long as the Company remains subject to such requirements
and the filing and availability of such reports and other documents as is
required for the applicable provisions of Rule 144; and
(b) furnish to any Investor so long as such Investor owns Registrable
Securities, promptly upon written request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act and that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3, (ii) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be reasonably
requested to permit the Investors to sell such securities pursuant to Rule 144
without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
assignable, by any Investor to any transferee of all or any portion of the
Registrable Securities if: (i) such Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company after such assignment, (ii) the Company is furnished
with written notice of (a) the name and address of such transferee or assignee
and (b) the securities with respect to which such registration rights are being
transferred or assigned, (iii) following such transfer or assignment, the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act and applicable state securities laws, (iv)
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained herein, and (v) such transfer shall have been made
in accordance with the applicable requirements of the Purchase Agreement, and
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions contained therein.
10. BOARD REPRESENTATION.
--------------------
So long as the Investors beneficially own (as defined in Rule 13d-3 under
the Exchange Act)
-14-
<PAGE>
(A) not less than 750,000 shares of Common Stock, the Investors shall be
entitled to designate two (2) persons reasonably acceptable to the Company to
serve on the Board of Directors of the Company, and (B) not less than 495,000
shares of Common Stock, the Investors shall be entitled to designate one (1)
person reasonably acceptable to the Company to serve on the Board of Directors
of the Company (the "Designated Directors"), and the Company shall use its best
efforts (including the inclusion of such persons in the Company's proxy
statement as director nominees) to cause the Designated Directors to be elected
as directors of the Company. The Company shall immediately expand the size of
its Board of Directors to seven (7) members and appoint the Designated Directors
to fill the vacancies created thereby. For so long as the Investors are entitled
to designate directors pursuant to this Section 10, the Company shall procure
and maintain directors' and officers' indemnification insurance covering the
Designated Directors in such amounts and with such deductibles and covering such
risks as are customary for similarly situated businesses. The Company shall
indemnify each Designated Director to the same extent that it indemnifies its
other directors pursuant to its organizational documents and applicable law. The
Company shall reimburse each Designated Director for all reasonable costs and
expenses incurred in connection with such Directors' attendance at meetings of
the Board of Directors or any committee upon which they, or any of them, may
serve.
11. RIGHT OF FIRST NEGOTIATION FOR ADDITIONAL SECURITIES.
----------------------------------------------------
So long as the Investors hold not less than 50% of the aggregate Series B
Shares and Warrants they purchased pursuant to the Purchase Agreement (or an
equivalent amount of Common Stock issued upon conversion or exercise thereof),
each time the Company proposes to offer any shares of, or securities convertible
into or exercisable for any shares of, any class of its capital stock
("Additional Securities"), the Company will make an offering of such Additional
Securities to the Investors in accordance with the following provisions:
(a) The Company shall deliver a written notice (a "First Negotiation
Notice") to the Investors, which notice shall set forth all material terms and
conditions, including, without limitation, the number of shares and the purchase
price, on which the Company desires to sell the Additional Securities.
(b) The Investors shall, for a period of thirty (30) days following
the receipt of the First Negotiation Notice by the Investors (the "First
Negotiation Period"), have the exclusive right to negotiate with the Company
with respect to the purchase and sale of the Additional Securities. All
negotiations between the Company and any Investor shall be conducted in good
faith.
(c) If, during the First Negotiation Period, the Company and one or
more of the Investors agree to enter into an agreement for the purchase and sale
of the Additional Securities, then the Company may not offer the Additional
Securities to any other Person and the purchase and sale of the Additional
Securities shall occur on the terms and conditions on which the Company and the
Investors agree. If more than one Investor agrees to purchase the Additional
Securities on the terms
-15-
<PAGE>
set forth in the First Negotiation Notice, each Investor so electing shall be
entitled to purchase its pro rata share of the Additional Securities.
(d) If the Company and one or more of the Investors do not agree to
enter into an agreement for the purchase and sale of the Additional Securities
on or before the expiration of the First Negotiation Period, then the Company
may attempt to sell the Additional Securities to any other person or entity for
a period of one hundred and twenty (120) days following the expiration of the
First Negotiation Period.
(e) Additional Securities shall not include any securities: (i)
subject to a Company Registration (as defined in Section 2(b)(i), above), (ii)
relating to a SEC Rule 145 transaction, (iii) issued in connection with the
effectuation of a split or subdivision of the outstanding shares of Common Stock
or a dividend or other distribution payable in additional shares of Common Stock
or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly, additional shares of Common Stock, (iv)
issued or issueable to employees, consultants or directors of the Company
directly or pursuant to a stock option plan or restricted stock plan approved by
the Board of Directors of the Company, (v) issued pursuant to the conversion or
exercise of convertible or exercisable securities outstanding or deemed
outstanding on the date hereof, or (vi) issued or issuable in connection with
the acquisition, merger, consolidation, or other business combination by or of
the Company with, by, or of any person.
12. PRE-EMPTIVE RIGHTS TO ACQUIRE ADDITIONAL SECURITIES
---------------------------------------------------
So long as the Investors hold not less than 50% of the aggregate Series B
Shares and Warrants they purchased pursuant to the Purchase Agreement (or an
equivalent amount of Common Stock issued upon conversion or exercise thereof),
each time the Company proposes to offer any Additional Securities, the Company
will, in addition to the right of first negotiation required under Section 11,
----------
above, make an offering of such Additional Securities to the Investors in
accordance with the following provisions:
(a) At least thirty (30) days prior to consummating the offer of
Additional Securities, the Company shall deliver a notice (the "Transfer
Notice") to the Investors at the addresses set forth in the Purchase Agreement
stating: (i) its bona fide intention to offer such Additional Securities, (ii)
the amount of such Additional Securities to be offered, (iii) the price and
terms, if any, upon which it proposes to offer such Additional Securities, and
(iv) an offer to the Investors to purchase the Additional Securities on the same
terms and conditions as contained in the Transfer Notice.
(b) The Investor may accept the offer to purchase such Additional
Securities by giving written notice of acceptance to the Company within fifteen
(15) days of receipt of the Transfer Notice, and the transfer of the Additional
Securities shall thereafter be effected between the Company and the Investors
upon all of the applicable terms and conditions set forth in the Transfer
-16-
<PAGE>
Notice, or such other or additional terms as the Company and the Investors shall
agree. In the event that the Investors do not accept the offer to purchase such
Additional Securities by giving written notice of acceptance to the Company
within fifteen (15) days of receipt of the Transfer Notice, and/or consummate
the sale of the Additional Securities within sixty (60) days of its acceptance
of the offer contained in the Transfer Notice, the Company shall be free to sell
such Additional Securities on substantially the same terms as those set forth in
the Transfer Notice.
13. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof may
be waived solely upon the written consent of the Company and the Investors
holding a majority of the Shares and Warrants (or an equivalent amount of Common
Stock issued upon conversion or exercise thereof).
14. MISCELLANEOUS.
-------------
(a) A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
(b) Any notices required or permitted to be given under the terms of
this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective five (5) days after being placed in the mail, if mailed, or
upon receipt or refusal of receipt, if delivered personally or by courier or
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be as set forth in the Purchase Agreement.
(c) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(d) This Agreement shall be governed by and construed in accordance
with the laws of the State of California applicable to contracts made and to be
performed in the State of California. Each of the Company and the Investors
irrevocably consents to the jurisdiction of the United States federal courts and
state courts located in the State of California in any suit or proceeding based
on or arising under this Agreement and irrevocably agrees that all claims in
respect of such suit or proceeding may be determined in such courts. Each of the
Company and the Investors irrevocably waives the defense of an inconvenient
forum to the maintenance of such suit or proceeding. Each of the Company and the
Investors further agrees that service of process upon the Company mailed by
first class mail to the address set forth in the Purchase Agreement shall be
deemed in every respect effective service of process upon the Company in any
such suit or
-17-
<PAGE>
proceeding. Nothing herein shall affect either the Company's or any Investor's
right to serve process in any other manner permitted by law.
(e) This Agreement and the Purchase Agreement (including all
schedules and exhibits thereto) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the Purchase
Agreement supersede all prior agreements and understandings among the parties
hereto and thereto with respect to the subject matter hereof and thereof.
(f) Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(g) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(h) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
(i) Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
(j) For purposes of this Agreement, the term "business day" means any
day other than a Saturday or Sunday or a day on which banking institutions in
the State of California are authorized or obligated by law, regulation or
executive order to close.
[Remainder of Page Intentionally Left Blank]
-18-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
BIOSOURCE INTERNATIONAL, INC.
a Delaware corporation
By: /s/ James H. Chamberlain
-------------------------------------
James H. Chamberlain
President and Chief Executive Officer
GENSTAR CAPITAL PARTNERS II, L.P.
By: Genstar Capital LLC
Its General Partner
By: /s/ Jean-Pierre L. Conte
---------------------------------
Jean-Pierre L. Conte
Managing Director
STARGEN LLC II
By: /s/ Jean-Pierre L. Conte
--------------------------------------
Jean-Pierre L. Conte
Managing Director
-19-
<PAGE>
EXHIBIT 4.2
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF COMMON STOCK
ISSUABLE HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION
UNDER THE ACT UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE
SALE OF SUCH SECURITIES IS MADE PURSUANT TO SEC RULE 144.
WARRANT TO PURCHASE COMMON STOCK
OF
BIOSOURCE INTERNATIONAL, INC.
NO. February __, 2000
THIS CERTIFIES THAT, for value received by BioSource International, Inc., a
Delaware corporation (the "Company"), GenStar Capital Partners II, LP, or its
-------
permitted registered assigns ("Holder"), is entitled, subject to the terms and
------
conditions of this Warrant, at any time or from time to time after the issuance
date of this Warrant (the "Effective Date"), and before 5:00 p.m. Pacific Time
---------------
on the fifth (5th) anniversary of the Effective Date (the "Expiration Date"), to
---------------
purchase from the Company 1,262,542 shares of Common Stock of the Company, at a
price per share of $7.77 (the "Purchase Price"). Both the number of shares of
---------------
Common Stock purchasable upon exercise of this Warrant and the Purchase Price
are subject to adjustment and change as provided herein.
1. CERTAIN DEFINITIONS. As used in this Warrant the following terms shall
have the following respective meanings:
1.1 "Fair Market Value" of a share of Common Stock as of a particular
-----------------
date shall mean:
(a) If traded on a securities exchange or the Nasdaq National
Market, the Fair Market Value shall be deemed to be the average of the closing
prices of the Common Stock of the Company on such exchange or market over the
five (5) trading days ending immediately prior to the applicable date of
valuation;
(b) If actively traded over-the-counter, the Fair Market Value shall
be deemed to be the average of the closing bid prices over the thirty (30)-day
period ending immediately prior to the applicable date of valuation; and
(c) If there is no active public market, the Fair Market Value shall
be the value thereof, as agreed upon by the Company and the Holder; provided,
however, that if the Company and the Holder cannot agree on such value, such
value shall be determined by an independent valuation firm experienced in
valuing businesses such as the Company and jointly selected in good faith by the
Company and the Holder. Fees and expenses of the valuation firm shall be paid
for by the Company.
<PAGE>
1.2 "Registered Holder" shall mean any Holder in whose name this Warrant
-----------------
is registered upon the books and records maintained by the Company.
1.3 "Warrant" as used herein, shall include this Warrant and any warrant
-------
delivered in substitution or exchange therefor as provided herein.
1.4 "Common Stock" shall mean the Common Stock of the Company and any
------------
other securities at any time receivable or issuable upon exercise of this
Warrant.
2. EXERCISE OF WARRANT.
2.1 Payment. Subject to compliance with the terms and conditions of this
-------
Warrant and applicable securities laws, this Warrant may be exercised, in whole
or in part at any time or from time to time, on or before the Expiration Date by
the delivery (including, without limitation, delivery by facsimile) of the form
of Notice of Exercise attached hereto as Exhibit A (the "Notice of Exercise"),
duly executed by the Holder, at the principal office of the Company, and as soon
as practicable after such date, surrendering
(a) this Warrant at the principal office of the Company, and
(b) payment, (i) in cash (by check) or by wire transfer, (ii) by
cancellation by the Holder of indebtedness of the Company to the Holder; or
(iii) by a combination of (i) and (ii), of an amount equal to the product
obtained by multiplying the number of shares of Common Stock being purchased
upon such exercise by the then effective Purchase Price (the "Exercise Amount").
---------------
2.2 Net Issue Exercise. In lieu of the payment methods set forth in
------------------
Section 2.1(b) above, the Holder may elect to exchange all or some of this
- --------------
Warrant for shares of Common Stock equal to the value of the amount of the
Warrant being exchanged on the date of exchange. If Holder elects to exchange
this Warrant as provided in this Section 2.2, Holder shall tender to the Company
-----------
the Warrant for the amount being exchanged, along with written notice of
Holder's election to exchange some or all of the Warrant, and the Company shall
issue to Holder the number of shares of the Common Stock computed using the
following formula:
X = Y (A-B)
-------------
A
Where: X = the number of shares of Common Stock to be
issued to Holder.
Y = the number of shares of Common Stock
purchasable under the amount of the
Warrant being exchanged (as adjusted to the
date of such calculation).
A = the Fair Market Value of one share of the
Common Stock.
B = Purchase Price (as adjusted to the date of
such calculation).
2.3 "Easy Sale" Exercise. In lieu of the payment methods set forth in
-------------------
Sections 2.1(b) and 2.2, above, when permitted by law and applicable regulations
- -----------------------
(including Nasdaq and NASD rules), the Holder may pay the Purchase Price through
a "same day sale" commitment from the Holder (and if applicable a broker-dealer
that is a member of the National Association of Securities Dealers (an "NASD
----
Dealer")), whereby the Holder irrevocably elects to exercise this
- ------
2
<PAGE>
Warrant and to sell a portion of the shares so purchased to pay the Purchase
Price and the Holder (or, if applicable, the NASD Dealer) commits upon sale (or,
in the case of the NASD Dealer, upon receipt) of such shares to forward the
Purchase Price directly to the Company.
2.4 Stock Certificates; Fractional Shares. As soon as practicable on or
-------------------------------------
after the date of any exercise of this Warrant, the Company shall issue and
deliver to the person or persons entitled to receive the same a certificate or
certificates for the number of whole shares of Common Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share equal to such
fraction of the current Fair Market Value of one whole share of Common Stock as
of such date of exercise. No fractional shares or scrip representing fractional
shares shall be issued upon an exercise of this Warrant.
2.5 Partial Exercise; Effective Date of Exercise. In case of any partial
--------------------------------------------
exercise of this Warrant, the Company shall cancel this Warrant upon surrender
hereof and shall execute and deliver a new Warrant of like tenor and date for
the balance of the shares of Common Stock purchasable hereunder. This Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above. The person
entitled to receive the shares of Common Stock issuable upon exercise of this
Warrant shall be treated for all purposes as the holder of record of such shares
as of the close of business on the date the Holder is deemed to have exercised
this Warrant.
2.6 Vesting. This Warrant shall vest fully upon issuance.
-------
3. VALID ISSUANCE: TAXES. All shares of Common Stock issued upon the
exercise of this Warrant shall be validly issued, fully paid and non-assessable,
and the Company shall pay all taxes and other governmental charges that may be
imposed in respect of the issue or delivery thereof. The Company shall not be
required to pay any tax or other charge imposed in connection with any transfer
involved in the issuance of any certificate for shares of Common Stock in any
name other than that of the Registered Holder of this Warrant, and in such case
the Company shall not be required to issue or deliver any stock certificate or
security until such tax or other charge has been paid, or it has been
established to the Company's reasonable satisfaction that no tax or other charge
is due.
4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number of
shares of Common Stock issuable upon exercise of this Warrant (or any shares of
stock or other securities or property receivable or issuable upon exercise of
this Warrant) and the Purchase Price are subject to adjustment upon occurrence
of the following events:
4.1 Adjustment for Stock Splits, Stock Subdivisions or Combinations of
------------------------------------------------------------------
Shares. The Purchase Price of this Warrant shall be proportionally decreased and
- ------
the number of shares of Common Stock issuable upon exercise of this Warrant (or
any shares of stock or other securities at the time issuable upon exercise of
this Warrant) shall be proportionally increased to reflect any stock split or
subdivision of the Company's Common Stock. The Purchase Price of this Warrant
shall be proportionally increased and the number of shares of Common Stock
issuable upon exercise of this Warrant (or any shares of stock or other
securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Common
Stock.
4.2 Adjustment for Dividends or Distributions of Stock or Other
-----------------------------------------------------------
Securities or Property. In case the Company shall make or issue, or shall fix a
- ----------------------
record date for the determination
3
<PAGE>
of eligible holders entitled to receive, a dividend or other distribution with
respect to the Common Stock (or any shares of stock or other securities at the
time issuable upon exercise of the Warrant) payable in (a) securities of the
Company or (b) assets or (c) cash dividends paid or payable solely out of
retained earnings, but only if such cash dividends are Extraordinary Dividends
(as defined below), then, in each such case, the Holder of this Warrant on
exercise hereof at any time after the consummation, effective date or record
date of such dividend or other distribution, shall receive, in addition to the
shares of Common Stock (or such other stock or securities) issuable on such
exercise prior to such date, and without the payment of additional consideration
therefor, the securities, assets or cash to which such Holder would have been
entitled upon such date if such Holder had exercised this Warrant on the date
hereof and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and all such
additional securities, assets or cash distributed with respect to such shares as
aforesaid during such period giving effect to all adjustments called for by this
Section 4. "Extraordinary Dividends" shall mean dividends or distributions
- ---------
declared with respect to the Common Stock that are in an amount greater than 3%
of the aggregate Fair Market Value of the shares of capital stock receiving such
dividends as of the trading day prior to the declaration of such dividends or
distributions.
4.3 Reclassification. If the Company, by reclassification of securities
----------------
or otherwise, shall change any of the securities as to which purchase rights
under this Warrant exist into the same or a different number of securities of
any other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change, and the Purchase Price therefor shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 4. No adjustment
shall be made pursuant to this Section 4.3 upon any conversion or redemption of
-----------
the Common Stock which is the subject of Section 4.5.
-----------
4.4 Adjustment for Capital Reorganization, Merger or Consolidation. In
--------------------------------------------------------------
case of any capital reorganization of the capital stock of the Company (other
than a combination, reclassification, exchange or subdivision of shares
otherwise provided for herein), or any merger or consolidation of the Company
with or into another corporation, or the sale of all or substantially all the
assets of the Company then, and in each such case, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Purchase Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 4. The foregoing provisions of this Section 4.4 shall similarly
--------- -----------
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Warrant. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.
4
<PAGE>
4.5 Conversion of Common Stock. In case all or any portion of the
--------------------------
authorized and outstanding shares of Common Stock of the Company are redeemed or
converted or reclassified into other securities or property pursuant to the
Company's Certificate of Incorporation or otherwise, or the Common Stock
otherwise ceases to exist, then, in such case, the Holder of this Warrant, upon
exercise hereof at any time after the date on which the Common Stock is so
redeemed or converted, reclassified or ceases to exist (the "Termination Date"),
----------------
shall receive, in lieu of the number of shares of Common Stock that would have
been issuable upon such exercise immediately prior to the Termination Date, the
securities or property that would have been received if this Warrant had been
exercised in full and the Common Stock received thereupon had been
simultaneously converted immediately prior to the Termination Date, all subject
to further adjustment as provided in this Warrant. Additionally, the Purchase
Price shall be immediately adjusted to equal the quotient obtained by dividing
(x) the aggregate Purchase Price of the maximum number of shares of Common Stock
for which this Warrant was exercisable immediately prior to the Termination Date
by (y) the number of shares of Common Stock of the Company for which this
Warrant is exercisable immediately after the Termination Date, all subject to
further adjustment as provided herein.
4.6 Issuances Below Market. In case the Company shall issue or sell (a)
----------------------
Common Stock, (b) rights, warrants or options entitling the holders thereof to
subscribe for or purchase shares of Common Stock or (c) any security convertible
into Common Stock, in each case at a price, or having an exercise or conversion
price, per share less than the Purchase Price (excluding any issuance for which
an appropriate and full adjustment has been made pursuant to Section 4.2), the
Purchase Price shall be immediately reduced by multiplying the Purchase Price by
a fraction of which (A) the numerator shall be the number of shares of Common
Stock outstanding immediately prior to such issuance or sale plus the number of
shares of Common Stock which the aggregate consideration received or receivable
(I) for the total number of shares of Common Stock, rights, warrants or options
or convertible securities so issued or sold and (II) upon the exercise or
conversion of all such rights, warrants, options or securities, would purchase
at such Purchase Price, and (B) the denominator shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus (without
duplication) the number of shares of Common Stock subject to all such rights,
warrants, options and convertible securities. The issuance of any shares of
Common Stock or other rights, warrants, options or convertible securities
pursuant to (a) the effectuation of a split or subdivision of the outstanding
shares of Common Stock or a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional
shares of Common Stock, (b) Common Stock (or securities exercisable or
convertible into Common Stock) issuable or issued to employees, consultants or
directors of the Company after the Purchase Date directly or pursuant to a stock
option plan or restricted stock plan approved by the Board of Directors of the
Company, (c) securities issued pursuant to the conversion or exercise of
convertible or exercisable securities outstanding or deemed outstanding on the
date of this Warrant, and (d) securities issued or issuable in connection with
the acquisition, merger, consolidation, or other business combination by or of
the Company with, by, or of any person, shall not be deemed to constitute an
issuance or sale to which this Section 4.6 applies.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in the
Purchase Price, or number or type of shares issuable upon exercise of this
Warrant, the Chief Financial Officer or Controller of the Company shall compute
such adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based, including a statement of the adjusted Purchase
5
<PAGE>
Price. The Company shall promptly send (by facsimile and by either first class
mail, postage prepaid or overnight delivery) a copy of each such certificate to
the Holder.
6. LOSS OR MUTILATION. Upon receipt of evidence reasonably satisfactory to
the Company of the ownership of and the loss, theft, destruction or mutilation
of this Warrant, and of indemnity reasonably satisfactory to it, and (in the
case of mutilation) upon surrender and cancellation of this Warrant, the Company
will execute and deliver in lieu thereof a new Warrant of like tenor as the
lost, stolen, destroyed or mutilated Warrant.
7. RESERVATION OF COMMON STOCK. The Company hereby covenants that at all
times there shall be reserved for issuance and delivery upon exercise of this
Warrant such number of shares of Common Stock or other shares of capital stock
of the Company as are from time to time issuable upon exercise of this Warrant
and, from time to time, will take all steps necessary to amend its Certificate
of Incorporation to provide sufficient reserves of shares of Common Stock
issuable upon exercise of this Warrant, including, without limitation, engaging
in best efforts to obtain the requisite stockholder approval of any necessary
amendment to the Certificate of Incorporation. All such shares shall be duly
authorized, and when issued upon such exercise, shall be validly issued, fully
paid and non-assessable, free and clear of all liens, security interests,
charges and other encumbrances or restrictions on sale and free and clear of all
preemptive rights, except encumbrances or restrictions arising under federal or
state securities laws. Issuance of this Warrant shall constitute full authority
to the Company's Officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock upon the exercise of this Warrant.
8. TRANSFER AND EXCHANGE. Subject to the terms and conditions of this
Warrant and compliance with all applicable securities laws, this Warrant and all
rights hereunder may be transferred to any Registered Holder's parent,
subsidiary or affiliate, or, if the Registered Holder is a partnership, to any
partner of such Registered Holder, or, if the Registered Holder is a limited
liability company, to any member of such Registered Holder, in whole or in part,
on the books of the Company maintained for such purpose at the principal office
of the Company referred to above, by the Registered Holder hereof in person, or
by duly authorized attorney, upon surrender of this Warrant properly endorsed
and upon payment of any necessary transfer tax or other governmental charge
imposed upon such transfer. Upon any permitted partial transfer, the Company
will issue and deliver to the Registered Holder a new Warrant or Warrants with
respect to the shares of Common Stock not so transferred. Each taker and holder
of this Warrant, by taking or holding the same, consents and agrees that when
this Warrant shall have been so endorsed, the person in possession of this
Warrant may be treated by the Company, and all other persons dealing with this
Warrant, as the absolute owner hereof for any purpose and as the person entitled
to exercise the rights represented hereby, any notice to the contrary
notwithstanding; provided, however that until a transfer of this Warrant is duly
registered on the books of the Company, the Company may treat the Registered
Holder hereof as the owner for all purposes.
9. RESTRICTIONS ON TRANSFER. The Holder, by acceptance hereof, agrees that,
absent an effective registration statement filed with the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
---
(the "Securities Act") covering the disposition or sale of this Warrant or the
--------------
Common Stock issued or issuable upon exercise hereof, as the case may be, and
registration or qualification under applicable state securities laws, such
Holder will not sell, transfer, pledge, or hypothecate any or all of this
Warrant or such Common Stock, as the case may be, unless either (i) the Company
has received an opinion of counsel, in form and substance reasonably
satisfactory to the Company, to the effect that such registration is not
required
6
<PAGE>
in connection with such disposition, (ii) the sale of such securities is made
pursuant to SEC Rule 144or (iii) such sale or transfer is to the Holder's
parent, subsidiary or affiliate, or, if the Holder is a partnership, to any
partner of such Holder, or, if the Holder is a limited liability company, to any
member of such Holder, pursuant to an exemption under the Securities Act.
10. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant, the
Holder hereby represents, warrants and covenants that any shares of stock
purchased upon exercise of this Warrant shall be acquired for investment only
and not with a view to, or for sale in connection with, any distribution
thereof; that the Holder has had such opportunity as such Holder has deemed
adequate to obtain from representatives of the Company such information as is
necessary to permit the Holder to evaluate the merits and risks of its
investment in the Company; that the Holder is able to bear the economic risk of
holding such shares as may be acquired pursuant to the exercise of this Warrant
for an indefinite period; that the Holder understands that the shares of stock
acquired pursuant to the exercise of this Warrant will not be registered under
the Securities Act (unless otherwise required pursuant to exercise by the Holder
of the registration rights, if any, granted to the Registered Holder) and will
be "restricted securities" within the meaning of Rule 144 under the Securities
Act and that the exemption from registration under Rule 144 will not be
available for at least one (1) year from the date of exercise of this Warrant,
subject to any special treatment by the SEC for exercise of this Warrant
pursuant to Section 2.2, and even then will not be available unless a public
-----------
market then exists for the stock, adequate information concerning the Company is
then available to the public, and other terms and conditions of Rule 144 are
complied with; and that all stock certificates representing shares of stock
issued to the Holder upon exercise of this Warrant or upon conversion of such
shares may have affixed thereto a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
11. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant shall not
entitle the Holder to any voting rights or other rights as a stockholder of the
Company. In the absence of affirmative action by such Holder to purchase Common
Stock by exercise of this Warrant or Common Stock upon conversion thereof, no
provisions of this Warrant, and no enumeration herein of the rights or
privileges of the Holder hereof shall cause such Holder hereof to be a
stockholder of the Company for any purpose.
12. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Holder that:
7
<PAGE>
12.1 Due Authorization; Consents. All corporate action on the part of
---------------------------
the Company, its officers, directors and shareholders necessary for (a) the
authorization, execution and delivery of, and the performance of all obligations
of the Company under, this Warrant, and (b) the authorization, issuance,
reservation for issuance and delivery of all of the Common Stock issuable upon
exercise of this Warrant, has been duly taken. This Warrant constitutes a valid
and binding obligation of the Company enforceable in accordance with its terms,
subject, as to enforcement of remedies, to applicable bankruptcy, insolvency,
moratorium, reorganization and similar laws affecting creditors' rights
generally and to general equitable principles. All consents, approvals and
authorizations of, and registrations, qualifications and filings with, any
federal or state governmental agency, authority or body, or any third party,
required in connection with the execution, delivery and performance of this
Warrant and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, the issuance and delivery of all of the
Common Stock issuable upon exercise of this Warrant, have been obtained.
12.2 Organization. The Company is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power to own, lease and operate its property and to
carry on its business as now being conducted and as currently proposed to be
conducted.
12.3 Valid Issuance of Stock. The outstanding shares of the capital
-----------------------
stock of the Company are duly and validly issued, fully paid and non-assessable,
and such shares, and all outstanding options and other securities of the
Company, have been issued in full compliance with the registration and
prospectus delivery requirements of the Securities Act and the registration and
qualification requirements of all applicable state securities laws, or in
compliance with applicable exemptions therefrom, and all other provisions of
applicable federal and state securities laws, including without limitation,
anti-fraud provisions.
12.4 Governmental Consents. All consents, approvals, orders,
---------------------
authorizations or registrations, qualifications, declarations or filings with
any federal or state governmental authority on the part of the Company required
in connection with the consummation of the transactions contemplated herein,
including, without limitation, those under the Securities Act and all applicable
state securities laws, shall have been obtained prior to and be effective as of
the Effective Date.
12.5 Listing on Nasdaq or Securities Exchange. The Company shall use its
----------------------------------------
best efforts to list any shares of Common Stock issuable upon exercise of this
Warrant on Nasdaq or such other national securities exchange on which shares of
Common Stock are then listed. The Company will at its expense cause all shares
of Common Stock issued upon exercise of this Warrant to be listed on Nasdaq
and/or such other national securities exchange on which shares of Common Stock
are then listed at the time of such issuance and shall maintain such listing.
12.6 No Impairment. The Company further covenants that it will not, by
-------------
amendment of its Certificate of Incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
the Company.
13. NOTICES. Except as may be otherwise provided herein, all notices,
requests, waivers and other communications made pursuant to this Agreement shall
be in writing and shall be conclusively deemed to have been duly given (a) when
hand delivered to the other party; (b) when received when sent by facsimile at
the address and number set forth below; (c) three business days
8
<PAGE>
after deposit in the U.S. mail with first class or certified mail receipt
requested postage prepaid and addressed to the other party as set forth below;
or (d) the next business day after deposit with a national overnight delivery
service, postage prepaid, addressed to the parties as set forth below with
next-business-day delivery guaranteed, provided that the sending party receives
a confirmation of delivery from the delivery service provider.
<TABLE>
<S> <C>
To Holder: To the Company:
GenStar Capital Partners II, LP BioSource International, Inc.
820 Flynn Road
Camarillo, California 93012
Telephone No.: (805)
Facsimile No.: (805)
Attention: James Chamberlain
President and Chief Executive Officer
With copies to (which shall not With copies to (which shall not
constitute notice): constitute notice):
Latham & Watkins Troop Steuber Pasich Reddick & Tobe
505 Montgomery Street, Suite 1900 2029 Century Park East, 24th Floor y, LLP
San Francisco, CA 94111-2562 Los Angeles, CA 90067
Telephone No.: (415) 391-0600 Telephone No.: (310) 728-3222
Facsimile No.: (415) 395-8095 Facsimile No.: (310) 728-2222
Attention: Scott Haber, Esq. Attention: Scott W. Alderton, Esq.
</TABLE>
Each person making a communication hereunder by facsimile shall promptly confirm
by telephone to the person to whom such communication was addressed each
communication made by it by facsimile pursuant hereto but the absence of such
confirmation shall not affect the validity of any such communication. A party
may change or supplement the addresses given above, or designate additional
addresses, for purposes of this Section 14 by giving the other party written
----------
notice of the new address in the manner set forth above.
14. HEADINGS. The headings in this Warrant are for purposes of convenience
in reference only, and shall not be deemed to constitute a part hereof.
15. LAW GOVERNING. This Warrant shall be construed and enforced in
accordance with, and governed by, the laws of the State of California, with
regard to conflict of law principles of such state.
16. NO IMPAIRMENT. The Company will not, by amendment of its Certificate of
Incorporation or bylaws, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, 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 Registered Holder of this
Warrant against impairment. Without limiting the generality of the foregoing,
the Company (a) will not increase the par value of any shares of stock issuable
upon the exercise of this Warrant above the amount payable therefor upon such
exercise, and (b) will take all such action as may be necessary or appropriate
in order that the
9
<PAGE>
Company may validly and legally issue fully paid and non-assessable shares of
Common Stock upon exercise of this Warrant.
17. NOTICES OF RECORD DATE. In case:
17.1 the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time receivable upon the exercise of this
Warrant), for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities or to receive any other right; or
17.2 of any consolidation or merger of the Company with or into another
corporation, any capital reorganization of the Company, any reclassification of
the capital stock of the Company, or any conveyance of all or substantially all
of the assets of the Company to another corporation in which holders of the
Company's stock are to receive stock, securities or property of another
corporation; or
17.3 of any voluntary dissolution, liquidation or winding-up of the
Company; or
17.4 of any redemption or conversion of all outstanding Common Stock;
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock or (such stock or
securities as at the time are receivable upon the exercise of this Warrant),
shall be entitled to exchange their shares of Common Stock (or such other stock
or securities), for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. The Company shall use all reasonable
efforts to ensure such notice shall be delivered at least thirty (30) days prior
to the date therein specified.
18. SEVERABILITY. If any term, provision, covenant or restriction of this
Warrant is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Warrant shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
19. COUNTERPARTS. For the convenience of the parties, any number of
counterparts of this Warrant may be executed by the parties hereto and each such
executed counterpart shall be, and shall be deemed to be, an original
instrument.
20. NO INCONSISTENT AGREEMENTS. The Company will not on or after the date
of this Warrant enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the Holders of this Warrant or otherwise
conflicts with the provisions hereof. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to holders of the Company's securities under any other
agreements, except rights that have been waived.
21. SATURDAYS, SUNDAYS AND HOLIDAYS. If the Expiration Date falls on a
Saturday, Sunday or legal holiday, the Expiration Date shall automatically be
extended until 5:00 p.m. the next business day.
10
<PAGE>
22. ENTIRE AGREEMENT. This Warrant, the Securities Purchase Agreement dated
as of January 10, 2000 by and among the Company and the Holder, and the Investor
Rights Agreement dated as of February __, 2000 by and among the Company and the
Holder, contain the sole and entire agreement and understanding of the parties
with respect to the entire subject matter of this Warrant, and any and all prior
discussions, negotiations, commitments and understandings, whether oral or
otherwise, related to the subject matter of this Warrant are hereby merged
herein.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
as of the Effective Date.
BIOSOURCE INTERNATIONAL, INC.
- ---------------------------------------
By
Printed Name
Title
11
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
BioSource International, Inc.
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
the securities of BioSource International, Inc., as provided for therein, and
(check the applicable box):
[_] tenders herewith payment of the exercise price in full in the form of
cash or a certified or official bank check in same-day funds in the
amount of $____________ for _________ such securities.
[_] Elects the [Net Issue Exercise][Easy Sale Exercise] option pursuant to
Section 2.2 or 2.3 of the Warrant, and accordingly requests delivery of a
net of ______________ of such securities.
Please issue a certificate or certificates for such securities in the name of,
and pay any cash for any fractional share to (please print name, address and
social security number):
Name:
----------------------------------------------------------------
Address:
----------------------------------------------------------------
Signature:
----------------------------------------------------------------
Note: The above signature should correspond exactly with the name on the first
page of this Warrant Certificate or with the name of the assignee appearing in
the assignment form below.
If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher whole number of shares.
<PAGE>
EXHIBIT B
---------
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, hereby sells, assigns and transfers unto ___________________
____________________________ the within Warrant Certificate, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint ____________________________ attorney, to transfer said Warrant
Certificate on the books of the within-named Company with respect to the number
of Warrants set forth below, with full power of substitution in the premises:
<TABLE>
<CAPTION>
- --------------------------------------- ------------------------------------- ------------------------------------
Name(s) of Assignee(s) Address # of Warrants
- --------------------------------------- ------------------------------------- ------------------------------------
<S> <C> <C>
- --------------------------------------- ------------------------------------- ------------------------------------
- --------------------------------------- ------------------------------------- ------------------------------------
- --------------------------------------- ------------------------------------- ------------------------------------
- --------------------------------------- ------------------------------------- ------------------------------------
- --------------------------------------- ------------------------------------- ------------------------------------
</TABLE>
And if said number of Warrants shall not be all the Warrants represented by the
Warrant Certificate, a new Warrant Certificate is to be issued in the name of
said undersigned for the balance remaining of the Warrants registered by said
Warrant Certificate.
--------------------------------------------------------------
Dated:
--------------------------------------------------------------
Signature:
--------------------------------------------------------------
Notice: The signature to the foregoing Assignment must correspond to the name as
written upon the face of this security in every particular, without alteration
or any change whatsoever; signature(s) must be guaranteed by an eligible
guarantor institution (banks, stock brokers, savings and loan associations and
credit unions with membership in an approved signature guarantee medallion
program) pursuant to Securities and Exchange Commission Rule 17Ad-15.
<PAGE>
EXHIBIT 4.3
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY, AND ALL SHARES OF COMMON STOCK
ISSUABLE HEREUNDER, HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION
UNDER THE ACT UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii) THE
SALE OF SUCH SECURITIES IS MADE PURSUANT TO SEC RULE 144.
WARRANT TO PURCHASE COMMON STOCK
OF
BIOSOURCE INTERNATIONAL, INC.
NO. February __, 2000
THIS CERTIFIES THAT, for value received by BioSource International, Inc., a
Delaware corporation (the "Company"), Stargen II LLC, or its permitted
-------
registered assigns ("Holder"), is entitled, subject to the terms and conditions
------
of this Warrant, at any time or from time to time after the issuance date of
this Warrant (the "Effective Date"), and before 5:00 p.m. Pacific Time on the
--------------
fifth (5th) anniversary of the Effective Date (the "Expiration Date"), to
---------------
purchase from the Company 24,458 shares of Common Stock of the Company, at a
price per share of $7.77 (the "Purchase Price"). Both the number of shares of
--------------
Common Stock purchasable upon exercise of this Warrant and the Purchase Price
are subject to adjustment and change as provided herein.
1. CERTAIN DEFINITIONS. As used in this Warrant the following terms shall
have the following respective meanings:
1.1 "Fair Market Value" of a share of Common Stock as of a particular
-------------------
date shall mean:
(a) If traded on a securities exchange or the Nasdaq National
Market, the Fair Market Value shall be deemed to be the average of the closing
prices of the Common Stock of the Company on such exchange or market over the
five (5) trading days ending immediately prior to the applicable date of
valuation;
(b) If actively traded over-the-counter, the Fair Market Value
shall be deemed to be the average of the closing bid prices over the thirty
(30)-day period ending immediately prior to the applicable date of valuation;
and
(c) If there is no active public market, the Fair Market Value
shall be the value thereof, as agreed upon by the Company and the Holder;
provided, however, that if the Company and the Holder cannot agree on such
value, such value shall be determined by an independent valuation firm
experienced in valuing businesses such as the Company and jointly selected in
good faith by the Company and the Holder. Fees and expenses of the valuation
firm shall be paid for by the Company.
<PAGE>
1.2 "Registered Holder" shall mean any Holder in whose name this
-----------------
Warrant is registered upon the books and records maintained by the Company.
1.3 "Warrant" as used herein, shall include this Warrant and any
-------
warrant delivered in substitution or exchange therefor as provided herein .
1.4 "Common Stock" shall mean the Common Stock of the Company and any
------------
other securities at any time receivable or issuable upon exercise of this
Warrant.
2. EXERCISE OF WARRANT.
2.1 Payment. Subject to compliance with the terms and conditions of
-------
this Warrant and applicable securities laws, this Warrant may be exercised, in
whole or in part at any time or from time to time, on or before the Expiration
Date by the delivery (including, without limitation, delivery by facsimile) of
the form of Notice of Exercise attached hereto as Exhibit A (the "Notice of
--------- -------
Exercise"), duly executed by the Holder, at the principal office of the Company,
- --------
and as soon as practicable after such date, surrendering
(a) this Warrant at the principal office of the Company, and
(b) payment, (i) in cash (by check) or by wire transfer, (ii) by
cancellation by the Holder of indebtedness of the Company to the Holder; or
(iii) by a combination of (i) and (ii), of an amount equal to the product
obtained by multiplying the number of shares of Common Stock being purchased
upon such exercise by the then effective Purchase Price (the "Exercise Amount").
---------------
2.2 Net Issue Exercise. In lieu of the payment methods set forth in
------------------
Section 2.1(b) above, the Holder may elect to exchange all or some of this
Warrant for shares of Common Stock equal to the value of the amount of the
Warrant being exchanged on the date of exchange. If Holder elects to exchange
this Warrant as provided in this Section 2.2, Holder shall tender to the Company
-----------
the Warrant for the amount being exchanged, along with written notice of
Holder's election to exchange some or all of the Warrant, and the Company shall
issue to Holder the number of shares of the Common Stock computed using the
following formula:
X = Y (A-B)
---------
A
Where: X = the number of shares of Common Stock to be issued to
Holder.
Y = the number of shares of Common Stock purchasable under
the amount of the Warrant being exchanged (as adjusted
to the date of such calculation).
A = the Fair Market Value of one share of the Common Stock.
B = Purchase Price (as adjusted to the date of such
calculation).
2.3 "Easy Sale" Exercise. In lieu of the payment methods set forth in
--------------------
Sections 2.1(b) and 2.2, above, when permitted by law and applicable regulations
- -----------------------
(including Nasdaq and NASD rules), the Holder may pay the Purchase Price through
a "same day sale" commitment from the Holder (and if applicable a broker-dealer
that is a member of the National Association of
2
<PAGE>
Securities Dealers (an "NASD Dealer")), whereby the Holder irrevocably elects to
-----------
exercise this Warrant and to sell a portion of the shares so purchased to pay
the Purchase Price and the Holder (or, if applicable, the NASD Dealer) commits
upon sale (or, in the case of the NASD Dealer, upon receipt) of such shares to
forward the Purchase Price directly to the Company.
2.4 Stock Certificates; Fractional Shares. As soon as practicable on
-------------------------------------
or after the date of any exercise of this Warrant, the Company shall issue and
deliver to the person or persons entitled to receive the same a certificate or
certificates for the number of whole shares of Common Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share equal to such
fraction of the current Fair Market Value of one whole share of Common Stock as
of such date of exercise. No fractional shares or scrip representing fractional
shares shall be issued upon an exercise of this Warrant.
2.5 Partial Exercise; Effective Date of Exercise. In case of any
--------------------------------------------
partial exercise of this Warrant, the Company shall cancel this Warrant upon
surrender hereof and shall execute and deliver a new Warrant of like tenor and
date for the balance of the shares of Common Stock purchasable hereunder. This
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above. The person
entitled to receive the shares of Common Stock issuable upon exercise of this
Warrant shall be treated for all purposes as the holder of record of such shares
as of the close of business on the date the Holder is deemed to have exercised
this Warrant.
2.6 Vesting. This Warrant shall vest fully upon issuance.
-------
3. VALID ISSUANCE: TAXES. All shares of Common Stock issued upon the
exercise of this Warrant shall be validly issued, fully paid and non-assessable,
and the Company shall pay all taxes and other governmental charges that may be
imposed in respect of the issue or delivery thereof. The Company shall not be
required to pay any tax or other charge imposed in connection with any transfer
involved in the issuance of any certificate for shares of Common Stock in any
name other than that of the Registered Holder of this Warrant, and in such case
the Company shall not be required to issue or deliver any stock certificate or
security until such tax or other charge has been paid, or it has been
established to the Company's reasonable satisfaction that no tax or other charge
is due.
4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number of shares
of Common Stock issuable upon exercise of this Warrant (or any shares of stock
or other securities or property receivable or issuable upon exercise of this
Warrant) and the Purchase Price are subject to adjustment upon occurrence of the
following events:
4.1 Adjustment for Stock Splits, Stock Subdivisions or Combinations of
------------------------------------------------------------------
Shares. The Purchase Price of this Warrant shall be proportionally decreased and
- ------
the number of shares of Common Stock issuable upon exercise of this Warrant (or
any shares of stock or other securities at the time issuable upon exercise of
this Warrant) shall be proportionally increased to reflect any stock split or
subdivision of the Company's Common Stock. The Purchase Price of this Warrant
shall be proportionally increased and the number of shares of Common Stock
issuable upon exercise of this Warrant (or any shares of stock or other
securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Common
Stock.
3
<PAGE>
4.2 Adjustment for Dividends or Distributions of Stock or Other
-----------------------------------------------------------
Securities or Property. In case the Company shall make or issue, or shall fix a
- ----------------------
record date for the determination of eligible holders entitled to receive, a
dividend or other distribution with respect to the Common Stock (or any shares
of stock or other securities at the time issuable upon exercise of the Warrant)
payable in (a) securities of the Company or (b) assets or (c) cash dividends
paid or payable solely out of retained earnings, but only if such cash dividends
are Extraordinary Dividends (as defined below), then, in each such case, the
Holder of this Warrant on exercise hereof at any time after the consummation,
effective date or record date of such dividend or other distribution, shall
receive, in addition to the shares of Common Stock (or such other stock or
securities) issuable on such exercise prior to such date, and without the
payment of additional consideration therefor, the securities, assets or cash to
which such Holder would have been entitled upon such date if such Holder had
exercised this Warrant on the date hereof and had thereafter, during the period
from the date hereof to and including the date of such exercise, retained such
shares and all such additional securities, assets or cash distributed with
respect to such shares as aforesaid during such period giving effect to all
adjustments called for by this Section 4. "Extraordinary Dividends" shall mean
---------
dividends or distributions declared with respect to the Common Stock that are in
an amount greater than 3% of the aggregate Fair Market Value of the shares of
capital stock receiving such dividends as of the trading day prior to the
declaration of such dividends or distributions.
4.3 Reclassification. If the Company, by reclassification of
----------------
securities or otherwise, shall change any of the securities as to which purchase
rights under this Warrant exist into the same or a different number of
securities of any other class or classes, this Warrant shall thereafter
represent the right to acquire such number and kind of securities as would have
been issuable as the result of such change with respect to the securities that
were subject to the purchase rights under this Warrant immediately prior to such
reclassification or other change, and the Purchase Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 4. No adjustment shall be made pursuant to this Section 4.3 upon any
- --------- -----------
conversion or redemption of the Common Stock which is the subject of Section
-------
4.5.
- ---
4.4 Adjustment for Capital Reorganization, Merger or Consolidation. In
--------------------------------------------------------------
case of any capital reorganization of the capital stock of the Company (other
than a combination, reclassification, exchange or subdivision of shares
otherwise provided for herein), or any merger or consolidation of the Company
with or into another corporation, or the sale of all or substantially all the
assets of the Company then, and in each such case, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Purchase Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 4. The foregoing provisions of this Section 4.4 shall similarly
--------- -----------
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Warrant. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect
4
<PAGE>
to the rights and interests of the Holder after the transaction, to the end that
the provisions of this Warrant shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable after
that event upon exercise of this Warrant.
4.5 Conversion of Common Stock. In case all or any portion of the
--------------------------
authorized and outstanding shares of Common Stock of the Company are redeemed or
converted or reclassified into other securities or property pursuant to the
Company's Certificate of Incorporation or otherwise, or the Common Stock
otherwise ceases to exist, then, in such case, the Holder of this Warrant, upon
exercise hereof at any time after the date on which the Common Stock is so
redeemed or converted, reclassified or ceases to exist (the "Termination Date"),
----------------
shall receive, in lieu of the number of shares of Common Stock that would have
been issuable upon such exercise immediately prior to the Termination Date, the
securities or property that would have been received if this Warrant had been
exercised in full and the Common Stock received thereupon had been
simultaneously converted immediately prior to the Termination Date, all subject
to further adjustment as provided in this Warrant. Additionally, the Purchase
Price shall be immediately adjusted to equal the quotient obtained by dividing
(x) the aggregate Purchase Price of the maximum number of shares of Common Stock
for which this Warrant was exercisable immediately prior to the Termination Date
by (y) the number of shares of Common Stock of the Company for which this
Warrant is exercisable immediately after the Termination Date, all subject to
further adjustment as provided herein.
4.6 Issuances Below Market. In case the Company shall issue or sell
----------------------
(a) Common Stock, (b) rights, warrants or options entitling the holders thereof
to subscribe for or purchase shares of Common Stock or (c) any security
convertible into Common Stock, in each case at a price, or having an exercise or
conversion price, per share less than the Purchase Price (excluding any issuance
for which an appropriate and full adjustment has been made pursuant to Section
4.2), the Purchase Price shall be immediately reduced by multiplying the
Purchase Price by a fraction of which (A) the numerator shall be the number of
shares of Common Stock outstanding immediately prior to such issuance or sale
plus the number of shares of Common Stock which the aggregate consideration
received or receivable (I) for the total number of shares of Common Stock,
rights, warrants or options or convertible securities so issued or sold and (II)
upon the exercise or conversion of all such rights, warrants, options or
securities, would purchase at such Purchase Price, and (B) the denominator shall
be the number of shares of Common Stock outstanding immediately prior to such
issuance plus (without duplication) the number of shares of Common Stock subject
to all such rights, warrants, options and convertible securities. The issuance
of any shares of Common Stock or other rights, warrants, options or convertible
securities pursuant to (a) the effectuation of a split or subdivision of the
outstanding shares of Common Stock or a dividend or other distribution payable
in additional shares of Common Stock or other securities or rights convertible
into, or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock, (b) Common Stock (or securities exercisable
or convertible into Common Stock) issuable or issued to employees, consultants
or directors of the Company after the Purchase Date directly or pursuant to a
stock option plan or restricted stock plan approved by the Board of Directors of
the Company, (c) securities issued pursuant to the conversion or exercise of
convertible or exercisable securities outstanding or deemed outstanding on the
date of this Warrant, and (d) securities issued or issuable in connection with
the acquisition, merger, consolidation, or other business combination by or of
the Company with, by, or of any person, shall not be deemed to constitute an
issuance or sale to which this Section 4.6 applies.
5
<PAGE>
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in
the Purchase Price, or number or type of shares issuable upon exercise of this
Warrant, the Chief Financial Officer or Controller of the Company shall compute
such adjustment in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment and showing in detail the facts upon
which such adjustment is based, including a statement of the adjusted Purchase
Price. The Company shall promptly send (by facsimile and by either first class
mail, postage prepaid or overnight delivery) a copy of each such certificate to
the Holder.
6. LOSS OR MUTILATION. Upon receipt of evidence reasonably
satisfactory to the Company of the ownership of and the loss, theft, destruction
or mutilation of this Warrant, and of indemnity reasonably satisfactory to it,
and (in the case of mutilation) upon surrender and cancellation of this Warrant,
the Company will execute and deliver in lieu thereof a new Warrant of like tenor
as the lost, stolen, destroyed or mutilated Warrant.
7. RESERVATION OF COMMON STOCK. The Company hereby covenants that at
all times there shall be reserved for issuance and delivery upon exercise of
this Warrant such number of shares of Common Stock or other shares of capital
stock of the Company as are from time to time issuable upon exercise of this
Warrant and, from time to time, will take all steps necessary to amend its
Certificate of Incorporation to provide sufficient reserves of shares of Common
Stock issuable upon exercise of this Warrant, including, without limitation,
engaging in best efforts to obtain the requisite stockholder approval of any
necessary amendment to the Certificate of Incorporation. All such shares shall
be duly authorized, and when issued upon such exercise, shall be validly issued,
fully paid and non-assessable, free and clear of all liens, security interests,
charges and other encumbrances or restrictions on sale and free and clear of all
preemptive rights, except encumbrances or restrictions arising under federal or
state securities laws. Issuance of this Warrant shall constitute full authority
to the Company's Officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock upon the exercise of this Warrant.
8. TRANSFER AND EXCHANGE. Subject to the terms and conditions of this
Warrant and compliance with all applicable securities laws, this Warrant and all
rights hereunder may be transferred to any Registered Holder's parent,
subsidiary or affiliate, or, if the Registered Holder is a partnership, to any
partner of such Registered Holder, or, if the Registered Holder is a limited
liability company, to any member of such Registered Holder, in whole or in part,
on the books of the Company maintained for such purpose at the principal office
of the Company referred to above, by the Registered Holder hereof in person, or
by duly authorized attorney, upon surrender of this Warrant properly endorsed
and upon payment of any necessary transfer tax or other governmental charge
imposed upon such transfer. Upon any permitted partial transfer, the Company
will issue and deliver to the Registered Holder a new Warrant or Warrants with
respect to the shares of Common Stock not so transferred. Each taker and holder
of this Warrant, by taking or holding the same, consents and agrees that when
this Warrant shall have been so endorsed, the person in possession of this
Warrant may be treated by the Company, and all other persons dealing with this
Warrant, as the absolute owner hereof for any purpose and as the person entitled
to exercise the rights represented hereby, any notice to the contrary
notwithstanding; provided, however that until a transfer of this Warrant is duly
registered on the books of the Company, the Company may treat the Registered
Holder hereof as the owner for all purposes.
9. RESTRICTIONS ON TRANSFER. The Holder, by acceptance hereof, agrees
that, absent an effective registration statement filed with the Securities and
Exchange Commission
6
<PAGE>
(the "SEC") under the Securities Act of 1933, as amended (the "Securities Act")
--- --------------
covering the disposition or sale of this Warrant or the Common Stock issued or
issuable upon exercise hereof, as the case may be, and registration or
qualification under applicable state securities laws, such Holder will not sell,
transfer, pledge, or hypothecate any or all of this Warrant or such Common
Stock, as the case may be, unless either (i) the Company has received an opinion
of counsel, in form and substance reasonably satisfactory to the Company, to the
effect that such registration is not required in connection with such
disposition, (ii) the sale of such securities is made pursuant to SEC Rule 144or
(iii) such sale or transfer is to the Holder's parent, subsidiary or affiliate,
or, if the Holder is a partnership, to any partner of such Holder, or, if the
Holder is a limited liability company, to any member of such Holder, pursuant to
an exemption under the Securities Act.
10. COMPLIANCE WITH SECURITIES LAWS. By acceptance of this Warrant,
the Holder hereby represents, warrants and covenants that any shares of stock
purchased upon exercise of this Warrant shall be acquired for investment only
and not with a view to, or for sale in connection with, any distribution
thereof; that the Holder has had such opportunity as such Holder has deemed
adequate to obtain from representatives of the Company such information as is
necessary to permit the Holder to evaluate the merits and risks of its
investment in the Company; that the Holder is able to bear the economic risk of
holding such shares as may be acquired pursuant to the exercise of this Warrant
for an indefinite period; that the Holder understands that the shares of stock
acquired pursuant to the exercise of this Warrant will not be registered under
the Securities Act (unless otherwise required pursuant to exercise by the Holder
of the registration rights, if any, granted to the Registered Holder) and will
be "restricted securities" within the meaning of Rule 144 under the Securities
Act and that the exemption from registration under Rule 144 will not be
available for at least one (1) year from the date of exercise of this Warrant,
subject to any special treatment by the SEC for exercise of this Warrant
pursuant to Section 2.2, and even then will not be available unless a public
-----------
market then exists for the stock, adequate information concerning the Company is
then available to the public, and other terms and conditions of Rule 144 are
complied with; and that all stock certificates representing shares of stock
issued to the Holder upon exercise of this Warrant or upon conversion of such
shares may have affixed thereto a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS
ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE
THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT
FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE
WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
11. NO RIGHTS OR LIABILITIES AS STOCKHOLDERS. This Warrant shall not
entitle the Holder to any voting rights or other rights as a stockholder of the
Company. In the
7
<PAGE>
absence of affirmative action by such Holder to purchase Common Stock by
exercise of this Warrant or Common Stock upon conversion thereof, no provisions
of this Warrant, and no enumeration herein of the rights or privileges of the
Holder hereof shall cause such Holder hereof to be a stockholder of the Company
for any purpose.
12. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Holder that:
12.1 Due Authorization; Consents. All corporate action on the
---------------------------
part of the Company, its officers, directors and shareholders necessary for (a)
the authorization, execution and delivery of, and the performance of all
obligations of the Company under, this Warrant, and (b) the authorization,
issuance, reservation for issuance and delivery of all of the Common Stock
issuable upon exercise of this Warrant, has been duly taken. This Warrant
constitutes a valid and binding obligation of the Company enforceable in
accordance with its terms, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, moratorium, reorganization and similar laws affecting
creditors' rights generally and to general equitable principles. All consents,
approvals and authorizations of, and registrations, qualifications and filings
with, any federal or state governmental agency, authority or body, or any third
party, required in connection with the execution, delivery and performance of
this Warrant and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, the issuance and delivery of all of the
Common Stock issuable upon exercise of this Warrant, have been obtained.
12.2 Organization. The Company is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power to own, lease and operate its property and
to carry on its business as now being conducted and as currently proposed to be
conducted.
12.3 Valid Issuance of Stock. The outstanding shares of the
-----------------------
capital stock of the Company are duly and validly issued, fully paid and non-
assessable, and such shares, and all outstanding options and other securities of
the Company, have been issued in full compliance with the registration and
prospectus delivery requirements of the Securities Act and the registration and
qualification requirements of all applicable state securities laws, or in
compliance with applicable exemptions therefrom, and all other provisions of
applicable federal and state securities laws, including without limitation,
anti-fraud provisions.
12.4 Governmental Consents. All consents, approvals, orders,
---------------------
authorizations or registrations, qualifications, declarations or filings with
any federal or state governmental authority on the part of the Company required
in connection with the consummation of the transactions contemplated herein,
including, without limitation, those under the Securities Act and all applicable
state securities laws, shall have been obtained prior to and be effective as of
the Effective Date.
12.5 Listing on Nasdaq or Securities Exchange. The Company shall
----------------------------------------
use its best efforts to list any shares of Common Stock issuable upon exercise
of this Warrant on Nasdaq or such other national securities exchange on which
shares of Common Stock are then listed. The Company will at its expense cause
all shares of Common Stock issued upon exercise of this Warrant to be listed on
Nasdaq and/or such other national securities exchange on which shares of Common
Stock are then listed at the time of such issuance and shall maintain such
listing.
8
<PAGE>
12.6 No Impairment. The Company further covenants that it will
-------------
not, by amendment of its Certificate of Incorporation or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
the Company.
13. NOTICES. Except as may be otherwise provided herein, all notices,
requests, waivers and other communications made pursuant to this Agreement shall
be in writing and shall be conclusively deemed to have been duly given (a) when
hand delivered to the other party; (b) when received when sent by facsimile at
the address and number set forth below; (c) three business days after deposit in
the U.S. mail with first class or certified mail receipt requested postage
prepaid and addressed to the other party as set forth below; or (d) the next
business day after deposit with a national overnight delivery service, postage
prepaid, addressed to the parties as set forth below with next-business-day
delivery guaranteed, provided that the sending party receives a confirmation of
delivery from the delivery service provider.
<TABLE>
<CAPTION>
<S> <C> <C>
To Holder: To the Company:
Stargen II LLC BioSource International, Inc.
820 Flynn Road
Camarillo, California 93012
Telephone No.: (805)
Facsimile No.: (805)
Attention: James Chamberlain
President and Chief Executive Officer
With copies to (which shall not With copies to (which shall not
constitute notice): constitute notice):
Latham & Watkins Troop Steuber Pasich Reddic & Tobey,
505 Montgomery Street, Suite 1900 LLP
San Francisco, CA 94111-2562 2029 Century Park East, 24th Floor
Telephone No.: (415) 391-0600 Los Angeles, CA 90067
Facsimile No.: (415) 395-8095 Telephone No.: (310) 728-3222
Attention: Scott Haber, Esq. Facsimile No.: (310) 728-2222
Attention: Scott W. Alderton Esq.
</TABLE>
Each person making a communication hereunder by facsimile shall promptly confirm
by telephone to the person to whom such communication was addressed each
communication made by it by facsimile pursuant hereto but the absence of such
confirmation shall not affect the validity of any such communication. A party
may change or supplement the addresses given above, or designate additional
addresses, for purposes of this Section 14 by giving the other party written
----------
notice of the new address in the manner set forth above.
14. HEADINGS. The headings in this Warrant are for purposes of
convenience in reference only, and shall not be deemed to constitute a part
hereof.
15. LAW GOVERNING. This Warrant shall be construed and enforced in
accordance with, and governed by, the laws of the State of California, with
regard to conflict of law principles of such state.
9
<PAGE>
16. NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or bylaws, or through reorganization,
consolidation, merger, dissolution, issue or sale of securities, sale of assets
or any other voluntary action, 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
Registered Holder of this Warrant against impairment. Without limiting the
generality of the foregoing, the Company (a) will not increase the par value of
any shares of stock issuable upon the exercise of this Warrant above the amount
payable therefor upon such exercise, and (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and non-assessable shares of Common Stock upon exercise of this
Warrant.
17. NOTICES OF RECORD DATE. In case:
17.1 the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the exercise of
this Warrant), for the purpose of entitling them to receive any dividend or
other distribution, or any right to subscribe for or purchase any shares of
stock of any class or any other securities or to receive any other right; or
17.2 of any consolidation or merger of the Company with or into
another corporation, any capital reorganization of the Company, any
reclassification of the capital stock of the Company, or any conveyance of all
or substantially all of the assets of the Company to another corporation in
which holders of the Company's stock are to receive stock, securities or
property of another corporation; or
17.3 of any voluntary dissolution, liquidation or winding-up of
the Company; or 17.4 of any redemption or conversion of all outstanding Common
Stock;
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock or (such stock or
securities as at the time are receivable upon the exercise of this Warrant),
shall be entitled to exchange their shares of Common Stock (or such other stock
or securities), for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. The Company shall use all reasonable
efforts to ensure such notice shall be delivered at least thirty (30) days prior
to the date therein specified.
18. SEVERABILITY. If any term, provision, covenant or restriction of
this Warrant is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Warrant shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
19. COUNTERPARTS. For the convenience of the parties, any number of
counterparts of this Warrant may be executed by the parties hereto and each such
executed counterpart shall be, and shall be deemed to be, an original
instrument.
10
<PAGE>
20. NO INCONSISTENT AGREEMENTS. The Company will not on or after the
date of this Warrant enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Holders of this Warrant or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to holders of the Company's securities under any other
agreements, except rights that have been waived.
21. SATURDAYS, SUNDAYS AND HOLIDAYS. If the Expiration Date falls on a
Saturday, Sunday or legal holiday, the Expiration Date shall automatically be
extended until 5:00 p.m. the next business day.
22. ENTIRE AGREEMENT. This Warrant, the Securities Purchase Agreement
dated as of January 10, 2000 by and among the Company and the Holder, and the
Investor Rights Agreement dated as of February __, 2000 by and among the Company
and the Holder, contain the sole and entire agreement and understanding of the
parties with respect to the entire subject matter of this Warrant, and any and
all prior discussions, negotiations, commitments and understandings, whether
oral or otherwise, related to the subject matter of this Warrant are hereby
merged herein.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
as of the Effective Date.
BIOSOURCE INTERNATIONAL, INC.
- -------------------------------------------
By
Printed Name
Title
11
<PAGE>
EXHIBIT A
---------
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
BioSource International, Inc.
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
the securities of BioSource International, Inc., as provided for therein, and
(check the applicable box):
[ ] tenders herewith payment of the exercise price in full in the form of
cash or a certified or official bank check in same-day funds in the
amount of $____________ for _________ such securities.
[ ] Elects the [Net Issue Exercise][Easy Sale Exercise] option pursuant to
Section 2.2 or 2.3 of the Warrant, and accordingly requests delivery of
a net of ______________ of such securities.
Please issue a certificate or certificates for such securities in the name of,
and pay any cash for any fractional share to (please print name, address and
social security number):
Name: ------------------------------------------------------------------
Address: ------------------------------------------------------------------
Signature: ------------------------------------------------------------------
Note: The above signature should correspond exactly with the name on the first
page of this Warrant Certificate or with the name of the assignee appearing in
the assignment form below.
If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher whole number of shares.
12
<PAGE>
EXHIBIT B
---------
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, hereby sells, assigns and transfers unto _______________ the
within Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________________________
attorney, to transfer said Warrant Certificate on the books of the within-named
Company with respect to the number of Warrants set forth below, with full power
of substitution in the premises:
- --------------------------------------------------------------------------------
Name(s) of Assignee(s) Address # of Warrants
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
And if said number of Warrants shall not be all the Warrants represented by the
Warrant Certificate, a new Warrant Certificate is to be issued in the name of
said undersigned for the balance remaining of the Warrants registered by said
Warrant Certificate.
------------------------------------------------------------------
Dated: ------------------------------------------------------------------
Signature: ------------------------------------------------------------------
Notice: The signature to the foregoing Assignment must correspond to the name
as written upon the face of this security in every particular, without
alteration or any change whatsoever; signature(s) must be guaranteed by an
eligible guarantor institution (banks, stock brokers, savings and loan
associations and credit unions with membership in an approved signature
guarantee medallion program) pursuant to Securities and Exchange Commission Rule
17Ad-15.
13
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0
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