<PAGE>
As filed with the Securities and Exchange Commission on March 22, 2000
Registration No. 333-32622
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
BIOSOURCE INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
Delaware 2835 77-0340829
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
820 Flynn Road
Camarillo, California 93012
(805) 383-5200
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
--------------
James H. Chamberlain
Chief Executive Officer & President
BioSource International, Inc.
820 Flynn Road
Camarillo, California 93012
(805) 383-5200
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Agent for Service)
--------------
Copies to:
<TABLE>
<S> <C>
Scott W. Alderton, Esq. Daniel Clivner, Esq.
Linda Giunta Michaelson, Esq. Michael Nooney, Esq.
Troop Steuber Pasich Reddick & Tobey, LLP Simpson Thacher & Bartlett
2029 Century Park East 3373 Hillview Avenue, Suite 250
Los Angeles, California 90067 Palo Alto, California 94304
(310) 728-3000 (650) 251-5000
</TABLE>
--------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
--------------
If the securities being registered to this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered in this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
--------------
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Title of Each Class of
Securities to be Proposed Maximum Aggregate
Registered Offering Price(1) Amount of Registration Fee
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<S> <C> <C>
Common Stock, $0.001 par
value $96,312,500 $25,427
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee,
pursuant to Rule 457(c) under the Securities Act of 1933, and based on the
average of the high and low prices on the Nasdaq National Market on March
15, 2000.
--------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 22, 2000
PROSPECTUS
4,000,000 Shares
[LOGO OF BIOSOURCE INTERNATIONAL]
Common Stock
Of the 4,000,000 shares offered in this prospectus, BioSource International,
Inc. is offering 3,350,000 shares and the selling stockholders of BioSource are
offering 650,000 shares. BioSource will not receive any proceeds from the sale
of shares by the selling stockholders.
BioSource's common stock is quoted on the Nasdaq National Market under the
symbol "BIOI". On March 20, 2000, the last reported sale price for our common
stock on the Nasdaq National Market was $15.50 per share.
-----------
<TABLE>
<CAPTION>
Per
Share Total
----- -----
<S> <C> <C>
Public offering price........................................... $ $
Underwriting discounts and commissions.......................... $ $
Proceeds to BioSource, before expenses.......................... $ $
Proceeds to selling stockholders, before expenses............... $ $
</TABLE>
BioSource and selling stockholders have granted the underwriters the right to
purchase up to an additional 600,000 shares to cover over-allotments.
-----------
Investing in our common stock involves a high degree of risk.
See "Risk Factors" beginning on page 7.
-----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined
whether this prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
CHASE H&Q
DAIN RAUSCHER WESSELS
THOMAS WEISEL PARTNERS LLC
, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Caution Regarding Reliance on Forward-Looking Statements................. 16
Use of Proceeds.......................................................... 17
Price Range of Common Stock.............................................. 17
Capitalization........................................................... 18
Selected Consolidated Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 26
Management............................................................... 36
Relationships and Related Transactions................................... 39
Principal and Selling Stockholders....................................... 40
Description of Capital Stock............................................. 43
Underwriting............................................................. 45
Legal Matters............................................................ 47
Experts.................................................................. 47
Where You Can Find More Information...................................... 47
Index to Consolidated Financial Statements and Financial Statement
Schedule................................................................ F-1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary may not contain all of the information you should consider before
investing in our common stock. You should read the entire prospectus carefully,
including "Risk Factors" and the financial statements and the related notes,
before making an investment decision. Except as otherwise noted, all
information in this prospectus assumes the underwriters' over-allotment option
will not be exercised, and each reference to a share of common stock includes
preferred share purchase rights issued under our rights agreement.
BioSource International
We develop, manufacture, market and distribute products used worldwide in
biomedical research that are instrumental in the development of new drug
therapies and medical diagnostic methods. Our products enable scientists and
biomedical researchers to better understand biochemistry, immunology and cell
biology of the human body, as well as disease processes. Through acquisitions
and internal growth, we believe we have grown to include a unique combination
of technological, production, and research and development skills resulting in
a full spectrum of products and services for the worldwide pharmaceutical and
biotechnology industries.
The biomedical research industry has seen significant advances in the
understanding of physiological processes at the cellular and molecular level.
In particular, the biotechnology industry has seen a substantial amount of
growth over the last year as efforts to sequence the human genetic structure,
or genome, have accelerated. Researchers have identified thousands of
previously unknown genes that potentially play key roles in physiological
systems in the human body. These genes are of significant interest to the
pharmaceutical industry, since they can be used as the basis of new therapeutic
discovery and development. The increase in biomedical research resulting from
the sequencing of the human genome has resulted in the need for methods and
products to accelerate and assist this research. The core competencies we have
developed in molecular and cellular biology, immunology and custom services
address this need.
We offer over 3,200 products that we group into the following product lines:
Assays; Antibodies; Bioactive Proteins and Peptides; Oligonucleotides; and
Serum, Buffers and Media. Our assays are primarily Enzyme-Linked ImmunoSorbent
Assay test kits and Radioimmuno Assays, and are used to measure substances,
mostly proteins, in biological samples. We produce both monoclonal and
polyclonal antibodies that are used to detect and quantitate antigens, and
separate and identify various types of cells. Our bioactive proteins and
peptides are used in basic research, drug discovery, enzymology, high
throughput screening, in vivo studies, x-ray crystallography and as antigens
for antibody production. Our oligonucleotides are synthetically-produced short
segments of DNA used for polymerase chain reaction, or PCR, initiation, gene
location and sequencing. We also sell serum, buffers and media for use as a
synthetic environment for cellular growth.
We have over 3,000 customers worldwide, including the customers of our
distributors. Our customers include:
<TABLE>
<CAPTION>
Pharmaceutical Biotechnology Universities Government
----------------------- --------------------- ------------------------------- ---------------------------------------
<S> <C> <C> <C>
American Home Products Amgen Brigham and Women's Hospital Centers for Disease Control
Aventis Pharmaceuticals Berlex Laboratories Georgetown University Food and Drug Administration
Baxter Biogen Johns Hopkins University National Cancer Institute
Boehringer Ingelheim Chiron UCLA National Institutes of Health
Glaxo Wellcome Human Genome Sciences UC San Francisco Veterans Administration Medical Centers
Johnson & Johnson Hyseq University of Michigan U.S. Army Research
Merck & Company Icos University of Pennsylvania
Pfizer IDEC Pharmaceuticals University of Texas MD Anderson
Pharmacia & Upjohn Rigel Pharmaceuticals Cancer Research Center
Schering-Plough
</TABLE>
3
<PAGE>
Our strategy is to capitalize on the growth of the biotechnology industry by
creating research tools and test kits that are not subject to the volatility
inherent in developing pharmaceuticals and includes the following components:
. We focus on the strategic direction of biomedical research with a strong
commitment to use innovative technologies and research techniques.
. We are committed to product development and believe by offering a broad
range of products we more fully address the needs of researchers.
. We believe we create superior value for, and offer greater affordability
and convenience to, our customers.
. We continuously evaluate potential acquisition candidates for
complementary products, businesses and technologies and have successfully
completed five acquisitions in the last seven years.
. We seek to create a team spirit among all of our employees that we
believe creates loyalty and pride, and translates into greater product
quality and enhanced customer service.
Corporate Information
Our principal executive offices are located at 820 Flynn Road, Camarillo,
California 93012, and our telephone number is (805) 383-5200. We maintain a
website at www.biosource.com. Information contained on our website does not
constitute part of this prospectus.
4
<PAGE>
The Offering
<TABLE>
<S> <C>
Shares offered by BioSource..................... 3,350,000 shares
Shares offered by the selling stockholders...... 650,000 shares
Total shares outstanding after the offering..... 13,155,552 shares
Use of proceeds................................. For strategic acquisitions of
businesses, products, services and
technologies; research and development;
working capital; and other general
corporate purposes.
Nasdaq National Market Symbol................... BIOI
</TABLE>
The number of shares of common stock outstanding after the offering is based
upon the number of shares outstanding as of March 20, 2000, assumes the
conversion of all outstanding shares of Series B Preferred Stock, which we
issued on February 15, 2000, into 1,485,200 shares of common stock and excludes
the following:
. 1,658,150 shares issuable upon the exercise of outstanding options to
acquire common stock as of March 20, 2000; and
. 1,357,860 shares issuable upon the exercise of outstanding warrants to
acquire common stock as of March 20, 2000.
Out of the total of 650,000 shares being offered by the selling
stockholders, 510,000 shares will be offered as a result of the prior
conversion of 127,500 shares of Series B Preferred Stock by the holders of the
Series B Preferred Stock. In the event that none of the remaining shares of the
Series B Preferred Stock are converted into shares of common stock in
connection with the consummation of this offering, the total number of shares
of common stock outstanding after the offering will be 12,040,352. For
information regarding the circumstances under which the Series B Preferred
Stock may be required to convert into common stock, you should read the section
of this prospectus titled "Description of Capital Stock--Series B Preferred
Stock."
5
<PAGE>
Summary Consolidated Financial Data
The following summary consolidated financial data for the years ended
December 31, 1995, 1996, 1997, 1998 and 1999, and as of December 31, 1999, is
derived from our audited consolidated financial statements. You should read
this summary consolidated financial data in conjunction with the sections of
the prospectus titled "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," as
well as the consolidated financial statements and related notes included in
this prospectus.
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------
1995 1996 1997 1998 1999
------ ------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of Operations
Data:
Net sales............................ $8,608 $15,913 $20,572 $21,859 $29,257
Cost of sales...................... 2,996 5,568 6,930 13,189 11,071
------ ------- ------- ------- -------
Gross profit......................... 5,612 10,345 13,642 8,670 18,186
Operating expenses:
Research and development........... 1,074 1,421 2,078 2,648 3,315
Sales and marketing................ 1,290 2,762 4,043 4,338 4,737
General and administrative......... 1,633 2,703 3,552 4,469 4,460
Purchased in-process technology.... -- -- -- 4,222 --
Amortization of intangibles........ -- -- 31 95 1,061
------ ------- ------- ------- -------
Operating income (loss).............. 1,615 3,460 3,938 (7,102) 4,613
Interest and other income
(expense), net.................... (4) 3 708 432 (1,016)
------ ------- ------- ------- -------
Income (loss) before income taxes.... 1,611 3,463 4,646 (6,670) 3,597
Income tax expense (benefit)....... 451 696 1,460 (1,535) 20
------ ------- ------- ------- -------
Net income (loss).................... $1,160 $ 2,767 $ 3,186 $(5,136) $ 3,577
====== ======= ======= ======= =======
Net income (loss) per share:
Basic.............................. $ 0.20 $ 0.38 $ 0.38 $ (0.68) $ 0.49
Diluted............................ $ 0.20 $ 0.35 $ 0.36 $ (0.68) $ 0.46
Weighted average shares outstanding:
Basic.............................. 5,827 7,282 8,318 7,509 7,235
Diluted............................ 5,946 8,009 8,965 7,509 7,833
</TABLE>
<TABLE>
<CAPTION>
As of
December 31, 1999
-------------------
Actual As Adjusted
------- -----------
(in thousands)
<S> <C> <C>
Consolidated Balance Sheet Data:
Current assets.............................................. $18,325 $60,716
Intangible assets, net of accumulated amortization.......... 13,816 13,816
Total assets................................................ 40,222 82,613
Current liabilities......................................... 7,340 4,586
Long-term debt, less current portion........................ 11,459 --
Total stockholders' equity.................................. 21,422 78,027
</TABLE>
The As Adjusted Consolidated Balance Sheet Data as of December 31, 1999 has
been adjusted to give effect to the following:
. the proceeds from the issuance of 371,300 shares of Series B Preferred
Stock on February 15, 2000; and
. our receipt of approximately $48,219,500 in net proceeds from this
offering of 3,350,000 shares of common stock pursuant to this prospectus,
at an assumed public offering price of $15.50 per share, after deducting
underwriting discounts and our estimated offering expenses.
6
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus 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 expect to use the net proceeds from this offering to acquire
complementary businesses, products, services and technologies; for research and
development; working capital and other general corporate purposes. From time to
time, we evaluate potential acquisitions of complementary businesses, products
or technologies and expect that we may likely undertake one or more
acquisitions during 2000. As of the date of this prospectus, we have no
understandings, commitments or agreements with respect to any acquisition.
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.
7
<PAGE>
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
8
<PAGE>
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
9
<PAGE>
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
10
<PAGE>
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.
11
<PAGE>
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.
12
<PAGE>
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 Offering
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 20, 2000 and from $6.06 to $32.00 per share from January 1, 2000
through March 20, 2000. For additional information regarding the price range of
our common stock, see "Price Range of Common Stock."
13
<PAGE>
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.
Future sales of currently outstanding shares could adversely affect our stock
price.
The market price of our common stock could drop as a result of sales of a
large number of shares in the market after this offering or in response to the
perception that these sales could occur. Upon completion of this offering, we
may have outstanding up to 14,513,412 shares of common stock, which are based
upon shares outstanding as of March 20, 2000, the conversion of all of our
Series B Preferred Stock and the exercise of all then exercisable warrants. Of
these shares, most will be registered and freely tradable. In addition we have
filed registration statements on Form S-8 under the Securities Act that cover
1,181,137 shares of common stock pursuant to outstanding but unexercised vested
options to acquire our common stock. Furthermore, the beneficial owners of
2,262,220 shares have the right to request that we register those shares for
sale in the public market. Following this offering, approximately 3,450,010
shares will be subject to agreements, which subject to limited exceptions,
prevent the sale of these shares for 90 days following the consummation of this
offering. After expiration of this lock-up period, all of these shares will be
eligible for immediate sale, in some instances subject to the volume
limitations of Rule 144. In addition, the underwriters of this offering can
release shares from one or more of the lock-up agreements without our approval.
Our management may not use the proceeds from this offering effectively.
Our management will have broad discretion over the use of a significant
portion of the proceeds of this offering for the foreseeable future.
Accordingly, our management may allocate the proceeds differently than
investors in this offering would have preferred, or we may fail to maximize our
returns on the proceeds of this offering.
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.
14
<PAGE>
Our principal stockholders and management own a significant percentage of our
capital stock and will be able to exercise significant influence over our
affairs.
After the completion of this offering, our executive officers, directors and
principal stockholders will continue to beneficially own 22.3% of our
outstanding common stock, based upon the beneficial ownership of our common
stock as of March 1, 2000. In addition, these same persons also hold options to
acquire additional shares of our common stock, which may increase their
percentage ownership of the common stock further in the future. Accordingly,
these stockholders:
. will be able to significantly influence the composition of our board of
directors;
. will significantly influence all matters requiring stockholder approval,
including change of control transactions; and
. will continue to have significant influence over our affairs.
This concentration of ownership of our common stock could have the effect of
delaying or preventing a change of control of us or otherwise discouraging a
potential acquirer from attempting to obtain control of us. This in turn could
have a negative effect on the market price of our common stock. It could also
prevent our stockholders from realizing a premium over the market prices for
their shares of common stock.
Absence of dividends could reduce our attractiveness to you.
Some investors favor companies that pay dividends, particularly in general
downturns in the stock market. We have never declared or paid any cash
dividends on our common stock. We currently intend to retain any future
earnings for funding growth and we do not currently anticipate paying cash
dividends on our common stock in the foreseeable future. Because we may not pay
dividends, your return on this investment likely depends on your selling our
stock at a profit.
15
<PAGE>
CAUTION REGARDING RELIANCE ON FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties that include, but are not limited to, the following:
. failure to manage growth and expansion;
. the unsuccessfulness or regulation by the government of our research and
development;
. inability to obtain licenses for new products or technologies;
. our financial condition and results of operations;
. international sales;
. new product introduction and success; and
. volatility of our stock price.
You can identify forward-looking statements generally by the use of forward-
looking terminology such as "believes," "may," "will," "plans," "estimates,"
"continues," "intends," "expects," "should," "could," "seeks," "pro forma,"
"anticipates," or other variations, including their use in the negative, or by
discussions of strategies, opportunities, plans or intentions. You may find
these forward-looking statements under the captions "Prospectus Summary," "Risk
Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Result of Operations," and "Business," as well as other captions
elsewhere in this prospectus. A number of factors could cause results to differ
materially from those anticipated by these forward-looking statements,
including those discussed under "Risk Factors" and "Business."
These forward-looking statements necessarily depend on assumptions and
estimates that may prove to be incorrect. Although we believe that the
assumptions and estimates reflected in the forward-looking statements are
reasonable, we cannot guarantee that we will achieve our plans, intentions, or
expectations. The forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results to differ in
significant ways from any future results expressed or implied by the forward-
looking statements.
The cautionary statements made in this prospectus are intended to apply to
all related forward-looking statements wherever they appear in this prospectus.
We assume no obligation to update these forward-looking statements or to update
the reasons why actual results could differ materially from those anticipated
in these forward-looking statements.
16
<PAGE>
USE OF PROCEEDS
BioSource will receive an estimated $48.2 million in net proceeds from the
sale of 3,350,000 shares of common stock offered by us pursuant to this
prospectus, or $49.7 million if the underwriters' over-allotment option is
exercised in full, at an assumed public offering price of $15.50 per share,
after deducting the underwriting discounts and commissions and estimated
offering expenses. We will not receive any proceeds from the sale of common
stock by the selling stockholders.
We intend to use the net proceeds from this offering to acquire
complementary businesses, products, services and technologies; for research and
development; working capital; and other general corporate purposes. From time
to time, we evaluate potential acquisitions of complementary businesses,
products or technologies and expect that we may likely undertake one or more
such acquisitions during 2000. As of the date of this prospectus, we have no
understandings, commitments or agreements with respect to any acquisition.
Accordingly, our management will retain broad discretion as to the allocation
of the net proceeds of this offering.
Pending the uses discussed above, we intend to invest the net proceeds of
this offering in United States government short-term, interest-bearing
securities or other guaranteed obligations of the United States government.
PRICE RANGE OF COMMON STOCK
Our common stock is traded on the Nasdaq National Market under the symbol
"BIOI." The following table sets forth, for the periods indicated, the high and
low sales price per share of our common stock as reported on the Nasdaq
National Market.
<TABLE>
<CAPTION>
High Low
------ -----
<S> <C> <C>
1998 Fiscal Year
First Quarter................................................. $ 7.00 $5.44
Second Quarter................................................ 7.00 5.50
Third Quarter................................................. 6.25 3.06
Fourth Quarter................................................ 3.88 2.41
1999 Fiscal Year
First Quarter................................................. $ 4.75 $2.50
Second Quarter................................................ 5.38 3.63
Third Quarter................................................. 6.13 3.75
Fourth Quarter................................................ 9.69 3.25
2000 Fiscal Year
First Quarter, through March 20, 2000......................... $32.00 $6.06
</TABLE>
On March 20, 2000, the last reported sale price of our common stock on the
Nasdaq National Market was $15.50. As of March 20, 2000, there were 8,180,352
shares of our common stock outstanding held by approximately 569 holders of
record.
17
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999 on
an actual basis and "as adjusted with full conversion" to give effect to the
following:
. the issuance of 371,300 shares of Series B Preferred Stock on February
15, 2000 and the conversion of all of those shares of Series B Preferred
Stock into 1,485,200 shares of common stock; and
. our receipt of approximately $48,219,500 in net proceeds from our
offering pursuant to this prospectus of 3,350,000 shares of common stock
at an assumed public offering price of $15.50 per share, after deducting
underwriting discounts and our estimated offering expenses.
The following table also sets forth our capitalization as of December 31,
1999 "as adjusted without full conversion," which gives effect to the same
items to which "as adjusted with full conversion" gives effect, except that
adjustment is made for the conversion of only 127,500 of the shares of Series B
Preferred Stock into 510,000 shares of common stock, with the remaining 243,800
shares of Series B Preferred Stock remaining unconverted.
We will not receive any proceeds from the sale of common stock in this
offering by the selling stockholders. The capitalization information set forth
in the table below should be read in conjunction with the more detailed
Consolidated Financial Statements of BioSource and the related notes included
in this prospectus.
<TABLE>
<CAPTION>
At December 31, 1999
-------------------------------
As
Adjusted
As Adjusted Without
With Full Full
Actual Conversion Conversion
------- ----------- ----------
(in thousands)
<S> <C> <C> <C>
Long-term liabilities, less current portion.... $11,459 $ -- $ --
------- ------- -------
Stockholders' equity:
Preferred Stock, $0.001 par value; 1,000,000
shares authorized; no shares issued or
outstanding, actual; 371,300 shares as
adjusted with full conversion; and 127,500
shares, as adjusted without full
conversion.................................. -- -- 4,318
Common Stock, $0.001 par value; 20,000,000
shares authorized; 7,711,716 shares issued
and 7,425,716 shares outstanding, actual;
12,546,916 shares issued and 12,260,916
shares outstanding, as adjusted with full
conversion; and 11,571,716, shares issued
and 11,285,716 shares outstanding, as
adjusted without full conversion............ 7 12 11
Additional paid-in capital................... 22,026 79,574 75,257
Retained earnings............................ 948 -- --
Accumulated other comprehensive loss......... (1,559) (1,559) (1,559)
------- ------- -------
Total stockholders' equity..................... 21,422 78,027 78,027
------- ------- -------
Total capitalization........................... $32,881 $78,027 $78,027
======= ======= =======
</TABLE>
The number of outstanding shares as of December 31, 1999 excludes:
. 1,993,925 shares of common stock issuable upon exercise of outstanding
stock options with weighted average exercise prices ranging from
approximately $3.24 to $3.48 per share; and
. warrants to purchase 218,100 shares of common stock, exercisable at
prices ranging from $7.50 to $11.10 per share.
In addition, on February 15, 2000, we issued warrants to purchase a total of
1,287,000 shares of our common stock, exercisable at $7.77 per share.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected data presented below under the captions "Consolidated Statement
of Operations Data" and "Consolidated Balance Sheet Data" for, and as of the
end of, each of the years in the five-year period ended December 31, 1999, are
derived from our consolidated financial statements that have been audited by
KPMG LLP, independent certified public accountants. The consolidated financial
statements as of December 31, 1999 and 1998, and for each of the years in the
three-year period ended December 31, 1999, and the report on these statements,
are included in this prospectus. The consolidated financial statements as of
December 31, 1995, 1996 and 1997, and for each of the years in the two-year
period ended December 31, 1996 are not included in this prospectus. You should
read the selected consolidated financial data together with our historical
financial statements and related notes to our audited reports, as well as the
section included in this prospectus entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------
1995 1996 1997 1998 1999
------ ------- ------- ------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of Operations
Data:
Net sales............................ $8,608 $15,913 $20,572 $21,859 $29,257
Cost of sales...................... 2,996 5,568 6,930 13,189 11,071
------ ------- ------- ------- -------
Gross profit......................... 5,612 10,345 13,642 8,670 18,186
Operating expenses:
Research and development........... 1,074 1,421 2,078 2,648 3,315
Sales and marketing................ 1,290 2,762 4,043 4,338 4,737
General and administrative......... 1,633 2,703 3,552 4,469 4,460
Purchased in-process technology.... -- -- -- 4,222 --
Amortization of intangibles........ -- -- 31 95 1,061
------ ------- ------- ------- -------
Operating income (loss).............. 1,615 3,460 3,938 (7,102) 4,613
Interest and other income
(expense), net.................... (4) 3 708 432 (1,016)
------ ------- ------- ------- -------
Income (loss) before income taxes.... 1,611 3,463 4,646 (6,670) 3,597
Income tax expense (benefit)....... 451 696 1,460 (1,535) 20
------ ------- ------- ------- -------
Net income (loss).................... $1,160 $ 2,767 $ 3,186 $(5,136) $ 3,577
====== ======= ======= ======= =======
Net income (loss) per share:
Basic.............................. $ 0.20 $ 0.38 $ 0.38 $ (0.68) $ 0.49
Diluted............................ $ 0.20 $ 0.35 $ 0.36 $ (0.68) $ 0.46
Weighted average shares outstanding:
Basic.............................. 5,827 7,272 8,318 7,509 7,235
Diluted............................ 5,946 8,009 8,965 7,509 7,833
<CAPTION>
As of December 31,
----------------------------------------
1995 1996 1997 1998 1999
------ ------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Current assets....................... $6,317 $22,407 $27,636 $18,278 $18,325
Total assets......................... 7,388 33,795 33,157 41,400 40,222
Current liabilities.................. 1,321 4,320 3,206 10,039 7,340
Long term debt, less current
portion............................. 64 1,314 1,292 13,666 11,459
Total stockholders' equity........... 5,897 28,161 28,658 17,696 21,422
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements of BioSource and the related notes included
elsewhere in this prospectus. Our discussion contains forward-looking
statements based upon current expectations that involve risks and
uncertainties, such as our plans, objectives, expectations and intentions. Our
actual results and the timing of events could differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those set forth under "Risk Factors," "Business" and elsewhere in
this prospectus.
Overview
We develop, manufacture, market and distribute products used worldwide in
biomedical research that are instrumental in the development of new drug
therapies and medical diagnostic methods. Our products enable scientists and
biomedical researchers to better understand biochemistry, immunology and cell
biology of the human body, as well as disease processes. Through acquisitions
and internal growth, we believe we have grown to include a unique combination
of technological, production, and research and development skills resulting in
a full spectrum of products and services for the worldwide pharmaceutical and
biotechnology industries.
BioSource was originally incorporated as a California corporation in October
1989, and was reincorporated as a Delaware corporation in May 1993 in
connection with the acquisition of TAGO Immunologicals, Inc., a manufacturer of
immunological reagents derived from antibodies produced in goats and other
animals. In November 1995, we acquired Keystone Laboratories, Inc., a
manufacturer of oligonucleotides. In June 1996, we acquired assets and assumed
selected liabilities of Medgenix Diagnostics, S.A. located in Fleurus, Belgium.
The Medgenix assets consisted of diagnostic and research assay kits, and
included manufacturing and distribution facilities, research and development
laboratories, customer accounts and an existing employee base. In December
1998, BioSource acquired Quality Controlled BioChemicals, Inc., a manufacturer
of peptides and antibodies. In December 1998, we also acquired substantially
all the assets and selected liabilities of Biofluids, Inc., a manufacturer of
serum, buffers and media.
In 1998, we incurred a net loss of $5,135,800. The loss was primarily the
result of charges of approximately (1) $4,966,000 related to the establishment
of valuation reserves for our antibody inventories, and the reduction of our
inventory value for Enzyme-Linked ImmunoSorbent Assay, or ELISA, test kits and
products manufactured in Europe and (2) $4,222,000 related to purchased in-
process technology in connection with our acquisition of QCB in December 1998.
As a result of the 1998 net loss, we had net operating losses that benefited
our income tax provision in 1999. All of our net operating losses have been
recognized as of December 31, 1999.
We currently manufacture products for inventory and ship products shortly
after receipt of orders and anticipate that we will continue to do so in the
future. Accordingly, we have not developed a significant backlog of products
and do not anticipate we will develop a material backlog of products in the
future.
Consolidated Results of Operations
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Net sales. Net sales were $29,257,000 in 1999 compared to $21,858,600 in
1998, an increase of $7,398,400 or 33.8%. $5,501,200 of the increase is
attributable to the revenues generated from the QCB and Biofluids acquisitions
in December 1998. The remaining increase is related to the increase in the
volume of sales of assay kits and oligonucleotides. Foreign sales represented
47.0% of total sales in 1999 and 59.5% of total sales in 1998. Net sales in the
United States were $15,518,000 in 1999 compared to $8,844,100 in 1998, an
increase of $6,673,900 or 75.5%. $5,501,200 of the increase is attributable to
the revenues generated
20
<PAGE>
from the QCB and Biofluids acquisitions in December 1998. The additional
increase was generated primarily from the increase in the sales of assay kits
and oligonucleotides. Net sales to Japan were $2,790,000 in 1999, an increase
of $155,300, or 5.9%, over the prior year. European sales were $10,139,400 in
1999, an increase of $447,000 or 4.6%. This increase was primarily due to an
increase in sales of assay kits.
Gross profit. Gross profit in 1999 was $18,186,500, or 62.2% of net sales,
compared to $8,670,000 or 39.7% of sales for 1998. The increased gross margin
is primarily the result of a 1998 charge of approximately $4,966,000 related to
(1) the establishment in 1998 of valuation reserves for antibody inventories
and (2) the reduction of inventory value for ELISA test kits and products
manufactured in Europe.
Research and development. Research and development expense in 1999 was
$3,315,400 and in 1998 was $2,648,300. Increased costs in domestic expenditures
of approximately $1,002,000 were due to the additional expenditures of our QCB
subsidiary acquired in December 1998. These costs were offset by a reduction of
$297,000 in our European expenses related to staff and other cost reductions in
Europe.
Purchased in-process technology. The purchased in-process technology charge
in 1998 of $4,222,000 relates to the portion of the QCB purchase price that was
allocated to products in development which had not yet reached technological
feasibility as of the acquisition date and did not have alternative future
uses. In accordance with applicable accounting rules, purchased in-process
technology is required to be expensed. You should read Note 2 of the Notes to
Consolidated Financial Statements for further discussion on this item.
Sales and marketing. Sales and marketing expense was $4,736,900 in 1999
compared to $4,337,500 in 1998. The increased sales and marketing expense of
$399,400, or 9.2%, is primarily due to additional costs associated with sales
and marketing activities of our QCB subsidiary and Biofluids division acquired
in December 1998 as well as overall increased advertising and other marketing
programs.
General and administrative. General and administrative expenses were
$4,460,300 in 1999 and $4,468,900 in 1998. General and administrative expenses
decreased as a result of a 1998 settlement of a legal claim by the former
landlord of our Belgium facility and costs associated with the transition and
relocation of our Belgium subsidiary, offset by an increase of additional costs
related to the acquisitions of QCB and Biofluids in December 1998.
Amortization of intangibles. Amortization of intangible assets was
$1,060,700 in 1999 and $95,100 in 1998. The increase was due to the full year
amortization of intangible assets acquired in connection with the acquisitions
of QCB and Biofluids in December 1998.
Interest income and expense. Interest expense of $1,367,300 in 1999 and
$215,900 in 1998 was related to the interest expense on the note used to
finance the acquisition of QCB and Biofluids in December 1998. Interest income
of $397,200 in 1999 and $513,400 in 1998 was derived from interest income on
invested cash.
Income tax expense (benefit). The income tax expense in 1999 was $19,600
while the income tax benefit in 1998 was $1,534,600. The effective income tax
rate of 0.5% for 1999 reflects the benefit of the utilization of all prior net
operating losses in our Belgium and other European subsidiaries. The effective
rate of 23.0% for 1998 reflects non-deductible foreign losses of approximately
$923,400.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Net sales. Net sales were $21,858,600 in 1998, an increase of $1,286,800 or
6.3% over 1997. Net sales in the United States were $8,844,100 in 1998, an
increase of $1,392,000, or 18.7%, over 1997. The increase in sales was driven
by increases in sales of assays and oligonucleotides. Net sales to European
customers were $9,692,400 in 1998, a decrease of $292,200, or 2.9%, over 1997.
The decline in sales was driven primarily by reduced sales of radioimmuno assay
kits. These kits were facing strong competition from non-radioactive assays and
as a result we were realizing a decline in revenue and market share. Net sales
in Japan
21
<PAGE>
were $2,634,700 in 1998, an increase of $181,300, or 7.4%, over the prior year.
The increase in sales was driven primarily by increases in sales of our ELISA
kits to both new and existing Japanese customers. However, Japanese sales in
the December 1998 quarter were affected by the adverse economic climate in
Asia. A large portion of our sales are derived from foreign sales, representing
59.5% of our net sales in 1998 and 63.8% of our net sales in 1997. Although the
percentage of domestic sales to total net sales has remained relatively
constant, domestic sales volume has increased by 18.7% in 1998 and 9.7% in 1997
as compared to the prior year.
Gross profit. Gross profit was $8,670,000, or 39.7%, in 1998 and
$13,641,700, or 66.3%, in 1997. The decline in gross profit of $4,971,700, or
36.4%, in 1998 as compared to 1997 was primarily the result of charges of
approximately $4,966,000 related to (1) the establishment of a valuation
reserve for our antibody inventory and (2) the reduction of inventory value for
ELISA test kits and products manufactured in Europe. Our strategy is to
maintain a broad base of products available for sale to our customers. With
regard to the antibody product inventory, we offer over 1,000 antibodies for
sale and find it to be more cost efficient to produce large quantities of the
antibody product during each production run. However, this inventory turns
slowly. Attempts have been made to reduce the quantity of antibody inventory
maintained in stock in order to increase the inventory turnover. However, this
approach did not allow us to maintain proper strategic levels of inventory
necessary to service our customer needs. As a result, in order to properly
account for excess or slow moving inventory resulting from large production
runs, the appropriate financial management policy with regard to the antibody
inventory was determined to be one of expensing the cost of production as
incurred as a component of cost of sales. Also contributing to the reduced
gross profit is an increased percentage of sales of lower profit
oligonucleotides as compared to the prior year and costs relating to the sale
of custom antibodies, custom peptides, sera, buffers and media resulting from
our acquisitions of QCB and Biofluids in December 1998.
Research and development. Research and development expense was $2,648,300 in
1998 and $2,077,700 in 1997. The increased research and development expense of
$570,600 in 1998 as compared to 1997 is primarily due to increased staffing
costs, expenditures related to the development of new product lines and
additions to current product lines, a reduction in grant funds received in the
current fiscal year and research and development expenditures related to QCB
for the month of December 1998.
Purchased in-process technology. Purchased in-process technology was
$4,222,000 in 1998 as compared to zero in 1997. The purchased in-process
technology charge in 1998 relates to the portion of the QCB purchase price that
was allocated to products in development which had not yet reached
technological feasibility as of the acquisition date and did not have
alternative future uses. In accordance with applicable accounting rules,
purchased in-process technology is required to be expensed. You should read
Note 2 of the Notes to Consolidated Financial Statements for further discussion
on this item.
Sales and marketing. Sales and marketing expenses were $4,337,500 in 1998
and $4,043,000 in 1997. The increased sales and marketing expense of $294,500,
or 7.3%, in 1998 as compared to 1997 is primarily due to increased staffing
costs, costs related to the repatriation of a United States employee that had
been assigned to an overseas position and increased advertising and other
marketing programs.
General and administrative. General and administrative expenses were
$4,468,900 in 1998 and $3,552,000 in 1997. The increased general and
administrative expense of $916,900, or 25.8%, in 1998 as compared to 1997 is
primarily due to increased staffing costs, the settlement of a claim by our
former landlord of our Belgian facility, costs associated with the closure of
overseas offices, costs related to the repatriation of a United States employee
that had been assigned to an overseas position and costs related to operating
QCB and Biofluids for the period from the acquisition dates to December 31,
1998. The increased general and administrative expense of $849,500, or 31.4%,
in 1997 as compared to 1996 is primarily due to incremental costs associated
with the acquisition of BioSource Europe. Additionally, costs increased in the
United States predominantly due to increased staffing costs required to support
BioSource's domestic growth.
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<PAGE>
Amortization of intangible assets. Amortization of intangible assets was
$95,100 in 1998 and $30,700 in 1997. The increase of $64,400 was due to the
amortization of intangible assets acquired in conjunction with the acquisitions
of QCB and Biofluids in December 1998.
Interest income and expense. Interest expense of $215,900 in 1998 was
related to the interest expense on the note used to finance the acquisition of
QCB and Biofluids. Interest expense of $133,000 in 1997 was related to interest
expense on the notes used to finance the purchase of our current facilities in
Camarillo, California. Interest income of $513,400 in 1998 and $760,400 in 1997
was derived from interest income on invested cash.
Income tax expense (benefit). Our income tax benefit for the year ended
December 31, 1998 was $1,534,600. Our income tax expense for the year ended
December 31, 1997 was $1,460,000. The income tax benefit recorded in 1998 is
primarily due to the inventory valuation reserves and purchased in-process
technology charges recorded in 1998.
Liquidity and Capital Resources
Cash and cash equivalents as of December 31, 1999 of $4,644,500 decreased by
$2,432,400, or 34%, from $7,076,900 at December 31, 1998. The decrease in cash
resulted primarily from the use of cash to reduce outstanding borrowings.
Working capital, which is the excess of current assets over current
liabilities, at December 31, 1999, was $10,984,900 as compared to $8,239,400 at
December 31, 1998 representing an increase of $2,745,500 or 33%. BioSource's
policy is to maintain liquidity in its investments to provide working capital
and have the ability to react to future potential long-term investment
opportunities in complementary businesses, products and technologies.
Capital expenditures of $1,077,000 for the year ended December 31, 1999 were
primarily for the purchases of laboratory, manufacturing and computer
equipment. The funding for these expenditures was obtained from our working
capital.
In April 1997, the Board of Directors authorized us to repurchase up to
200,000 shares of our outstanding common stock at market price. In December
1997, the Board of Directors authorized us to repurchase up to 1,000,000
additional shares of our outstanding common stock at market price and in August
1998 we were authorized to repurchase up to an additional 300,000 shares of our
outstanding common stock at market price. No shares were repurchased during the
year ended December 31, 1999 or for the period from January 1, 2000 through
March 15, 2000. As of December 31, 1999, we have repurchased a total of
1,279,500 shares of our common stock for $8,054,300, an average price of $6.29
per share, since the inception of the repurchase program in April 1997.
In December 1998, we executed a loan agreement with Union Bank of
California, N.A. and borrowed $14,000,000 which was used to finance the
acquisitions of the stock of QCB and all of the assets and selected liabilities
of Biofluids. As of December 31, 1999, the balance was $12,000,000. On February
16, 2000, we repaid $8,100,000 of our borrowings under the loan agreement with
the proceeds of our Series B Preferred Stock and warrants financing. On March
11, 2000, we amended this loan agreement to convert our balance of $3,400,000
to a line of credit and on March 13, 2000, we repaid $3,000,000 of the line of
credit. Our line of credit provides for borrowings of up to $3,400,000 and
expires on February 26, 2001. Interest on the line of credit is payable monthly
at LIBOR plus 2%. Covenants in the loan agreement require us to maintain a
minimum ratio of total liabilities to tangible net assets, achieve minimum net
profit levels, and comply with specified ratios of earnings before interest,
taxes, depreciation and amortization to debt service costs. We are also
required to comply with various non-financial covenants. As of the date of this
prospectus, we were in compliance with regard to these covenants.
QCB had six loans outstanding aggregating $1,394,700 with MetroWest Bank
which we assumed upon completion of the acquisition of QCB in December 1998.
These loans were refinanced with Union Bank of California, N.A in January 2000.
As of January 20, 2000, we had completely repaid each of these loans with the
proceeds received from the sale of warrants.
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<PAGE>
On February 15, 2000, we issued 371,300 shares of our 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 our common
stock at an effective price of $6.06 per share of common stock. The Series B
Preferred Stock will be entitled to receive in-kind dividends at a rate of 8%
of the original issue price. Unless all dividends on the outstanding shares of
Series B Preferred Stock have been paid, no dividends or other distributions
shall be paid to common stockholders. The Series B Preferred Stock has a
liquidation preference to the common stock. 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 sale 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 us 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
are not met.
In connection with the issuance of Series B Preferred Stock, the holders
received detachable stock purchase warrants. The warrants are exercisable for
1,287,000 shares of common stock at an exercise price of $7.77 per share. We
allocated the net proceeds of $8,385,000 based on the relative fair value of
the warrants and the Series B Preferred Stock. The book value of the Series B
Preferred Stock of $5,581,600 will accrete to its liquidation value immediately
by $995,100 related to the beneficial conversion feature, then through February
2004 or earlier upon accelerated conversion, under the interest method. This
accretion will not have an effect on net income, but will reduce the income
available to common stockholders used to calculate basic earnings per share.
On March 8, 2000, we entered into a lease for a new facility in Camarillo,
California. The lease will commence on May 1, 2000, and expires on June 30,
2005, with the option to continue the lease for two additional five-year terms.
Annual lease payments in the initial five-year period ended December 31, 2005,
range from $342,000 at inception to $411,000 at termination.
We currently estimate that we will use the net proceeds from this offering
to acquire complementary businesses, products, services and technologies; for
research and development; working capital; and other general corporate
purposes. From time to time, we evaluate potential acquisitions of
complementary businesses, products or technologies and expect that we may
likely undertake one or more such acquisitions during 2000. As of the date of
this prospectus, we have no understandings, commitments or agreements with
respect to any acquisition. Accordingly, our management will retain broad
discretion as to the allocation of the net proceeds of this offering. The
amount and timing of these expenditures will vary depending on a number of
factors, including the availability of potential acquisitions. We believe that
the net proceeds from this offering, together with our current cash, cash
equivalents and short-term investments will be sufficient to meet our
anticipated cash needs for working capital and capital expenditures for at
least the next twelve months.
Year 2000
The following statements constitute a "Year 2000 Readiness Disclosure" under
the Year 2000 Information and Readiness Disclosure Act.
Prior to the end of 1999, we completed our systems assessment and installed
a new version of our business system software that is purported to be Year 2000
compliant by the software vendor. We have implemented the software as well as
some other less significant software, and fully tested the software to ensure
Year 2000 compliance. Software for one piece of laboratory equipment was
determined to require an upgrade in order to be Year 2000 compliant which was
subsequently implemented.
To date, we have not experienced any material failures of any of our systems
related to the failure of Year 2000 compliance. In addition, to date, we have
not been made aware of any Year 2000 compliance failures involving our
customers and suppliers.
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To date, we have spent an immaterial amount on the compliance program, and
we do not expect to incur any material additional amounts. The costs discussed
above do not include our internal costs, principally the payroll costs for
those persons working on the project, which costs we do not track.
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.
Disclosure of Market Risk
We conduct business in various foreign currencies, including Belgian francs,
British pounds and German marks, 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 dates that they are
converted. We are also subject to exchange rate exposures arising from the
translation and consolidation of the financial results of our foreign
subsidiaries. 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. There can be no assurance that actions taken to manage
our exchange rate 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 associated with the exchange of
foreign currencies into U.S. dollars.
Our exposure to market risks for changes in interest rates relates primarily
to outstanding commercial debt. Due to the recent paydown of our commercial
debt, we anticipate no material market risk exposure for changes in interest
rates. Accordingly, we have not included quantitative tabular disclosures.
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<PAGE>
BUSINESS
Overview
We develop, manufacture, market and distribute products used worldwide in
biomedical research that are instrumental in the development of new drug
therapies and medical diagnostic methods. Our products enable scientists and
biomedical researchers to better understand biochemistry, immunology and cell
biology of the human body, as well as disease processes. We offer over 3,200
products that we group into the following product lines: Assays; Antibodies;
Bioactive Proteins and Peptides; Oligonucleotides; and Serum, Buffers and
Media. Through acquisitions and internal growth, we believe we have grown to
include a unique combination of technological, production, and research and
development skills resulting in a full spectrum of products and services for
the worldwide pharmaceutical and biotechnology industries.
We believe we have a strong scientific research staff, a broad product line
and an established trade name, giving us a strong presence in the biomedical
research market. We intend to continue our focus on new product development,
and to aggressively seek to acquire businesses, products and technologies
complementary to our current business.
Industry Overview
The biomedical research industry has seen significant advances in the
understanding of physiological processes at the cellular and molecular level.
In particular, the biotechnology industry has seen a substantial amount of
growth over the last year as efforts to sequence the human genetic structure,
or genome, have accelerated. Researchers have identified thousands of
previously unknown genes that potentially play key roles in physiological
systems in the human body. These genes are of significant interest to the
pharmaceutical industry, since they can be used as the basis of new therapeutic
discovery and development. The increase in biomedical research resulting from
the sequencing of the human genome has resulted in the need for methods and
products to accelerate and assist this research. The core competencies we have
developed in molecular and cellular biology, immunology and custom services
address this need.
Biomedical researchers around the world are constantly in search of
specialty research products and services, which are necessary to conduct both
basic and clinical research. This research is conducted in settings that range
from university and medical school laboratories to pharmaceutical and
biotechnology research and development groups. The success of this type of
research depends upon the availability of high quality biological reagents and
custom services, including the types of assay kits, antibodies, biologically
active proteins, molecular probes and serums that we develop, manufacture and
sell.
Strategy
Our goal is to capitalize on the growth of the biotechnology industry by
creating research tools and test kits that are not subject to the volatility
inherent in developing pharmaceuticals. Our strategy includes the following
elements:
Focus on the Strategic Direction of Biomedical Research. Our continued
success depends, in part, on our strong commitment to use innovative
technologies and research techniques to service the growing research product
needs. Academic institutions, as well as pharmaceutical and biotechnology
companies, are increasingly relying on biomedical research companies such as
ours to provide innovative tools to further their basic research and screen
their drug candidates. We believe we are uniquely positioned to have a strong
impact on the research community with our enabling user-friendly technologies.
Commitment to Product Development. We offer over 3,200 products in five
major product lines. We believe our industry is diverse and fragmented, and by
offering a broad range of products we more fully address the needs of
researchers, thereby offering them the ability to look to us first to satisfy
many of their needs. We focus on the introduction of new products to meet the
needs of our customers and the rapid changes that are taking place in
biomedical research. For example, in 1999, we introduced over 250 new products
that targeted the growing cellular biology research area.
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Create Superior Value. We seek to create superior value for our customers.
For instance, our staff have written many application booklets that provide an
overview of the technology we provide in various areas, the types of
performance that can be expected using our products and troubleshooting
guidelines. Our communications with customers are highly technical, fostering
the understanding that our products are from scientists to scientists. We also
believe we offer greater affordability and convenience to our customers than do
our competitors.
Acquire Complementary Businesses, Products and Technologies. We continuously
evaluate potential acquisition candidates for complementary products and
businesses and have successfully completed five acquisitions in the last seven
years, which include: TAGOImmunologics, Medgenix, Keystone Laboratories,
Biofluids and QCB.
Provide Superior Customer Service. We seek to create a team spirit among all
of our employees, fostering awareness of our objectives and strategies at all
levels within our company. We believe this creates loyalty and pride, which
translates into greater product quality and enhanced customer service.
Products
We offer over 3,200 different products, which we group into the following
product lines:
. assays
. antibodies
. bioactive proteins and peptides
. oligonucleotides
. serum, buffers and media
Assays
Enzyme-Linked ImmunoSorbent Assay test kits. We have developed methodologies
for the measurement of cytokines and chemokines in blood or other biological
samples. ELISA test kits are a combination of cytokines, their antibodies and
other chemical reagents, and are used to measure the presence or quantity of a
particular bioactive protein in serum, plasma or other biological sample. The
quantitation of these cytokines and chemokines has been shown to be an
excellent way for scientists to determine the status of the immune system.
Since many of the current targets of pharmaceutical intervention are designed
to modulate the immune system, using these quantitation markers as a means for
gauging the effectiveness of treatment is becoming a key monitor.
In a typical ELISA test kit, an antibody is immobilized or "bound" on a
microtiter well of the kit's test plate. A sample containing the antigen that
is to be measured is added by the researcher and allowed to react with the
bound antibody. After the well is washed, a second antibody with a specific
enzymatic tag is added and allowed to react with the bound antigen. After
washing away any remaining free antibody, the researcher adds a substrate that
produces a colored reaction. The amount of color is proportional and thereby
indicates the amount of antigen present, which can be measured even in minute
concentrations, using common laboratory instruments. This method of
quantitation of these antigens has become an integral tool both in research and
diagnostic applications as it provides a relatively inexpensive, accurate and
rapid method for the evaluation of immune status.
Our ELISA tests produce results in a few hours, compared to days or even
weeks with bioassays. We offer kits for human, mouse, rat, monkey and swine
proteins. The diversity of species is important to allow investigators to
establish numerous measurements in pre-clinical animal model systems. We offer
over 70 types of ELISA kits and we believe we are the leader in sales of rat,
monkey and swine cytokine ELISA kits. Detection of fluctuations in cytokine
levels by ELISA tests, whether in an in vitro cell culture experiment of a new
drug or in a patient's serum, provide researchers and scientists with valuable
information in understanding disease progression, therapy and diagnosis.
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Of the more than 70 kits we offer, the following table illustrates a few of
the more common applications of our ELISA test kits:
<TABLE>
<CAPTION>
Test Kit Characteristics/Application
-------- ---------------------------
<C> <S>
MIP-4 This kit tests for the presence of human macrophage inflammatory
protein-4, a chemokine which is an important regulator of white
blood cell migration to areas of inflammation and has been
associated with human neurodegenerative diseases, such as
Alzheimer's Disease, autoimmune diseases and infections. MIP-4 was
discovered by a major pharmaceutical company in connection with
its human genome research. From this discovery, we were able to
develop antibodies and create a kit to measure the presence of
MIP-4.
Eotaxin This test kit measures the chemokine, Eotaxin, which is an
important molecule in the origin of allergic responses. We
developed this kit in response to the demand from researchers
studying the physiology of white blood cells. Our kits are used in
the process of drug development to determine the effect of the
target drug on white blood cell function.
Beta amyloid This test kit measures for beta amyloid, an important molecule in
the study of Alzheimer's Disease.
</TABLE>
Radioimmuno assays. We produce and market RIAs, which are used
internationally in clinical laboratories for the measurement of hormones and
proteins important in growth, reproductive and thyroid disease. These assays
utilize radioisotopically labeled molecules to compete with non-isotopically
labeled molecules for sites on known antibody concentrations. RIA is a mature
technology used primarily in European and other foreign countries and is not
widely used in the United States.
Other assays. We have combined our oligonucleotide and ELISA technologies to
develop a portfolio of other assay kits that measure the quantity of messenger
RNA, the type of RNA that serves as a template for protein synthesis, of
various cytokines in blood, cultured cells or tissues. Our molecular analysis
kit product line permits detection of the individual genes, and quantitates the
amount of the gene that encodes for a specific protein. We also have developed
kits that allow researchers to measure multiple genes at the same time from a
single sample.
Antibodies
Antibodies are used as detector systems in the research of normal and
abnormal proteins. Antibodies are proteins generated by immune cells in
response to foreign substances, which are called antigens. Antibodies have
specific amino acid sequences which cause them to interact only with the
antigen that induced their creation. Antibodies circulate in the blood and
assist the body's immune system by searching out and neutralizing or
eliminating antigens. Antibodies are used by researchers in a variety of
applications, including neutralization studies in bioassay systems, as capture
and detection molecules for protein quantitation and for cellular
differentiation. Antibodies used in research are generally produced by
injecting an antigen into animals, which cause the animals' immune system to
produce an antibody specific to that antigen.
Our TAGOImmunologics product line provides researchers and biotechnology
companies with a broad array of secondary antibodies. These products are used
in the development of analytical signals in various assays. In addition, other
companies use our TAGO products as a component of their test kits.
We also have developed a significant catalog of innovative tools which
enable customers to more readily understand the complex signals which control
cellular processes. Many of these tools are antibodies that recognize specific,
activated or inactivated forms of proteins containing one or more molecules of
phosphate
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at specific sites. Such an addition of phosphate molecules, which is referred
to as phosphorylation, or removal of phosphate molecules, which is referred to
as dephosphorylation, control most of the signaling within and between cells.
Diseases such as cancer, heart disease and Alzheimer's have been shown to be at
least in part due to the malfunctioning of key molecules within cells, in many
cases due to alterations in their activity through altered phosphorylation.
We offer over 2,000 antibody products. The following table illustrates some
of the uses for the antibodies we offer:
<TABLE>
<CAPTION>
Uses Description
---- -----------
<C> <S>
Flow Cytometry In order to identify specific cell types by the
nature of the antigens expressed on their surface,
antibodies are bound to cells and visualized by
labeling the antibody molecules with a fluorescent
dye or "fluorochrome." The result is examined with
an instrument known as a flow cytometer.
ELISA Test Kits Antibodies are used in our ELISA test kits to detect
and measure proteins in biological fluids. An
antibody coupled with an enzyme reacts with a
colorless substrate in the presence of a sample
containing the antigen of interest to generate a
colored reaction product. The color produced is
proportional to, and thereby indicates the amount
of, antigen present in the sample.
High Throughput Screening High throughput screening permits the researcher to
test thousands of drug candidates in a short period
of time for their effect on target molecules. In
order to be used in this manner, we conjugate our
antibodies to different dyes or enzymes.
Immunoblotting Immunoblotting uses antibodies to identify a
specific protein in a complex mixture. In this
process, a protein of interest is separated by
molecular weight using gel electrophoresis. A
specific antibody is then passed over the mixture,
and any protein that binds to the antibody is
visibly detected.
</TABLE>
The research conducted by our customers often requires that we manufacture
unique, specific peptides or antibodies for custom research projects.
Previously unidentified genes and proteins are being identified at a rapid
rate, which often precedes the introduction of catalog offerings by many months
to years. Through our QCB subsidiary we engage in the manufacture of these
custom peptides and antibodies thus allowing customers to perform timely
research on these new or proprietary targets. The capabilities to provide
custom peptides and antibodies as well as innovative catalog products further
strengthens our strategic relationships with our customers and has led to the
development of new catalog products and expanded sales opportunities.
Bioactive Proteins and Peptides
Proteins, which are chains of amino acids in particular sequences, and their
interactions are responsible for all of the biochemical and physical properties
of a cell, as well as variations among different types of cells. Proteins take
various forms, including enzymes, hormones, antibodies, receptors, cytokines
and chemokines. Proteins are ideal for use in basic research, drug discovery,
enzymology, high throughput screening, in vivo studies, x-ray crystallography
or as antigens for antibody production. Our primary protein products are
cytokines and chemokines, which are regulatory molecules that control growth
and differentiation of cells.
Cytokines. The development of an effective immune response involves complex
cell-to-cell communications, which are mediated by a group of small hormone-
like soluble secreted proteins collectively called cytokines. Cytokines, like
growth factors, interact with specialized target receptors on the surface of
the cells and stimulate a chain of secondary messengers leading to a biological
response. These responses
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result from changes in both the molecular capabilities and behaviors of cells.
For example, cytokines can activate cells to recognize and eliminate harmful
bacteria and viruses. They carry vital signals to the cell's genetic machinery
that can trigger it to grow or stop growing. Cytokines can also signal a cell
to differentiate, that is, to acquire the features necessary for it to take on
more specialized tasks. Specific cytokines play a key role in stimulating cells
surrounding a wound to grow and divide and also in attracting migratory cells
to the site. Some cytokines have a regulatory function, and other cytokines
exert direct effects of their own.
Cytokines are extracted from natural sources, such as human and animal
platelets, white blood cells and lymphatic cells, or are produced through
genetic engineering, also known as recombinant DNA technology. Cytokines
coordinate and orchestrate the proper functioning of the immune system. In
addition to producing the human cytokines, we also produce the equivalent
proteins from mice, rats, swine and monkeys. Many cytokines are being
investigated for their ability to activate or suppress host immunity. Cytokines
and other similar growth factors and adhesion molecules are instrumental in the
body's defense against cancer, AIDS and other life-threatening disorders.
Chemokines. Chemokines are specific proteins that regulate the recruitment
and activation of white blood cells and other sites of inflammation. Chemokines
function by binding to receptors on the surface of affected cells. Tremendous
interest in chemokines exists due to recent studies linking chemokines and
their receptors to the development of HIV.
Other Proteins. To date we have focused on cytokines, chemokines and growth
factors; however, with the progress of the human genome project, protein
discoveries will expand beyond these proteins. Signal transduction proteins, of
which it is hypothesized that only a fraction have been discovered, will be
important in high throughput screens of drug candidates since the irregular
functioning of these proteins is involved in substantially all diseases.
Additionally, researchers will want reagents to the nuclear proteins,
cytoskeletal proteins and others that will be discovered to study their role in
various diseases. Reagents to these markers can be created using our core
competencies.
We offer over 70 protein products. The following table shows examples of
different cytokines we produce and use:
<TABLE>
<CAPTION>
Cytokine Research Uses
-------- -------------
<C> <S>
IL-4 Interleukin 4 is a protein that has been observed to have direct
growth-suppressive activity on a variety of malignancies. IL-4 is
used in cancer research.
VEGF Vascular Endothelial Growth Factor regulates angiogenesis, the
process of new blood vessel growth. VEGF is used in drug development,
cancer research and as a growth factor for endothelial cells.
TNF Tumor Necrosis Factor is a protein that plays a vital role in the
regulation of the immune system. TNF is used to study immunological
processes, cancer, inflammation and septic shock.
</TABLE>
Peptides. Bioactive peptides are subsections of proteins or small proteins
that are synthetically created. These peptides represent the active or
inhibitory site of a particular protein, and are used to study the activity of
various proteins. Some bioactive peptides, such as beta amyloid peptides, have
been shown to play a major role in the development of Alzheimer's Disease. We
sell a significant amount of beta amyloid peptides as well as many other
bioactive peptides through our QCB subsidiary.
Oligonucleotides
The production of oligonucleotides is a custom service we provide for
researchers engaged in molecular biology. An oligonucleotide is a synthesized
polymer made up of the same building blocks that form DNA. Synthetic
oligonucleotides have been used in molecular biology for over twenty years,
essentially as
30
<PAGE>
templates for nucleic acid and protein synthesis, and more recently, as the
therapeutic agents for the inhibition of gene expression or as a diagnostic
agent to identify disease. DNA is used by almost every discipline in biomedical
research in both academic and commercial areas, including molecular biology and
cell biology departments of major universities and biomedical companies
developing gene therapy products. These researchers use synthetic
oligonucleotides to determine the exact sequence of a gene, or to perform
experiments leading to the potential development of pharmaceutical drugs. The
primary use of the oligonucleotides we develop and sell are for DNA sequencing
and polymerase chain reaction, or PCR, priming.
In DNA sequencing, we synthesize oligonucleotides pursuant to customer
specifications, which they use to initiate a process of sequencing a DNA
strand. DNA sequencing is used in a wide range of biomedical research
applications to identify the makeup of particular strands of DNA.
In PCR priming, our synthesized oligonucleotides are used by our customers
in combination with other reagents to amplify a specific genetic sequence
isolated from a cell sample. After PCR amplification, gel electrophoresis is
used to identify and even to quantitate a specific DNA or RNA sequence from
that sample. PCR is an extremely powerful tool in molecular biology research
because it can amplify genetic information from a single copy of DNA or RNA.
Using PCR technology, the presence of the genetic message used to code for the
production of protein can be identified, thereby offering numerous
possibilities in the detection of genetic disorders, monitoring disease
progression, and in understanding cellular functions.
Genomics research requires large quantities of oligonucleotides. DNA arrays
for expression profiling and single nucleotide polymorphism, or SNP, analysis
all require the use of synthetic DNA oligonucleotides. In addition, high
throughput screening techniques, used in drug discovery are incorporating the
use of fluorescent modified DNA oligonucleoticle probes to detect and quantify
target gene expression. We have developed technologies to rapidly produce and
manufacture large number of high quality DNA oligonucleotides for DNA array
construction and developed proprietary processes to produce fluorescent probes.
The following table illustrates some of the uses for the DNA oligonucleotide
services we offer:
<TABLE>
<CAPTION>
Uses Applications
---- ------------
<C> <S>
Primers Oligonucleotides are used in the initiation of the PCR process.
Probes DNA oligonucleotides are used in hybridization reactions to search and
detect specific genetic sequences. Our FRET, or Forster Resonance
Energy Transfer, probes are fluorescent probes used in real time PCR
quantitation and diagnostic molecular analysis.
Arrays Oligonucleotides are used on a solid matrix to profile gene expression
or single nucleotide polymorphisms, or SNPS.
</TABLE>
Serum, Buffers and Media
We manufacture over 140 varieties of serum, buffers and media. These
products are vital in growing specialized cell cultures. In most cases, cell
cultures are a primary testing method for the effectiveness of vaccines and
drugs for a variety of diseases.
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<PAGE>
Customers
We have over 3,000 customers worldwide, including the customers of our
distributors. No single customer accounted for 10% or more of our total revenue
during any of the last three years. Our customers include:
<TABLE>
<CAPTION>
Pharmaceutical Biotechnology Universities Government
- ----------------------- --------------------- ------------------------------- ---------------------------------------
<S> <C> <C> <C>
American Home Products Amgen Brigham and Women's Hospital Centers for Disease Control
Aventis Pharmaceuticals Berlex Laboratories Georgetown University Food and Drug Administration
Baxter Biogen Johns Hopkins University National Cancer Institute
Boehringer Ingelheim Chiron UCLA National Institutes of Health
Glaxo Wellcome Human Genome Sciences UC San Francisco Veterans Administration Medical Centers
Johnson & Johnson Hyseq University of Michigan US Army Research
Merck & Company Icos University of Pennsylvania
Pfizer IDEC Pharmaceuticals University of Texas MD Anderson
Pharmacia & Upjohn Rigel Pharmaceuticals Cancer Research Center
Schering-Plough
</TABLE>
Research and Development
Traditionally we have focused our research and development in the area of
cytokine biology. Cytokines are soluble proteins that act as chemical
communicators between cells. As we have extended our product lines into
cellular communication, or signal transduction, the following three areas of
biomedical research have been impacted dramatically by recent trends and
technology: (1) apoptosis, which is related to programmed cell death, (2)
angiogenesis, which involves blood vessel growth factors important in wound
healing and tumor development, and (3) degenerative neurological diseases such
as Alzheimer's Disease. We have focused our research and development efforts
aggressively into the generation of products for these areas. Our sales people,
who have education and backgrounds in the biological sciences, discuss issues
and ideas with our customers, which serves as an additional source for
identifying, creating and developing some of our new products.
Our current research and development activities are focused in four major
areas:
. expansion of current and novel methodologies into the areas of
angiogenesis, cardiovascular, inflammation, neurology and tumor
development;
. selective addition of new cytokine, chemokine and growth factors to our
existing product offerings;
. development of ELISA kits for detection of site-specific phosphorylation
and site-specific cleavage of important signal pathways proteins; and
. maintenance of our position in the rat, swine and monkey ELISA test kit
markets.
Currently we employ 32 research scientists, ten of whom hold Ph.D.'s. Among
these professionals are experts in peptide chemistry, molecular biology,
immunology and signal transduction. In particular, their knowledge is
fundamental to the development of peptides, oligonucleotides, proteins,
antibodies and assay kits. Our research laboratories are located in Camarillo,
California; Hopkinton, Massachusetts; and Nivelles, Belgium. In the year ended
December 31, 1999, we introduced over 250 new products, of which approximately
95% were developed by our scientists. In addition, at February 29, 2000 we had
approximately 50 products under development. We spent approximately $2,648,300
in 1998, excluding $4,222,000 of purchased in-process technology, and
approximately $3,315,400 in 1999 on research and development.
Manufacturing
Our reagent products and ELISA test kits are currently manufactured at our
laboratories located in Camarillo, California. We manufacture oligonucleotides
at our laboratories located at the facilities of our Keystone subsidiary in
Foster City, California. Our custom antibodies are manufactured at the
laboratory
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<PAGE>
facilities of our QCB subsidiary in Hopkinton, Massachusetts. Our serum,
buffers and media are manufactured at the facilities of our Biofluids division
in Rockville, Maryland. We also manufacture antibodies and assay kits at the
facilities of our European subsidiary in Nivelles, Belgium.
Labeling, packaging, and shipping are carried out independently at each
facility. We purchase our packaging components from outside suppliers who
follow our own custom packaging designs. We have an internal graphic arts
department located at our Camarillo, California facility that designs and
produces our packaging and marketing materials. We believe there are numerous
available suppliers for our packaging components.
We believe that we have adequate supplies of raw materials on hand to
continue to manufacture almost all of our products and meet customer demand,
and that those materials that we do not produce internally are readily
available from multiple sources.
Sales and Marketing
We have 17 sales representatives worldwide. The principal markets for our
products are in the United States, Japan and Western Europe. We have a direct
sales force strategically located in major metropolitan areas in the United
States. The use of a direct sales force provides us with an opportunity to
discuss directly with researchers and scientists new developments and trends in
the industry. We advertise in various scientific trade journals and distribute
our own product catalog to all current and selected potential customers. We
sell to our international markets directly through our European subsidiary, and
we use international distributors that specifically target selected foreign
medical markets.
Our sales people hold biological sciences undergraduate degrees and undergo
training in the nature and application of our products and proven selling
techniques. We believe that by investing in the scientific training of our
sales force, we are able to determine the needs of researchers and scientists
in the biomedical community. Our sales force is used not only as a traditional
marketing group, but also to provide valuable feedback for product development.
Each representative is responsible for the maintenance of existing accounts as
well as the generation of new business. Representatives are paid a base salary
and commissions. The commissions are based upon sales growth over previous
years' sales levels.
Besides the United States, we sell directly to Germany, Belgium, Holland and
the United Kingdom, and use a network of international distributors covering 41
other countries. We utilize a network of both exclusive and non-exclusive
international distributors, but we generally grant exclusive distribution
rights only where the distributor maintains direct field representatives
proportionate to the potential for sales of our products in a defined
geographical area. In order to serve as our exclusive distributor, the
distributor must generally meet acceptable annual sales goals. All of our
distributors are required to limit their primary sales focus to the biomedical
research market. We offer all of our distributors annual training to enhance
their knowledge of our products as well as their respective applications,
solicit requests for new products and ultimately to increase sales.
Competition
We are engaged in a segment of the health care products industry that is
highly competitive. Our primary competitors include biotechnology companies
such as Techne Corporation, Pharmingen, New England Biolabs, and Life
Technologies. Many of our competitors have been involved in the health care
industry significantly longer than us and benefit from greater name
recognition. In addition, many of our competitors have greater resources to
devote to research and development, sales and marketing and occasionally engage
in price cutting measures to achieve leadership in their field. However, we
believe that by offering a very broad and complete product line that enables
the end user to obtain many products
33
<PAGE>
from one source we gain a competitive advantage. In addition, competition in
our markets generally focuses on the following factors:
. quality;
. speed of delivery;
. application/customer support;
. breadth of product offerings; and
. price.
Patents and Trademarks
We do not own any patents and do not believe that patent protection is
available for any of our products or processes. We seek to protect our
interests by treating technologies and know-how as trade secrets and by
requiring all employees and contractors to execute invention and assignment
agreements with us, which include confidentiality provisions.
"TAGOImmunologicals," "Cytoscreen," "Primescreen," "ICScreen" and "Cytosets"
are unregistered product trademarks used for some of our products, but are only
of limited importance to our business. "Biofluids" is also a registered
trademark we acquired as part of our acquisition of Biofluids in December 1998.
Government and Environmental Regulation
Except as we indicate in the following paragraph, approval by the Food and
Drug Administration is not required for the sale of any of our products in the
United States because our products are marketed and sold for research use only.
Research products are not currently required to comply with the lengthy FDA
approval process associated with diagnostic or therapeutic products. In the
event we develop products directly for the diagnostic market in the United
States, we will be required to obtain FDA approval prior to selling them. This
approval, if required, could be time consuming and costly.
Some of our products, however, are used by our customers as raw materials or
intermediates in the production of diagnostic products. As such, we received
clearance by the State of California and the FDA to manufacture our
TAGOImmunologics product line as Analyte Specific Reagents. These reagents are
classified as Class I biologics that are manufactured in compliance with the
FDA's Quality System Regulation, also known as cGMP. This registration allows
us to market these products to clinical laboratories and manufacturers of in
vitro diagnostic products.
We believe that we are materially in compliance with the Occupational Safety
and Health Act, the Environmental Protection Act, the Toxic Substances Control
Act, and other similar laws of general application.
Our European subsidiary's clinical products are produced in facilities that
have achieved ISO 9001 certification, and are eligible to be used in Europe for
clinical diagnostics. In all of our markets in which we sell through
distributors, our distributors are responsible for compliance with the
applicable governmental regulations.
Except as we indicated above, we are not subject to direct governmental
regulation other than the laws and regulations generally applicable to
businesses in the jurisdictions in which we operate, including those governing
the handling and disposal of hazardous wastes and other environmental matters.
Our research and development activities involve the controlled use of small
amounts of hazardous materials, chemical and radioactive compounds. Although we
believe that our safety procedures for handling and disposing of such materials
comply with applicable regulations, the risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of
such an accident, we could be held liable for resulting damages. This liability
could have a material adverse effect on us.
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<PAGE>
Properties
Our principal executive offices are located in Camarillo, California,
approximately 50 miles northwest of Los Angeles, California, in our 29,000
square foot facility. We purchased this property on March 28, 1996 and own it
subject to a first trust deed mortgage that was made by the lender pursuant to
the Small Business Administration's Loan Guarantee Program, with an outstanding
principal balance of $688,000, due on April 1, 2016. The property is subject to
a second trust deed loan with the California Statewide Development Corp. with
an outstanding principal balance of $561,500, due approximately June 1, 2016.
Our payments under these mortgages are unconditionally guaranteed by James H.
Chamberlain, our Chief Executive Officer and President.
On March 8, 2000 we entered into a lease for a new facility in Camarillo,
California, and we intend to relocate our Camarillo offices and laboratories to
this new location on or about May 1, 2000. Our new building contains
approximately 51,821 square feet and is situated in an industrial park
approximately two blocks from our current facility. The lease will commence on
May 1, 2000 and run through June 30, 2005, with the option to continue the
lease for two additional five-year terms. The new facility has three laboratory
areas, including molecular biology facilities, a protein purification facility
and an assay development and manufacturing facility, as well as ELISA
development and manufacturing space and cold storage rooms sufficient to
accommodate our current and anticipated future needs.
Our Keystone subsidiary leases facilities in Foster City, California,
approximately 20 miles south of San Francisco, which consists of approximately
3,500 square feet, of which approximately 3,000 square feet is our
oligonucleotide laboratory, under a lease that expires in May 2003.
Our QCB subsidiary leases facilities in Hopkinton, Massachusetts,
approximately 25 miles west of Boston, which consist of approximately 11,500
square feet, of which approximately 7,000 square feet is laboratory space,
under a lease that expires in April 2001.
Our Biofluids division leases facilities in Rockville, Maryland, which
consist of approximately 11,500 square feet of warehouse, manufacturing, and
office space, under a lease that expires in May 2001.
Our European subsidiary leases facilities in Nivelles, Belgium, which
consist of approximately 30,000 square feet of manufacturing, laboratory and
office space, under a lease that expires in March 2007.
Additional small sales offices are leased in Germany, Holland and the United
Kingdom.
We believe that all of our facilities are in good condition, are adequately
covered by insurance and will be adequate for our occupancy needs for the
foreseeable future.
Employees
As of February 29, 2000, we employed 207 individuals, 200 of whom were full
time employees. Sixteen of our employees at that date had doctoral degrees.
None of our employees in the United States is represented by a labor union.
As of February 29, 2000, 48 of our 207 employees worked for our BioSource
Europe subsidiary, which is located in Nivelles, Belgium. As is customary under
Belgian labor law, employees of our Belgian subsidiary, BioSource Europe S.A.,
are represented by three national unions who represent employee interests to
the national chemistry industry employer organization. Pursuant to Belgian law,
we have been subject to heightened restrictions regarding severance obligations
applicable to companies with more than 50 employees. Because we now employ less
than 50 employees at our Belgian facility, union representation for works
councils and safety councils will terminate in April 2000 for this facility.
Accordingly although we remain subject to other severance obligations
applicable generally to companies in Belgium, the additional severance benefits
that currently apply to our Belgian facility will terminate in November 2000.
We believe we are in compliance with these Belgian legal restrictions. We
consider our current employee relations to be good.
Legal Proceedings
We are not a party, nor is any of our property subject, to any material
legal proceedings.
35
<PAGE>
MANAGEMENT
The following table sets forth information with respect to our directors,
executive officers and key employees as of March 1, 2000:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
James H. Chamberlain.............. 52 Chairman of the Board, President and
Chief Executive Officer
Charles C. Best................... 40 Chief Financial Officer, Executive
Vice President, Finance
Gus E. Davis...................... 52 Chief Operating Officer, Executive
Vice President, Sales & Marketing
Richard O. Buford................. 52 Vice President, Human Resources,
Secretary
Cirilo D. Cabradilla, Jr., Ph.D... 52 Vice President, Molecular Biology
Jordan B. Fishman, Ph.D........... 42 Vice President, Cellular Biology
Kevin J. Reagan, Ph.D............. 48 Vice President, Immunology
Jozef Vangenechten, Ph.D. ........ 45 General Manager, BioSource Europe, S.A
Jean-Pierre L. Conte.............. 36 Director
Leonard M. Hendrickson*........... 52 Director
David J. Moffa, Ph.D.*............ 57 Director
John R. Overturf, Jr.**........... 39 Director
Robert D. Weist**................. 60 Director
Robert J. Weltman................. 34 Director
</TABLE>
- --------
* Member of the Compensation Committee.
** Member of the Audit Committee.
James H. Chamberlain has served as Director, President and Chief Executive
Officer of BioSource and its predecessor, BioSource Industries, Inc., since it
was founded in October 1989, and was elected as its Chairman of the Board in
November 1993. Previously, Mr. Chamberlain was Manager for Business Development
for Amgen Inc., where he started and managed the Amgen Biologicals Division.
Mr. Chamberlain also serves on the board of directors of Biopool International,
Inc. He received his Bachelor of Arts degree from West Virginia University and
studied biochemistry at the University of Pittsburgh.
Charles C. Best joined BioSource in December 1999 as Chief Financial
Officer. Prior to his employment at BioSource, Mr. Best served four and a half
years as Vice President and Chief Financial Officer of Cogent Light
Technologies, Inc., a company engaged in the manufacture of surgical lighting
instruments. From 1989 to 1995, Mr. Best worked in various positions including
Corporate Controller for 3D Systems, Inc., a company engaged in the manufacture
and sale of high tech rapid prototyping equipment. Mr. Best is a CPA and holds
a Bachelor of Science degree in Business Administration and Accounting from San
Diego State University.
Gus E. Davis became our Executive Vice President Sales and Marketing and
Chief Operating Officer in June 1995. From February 1994 to June 1995, Mr.
Davis served as Vice President of Sales and Marketing of the Company. Prior to
that time, since February 1993, Mr. Davis was employed as Vice President of
Sales and Marketing at Genosys Biotechnologies, a company engaged in the
manufacturing of oligonucleotides. Mr. Davis received his Bachelor of Science
and Masters degree in Biology and Chemistry from Sam Houston State University.
Richard O. Buford became Vice President of Human Resources of BioSource in
February 1993. From 1989 to 1992, Mr. Buford served as Vice President of
Operations for The Office Mart, a California regional commercial furniture and
office supply distributor. Mr. Buford received a Bachelor of Arts and a Masters
degree in English from the University of California at Santa Barbara.
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<PAGE>
Cirilo D. Cabradilla, Jr., Ph.D. became President of our Keystone subsidiary
in November 1995. From 1991 to 1995, Dr. Cabradilla served as President of
Keystone Laboratories, Inc. From 1988 to 1991, Dr. Cabradilla was Vice
President, Product Development, of Vascor, a pharmaceutical company.
Dr. Cabradilla was an Assistant Professor of Viral Oncology from 1996-1997 at
the University of Pennsylvania, School of Veterinary Medicine. He did his
postdoctoral training at the National Cancer Institute from 1974-1977.
Dr. Cabradilla received a Bachelor of Science and a Ph.D. degree in
Biochemistry from the University of California at Davis.
Jordan Fishman, Ph.D. became President of the Quality Controlled
Biochemicals subsidiary in December 1998. From 1993 to 1998, Dr. Fishman served
as the Senior Vice-President and Chief Scientific Officer of Quality Controlled
Biochemicals, Inc. From 1988 until 1992, Dr. Fishman was an Assistant Professor
of Pharmacology at the University of Massachusetts Medical School. From 1985
until 1988, Dr. Fishman was an Assistant Professor of Biochemistry at Boston
University School of Medicine and a Research Neurochemist at the Edith Nourse
Rogers Memorial VA Hospital in Bedford, Massachusetts. Dr. Fishman received his
Ph.D. in Biochemistry and Toxicology/Carcinogenesis from the University of
Tennessee at Oak Ridge, and his Bachelor of Science from Washington University,
St. Louis, Missouri.
Kevin J. Reagan, Ph.D. became Vice President, Immunology in December 1996.
From 1991 to December 1996, Dr. Reagan served as the first Director of
Development Laboratories and then Vice President, Laboratory Operations at
Specialty Laboratories, Inc., a clinical reference lab. From 1990 to 1991, Dr.
Reagan was the Associate Director of AIDS/Hepatitis R&D at Ortho Diagnostics,
Inc., a Johnson & Johnson Company. Dr. Reagan received his Bachelor of Arts in
Biological Sciences from the University of Delaware. Dr. Reagan received both
his Masters and Ph.D. degrees in Microbiology and Immunology from Hahnemann
Medical College.
Jozef Vangenechten, Ph.D. became Managing Director of BioSource Europe, S.A.
in February 1998. From 1988 to February 1998, Dr. Vangenechten worked for
Societe Generale de Surveillance, n.v., an international provider of
environmental compliance services, most recently as Managing Director of SGS's
EcoCare Environmental Services division.
Jean-Pierre L. Conte has served as a director of BioSource since February
2000. Mr. Conte is a Managing Director of Genstar Capital LLC, which is the
sole general partner of Genstar Capital Partners II, L.P., a private equity
investment firm. Prior to joining Genstar in 1995, he was a principal for six
years at the NTC Group, Inc., a private equity investment firm. He is a
director of several private companies, including NEN Life Science Products,
Inc. Mr. Conte earned a Masters of Business Administration from Harvard
University Graduate School of Business and a Bachelor of Arts from Colgate
University. Mr. Conte has been appointed to the Board of Directors pursuant to
an investor rights agreement among Genstar, Stargen and us, which is described
under "Relationships and Related Transactions."
Leonard M. Hendrickson has been a director of BioSource since October 1993.
Mr. Hendrickson is the President of Isotope Products Laboratories, a position
he has held since February 1992. From February 1990 to January 1992, Mr.
Hendrickson served as the principal consultant for Microchemics, a marketing
and business development consulting firm that he founded. Mr. Hendrickson also
serves on the board of directors of Isotope Products Laboratories, a subsidiary
of Eckert & Ziegler AG. Mr. Hendrickson holds a Bachelor of Science degree from
the University of Pennsylvania and a Masters in Business Administration from
American University in Washington, D.C.
David J. Moffa, Ph.D. has been a director of BioSource since April 1995. Dr.
Moffa serves: as the Regional Director and as special projects director for Lab
Corporation of America, Inc. located in Fairmont, West Virginia, positions he
has held since 1982 and 1984, respectively; as Director of Medical Arts
Lab/RBL, a position he has held since 1985; and as Director of Lab Corporation
of America, Inc. located in Altoona, Pennsylvania, a position he has held since
1990. Dr. Moffa also serves as an advisor and consultant to various diagnostic,
scientific and health care facilities, and is an owner and developer of GM
Realty and Moffa
37
<PAGE>
Properties. Dr. Moffa also serves on a number of committees and boards of
directors of various privately held companies and governmental offices,
including One Valley Bank, Inc. Dr. Moffa has completed a post doctoral
fellowship in Clinical Biochemistry at the West Virginia University National
Institutes of Health, holds a Ph.D. in Medical Biochemistry from the West
Virginia School of Medicine, a Masters of Science degree in Biochemistry from
West Virginia University and a Bachelor of Arts degree in Pre-Medicine from
West Virginia University.
John R. Overturf, Jr. has been a director of BioSource since September 1993.
Mr. Overturf serves as the President of R.O.I., Inc., a private investment
company, a position he has held since July 1993. He also serves as President of
the Combined Penny Stock Fund, Inc., a closed-end stock market fund, a position
he has held since August 1996. From September 1993 until September 1996, Mr.
Overturf served as Vice President of the Rockies Fund, Inc., a closed-end stock
market fund. Mr. Overturf holds a Bachelor of Science degree in Finance from
the University of Northern Colorado.
Robert D. Weist has been a director of BioSource since April 1996. Mr. Weist
has been President of Weist Associates, a management consulting firm, since
April 1992. From January 1986 through April 1992, Mr. Weist was a consultant to
and Senior Vice President, Administration, General Counsel and Secretary of
Amgen, Inc., having served as Vice President, General Counsel and Secretary
from March 1982 through January 1986. Mr. Weist holds a Juris Doctor degree
from New York University and a Masters in Business Administration from the
University of Chicago.
Robert J. Weltman has served as a director of BioSource since February 2000.
He is currently a Vice President of Genstar Capital LLC, the sole general
partner of Genstar Capital Partners II, L.P., a private equity investment firm.
Mr. Weltman joined Genstar in August 1995. Prior to joining Genstar, from July
1993 to July 1995, Mr. Weltman was an Associate with Robertson, Stephens &
Company, an investment banking firm. In addition, Mr. Weltman is a director of
NEN Life Science Products, Inc. Mr. Weltman holds an AB degree in chemistry
from Princeton University. Mr. Weltman has been appointed to the Board of
Directors pursuant to an investor rights agreement among Genstar, Stargen and
us, which is described under "Relationships and Related Transactions."
38
<PAGE>
RELATIONSHIPS AND RELATED TRANSACTIONS
Our Chief Executive Officer and President, James H. Chamberlain, is indebted
to us in the aggregate principal amount of $350,000 as of March 1, 2000. The
loan is represented by a promissory note in the principal amount of $350,000,
bearing interest at 5.9% per year. The loan provides for interest only
payments, payable quarterly, with all principal due upon demand. We also made
loans in the amount of $15,000 and $84,000 to Mr. Chamberlain which were repaid
to BioSource in full in January and June 1998, respectively.
On January 10, 2000, we entered into a securities purchase agreement with
Genstar Capital Partners II, L.P. and Stargen II LLC. Pursuant to this
agreement, we sold Genstar and Stargen a total of 371,300 shares, including
364,244 to Genstar and 7,056 to Stargen, of our Series B Preferred Stock for
$9,000,312 in the aggregate. These shares are convertible into 1,485,200
shares, including 1,456,976 for Genstar and 28,244 to Stargen, of our common
stock. In addition, we issued Genstar and Stargen warrants to purchase a total
of 1,287,000 shares of common stock, including 1,262,542 to Genstar and
24,458 to Stargen, exercisable at $7.77 per share. Under the investor rights
agreement among Genstar, Stargen and us, executed in connection with the
securities purchase agreement, Genstar and Stargen also have the right to
appoint two out of our seven directors to our board of directors as long as
they beneficially own, in the aggregate, at least 750,000 shares of common
stock, or one director if they beneficially own at least 495,000 shares.
Pursuant to the investor rights agreement, we appointed Jean-Pierre L. Conte, a
Managing Director of Genstar Capital LLC, and Robert J. Weltman, a Vice
President of Genstar Capital LLC, to our board of directors. Genstar and
Stargen also have the right of first refusal to purchase additional shares and
the right to require us to register the shares of our common stock underlying
the preferred stock and the warrants. They have waived their right of first
refusal in connection with this offering and have exercised a portion of their
registration rights. The consummation of the securities purchase agreement,
including the issuance of the shares of Series B Preferred Stock and the
warrants, occurred on February 15, 2000. Pursuant to the securities purchase
agreement, we paid a $270,009 transaction fee to Genstar Capital LLC and
reimbursed all of the fees and expenses of approximately $195,426, incurred by
Genstar Capital Partners and its affiliates in connection with the securities
purchase agreement.
We purchased our principal executive offices located in Camarillo,
California, on March 28, 1996, and own it subject to a first trust deed
mortgage that was made by the lender pursuant to the Small Business
Administration's Loan Guarantee Program. The property is subject to a second
trust deed loan with the California Statewide Development Corp. Our payments
under these mortgages, which are described in greater detail in the "Business--
Properties" section of this prospectus, are unconditionally guaranteed by James
H. Chamberlain, our Chief Executive Officer and President.
39
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table presents information regarding the beneficial ownership
of our common stock as of March 1, 2000, and as adjusted to reflect our sale of
shares of our common stock and the selling stockholders sale of our common
stock offered by this prospectus, for:
. each person who is known to us to be the beneficial owner of more than 5%
of our outstanding common stock;
. each of our directors;
. each of our executive officers;
. all executive officers and directors as a group; and
. the selling stockholders.
Unless otherwise provided below such person's name, the address of each
person listed is in care of us, at 820 Flynn Road, Camarillo, California 93012,
and the address of Messrs. Conte, Weltman and Genstar Capital LLC and Stargen
LLC is 555 California Street, Suite 4850, San Francisco, California 94104.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission that deem shares to be beneficially owned by
any person who has or shares voting or investment power with respect to such
shares. Shares of common stock under warrants or options currently exercisable
or exercisable within 60 days of March 1, 2000 are deemed outstanding for
purposes of computing the percentage ownership of the person holding such
warrants or options but are not deemed outstanding for computing the percentage
ownership of any other person. Unless otherwise indicated, the persons named in
this table have sole voting and sole investment power with respect to all
shares shown as beneficially owned, subject to community property laws where
applicable.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior to Owned After the
Offering Offering
-------------------- --------------------
Number of Percent of
Number of Percent of Shares Number of Class(1)
Name of Beneficial Owner Shares Class(1) Offered Shares
- ------------------------ --------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
James H. Chamberlain(2).... 824,156 9.6% 81,000 743,156 6.0%
Charles C. Best(3)......... 5,000 * -- 5,000 *
Gus E. Davis(4)............ 90,000 1.1 18,000 72,000 *
Jean-Pierre L. Conte(5).... 2,772,220 25.4 510,000 2,262,220 15.9
Leonard M. Hendrickson(6).. 79,400 * 8,000 71,400 *
David J. Moffa, Ph.D(7) ... 66,900 * 7,000 59,900 *
John R. Overturf, Jr(8).... 67,000 * 7,000 60,000 *
Robert D. Weist(9)......... 57,000 * 6,000 51,000 *
Robert J. Weltman(10)...... -- -- -- -- --
Genstar Capital LLC(5)..... 2,719,518 25.0 500,308 2,219,210 15.6
Stargen II LLC(5).......... 52,702 * 9,692 43,010 *
Richard O. Buford(11)...... 59,875 * 6,000 53,875 *
Valerie A. Bressler-
Hill(12).................. 22,775 * 2,000 20,775 *
Jordan B. Fishman,
Ph.D.(13)................. 33,334 * 3,000 30,334 *
Kevin J. Reagan,
Ph.D.(14)................. 21,250 * 2,000 19,250 *
Dimensional Fund Advisors,
Inc.(15).................. 571,200 7.0 -- 571,200 4.8
1299 Ocean Avenue, 11th
Floor
Santa Monica, CA 90401
All of the directors and
executive officers as a
group (nine persons)(16).. 3,961,676 33.9% 637,000 3,324,676 22.3%
</TABLE>
- --------
* less than one percent
(1) Percentage ownership prior to the offering is based on 8,137,233 shares of
common stock outstanding as of March 1, 2000. Percentage ownership after
the offering is based on 8,137,233 shares of common stock outstanding as
of March 1, 2000 plus (1) 510,000 shares of common stock issuable upon
conversion of the Series B Preferred Stock and (2) 3,350,000 shares of
common stock sold by us in this offering.
40
<PAGE>
(2) Includes (1) 437,500 shares of common stock reserved for issuance upon
exercise of stock options that are currently exercisable or are
exercisable within 60 days of March 1, 2000, 81,000 of which
Mr. Chamberlain expects to exercise in connection with this offering; (2)
383,156 shares of common stock held in the Chamberlain Family Trust for
which Mr. Chamberlain serves as trustee; (3) 3,400 shares of common stock
held in Mr. Chamberlain's IRA account; and (4) 100 shares held as
custodian for Mr. Chamberlain's granddaughter.
(3) Includes 5,000 shares of common stock reserved for issuance upon exercise
of stock options that are currently exercisable or are exercisable within
60 days of March 1, 2000.
(4) Includes 90,000 shares of common stock reserved for issuance upon exercise
of stock options that are currently exercisable or are exercisable within
60 days of March 1, 2000, 18,000 of which Mr. Davis expects to exercise in
connection with this offering.
(5) Genstar Capital Partners II, L.P. holds 1,456,976 shares of common stock
issuable upon conversion of Series B Preferred Stock and 1,262,542 shares
of common stock issuable upon exercise of warrants and Stargen LLC holds
28,244 shares of common stock issuable upon conversion of Series B
Preferred Stock and 24,458 shares of common stock issuable upon exercise
of warrants, all of which are currently convertible or exercisable.
Genstar Capital LLC is the general partner of Genstar Capital Partners II,
L.P. Mr. Conte, Richard F. Hoskins and Richard D. Paterson are the
managers and managing directors of Genstar Capital LLC and are members of
Stargen, and Mr. Paterson is the Administrative Member of Stargen. In such
capacities Messrs. Conte, Hoskins and Paterson may be deemed to
beneficially own shares of common stock beneficially held by Genstar
Capital Partners and Stargen, but disclaim such beneficial ownership,
except to the extent of their economic interest in these shares. Messrs.
Conte, Hoskins, Paterson, Genstar Capital LLC, Genstar Capital Partners
II, L.P. and Stargen LLC may be deemed to be acting as a group in relation
to their respective holdings in BioSource but do not affirm the existence
of any such group.
(6) Includes (1) 67,000 shares of common stock reserved for issuance upon
exercise of stock options that are currently exercisable or are
exercisable within 60 days of March 1, 2000, 8,000 of which
Mr. Hendrickson expects to exercise in connection with this offering; (2)
800 shares of common stock owned; (3) 4,000 shares held of record by two
of Mr. Hendrickson's minor children; and (4) 7,600 shares of common stock
held in Microchemics Simplified Employee Pension Plan.
(7) Includes (1) 59,500 shares of common stock reserved for issuance upon
exercise of stock options that are currently exercisable or are
exercisable within 60 days of March 1, 2000, 7,000 of which Dr. Moffa
expects to exercise in connection with this offering; (2) 550 shares of
common stock held solely by Dr. Moffa's spouse; (3) 4,000 shares of common
stock held jointly with Dr. Moffa's spouse; and (4) 2,850 shares of common
stock held directly.
(8) Includes (1) 65,000 shares of common stock reserved for issuance upon
exercise of stock options that are currently exercisable or are
exercisable within 60 days of March 1, 2000, 7,000 of which Mr. Overturf
expects to exercise in connection with this offering and (2) 2,000 shares
of common stock owned.
(9) Includes 57,000 shares of common stock reserved for issuance upon exercise
of stock options that are currently exercisable or are exercisable within
60 days of March 1, 2000, 6,000 of which Mr. Weist expects to exercise in
connection with this offering.
(10) Mr. Weltman is a Vice President and a member, but not a managing member,
of Genstar Capital LLC and a member, but not a managing member, of Stargen
LLC. Mr. Weltman does not have power to vote or dispose of, or to direct
the voting or disposition of, any securities beneficially owned by Genstar
Capital LLC or Stargen LLC. Mr. Weltman disclaims that he beneficially
owns any shares of common stock beneficially owned by Genstar Capital LLC
or Stargen LLC, except to the extent of his economic interest in shares
owned by Genstar Capital LLC and Stargen LLC.
41
<PAGE>
(11) Includes (1) 52,938 shares of common stock reserved for issuance upon
exercise of stock options that are currently exercisable or are
exercisable within 60 days of March 1, 2000, 6,000 of which Mr. Buford
expects to exercise in connection with this offering and (2) 6,937 shares
of common stock owned.
(12) Includes (1) 19,075 shares of common stock reserved for issuance upon
exercise of stock options that are currently exercisable or are
exercisable within 60 days of March 1, 2000, 2,000 of which Ms. Bressler-
Hill expects to exercise in connection with this offering and (2) 3,700
shares of common stock owned.
(13) Includes 33,334 shares of common stock reserved for issuance upon exercise
of stock options that are currently exercisable or are exercisable within
60 days of March 1, 2000, 3,000 of which Dr. Fishman expects to exercise
in connection with this offering.
(14) Includes 21,250 shares of common stock reserved for issuance upon exercise
of stock options that are currently exercisable or are exercisable within
60 days of March 1, 2000, 2,000 of which Dr. Reagan expects to exercise in
connection with this offering.
(15) As disclosed on the Schedule 13G filed by Dimensional Fund Advisors Inc.
with the Commission on February 3, 2000.
(16) Includes (1) 653,000 shares of common stock reserved for issuance upon
exercise of stock options that are currently exercisable or are
exercisable within 60 days of March 1, 2000, 127,000 of which are expected
to be exercised in connection with this offering; (2) 975,220 shares of
common stock reserved for issuance upon the conversion of Series B
Preferred Stock; and (3) 1,287,000 shares of common stock reserved for
issuance upon the exercise of warrants.
42
<PAGE>
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue 20,000,000 shares of our common stock, par value
$0.001 per share and 1,000,000 shares of preferred stock, par value $0.001 per
share. As of March 20, 2000, there were 8,180,352 shares of our common stock
outstanding, no shares of our Series A Preferred Stock outstanding, and 371,300
shares of our Series B Preferred Stock outstanding. The outstanding shares of
the Series B Preferred Stock may be converted to common stock prior to or upon
consummation of this offering under the circumstances indicated under the
heading "Series B Preferred Stock" below, which would result in the issuance of
1,485,200 additional shares of common stock. In connection with the offering,
the holders of the Series B Preferred Stock will be converting 127,500 shares
of the Series B Preferred Stock into 510,000 shares of common stock, which will
be sold in the offering. The following statements are brief summaries of our
capital stock.
Common Stock
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Subject to any
preferences granted to holders of our preferred stock, the holders of our
common stock are entitled to receive dividends, as well as any other
distributions to stockholders, in proportion to their ownership, as may be
declared by our board of directors out of legally available funds. In the event
of our liquidation, dissolution or winding up, the holders of common stock are
entitled, subject to the rights of holders of preferred stock issued by us, to
share proportionally in all assets remaining available for distribution to them
after payment of liabilities. The outstanding shares of our common stock are,
and the common stock issuable pursuant to this offering will be, when issued,
duly authorized, validly issued, fully paid and nonassessable.
Preferred Stock
Our board of directors has the authority to issue the authorized and
unissued preferred stock in one or more classes or series, and our board of
directors may determine the designations, rights and preferences of the
preferred stock. Accordingly, and without the need for stockholder approval,
our board of directors has the power to issue preferred stock with dividend,
liquidation, conversion, voting or other rights, which may adversely affect the
voting power or other rights of the holders of our common stock. In the event
of issuance, and under various circumstances such as the Series A Preferred
Stock discussed below, we could use our preferred stock as a way of
discouraging, delaying or preventing an acquisition or a change in our control.
Series A Preferred Stock
In February 1999, our board declared a dividend of one preferred share
purchase right for each share of common stock outstanding on March 2, 1999.
Each right entitles the registered holder to purchase from the us one one-
thousandth of a share of our Series A Preferred Stock, par value $.001 per
share, at a price of $24.50 per one one-thousandth of a preferred share,
subject to adjustment. The purchase rights are subject to the terms and
conditions of the rights agreement, dated February 25, 1999, filed with the SEC
on March 1, 1999, on Form 8-A. In connection with our issuance of Series B
Preferred Stock and warrants to Genstar and Stargen, we amended our rights
agreement as of January 10, 2000, to include Genstar and Stargen as "Exempt
Persons" under the rights agreement and to exclude from the definition of
"Distribution Date" (1) the date of the approval, execution or delivery of the
securities purchase agreement with Genstar and Stargen and (2) the consummation
of the transactions contemplated by the agreements.
Initially and until a distribution date occurs, the rights are attached to
all common shares and no separate rights certificates will be issued. During
this initial period,
. the rights are not exercisable;
. the rights are transferred with the common shares and are not
transferable separately from the common shares;
43
<PAGE>
. new common share certificates or book entry shares issued will contain a
notation incorporating the rights agreement by reference; and
. the transfer of any common shares will also constitute the transfer of
the rights associated with those common shares.
Series B Preferred Stock
On January 8, 2000, the Board of Directors approved the creation of a series
of 500,000 shares of Series B Preferred Stock, $0.001 par value per share.
These shares are convertible, and the holder is entitled to be credited with a
non-cash dividend of additional Series B shares on the first day of each year
at the dividend rate of 8% per year. Series B Preferred Stock also has a
liquidation preference of $6.06 per share. 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 sale 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 us 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. The certificate of designation of preferences, rights
and limitations of Series B Preferred Stock of BioSource International, Inc.
was filed with the Delaware Secretary of State on February 4, 2000.
Warrants
On February 15, 2000, we issued to Genstar Capital Partners II, LP and
Stargen II LLC warrants to purchase an aggregate of 1,287,000 shares of our
common stock at an exercise price equal to $7.77 per share. These warrants
fully vested on the date of the grant and terminate on February 15, 2005. These
warrants do not have any voting rights, dividend rights or preferences until
they are exercised and converted to common stock. The warrants are not
redeemable.
On June 5, 1996, in connection with a public offering of our common stock,
we issued to Cruttenden Roth Incorporated and Commonwealth Associates, the
representatives of the underwriters in that offering, a warrant to purchase up
to an aggregate of 118,100 shares at an exercise price of $11.10 per share.
Subsequent to issuance, the warrant was allocated as follows: (1) Cruttenden
received a warrant to acquire 59,050 shares; (2) Commonwealth received a
warrant to acquire 47,240 shares; and (3) an employee of Commonwealth received
a warrant to acquire 11,810 shares. On March 2, 2000, Commonwealth exercised
its warrant in full. The warrants are fully vested and terminate on May 29,
2001. These warrants do not have any voting rights, dividend rights or
preferences until they are exercised and converted to common stock. The
warrants are not redeemable.
Anti-Takeover Provisions
In addition to the rights agreement discussed above, our certificate of
incorporation and bylaws include some provisions which may have the effect of
discouraging persons from pursuing non-negotiated takeover attempts. These
provisions include the inability of stockholders to take action by written
consent without a meeting and the inability for the stockholders to remove
directors without cause.
Transfer Agent
Our transfer agent and registrar for our common stock is U.S. Stock Transfer
Corporation, 1745 Gardena Avenue, Glendale, CA 91204-2991.
44
<PAGE>
UNDERWRITING
Chase Securities Inc., Dain Rauscher Incorporated and Thomas Weisel Partners
LLC are the representatives of the underwriters. Subject to the terms and
conditions of the underwriting agreement, the underwriters named below, through
their representatives, have severally agreed to purchase from BioSource and the
selling stockholders the following respective number of shares of common stock:
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
Chase Securities Inc.............................................
Dain Rauscher Incorporated.......................................
Thomas Weisel Partners LLC.......................................
---------
Total............................................................ 4,000,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the underwriters
are subject to various conditions precedent, including the absence of any
material adverse change in our business and the receipt of certificates,
opinions and letters from us, our counsel and the independent auditors. The
underwriters are committed to purchase all of the shares of common stock
offered by us if they purchase any shares.
The following table shows the per share and total underwriting discounts and
commissions we and the selling stockholders will pay to the underwriters. These
amounts are shown assuming both no exercise and full exercise of the
underwriters' over-allotment option to purchase additional shares.
<TABLE>
<CAPTION>
Total
-------------------------------------
Per Without Over- With Over-
Share allotment Exercise allotment Exercise
----- ------------------ ------------------
<S> <C> <C> <C>
Underwriting discounts and
commissions paid by us......
Underwriting discounts and
commissions paid by the
selling stockholders........
</TABLE>
We estimate that the total expenses of this offering, excluding underwriting
discounts and commissions, will be approximately $590,000.00.
The underwriters propose to offer the shares of common stock directly to the
public at the public offering price set forth on the cover page of this
prospectus and to various dealers at that price less a concession not in excess
of $ per share. The underwriters may allow and these dealers may reallow
a concession not in excess of $ per share to various other dealers. After
this offering of the shares, the offering price and other selling terms may be
changed by the underwriters.
We have granted to the underwriters an option, exercisable no later than
30 days after the date of this prospectus, to purchase up to 100,000 additional
shares of common stock at the public offering price, less the underwriting
discount set forth on the cover page of this prospectus. In addition, Genstar
and Stargen have granted to the underwriters an option, exercisable no later
than 30 days after the date of this prospectus, to purchase on a pro rata basis
up to 500,000 additional shares of common stock at the public offering price,
less the underwriting discount set forth on the cover page of this prospectus.
In the event that the underwriters exercise the option in full, the holders of
the Series B Preferred Stock will convert 125,000 shares of the Series B
Preferred Stock and sell the resulting 500,000 shares of common stock. To the
extent
45
<PAGE>
that the underwriters exercise this option, each of the underwriters will have
a firm commitment to purchase approximately the same percentage of these option
shares which the number of shares of common stock to be purchased by it shown
in the above table bears to the total number of shares of common stock offered
by this prospectus. BioSource, Genstar and Stargen will be obligated, pursuant
to the option, to sell shares to the underwriters to the extent the option is
exercised. The underwriters may exercise this option only to cover over-
allotments made in connection with the sale of shares of common stock in this
offering.
The offering of the shares is made for delivery when, as and if accepted by
the underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
We, together with the selling stockholders, have agreed to indemnify the
underwriters against liabilities specified in the underwriting agreement,
including liabilities under the Securities Act, and to contribute to payments
the underwriters may be required to make in respect of these liabilities.
Prior to the closing of this offering, some of our securityholders,
including Genstar, Stargen and their affiliates, and our executive officers,
directors and key employees, agreed that they will not, without the prior
written consent of Chase Securities Inc., offer, sell or otherwise dispose of
any shares of capital stock, options or warrants to acquire shares of capital
stock or securities exchangeable for or convertible into shares of capital
stock owned by them for a period of 90 days following this public offering.
This period will terminate on , 2000. We also agreed that we
would not, without the prior written consent of Chase Securities Inc., offer,
sell or otherwise dispose of any shares of capital stock, options or warrants
to acquire shares of capital stock or securities exchangeable for or
convertible into shares of capital stock until , 2000, except
that we may issue shares upon the exercise of options granted prior to the date
of this prospectus, and may grant additional options under our stock option
plans. Without the prior written consent of Chase Securities Inc., any
additional options granted shall not be exercisable until , 2000.
Persons participating in this offering may over-allot or effect transactions
which stabilize, maintain or otherwise affect the market price of the common
stock at levels above those which might otherwise prevail in the open market,
including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of the common stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
the offering. A penalty bid means an arrangement that permits the underwriters
to reclaim a selling concession from a syndicate member in connection with the
offering when shares of common stock sold by the syndicate member are purchased
in syndicate covering transactions. These transactions may be effected on the
Nasdaq National Market, in the over-the-counter market, or otherwise. This
stabilizing, if commenced, may be discontinued at any time.
In connection with this offering, underwriters and selling group members, if
any, who are qualified market makers on the Nasdaq National Market may engage
in passive market making transactions in our common stock on the Nasdaq
National Market in accordance with Rule 103 of Regulation M under the
Securities Exchange Act of 1934. In general, a passive market maker must
display its bid at a price not in excess of the highest independent bid of such
security; if all independent bids are lowered below the passive market maker's
bid, however, such bid must then be lowered when certain purchase limits are
exceeded.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since
December 1998, Thomas Weisel Partners has been named as a lead or co-manager on
142 filed public offerings of equity securities, of which 104 have been
completed, and has acted as a syndicate member in an additional 76 public
offerings of equity securities. Thomas Weisel Partners does not have any
material relationship with us or any of our officers, directors or other
controlling persons, except with respect to its contractual relationship with
us pursuant to the underwriting agreement entered into in connection with this
offering.
46
<PAGE>
LEGAL MATTERS
Our counsel, Troop Steuber Pasich Reddick & Tobey, LLP, Los Angeles,
California, has rendered an opinion that the common stock offered by us, upon
its sale will be duly and validly issued, fully paid and non-assessable. Troop
Steuber Pasich Reddick & Tobey, LLP beneficially owns 45,000 shares of our
common stock. Certain legal matters in connection with the offering will be
passed upon for the underwriters by Simpson Thacher & Bartlett, Palo Alto,
California.
EXPERTS
The consolidated financial statements and schedule of BioSource
International, Inc. as of December 31, 1999 and 1998, and for each of the years
in the three-year period ended December 31, 1999, have been included in the
prospectus and elsewhere in the registration statement in reliance upon the
report of KPMG LLP, independent certified public accountants, appearing
elsewhere in the registration statement, and upon their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Commission a registration statement on Form S-3 under
the Securities Act with respect to the shares of common stock offered in this
prospectus. This prospectus does not contain all of the information set forth
in the registration statement and the related exhibits. Statements contained in
this prospectus as to the contents of any contract or any other document
referred to are not necessarily complete, and with respect to any contract or
other document filed as an exhibit to the registration statement, reference is
made to the exhibit for a more complete description of the matter involved, and
each such statement is qualified in its entirety by this reference.
For further information about us and our common stock, please review the
registration statement and the exhibits and schedules filed with it. In
addition to the registration statement, you may also learn more about us from
the reports, proxy statements and other information that we have filed with the
Commission under the Securities Exchange Act of 1934. Copies of the
registration statement, including the exhibits, as well as the other
information we have filed with the Commission, may be inspected without charge
at the Commission's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, copies of all or any part of these
documents may be obtained upon payment of prescribed rates, by writing the
Public Reference Section of the Securities and Exchange Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at Seven World Trade Center, Suite 1300, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Suit 1400, Chicago,
Illinois 60661. Please call the Commission at 1-800-SEC-0330 for further
information on the public reference rooms. The registration statement and the
other information we have filed with the Commission are also available at the
offices of the National Association of Securities Dealers, Inc., Reports
Section, 1735 K Street, N.W., Washington, D.C. 20006. In addition, the
registration statement and the other information we have filed with the
Commission is available to the public from commercial document retrieval
services and at the web site maintained by the Commission at
http://www.sec.gov. You may also visit us at http://www.biosource.com.
The Commission allows us to "incorporate by reference" information into the
registration statement of which this prospectus forms a part, which means that
we can disclose important information to you by referring you to another
document filed separately with the Commission. The information incorporated by
reference is deemed to be part of the registration statement, except for any
information superceded by information in the registration statement and this
prospectus. This prospectus incorporates by reference the documents set forth
below that we have previously filed with the Commission. These documents
contain important information about us and our finances.
1) our annual report on Form 10-K for the fiscal year ended December 31,
1999; and
2) the description of our capital stock contained in our registration
statement on Form SB-2, as amended, filed with the Commission on May 30,
1996, pursuant to Section 12 of the Securities Exchange Act of 1934.
47
<PAGE>
We are also incorporating by reference any additional documents that we file
with the Commission between the date of this prospectus and the termination of
the offering.
We will provide without charge to each person to whom this prospectus is
delivered, upon written or oral request, a copy of any and all of the documents
that have been incorporated in this prospectus, other than the exhibits to
these documents, unless the exhibits are specifically incorporated by
reference. You should direct your requests for documents to the following:
BioSource International, Inc.
820 Flynn Road, Suite A
Camarillo, California 93012
Attention: Investor Relations
Telephone Number: (805) 383-5200
48
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheets at December 31, 1998 and December 31, 1999... F-3
Consolidated Statements of Operations for years ended December 31, 1997,
1998 and 1999........................................................... F-4
Consolidated Statements of Stockholders' Equity for years ended December
31, 1997, 1998 and 1999................................................. F-5
Consolidated Statements of Cash Flows for years ended December 31, 1997,
1998 and 1999........................................................... F-6
Notes to Consolidated Financial Statements for December 31, 1997, 1998
and 1999................................................................ F-7
Financial Statement Schedule--Valuation and Qualifying Accounts.......... F-20
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
BioSource International, Inc.:
We have audited the consolidated financial statements of BioSource
International, Inc. and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of BioSource
International, Inc. and subsidiaries as of December 31, 1998 and 1999 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999 in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG LLP
Los Angeles, California
March 10, 2000
F-2
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1999
(Amounts in thousands, except for share amounts)
<TABLE>
<CAPTION>
1998 1999
--------- ---------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 7,076.9 $ 4,644.5
Accounts receivable, less allowance for doubtful
accounts of $301.0 at December 31, 1998 and $328.1 at
December 31, 1999.................................... 4,381.0 5,088.9
Inventories, net (note 3)............................. 4,970.6 6,015.3
Prepaid expenses and other current assets............. 726.2 578.7
Deferred income taxes (note 9)........................ 1,123.4 1,997.8
--------- ---------
Total current assets................................. 18,278.1 18,325.2
Property and equipment, net (note 4).................... 5,513.6 5,392.6
Intangible assets net of $125.8 at December 31, 1998 and
$1,186.4 of accumulated amortization at December 31,
1999 (note 2).......................................... 14,451.2 13,816.3
Other assets............................................ 1,318.0 819.3
Deferred income taxes (note 9).......................... 1,839.2 1,868.4
--------- ---------
$41,400.1 $40,221.8
========= =========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Notes payable to banks, current portion (note 5)...... $ 3,012.5 $ 2,754.4
Accounts payable...................................... 1,643.0 2,067.6
Accrued expenses...................................... 4,155.6 1,923.8
Deferred income....................................... 625.9 369.0
Income taxes payable.................................. 601.7 225.5
--------- ---------
Total current liabilities............................ 10,038.7 7,340.3
Notes payable to banks, less current portion (note 5)... 13,665.6 11,459.3
--------- ---------
Total liabilities.................................... 23,704.3 18,799.6
Commitments and contingencies (notes 5 and 12)
Stockholders' equity:
Preferred stock, $.001 par value. Authorized 1,000,000
shares; none issued or outstanding................... -- --
Common stock, $.001 par value. Authorized 20,000,000
shares issued 7,469,925 shares and outstanding
7,178,925 shares at December 31, 1998, issued
7,711,716 shares and outstanding 7,425,716 shares at
December 31, 1999 ................................... 7.2 7.4
Additional paid-in capital............................ 21,186.8 22,025.9
Retained earnings (accumulated deficit)............... (2,629.3) 948.1
Accumulated other comprehensive loss.................. (868.9) (1,559.2)
--------- ---------
Total stockholders' equity........................... 17,695.8 21,422.2
--------- ---------
$41,400.1 $40,221.8
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1997, 1998 and 1999
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Net sales...................................... $20,571.8 $21,858.6 $29,257.0
Cost of sales.................................. 6,930.1 13,188.6 11,070.5
--------- --------- ---------
Gross profit................................. 13,641.7 8,670.0 18,186.5
--------- --------- ---------
Operating expenses:
Research and development..................... 2,077.7 2,648.3 3,315.4
Sales and marketing.......................... 4,043.0 4,337.5 4,736.9
General and administrative................... 3,552.0 4,468.9 4,460.3
Purchased in-process technology.............. -- 4,222.0 --
Amortization of intangibles.................. 30.7 95.1 1,060.7
--------- --------- ---------
Total operating expenses................... 9,703.4 15,771.8 13,573.3
--------- --------- ---------
Operating income (loss)........................ 3,938.3 (7,101.8) 4,613.2
Interest income.............................. 760.4 513.4 397.2
Interest expense............................. (133.0) (215.9) (1,367.3)
Other income (expense), net.................. 80.6 133.9 (46.1)
--------- --------- ---------
Income (loss) before income taxes.............. 4,646.3 (6,670.4) 3,597.0
Income tax expense (benefit)................. 1,460.0 (1,534.6) 19.6
--------- --------- ---------
Net income (loss).......................... $ 3,186.3 $(5,135.8) $ 3,577.4
========= ========= =========
Net income (loss) per share:
Basic........................................ $ 0.38 $ (0.68) $ 0.49
========= ========= =========
Diluted...................................... $ 0.36 $ (0.68) $ 0.46
========= ========= =========
Weighted average shares outstanding:
Basic........................................ 8,318.0 7,508.8 7,234.7
========= ========= =========
Diluted...................................... 8,965.2 7,508.8 7,832.9
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1997, 1998 and 1999
(Amounts in thousands)
<TABLE>
<CAPTION>
Common stock Retained
---------------- Additional earnings Accumulated Net
Number of paid-in (accumulated comprehensive stockholders' Comprehensive
shares Amount capital deficit) loss equity income (loss)
--------- ------ ---------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996................... 8,319.0 $8.3 $28,837.1 $ (679.8) $ (5.0) $28,160.6
Exercise of stock
options................ 77.0 -- 147.2 -- -- 147.2
Exercise of warrants.... 35.0 -- 64.8 -- -- 64.8
Purchases of treasury
stock.................. (283.3) (0.2) (1,744.3) -- -- (1,744.5)
Net income.............. -- -- -- 3,186.3 -- 3,186.3 $ 3,186.3
Foreign currency
translation
adjustments............ -- -- -- -- (1,156.1) (1,156.1) (1,156.1)
------- ---- --------- --------- --------- --------- ---------
Total comprehensive
income................. $ 2,030.2
=========
Balance at December 31,
1997................... 8,147.7 8.1 27,304.8 2,506.5 (1,161.1) 28,658.3
Issuance of stock
options to non
employees.............. -- -- 110.4 -- -- 110.4
Exercise of stock
options................ 27.4 0.1 59.9 -- -- 60.0
Income tax benefit from
exercise of stock
options................ -- -- 20.5 -- -- 20.5
Purchases of treasury
stock.................. (996.2) (1.0) (6,308.8) -- -- (6,309.8)
Net loss................ -- -- -- (5,135.8) -- (5,135.8) $(5,135.8)
Foreign currency
translation
adjustments............ -- -- -- -- 292.2 292.2 292.2
------- ---- --------- --------- --------- --------- ---------
Total comprehensive
loss................... $(4,843.6)
=========
Balance at December 31,
1998................... 7,178.9 7.2 21,186.8 (2,629.3) (868.9) 17,695.8
Issuance of stock
options to non
employees.............. -- -- 13.5 -- -- 13.5
Exercise of stock
options................ 246.8 .2 609.0 -- -- 609.2
Income tax benefit from
exercise of stock
options................ -- -- 216.6 -- -- 216.6
Net income.............. -- -- -- 3,577.4 -- 3,577.4 $ 3,577.4
Foreign currency
translation
adjustments............ -- -- -- -- (690.3) (690.3) (690.3)
---------
Total comprehensive
income................. $ 2,887.1
------- ---- --------- --------- --------- --------- =========
Balance at December 31,
1999................... 7,425.7 $7.4 $22,025.9 $ 948.1 $(1,559.2) $21,422.2
======= ==== ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1997, 1998 and 1999
(Amounts in thousands)
<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................... $ 3,186.3 $ (5,135.8) $ 3,577.4
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization............ 712.0 959.8 1,990.9
Net (gain) loss on sale of property and
equipment............................... (6.3) 31.5 --
Purchased in-process technology.......... -- 4,222.0 --
Non-cash stock compensation.............. -- 110.4 13.5
Non-cash write-down of inventory......... -- 4,966.0 --
Other.................................... (110.0) 28.0 --
Changes in assets and liabilities, net of
effects of acquisitions:
Accounts receivable...................... 413.0 (386.1) (1,175.2)
Inventories.............................. (1,177.3) (1,048.3) (1,356.5)
Prepaid expenses and other current
assets.................................. (549.7) 888.0 (90.6)
Deferred income taxes.................... (56.0) (2,491.6) (903.6)
Other assets............................. 142.5 (1,001.1) 314.2
Accounts payable......................... (318.9) (62.0) 327.8
Accrued expenses......................... (581.3) 2,592.3 (2,255.7)
Deferred income.......................... -- 3.9 (256.9)
Income taxes payable..................... 194.0 348.9 215.5
---------- ---------- ---------
Net cash provided by operating
activities............................ 1,848.3 4,025.9 400.8
---------- ---------- ---------
Cash flows from investing activities:
Purchase of property and equipment........ (659.0) (1,390.0) (1,077.0)
Purchase of Quality Controlled
Biochemicals............................. -- (15,193.9) --
Purchase of net assets from Biofluids..... -- (2,822.5) --
Proceeds from sale of property and
equipment................................ 21.4 3.1 25.6
Purchases of investments.................. (23,028.0) (7,614.8) --
Proceeds from sale of investments......... 29,387.9 12,583.5 --
---------- ---------- ---------
Net cash provided by (used in)
investing activities.................. 5,722.3 (14,434.6) (1,051.4)
---------- ---------- ---------
Cash flows from financing activities:
Proceeds from the exercise of options..... 147.2 60.0 609.2
Proceeds from the exercise of warrants.... 64.8 -- --
Borrowings from bank...................... -- 14,000.0 --
Repayments to bank........................ (28.5) (31.1) (2,466.6)
Payments on capital lease obligations..... (2.3) (3.0) (9.6)
Payments to acquire treasury stock........ (1,744.5) (6,309.8) --
---------- ---------- ---------
Net cash provided by (used in)
financing activities.................. (1,563.3) 7,716.1 (1,867.0)
---------- ---------- ---------
Net increase (decrease) in cash and
cash equivalents...................... 6,007.3 (2,692.6) (2,517.6)
Effect of exchange rates on cash and cash
equivalents................................ (136.7) 292.0 85.2
Cash and cash equivalents at beginning of
year....................................... 3,606.9 9,477.5 7,076.9
---------- ---------- ---------
Cash and cash equivalent at end of year..... $ 9,477.5 $ 7,076.9 $ 4,644.5
========== ========== =========
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest................................. $ 136.4 $ 117.2 $ 1,171.4
========== ========== =========
Income taxes............................. $ 1,477.7 $ 1,117.6 $ 286.2
========== ========== =========
</TABLE>
In 1999, additional paid-in capital increased by $216.6 in connection with
the tax benefit associated with the exercise of employee stock options.
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1998 and 1999
1. Summary of Significant Accounting Policies
Description of Business
We develop, manufacture, market and distribute products used worldwide in
disease related biomedical research and clinical diagnostics, principally in
the fields of immunology and molecular biology. Our products include ELISA
assay test kits, clinical diagnostic kits, bioactive proteins, antibodies,
bioactive peptides, oligonucleotides and related products. These products
enable scientists to better understand the biochemistry, immunology and cell
biology of the human body. Some examples would include certain diseases such as
cancer, aging, arthritis and other inflammatory diseases, AIDS and certain
other infectious diseases.
Principles of Consolidation
The consolidated financial statements include the accounts of BioSource
International, Inc. (Company) 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 original maturities of three months or less.
Financial Instruments
The carrying value of financial instruments such as cash and cash
equivalents, trade receivables, and payables approximates their fair value at
December 31, 1998 and 1999 due to the short-term nature of these instruments.
The carrying value of the long-term debt also approximates fair value as of
December 31, 1998 and 1999 based on the terms the Company could obtain for
similar debt instruments with similar maturity. However, due to interest rate
fluctuations, the recorded value of the Heller Financial mortgage is
approximately 2% higher than the fair value of similar currently available debt
instruments. Assuming interest rates remain constant at the current level, this
interest rate differential would cost BioSource approximately $114,000 in
additional interest over the remaining life of the loan. See Note 5 for further
description of this Note Payable.
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.
Goodwill and other intangibles are amortized on the straight-line basis over
periods of 5 to 15 years. Accumulated amortization at December 31, 1998 and
1999 was $125,800 and $1,186,400, respectively.
F-7
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Advertising, Marketing and Promotion Costs
Advertising, marketing and promotion costs are expensed as incurred. These
expenses charged to operations for the years ended 1997, 1998 and 1999 were
$805,300, $1,004,700, and $1,212,600, respectively.
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 (generally five to ten years). These costs are
included with other assets in the accompanying consolidated balance sheets.
Accumulated amortization at December 31, 1998 and 1999 was approximately
$110,400 and $205,500.
Revenue Recognition
Sales and related cost of goods sold are recognized upon shipment of
products. Certain customers prepay for sera or media and buffer product and
request shipment of the product at future dates. The Company records deferred
revenue until such time as a product is shipped to our customer. Upon shipment,
the appropriate sale and cost of goods sold are recognized.
Research and Development Costs
Research and development costs are charged to expense as incurred. Such
costs amounted to $2,077,700, $2,648,300, and $3,315,400 in 1997, 1998 and
1999, respectively.
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 the Company's long-lived assets would be reduced to its
estimated fair market value based on discounted cash flows. As a result, we
have determined that our long-lived assets are not impaired as of December 31,
1998 and 1999.
Stock Compensation
We account for stock-based compensation under the provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). Under the provisions of SFAS 123, the Company has
elected to continue to measure compensation cost under Accounting Practice
Board Opinion No. 25 and comply with the pro forma disclosure requirements.
F-8
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 (loss) and foreign currency
translation adjustments, the Company does not have any transactions and other
economic events that qualify as comprehensive income as defined under SFAS No.
130.
Business Segment Reporting
We adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information," in 1998. SFAS No. 131 establishes new standards for
reporting information about business segments and related disclosures about
products and services, geographic areas and major customers, if applicable.
Management of the Company has determined its reportable segments are strategic
business units that offer both sales to external customers from geographic
company facilities and sales to external customers in certain geographic
regions. Significant reportable business segments are the United States and
European facilities, and sales to external customers are summarized as those
located in the United States, Europe, Japan and other. Information related to
these segments is summarized in Note 11.
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.
Concentrations of Credit Risk
Financial instruments, which potentially subject us to concentrations of
credit risk, consist primarily of cash equivalents and trade accounts
receivable. The credit risk associated with trade accounts is mitigated by our
credit evaluation process; reasonably short collection terms and the
geographical dispersion of sales transactions mitigate credit risk.
Foreign Currency Translation
The assets and liabilities of BioSource's 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 stockholders' equity. Gains and
losses from foreign currency transactions are included in net income. Foreign
currency transaction gains and losses were insignificant to the operating
results for each of the years in the three-year period ended December 31, 1999.
Other Assets
Included in other assets at December 31, 1998 and 1999 is a note receivable
from an officer of $350,000. The note bears interest at 5.9% and is due on
demand. Management does not expect to demand payment within the 12 months
subsequent to December 31, 1999.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
F-9
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. Business Combinations
On December 10, 1998, BioSource acquired Quality Controlled Biochemicals,
Inc. (QCB). QCB is a leading manufacturer of phosphopeptides, phosphorylation
state-specific antibodies, custom peptides and custom antibodies. The
transaction was accounted for as a purchase. The results of operations of QCB
are included in the accompanying consolidated financial statements from the
date of acquisition. The purchase price was $15,193,900, including related
acquisition costs. The purchase price exceeded the fair value of net assets
acquired by approximately $16,034,500 of which $4,222,000 was allocated to in-
process technology. The remaining $11,812,500, which is being amortized on a
straight-line basis, was allocated to identifiable intangible assets and
goodwill with useful lives ranging from 5 to 15 years and is summarized as
follows:
<TABLE>
<S> <C>
Developed technology............................................. $ 7,655.4
Core technology.................................................. 665.3
Assembled workforce.............................................. 408.1
Trade name....................................................... 257.0
Goodwill......................................................... 2,826.7
---------
$11,812.5
=========
</TABLE>
The purchased in-process technology charge in 1998 relates to the portion of
the QCB purchase price that was allocated to products in development which had
not yet reached technological feasibility as of the acquisition date and did
not have alternative future uses and in accordance with applicable accounting
rules, purchased in-process technology is required to be expensed.
At the date of acquisition QCB had approximately 100 unique phosphorylated
antibodies under development, with most of these antibodies in the final phase
of development. We estimate that on an overall basis these antibodies were
approximately 75% complete when acquired. The balance of the development work
was completed by the end of 1999.
On December 15, 1998, BioSource purchased certain assets and liabilities of
Biofluids, Inc. for $2,822,500 in cash, including related acquisition costs.
Biofluids is involved in the manufacture and sale of sera, media and buffers
utilized in biomedical research. The acquisition was accounted for as a
purchase. Accordingly, the assets and liabilities of the acquired business are
included in the consolidated balance sheet as of December 31, 1998. The results
of Biofluids operations from the date of the acquisition to December 31, 1998
were not significant. Intangible assets were acquired in the amount of
$2,348,700 and are being amortized over a 15-year period and included in
intangible assets in the consolidated balance sheet at December 31, 1998 and
1999.
The following summarized unaudited pro forma financial information assumes
the acquisition had occurred on January 1, 1998:
<TABLE>
<CAPTION>
1998
----------------------
(in thousands,
except per share data)
<S> <C>
PRO FORMA INFORMATION
Net sales........................................... $27,752.9
Net loss............................................ $(6,731.8)
Net loss per share.................................. $ (0.90)
</TABLE>
These amounts are based upon certain assumptions and estimates, and do not
reflect any benefit from economies, which might be achieved from combined
operations. The pro forma results do not necessarily represent results that
would have occurred if the acquisition had taken place on the basis assumed
above, nor are they indicative of the results of future combined operations.
F-10
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Inventories
Inventories at December 31, 1998 and 1999 are summarized as follows (000's):
<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C>
Raw materials........................................ $ 4,115.0 $ 4,060.0
Work in process...................................... 750.4 598.6
Finished goods....................................... 3,972.4 5,040.7
--------- ---------
Subtotal............................................. 8,837.8 9,699.3
Inventory reserve.................................... (3,867.2) (3,684.0)
--------- ---------
Net inventory........................................ $ 4,970.6 $ 6,015.3
========= =========
</TABLE>
4. Property and Equipment
Property and equipment at December 31, 1998 and 1999 are summarized as
follows (000's):
<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C>
Land................................................. $ 360.0 $ 360.0
Building and improvements............................ 2,283.5 2,255.0
Machinery and equipment.............................. 3,749.1 4,157.4
Office furniture and equipment....................... 1,596.8 1,883.1
Leasehold improvements............................... 87.2 107.9
--------- ---------
8,076.6 8,763.4
Less accumulated depreciation and amortization....... (2,563.0) (3,370.8)
--------- ---------
$ 5,513.6 $ 5,392.6
========= =========
</TABLE>
5. Long Term Debt and Notes Payable to Banks
In December, 1998, BioSource executed a loan agreement with Union Bank of
California, N.A. and borrowed $14,000,000 which was used to finance the
acquisitions of Quality Controlled Biochemicals, Inc. and all of the assets and
selected liabilities of Biofluids, Inc. The principal amounts outstanding as of
December 31, 1998 and 1999 were $14,000,000 and $12,000,000, respectively.
Principal repayments are to be made at approximately $166,700 per month for the
seven-year term of the loan. Interest is provided at a rate which is 2% per
annum in excess of either the bank's adjusted treasury rate for a term selected
by BioSource or the bank's LIBOR rate for a term also selected by the Company.
The actual interest rate at December 31, 1999 was 8.12%. The loan matures on
December 5, 2005. The terms of this loan require the Company to maintain a
minimum cash balance of $3,500,000 as of December 31, 1999. Additionally,
BioSource must maintain a minimum ratio of total liabilities to tangible net
assets, achieve minimum net profit levels, and comply with specified ratios of
earnings before interest, taxes, depreciation and amortization to debt service
costs. We are also required to comply with certain non-financial covenants. At
December 31, 1999, BioSource was in compliance with these covenants.
In June 1996, BioSource secured financing from Heller Financial Corp. in
order to finance the purchase of BioSource's corporate headquarters. The 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
outstanding principal balances at December 31, 1998 and 1999 were $705,300 and
$688,000 respectively.
F-11
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In June 1996, a loan was obtained from the Small Business Administration to
finance the purchase of the corporate headquarters building. The original loan
principal was $616,000 and is secured by a first trust deed on the property.
The loan bears interest at a rate of 7.6% and has a 20-year term. The
outstanding principal balances at December 31, 1998 and 1999 were $578,100 and
$561,500 respectively.
Payments to both Heller Financial Corp. and the Small Business
Administration are guaranteed by the chairman of the board of the Company.
Quality Controlled Biochemicals, Inc. had four loans outstanding aggregating
$964,100 at December 31, 1999 with MetroWest Bank which were assumed by
BioSource upon completion of the acquisition of QCB in December 1998.
Description of all loans outstanding at December 31, 1998 and 1999 follows
(000's):
<TABLE>
<CAPTION>
Amount Outstanding at
-------------------------
December 31, December 31,
Type of Loan Maturity Date Interest Rate 1998 1999
- ------------ ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Term Loan............ January 31, 2002 9.25% $ 123.3 $ 83.2
Term Loan............ April 17, 1999 8.75% 53.5 --
Term Loan............ April 17, 2003 9.50% 385.7 296.7
Term Loan............ August 22, 2000 9.75% 66.7 22.3
Line of Credit....... April 17, 1999 8.75% 203.5 --
Line of Credit....... December 31, 1999 9.25% 562.0 562.0
-------- --------
$1,394.7 $ 964.2
======== ========
</TABLE>
Under the terms of the MetroWest Bank loan agreement, BioSource must meet
certain financial covenants that include a minimum tangible net worth covenant,
debt to tangible net worth, current ratio covenant, and other non-financial
covenants. BioSource was in compliance with these covenants as of December 31,
1999.
Maturities of the notes payable outstanding as of December 31, 1999 are:
<TABLE>
<CAPTION>
Year ending December 31:
------------------------
<S> <C>
2000........................................................ $ 2,754,400
2001........................................................ 2,165,800
2002........................................................ 2,135,600
2003........................................................ 2,076,900
2004........................................................ 2,051,500
Thereafter.................................................. 3,029,500
-----------
$14,213,700
===========
</TABLE>
6. Common Stock and Treasury Stock
In 1997, the Board of Directors authorized us to repurchase up to 1,200,000
shares of our outstanding common stock at market price. In 1998 we were
authorized to extend the repurchase program up to 1,500,000 shares of the
Company's stock. During the years ended December 31, 1997 and 1998, we
repurchased 283,300 and 996,200 shares of the Company's common stock for
$1,744,500, and $6,309,800, an average price of $6.16, and $6.33, respectively.
As of December 31, 1999, we have repurchased a total of 1,279,500 shares of the
Company's common stock for $8,054,300, an average price of $6.29 per share
since the inception of the repurchase program in April 1997.
F-12
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Stock Options, Purchase Plans and Warrants
The Company currently has one stock option plan in place--the 1993 Stock
Incentive Plan (the 1993 Plan)--and several stock option agreements with
certain officers in effect.
Under the 1993 Plan, stock options may be granted to full-time employees,
part-time employees, directors and consultants of the Company to purchase a
maximum of 2,000,000 shares of common stock. Options granted under the 1993
Plan are generally exercisable at the rate of 25% each year beginning one year
from the date of grant. The stock options generally expire ten years from the
date of grant.
In August 1998, the Board of Directors approved the repricing of options
granted under this plan to an exercise price of $4.625 per share for all
optionees except for Officers and Board of Directors. As part of the repricing,
395,500 shares were canceled and 355,950 new shares were granted at the new
exercise price.
The per share weighted average fair value of stock options granted during
1997, 1998 and 1999 was $5.27, $2.40 and $3.43, respectively, on the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Expected dividend yield.................................. 0% 0% 0%
Risk-free interest rate.................................. 6.4% 4.75% 6.40%
Expected volatility...................................... 60% 60% 69%
Expected option life (years)............................. 9 8.8 7.1
</TABLE>
The Company applies APB Opinion No. 25 in accounting for its plan, and
accordingly, no compensation cost has been recognized for its stock options in
the consolidated financial statements. Had the Company determined compensation
cost based upon the fair value at the grant date for its stock options under
SFAS No. 123, the Company's net income (loss) would have changed to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1998 1999
-------- --------- --------
(in thousands,
except per share data)
<S> <C> <C> <C>
Net income (loss):
As reported................................ $3,186.3 $(5,135.8) $3,577.4
Pro forma.................................. $2,774.6 $(6,135.0) $2,194.5
======== ========= ========
Net income (loss) per share:
As reported
Basic.................................... $ 0.38 $ (0.68) $ 0.49
Diluted.................................. $ 0.36 $ (0.68) $ 0.46
Pro forma
Basic.................................... $ 0.38 $ (0.82) $ 0.30
Diluted.................................. $ 0.31 $ (0.82) $ 0.28
======== ========= ========
</TABLE>
Pro forma net income (loss) reflects compensation expense related to the
vested portion of options granted during the periods 1995 through 1999.
To the extent that BioSource derives a tax benefit from options exercised by
employees, such benefit is credited to additional paid-in capital. Tax benefits
recognized totaling $0, $20,500 and $216,600, were credited to additional paid-
in capital in fiscal 1997, 1998 and 1999, respectively.
F-13
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following summarizes the stock option transactions under the 1993 Plan
during the periods presented:
<TABLE>
<CAPTION>
Weighted
average
Shares exercise price
--------- --------------
<S> <C> <C>
Options outstanding at December 31, 1996......... 998,406 $4.15
Options granted.................................. 192,000 7.21
Options exercised................................ (77,044) 1.98
Options canceled................................. (120,801) 6.88
--------- -----
Options outstanding at December 31, 1997......... 992,561 4.57
Options granted.................................. 1,256,950 3.78
Options exercised................................ (27,410) 2.19
Options canceled................................. (504,955) 7.05
--------- -----
Options outstanding at December 31, 1998......... 1,717,146 3.30
Options granted.................................. 291,000 4.56
Options exercised................................ (221,791) 2.58
Options canceled................................. (169,930) 4.69
--------- -----
Options outstanding at December 31, 1999......... 1,616,425 $3.48
========= =====
</TABLE>
At December 31, 1999, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $1.28-$8.94 and 7.6
years, respectively.
At December 31, 1997, 1998 and 1999, the number of options exercisable was
592,435, 1,031,730, and 1,142,279, respectively, and the weighted average
exercise price of those options was $4.57, $3.30 and $3.47, respectively.
The Company has several stock option agreements with certain officers. The
outstanding agreements expire from May 2003 through December 2008.
The following summarizes transactions outside the option plan during the
periods presented:
<TABLE>
<CAPTION>
Weighted
average
Shares exercise price
------- --------------
<S> <C> <C>
Options outstanding at December 31, 1996........... 402,500 $3.13
Options granted.................................... -- --
Options exercised.................................. -- --
Options canceled................................... -- --
------- -----
Options outstanding at December 31, 1997........... 402,500 3.13
Options granted.................................... -- --
Options exercised.................................. -- --
Options canceled................................... -- --
------- -----
Options outstanding at December 31, 1998 402,500 3.13
Options granted.................................... -- --
Options exercised.................................. (25,000) 1.50
Options canceled................................... -- --
------- -----
Options outstanding at December 31, 1999 377,500 $3.24
======= =====
</TABLE>
At December 31, 1999, the range of exercise prices and weighted average
remaining contractual life of outstanding options under certain agreements was
$1.50-$6.44 and 5 years, respectively.
F-14
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
At December 31, 1997, 1998 and 1999, the number of options under certain
agreements exercisable was 330,884, 365,259 and 374,633, respectively, and the
weighted average exercise price of those options was $3.13, $3.13 and $3.22,
respectively.
Effective April 7, 1995, the Company adopted an Employee Stock Purchase Plan
to provide substantially all full-time employees, excluding officers, an
opportunity to purchase shares of its common stock through payroll deductions.
In addition, the Company provides a matching contribution equal to 50% of the
participant's contribution. All contributions are invested in the Company's
common stock, which is purchased on the open market at prevailing market
prices. Participants have a fully vested interest in the shares purchased with
payroll deductions and become fully vested in the shares purchased with Company
matching contributions after two years. The Company's matching expense for the
years ended December 31, 1997, 1998 and 1999 was approximately $10,000,
$14,000, and $17,700, respectively.
At December 31, 1999 the Company had outstanding warrants to purchase
218,100 shares of the Company's common stock originally issued in connection
with the second primary stock offering with exercise prices ranging from $7.50
to $11.10 per share and expiration dates between February 1, 2001 and May 29,
2001.
8. Stockholder Rights Plan
On February 16, 1999, we adopted a stockholders' rights plan to protect the
Company and its stockholders from unsolicited attempts or inequitable offers to
acquire our stock. The rights plan has no immediate dilutive effect and does
not diminish our ability to accept an offer to purchase the Company that is
approved by the board. The stockholder rights plan was implemented through a
dividend of one preferred share purchase right on each outstanding share of our
common stock outstanding on March 2, 1999. Each right will entitle stockholders
to buy one one-thousandth of a share of Series A preferred stock at an exercise
price of $24.50. The rights will become exercisable (with certain limited
exceptions provided in the rights agreement) following the 10th day after: (a)
a person or group announces acquisition of 15 percent or more of our common
stock, (b) a person or group announces commencement of a tender offer the
consummation of which would result in ownership by the person or group of 15
percent or more of our common stock, (c) the filing of a registration statement
for any such exchange offer under the Securities Act of 1933, or (d) our board
determining that a person is an "adverse person," as defined in the rights
plan. The buyer or any "adverse person" would not be entitled to exercise
rights under the rights plan. The effect of the rights plan is to discourage
acquisitions of more than 15 percent of our common stock without negotiations
with our board. We can redeem the rights for $.001 per right at certain times
as provided in the rights agreement. The rights expire on January 31, 2009.
9. Income Taxes
Income tax expense (benefit) is summarized as follows:
<TABLE>
<CAPTION>
1997 1998 1999
-------- --------- -------
<S> <C> <C> <C>
Current:
Federal.................................... $1,092.0 $ 802.6 $ 720.0
State and local............................ 172.0 155.0 203.2
Foreign.................................... 140.0 (0.6) --
-------- --------- -------
1,404.0 957.0 923.2
-------- --------- -------
Deferred:
Federal.................................... 61.0 (2,014.0) 76.0
State and local............................ (5.0) (477.6) (7.2)
Foreign.................................... -- -- (972.4)
-------- --------- -------
56.0 (2,491.6) (903.6)
-------- --------- -------
$1,460.0 $(1,534.6) $ 19.6
======== ========= =======
</TABLE>
F-15
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The primary components of temporary differences which give rise to deferred
taxes at December 31, 1998 and 1999 are:
<TABLE>
<CAPTION>
1998 1999
--------- --------
<S> <C> <C>
Deferred tax assets:
Accruals for salary and bonus....................... $ 21.6 $ 31.8
Reserves for inventory.............................. 1,084.4 1,033.4
Purchased in-process technology/goodwill............ 1,752.2 1,622.2
Net operating loss carryforwards.................... 1,477.6 1,209.5
Allowance for doubtful accounts..................... -- 38.3
--------- --------
Total deferred tax assets............................. 4,335.8 3,935.2
Less valuation allowance............................ (1,160.2) --
--------- --------
Deferred tax assets net of valuation allowance........ 3,175.6 3,935.2
--------- --------
Deferred tax liability
Depreciation........................................ 103.4 69.0
State taxes......................................... 109.6 --
--------- --------
Total deferred tax liability.......................... 213.0 69.0
--------- --------
Net deferred tax assets............................... $ 2,962.6 $3,866.2
========= ========
</TABLE>
Management has reviewed the recoverability of deferred income tax assets and
has determined that it is more likely than not that the deferred tax assets
will be fully realized through future taxable earnings. During 1999 the Company
completed an analysis of its net operating losses in Belgium and as a result
recognized a deferred tax asset of $1,160,200.
Actual income tax expense (benefit) differs from that obtained by applying
the Federal income tax rate of 34% to income (loss) before income taxes as
follows:
<TABLE>
<CAPTION>
1997 1998 1999
-------- --------- ---------
<S> <C> <C> <C>
Computed "expected" tax expense
(benefit)............................... $1,580.0 $(2,267.9) $ 1,223.0
Nondeductible items...................... 9.0 10.9 16.2
State taxes (net of Federal benefit)..... 110.0 (212.9) 138.9
Reduction of valuation allowance......... -- -- (1,160.2)
Tax credits.............................. (110.0) (66.0) (100.0)
Tax effect resulting from foreign sales
corporation activities.................. (63.0) (94.2) (75.6)
Prior year adjustment to provision....... -- 116.5 --
Effect of foreign operations............. -- 923.4 187.8
Other.................................... (65.0) 55.6 (210.5)
-------- --------- ---------
Total.................................. $1,460.0 $(1,534.6) $ 19.6
======== ========= =========
</TABLE>
As of December 31, 1999, the Company has a net operating loss (NOL)
carryforward of approximately $756,701 for Federal income tax purposes. The
Federal NOL has a carryover period of 15 years and is available to offset
future taxable income, if any, through 2005, subject to an annual statutory
limitation.
10. 401(k) Benefit Plan
The Company has a 401(k) profit sharing plan, which covers substantially all
domestic employees of the Company. Plan participants may make voluntary
contributions up to 20% of their earnings up to the statutory limitation. The
Company's contribution is $0.25 for each $1.00 contributed by employees up to
the first $2,000. Company contributions have no vesting period. The Company's
contribution was $38,300 in 1999. There were no Company contributions made in
1997 and 1998.
F-16
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Business Segments
BioSource is 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. The
Company's customers are not concentrated in any specific geographic region and
no single customer accounts for a significant amount of our sales.
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. The Company's 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 segment information is summarized as follows:
<TABLE>
<CAPTION>
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Sales-from Segments:
Net sales to external customers from:
United States:
Domestic................................... $ 7,452.1 $ 8,844.1 $15,518.0
Export..................................... 4,220.7 4,270.3 4,678.2
--------- --------- ---------
Total United States...................... 11,672.8 13,114.4 20,196.2
Europe....................................... 8,899.0 8,744.2 9,060.8
--------- --------- ---------
Consolidated............................. $20,571.8 $21,858.6 $29,257.0
========= ========= =========
Operating income (loss):
United States................................ $ 3,244.7 $(4,459.4) $ 2,710.6
Europe....................................... 693.6 (2,642.4) 1,902.6
--------- --------- ---------
Consolidated............................. $ 3,938.3 $(7,101.8) $ 4,613.2
========= ========= =========
Identifiable assets at end of year:
United States................................ $33,762.7 $32,184.3
Europe....................................... 7,637.4 7,804.6
--------- ---------
Consolidated............................. 41,400.1 $39,988.9
========= =========
Net interest expense (income):
United States................................ $ (575.0) $ (315.6) $ 815.7
Europe....................................... (52.4) 18.1 154.4
--------- --------- ---------
Consolidated............................. $ (627.4) $ (297.5) $ 970.1
========= ========= =========
Depreciation and amortization:
United States................................ $ 371.7 $ 502.3 $ 1,559.5
Europe....................................... 340.3 457.5 431.4
--------- --------- ---------
Consolidated............................. $ 712.0 $ 959.8 $ 1,990.9
========= ========= =========
Capital expenditures:
United States................................ $ 398.3 $ 608.2 $ 899.0
Europe....................................... 260.7 781.8 178.0
--------- --------- ---------
Consolidated............................. $ 659.0 $ 1,390.0 $ 1,077.0
========= ========= =========
</TABLE>
F-17
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Sales-to Segments:
Net Sales to external customers:
United States.................................. $ 7,452.1 $ 8,844.1 $15,518.0
Europe......................................... 9,984.6 9,692.4 10,139.4
Japan.......................................... 2,453.4 2,634.7 2,790.0
Other.......................................... 681.7 687.4 809.6
--------- --------- ---------
Total........................................ $20,571.8 $21,858.6 $29,257.0
========= ========= =========
</TABLE>
12. Commitments and Contingencies
At December 31, 1999 the Company had leases for certain of its facilities
and equipment under various noncancelable operating leases expiring through
March 2007. Total rental expense was approximately $385,000, $453,400 and
$722,900 for the years ended December 31, 1997, 1998 and 1999, respectively.
On March 8, 2000 the Company entered into a lease for a new facility in
Camarillo, California. The lease will commence on May 1, 2000 and expires on
June 30, 2005, with the option to continue the lease for two additional five-
year terms. Annual lease payments in the initial five-year period ended
December 31, 2005 range from $342,000 at inception to $411,000 at termination.
At December 31, 1999, the future minimum payments under these leases,
including the lease executed on March 8, 2000, are as follows:
<TABLE>
<S> <C>
2000.............................................................. $ 878.7
2001.............................................................. 882.9
2002.............................................................. 757.4
2003.............................................................. 676.8
2004.............................................................. 615.7
Thereafter........................................................ 685.7
--------
$4,497.2
========
</TABLE>
13. Earnings Per Share
The Company presents basic and diluted earnings (loss) per share ("EPS").
Basic EPS includes no dilution and is computed by dividing net income (loss)
available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
from securities that could share in the earnings of the Company.
The reconciliation's of basic to diluted weighted average shares are as
follows:
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------
1997 1998 1999
-------- --------- --------
<S> <C> <C> <C>
Net earnings (loss) used for basic and
diluted earnings (loss) per share......... $3,186.3 $(5,135.8) $3,577.4
======== ========= ========
Weighted average shares used in basic
computation............................... 8,318.0 7,508.8 7,234.7
Dilutive stock options and warrants........ 647.2 -- 598.2
-------- --------- --------
Weighted average shares used for diluted
computation............................... 8,965.2 7,508.8 7,832.9
======== ========= ========
</TABLE>
F-18
<PAGE>
BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Options to purchase 367,079, 292,936 and 404,849 shares of common stock at
prices ranging from $7.06 to $9.06, $5.25 to $8.94 and $4.13 to $8.94 were
outstanding during 1997, 1998 and 1999, respectively, but were not included in
the computation of diluted earnings (loss) per share because the options'
exercise price was greater than the average market price of the common shares.
Options to purchase 1,824,710 shares of common stock at a prices ranging from
of $1.28 to $4.63 per share were outstanding during 1998, but were not included
in the computation of diluted loss per share because the options were
antidilutive, as the Company incurred a net loss for the year
14. Subsequent events
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 or 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 book value of the
Series B Preferred Stock of $5,581,600 will accrete to its liquidation value
immediately by $995,100 related to the beneficial conversion feature then
through February 2004 or earlier upon accelerated conversion, under the
interest method. Such accretion will not have an effect on net income, but will
reduce the income available to common shareholders used to calculate basic
earnings per share.
F-19
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
Balance at Provision Deductions Balance at
Beginning Charged Accounts End of
of Year to Income Written Off Year
---------- --------- ----------- ----------
(000's)
<S> <C> <C> <C> <C>
1997
Allowance for doubtful accounts.... $ 49.0 $ 154.0 $ -- $ 203.0
Inventory reserve.................. 65.5 309.2 -- 374.7
1998
Allowance for doubtful accounts.... $ 203.0 $ 178.3 $ 80.3 $ 301.0
Inventory reserve.................. 374.7 5,240.8 1,748.3 3,867.2
1999
Allowance for doubtful accounts.... $ 301.0 $ 86.5 $ 59.4 $ 328.1
Inventory reserve.................. 3,867.2 1,455.3 1,638.5 3,684.0
</TABLE>
F-20
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4,000,000 Shares
[LOGO OF BIOSOURCE INTERNATIONAL]
Common Stock
----------------
PROSPECTUS
----------------
Chase H&Q
Dain Rauscher Wessels
Thomas Weisel Partners LLC
----------------
, 2000
----------------
You should rely only on information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. BioSource and the selling stockholders are
offering to sell, and seeking offers to buy, shares of common stock only in
jurisdictions where offers and sales are permitted. The information contained
in this prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or of any sale of our
common stock.
We have not taken any action in any jurisdiction outside the United States
to permit a public offering of the common stock or possession and distribution
of this prospectus in that jurisdiction. Persons who come into possession of
this prospectus in jurisdictions outside the United States are required to
inform themselves about and to observe any restrictions as to this offering
and the distribution of this prospectus applicable to that jurisdiction.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table itemizes the expenses incurred by the Registrant in
connection with the issuance and distribution of the Securities being
registered, other than underwriting discounts. All the amounts shown are
estimates except the Securities and Exchange Commission registration fee and
the NASD filing fee.
<TABLE>
<S> <C>
Registration fee--Securities and Exchange Commission............ $ 25,427
NASD filing fee................................................. 10,132
Nasdaq National Market fee...................................... 17,500
Accounting fees and expenses.................................... 180,000
Legal fees and expenses (other than blue sky)................... 280,000
Blue sky fees and expenses, including legal fees................ 25,000
Printing; stock certificates.................................... 30,000
Transfer agent and registrar fees............................... 10,000
Miscellaneous................................................... 11,941
---------
Total........................................................... $ 590,000
=========
</TABLE>
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law provides in relevant
part that a corporation may indemnify any person who was or is a party to or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful.
In addition, Section 145 provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper. Delaware law further provides that nothing
in the above-described provisions shall be deemed exclusive of any other rights
to indemnification or advancement of expenses to which any person may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
Article VIII of the Registrant's Certificate of Incorporation provides for
the indemnification of directors to the fullest extent permissible under
Delaware law.
II-1
<PAGE>
Article V of the Registrant's Bylaws provides for the indemnification of
officers, directors and third parties acting on behalf of the Registrant if
such person acted in good faith and in a manner reasonably believed to be in
and not opposed to the best interest of the Registrant, and, with respect to
any criminal action or proceeding, the indemnified party had no reason to
believe his or her conduct was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for
in the Registrant's Bylaws, and intends to enter into indemnification
agreements with any new directors and executive officers in the future.
In addition, the Registrant has purchased insurance pursuant to which its
directors and officers are insured against liability, which they may incur in
their capacity as such.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
Section 7 of the Underwriting Agreement filed as Exhibit 1.1 hereto sets
forth certain provisions with respect to the indemnification of certain
controlling persons, directors and officers against certain losses and
liabilities, including certain liabilities under the Securities Act.
Item 16. Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
1.1 Form of Underwriting Agreement.+
2.1 Asset Purchase Agreement dated April 30, 1996, by and among
Registrant, Nordion International, Inc. and Medgenix Diagnostics, S.A.
(1)
2.2 Stock Purchase Agreement dated as of December 9, 1998 by and among
BioSource International, Inc., Quality Controlled Biochemicals, Inc.,
the stockholders of Quality Controlled Biochemicals, Inc., and the
stockholders of Javelle Pharmaceuticals, Inc.(2)
2.3 Asset Purchase Agreement dated as of December 14, 1998 by and among
BioSource International, Inc., a Delaware Corporation, and Biofluids,
Inc., a Maryland Corporation and the Biofluids stockholder.(3)
4.1 Specimen Stock Certificate of Common Stock of Registrant.(4)
4.2 Certificate of Designation of Series A Preferred Stock.(5)
4.3 Certificate of Designation of Series B Preferred Stock.*
4.4 Rights Agreement, dated as of February 25, 1999, between the Company
and U.S. Stock Transfer and Trust Corporation, as Rights Agent.(5)
4.5 Form of Right Certificate.(5)
4.6 Summary of Share Purchase Rights.(5)
4.7 Form of Warrant Agreement.(6)
4.8 Investor Rights Agreement dated February 15, 2000 by and among
BioSource International, Inc. Genstar Capital Partners II, L.P. and
Stargen II LLC.
4.9 Warrant to Purchase Common Stock of the Company issued to Genstar
Capital Partners II, LP. on February 15, 2000.
4.10 Warrant to Purchase Common Stock of the Company issued to Stargen II
LLC on February 15, 2000.
5.1 Opinion and Consent of Troop Steuber Pasich Reddick & Tobey, LLP.*
23.1 Consent of Troop Steuber Pasich Reddick & Tobey, LLP (included in its
opinion filed as Exhibit 5.1 hereto).*
23.2 Consent of KPMG LLP, independent public accountants.
24.1 Power of Attorney (included on signature page).*
27.1 Financial Data Schedule.*
</TABLE>
- --------
* Previously Filed
+ To be filed by amendment.
II-2
<PAGE>
(1) Incorporated by reference to the Company's Amendment No. 1 to Registration
Statement on Form SB-2 (SEC No. 333-3336) as filed with the SEC on May 14,
1996.
(2) Incorporated by reference to the Company's Current Report on Form 8-K/A
filed with the SEC on February 19, 1999.
(3) Incorporated by reference to the Company's Form 10-K for the year ended
December 31, 1998 filed with the SEC on April 15, 1999.
(4) Incorporated by reference to the Company's Registration Statement on Form
S-4 as filed with the SEC on October 22, 1992, as amended.
(5) Incorporated by reference to Form 8-A filed March 1, 1999.
(6) Incorporated by reference to the Company's Registration Statement on Form
SB-2 (SEC No. 333-3336) as filed with the SEC on April 10, 1996.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer of controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by a controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For the purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the Offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3 and has duly caused this Amendment No. 1 to Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California, on March 22, 2000.
BIOSOURCE INTERNATIONAL, INC.
By: /s/ James H. Chamberlain
___________________________________
James H. Chamberlain
Chairman of the Board
Chief Executive Officer and
President
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James H. Chamberlain Chairman of the Board, Chief March 22, 2000
____________________________________ Executive Officer and
James H. Chamberlain President
* Chief Financial Officer March 22, 2000
____________________________________
Charles C. Best
* Director March 22, 2000
____________________________________
Leonard M. Hendrickson
* Director March 22, 2000
____________________________________
David J. Moffa, Ph.D.
* Director March 22, 2000
____________________________________
John R. Overturf, Jr.
* Director March 22, 2000
____________________________________
Robert D. Weist
* Director March 22, 2000
____________________________________
Jean-Pierre L. Conte
* Director March 22, 2000
____________________________________
Robert J. Weltman
* Power of Attorney
By: /s/ James H. Chamberlain
-----------------------------
James H. Chamberlain
Attorney In Fact
</TABLE>
II-4
<PAGE>
EXHIBIT 4.8
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,
-5-
<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
-6-
<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
-7-
<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
-8-
<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.
-9-
<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
-10-
<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,
-11-
<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
-13-
<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
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<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
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<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]
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<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
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<PAGE>
EXHIBIT 4.9
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 4.10
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.
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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.
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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
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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.
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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.
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EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
BioSource International, Inc.:
We consent to the use of our report incorporated herein by reference and to
the references to our firm under the headings "Selected Consolidated Financial
Data" and "Experts" in the prospectus.
KPMG LLP
Los Angeles, California
March 21, 2000
